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

Under a perpetual inventory system, how is the Cost of Goods Sold (COGS) determined when a sale occurs?

COGS is calculated only at the end of the accounting period using a physical count.

COGS is not recorded until payment is received from the customer.

COGS is estimated using the predetermined overhead rate.

COGS is updated continuously with each sale based on the actual cost of inventory sold.

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Verified step by step guidance

Understand the perpetual inventory system: In a perpetual inventory system, inventory records are updated continuously to reflect purchases and sales. This system provides real-time tracking of inventory levels and costs.

Recognize the role of Cost of Goods Sold (COGS): COGS represents the direct costs associated with the production or purchase of goods that are sold during a specific period. It is an expense recorded on the income statement.

Identify how COGS is determined in a perpetual inventory system: When a sale occurs, the system automatically calculates and updates COGS based on the actual cost of the inventory sold. This is done in real-time, ensuring accurate financial reporting.

Contrast with other methods: Unlike periodic inventory systems, where COGS is calculated at the end of the accounting period using a physical count, the perpetual system continuously updates COGS without waiting for a physical inventory count.

Understand the implications: The perpetual inventory system provides timely and accurate financial information, which is crucial for decision-making and maintaining proper inventory control.