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 of Goods Sold, how does the perpetual inventory system differ from the periodic inventory system in recording inventory transactions?

Both systems update inventory and cost of goods sold only at the end of the accounting period.

The perpetual system continuously updates inventory and cost of goods sold with each purchase and sale, while the periodic system updates these accounts only at the end of the period.

Neither system records cost of goods sold in the financial statements.

The perpetual system only updates inventory at the end of the period, while the periodic system updates inventory after every transaction.

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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 materials and labor. It is a key component in determining gross profit.

Learn the perpetual inventory system: In this system, inventory and COGS accounts are updated continuously with each purchase and sale transaction. This provides real-time tracking of inventory levels and costs.

Learn the periodic inventory system: In this system, inventory and COGS accounts are updated only at the end of the accounting period. Businesses perform a physical count of inventory to calculate ending inventory and COGS.

Compare the two systems: The perpetual system provides more detailed and timely information about inventory and COGS, while the periodic system relies on periodic updates and physical counts, which may be less accurate in real-time.

Understand the implications for financial statements: The perpetual system records COGS in the financial statements continuously, while the periodic system records COGS only after the end-of-period adjustments are made.