Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

4. Merchandising Operations

Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory

Financial Accounting

4. Merchandising Operations

Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory

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Multiple Choice

In the context of Cost of Goods Sold under perpetual and periodic inventory systems, cost allocation is the process of assigning which types of costs?

Depreciation expense on fixed assets

The costs of inventory items sold during the period

Interest expense on long-term debt

Only administrative and selling expenses

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Verified step by step guidance

Understand the concept of Cost of Goods Sold (COGS): COGS represents the direct costs attributable to the production of goods sold by a company during a specific period. It includes costs such as raw materials, direct labor, and manufacturing overhead directly tied to the production of goods.

Differentiate between perpetual and periodic inventory systems: In a perpetual inventory system, inventory records are updated continuously as transactions occur. In a periodic inventory system, inventory records are updated at the end of an accounting period.

Identify the types of costs included in COGS: The costs allocated to COGS are the costs of inventory items sold during the period. These include the purchase cost of inventory, freight-in costs, and any other costs directly related to acquiring or producing the inventory.

Exclude unrelated costs: Depreciation expense on fixed assets, interest expense on long-term debt, and administrative and selling expenses are not included in COGS. These costs are categorized separately as operating expenses or non-operating expenses.

Apply the correct allocation process: Under both perpetual and periodic systems, the costs of inventory items sold during the period are assigned to COGS. In the perpetual system, this is done in real-time, while in the periodic system, it is calculated at the end of the period using the formula: \( \text{COGS} = \text{Beginning Inventory} + \text{Purchases} - \text{Ending Inventory} \).