Multiple Choice
Which of the following is considered a cost of selling merchandise on account under both perpetual and periodic inventory systems?
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4. Merchandising Operations
Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory
Multiple Choice
Which of the following is a function of inventory in a company's accounting system?
A
To record cash receipts from customers
B
To calculate depreciation expense for fixed assets
C
To track the issuance of company stock
D
To provide a record of goods available for sale and help determine the cost of goods sold
Verified step by step guidance1
Understand the concept of inventory in accounting: Inventory represents goods that a company holds for sale in the ordinary course of business or materials used in production.
Recognize the primary function of inventory in accounting: It is used to provide a record of goods available for sale and to help determine the cost of goods sold (COGS).
Differentiate inventory from other accounting functions: Inventory is not related to recording cash receipts, calculating depreciation, or tracking stock issuance. These are separate accounting processes.
Learn how inventory impacts financial statements: Inventory is reported as a current asset on the balance sheet and plays a key role in calculating COGS, which is an expense on the income statement.
Understand the relationship between inventory and COGS: The formula for COGS is typically expressed as: \( \text{COGS} = \text{Beginning Inventory} + \text{Purchases} - \text{Ending Inventory} \). This calculation helps determine the cost of goods sold during a specific period.
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