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

If inventory is updated periodically, which method is being used to account for the cost of goods sold?

Just-in-time inventory system

Periodic inventory system

Specific identification method

Perpetual inventory system

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Verified step by step guidance

Understand the concept of inventory systems: Inventory systems are methods used to track and account for inventory levels and the cost of goods sold (COGS). The two main systems are the periodic inventory system and the perpetual inventory system.

Define the periodic inventory system: In this system, inventory is updated periodically, typically at the end of an accounting period. The cost of goods sold is calculated using the formula: \( \text{COGS} = \text{Beginning Inventory} + \text{Purchases} - \text{Ending Inventory} \).

Compare the periodic inventory system to the perpetual inventory system: The perpetual inventory system updates inventory records continuously as transactions occur, whereas the periodic system updates inventory only at specific intervals.

Evaluate the options provided: The 'Just-in-time inventory system' is a strategy to minimize inventory levels, not a method for updating inventory. The 'Specific identification method' is a way to track individual items of inventory, not a system for updating inventory. The 'Perpetual inventory system' updates inventory continuously, which does not match the description of periodic updates.

Conclude that the correct method for updating inventory periodically is the 'Periodic inventory system,' as it aligns with the description provided in the problem.