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 included in the calculation of Cost of Goods Sold (COGS) under a periodic inventory system?

Inventory is continuously updated in real time

Cost of goods sold is updated after every purchase

Purchases made during the period

Inventory losses detected immediately after each sale

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Verified step by step guidance

Understand the periodic inventory system: In this system, inventory is not updated in real-time. Instead, inventory levels and Cost of Goods Sold (COGS) are determined at the end of the accounting period.

Recognize the formula for COGS under a periodic inventory system: \( \text{COGS} = \text{Beginning Inventory} + \text{Purchases} - \text{Ending Inventory} \). This formula highlights that purchases made during the period are included in the calculation.

Note that inventory losses are not immediately detected under a periodic inventory system. Losses are typically identified during a physical count at the end of the period and are factored into the ending inventory value.

Understand that purchases made during the period are a key component of the COGS calculation. These purchases represent the cost of acquiring goods intended for resale during the accounting period.

Clarify that inventory is not continuously updated in real-time under a periodic inventory system. Instead, updates occur after a physical count at the end of the period, which contrasts with a perpetual inventory system where updates happen after every transaction.