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 is a key difference between the perpetual and periodic inventory systems in determining Cost of Goods Sold (COGS)?

In the periodic system, inventory records are updated after every purchase, while in the perpetual system, inventory is only updated at year-end.

In the perpetual system, COGS is updated continuously with each sale, while in the periodic system, COGS is determined at the end of the period.

Both systems require a physical count of inventory after every sale to determine COGS.

The perpetual system does not require any record-keeping for inventory transactions.

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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, including the cost of materials and labor.

Learn the key difference between perpetual and periodic inventory systems: The perpetual system updates inventory and COGS continuously with each transaction, while the periodic system calculates COGS at the end of the accounting period.

Clarify the role of physical inventory counts: In the periodic system, a physical count is essential to determine ending inventory and calculate COGS. In the perpetual system, physical counts are used to verify records but are not required for COGS calculation.

Analyze the incorrect statements: For example, the claim that inventory records are updated after every purchase in the periodic system is false; this applies to the perpetual system. Similarly, the statement that the perpetual system does not require record-keeping is incorrect.

Conclude with the correct answer: The perpetual system continuously updates COGS with each sale, while the periodic system determines COGS at the end of the period. This distinction is the key difference between the two systems.