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

1. Under the perpetual inventory system, how is the Cost of Goods Sold (COGS) determined at the time of each sale compared to the periodic inventory system?

COGS is updated continuously in both systems.

COGS is never recorded in the perpetual system.

COGS is updated continuously with each sale in the perpetual system, while in the periodic system, COGS is calculated at the end of the period.

COGS is only calculated at the end of the period in both systems.

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Verified step by step guidance

Step 1: Understand the perpetual inventory system. In this system, inventory records are updated continuously to reflect purchases and sales. The Cost of Goods Sold (COGS) is determined and recorded at the time of each sale, providing real-time tracking of inventory and expenses.

Step 2: Understand the periodic inventory system. In this system, inventory records are not updated continuously. Instead, the COGS is calculated at the end of the accounting period by using the formula: \( \text{COGS} = \text{Beginning Inventory} + \text{Purchases} - \text{Ending Inventory} \).

Step 3: Compare the two systems. In the perpetual system, COGS is updated immediately with each sale, reflecting the cost of the items sold. In the periodic system, COGS is calculated only at the end of the period, based on the inventory count and purchases during the period.

Step 4: Recognize the operational differences. The perpetual system requires advanced technology, such as point-of-sale systems, to track inventory and COGS in real-time. The periodic system is simpler but less accurate for day-to-day inventory management.

Step 5: Apply the correct understanding. The correct answer is that COGS is updated continuously with each sale in the perpetual system, while in the periodic system, COGS is calculated at the end of the period.