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

On a traditional income statement, Cost of Goods Sold (COGS) reports the:

total cost of inventory purchased during the period

total cost of inventory sold to customers during the period

total sales revenue earned during the period

ending inventory balance at the end of the period

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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 materials and labor directly involved in creating the product.

Clarify the distinction between inventory purchased and inventory sold: Inventory purchased refers to the total cost of goods acquired during the period, while inventory sold refers to the portion of inventory that has been sold to customers, which is what COGS measures.

Recognize the relationship between COGS and sales revenue: COGS is subtracted from sales revenue on the income statement to calculate gross profit, but it does not represent total sales revenue itself.

Understand the role of ending inventory: Ending inventory is the value of unsold goods at the end of the period and is not included in COGS. Ending inventory is reported on the balance sheet, not the income statement.

Conclude that COGS on a traditional income statement specifically reports the total cost of inventory sold to customers during the period, as this aligns with its definition and purpose in financial accounting.