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

Periodic Inventory - Purchases

Financial Accounting

4. Merchandising Operations

Periodic Inventory - Purchases

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Multiple Choice

Under a periodic inventory system, purchases are:

Immediately debited to the Inventory account.

Recorded as an expense when purchased.

Not recorded until the goods are sold.

Recorded in a Purchases account and not directly added to Inventory until period-end.

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Verified step by step guidance

Understand the periodic inventory system: In this system, inventory updates are not made continuously. Instead, inventory is updated at the end of the accounting period.

Recognize the role of the Purchases account: Under the periodic inventory system, purchases of inventory are recorded in a separate Purchases account rather than directly adjusting the Inventory account.

Clarify the timing of inventory updates: Inventory is not updated immediately when goods are purchased. Instead, the Purchases account accumulates the cost of goods purchased during the period.

Learn the period-end adjustment process: At the end of the accounting period, the balance in the Purchases account is used to calculate the cost of goods sold (COGS) and update the Inventory account.

Understand the distinction from perpetual inventory systems: Unlike the periodic system, a perpetual inventory system updates the Inventory account immediately with each purchase or sale, providing real-time inventory tracking.