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

In the context of cost accounting systems, which of the following best describes the primary purpose of using perpetual and periodic inventory systems?

Prepare cash flow statements for external reporting.

Calculate depreciation expense for fixed assets.

Allocate administrative expenses to different departments.

Track and determine the cost of goods sold and inventory balances throughout the accounting period.

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Verified step by step guidance

Understand the context: The problem is asking about the primary purpose of using perpetual and periodic inventory systems in cost accounting. These systems are designed to manage inventory and track costs effectively.

Define the perpetual inventory system: This system continuously updates inventory records for every purchase and sale transaction. It provides real-time data on inventory levels and cost of goods sold (COGS).

Define the periodic inventory system: This system updates inventory records at specific intervals, typically at the end of an accounting period. It calculates COGS by using the formula: \( \text{COGS} = \text{Beginning Inventory} + \text{Purchases} - \text{Ending Inventory} \).

Compare the two systems: Both systems aim to track inventory and determine the cost of goods sold, but the perpetual system provides more detailed and immediate information, while the periodic system is simpler and less resource-intensive.

Conclude the primary purpose: The main goal of these systems is to track and determine the cost of goods sold and inventory balances throughout the accounting period, which is essential for accurate financial reporting and decision-making.