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 an advantage of using the perpetual inventory system over the periodic inventory system when calculating Cost of Goods Sold (COGS)?

COGS is only determined at the end of the accounting period.

It eliminates the need for tracking individual inventory purchases.

Inventory records are updated continuously, providing real-time information.

Physical inventory counts are not required at any time.

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Verified step by step guidance

Understand the two inventory systems: The perpetual inventory system updates inventory records continuously as transactions occur, while the periodic inventory system updates inventory records only at the end of an accounting period.

Analyze the options provided in the question. For example, the statement 'COGS is only determined at the end of the accounting period' applies to the periodic inventory system, not the perpetual system.

Evaluate the statement 'It eliminates the need for tracking individual inventory purchases.' This is incorrect because the perpetual system requires detailed tracking of inventory purchases and sales in real-time.

Consider the statement 'Inventory records are updated continuously, providing real-time information.' This is a key feature of the perpetual inventory system, making it an advantage over the periodic system.

Review the statement 'Physical inventory counts are not required at any time.' This is incorrect because even with a perpetual system, physical inventory counts are still necessary to verify records and account for discrepancies like theft or damage.