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

Which of the following methods results in the Cost of Goods Sold (COGS) being updated continuously as each sale occurs?

Periodic inventory system

Specific identification method

Perpetual inventory system

Weighted average method (periodic)

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Verified step by step guidance

Understand the concept of inventory systems: Inventory systems are methods used by businesses to track and manage inventory levels. The two main types are the periodic inventory system and the perpetual inventory system.

Learn about the periodic inventory system: In this system, inventory and Cost of Goods Sold (COGS) are updated at the end of an accounting period, not continuously. Sales transactions do not immediately affect inventory records.

Understand the perpetual inventory system: This system updates inventory and COGS continuously as each sale or purchase occurs. It uses technology like barcodes and point-of-sale systems to track inventory in real-time.

Compare the specific identification method: This method tracks individual items of inventory and assigns specific costs to them. While it can be used in a perpetual system, it does not inherently update COGS continuously unless paired with a perpetual inventory system.

Clarify weighted average method (periodic): This method calculates an average cost for inventory items and updates COGS periodically, not continuously. It is typically used in a periodic inventory system.