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 inventory accounting method continuously updates the cost of goods sold and inventory balances with each purchase and sale transaction?

Specific identification method

Periodic inventory system

Weighted average cost method

Perpetual inventory system

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Verified step by step guidance

Understand the concept of inventory accounting methods: Inventory accounting methods are used to track and manage the cost of goods sold (COGS) and inventory balances. These methods differ in how and when they update inventory records.

Learn about the perpetual inventory system: The perpetual inventory system continuously updates inventory records and the cost of goods sold after each purchase or sale transaction. This system uses real-time tracking, often supported by technology such as barcode scanners or inventory management software.

Compare the perpetual inventory system with other methods: The periodic inventory system updates inventory records and COGS only at the end of an accounting period, while the weighted average cost method calculates an average cost for inventory items but does not inherently update records continuously.

Understand why the perpetual inventory system is the correct answer: Among the options provided, the perpetual inventory system is the only method that continuously updates inventory balances and COGS with each transaction, making it distinct from the other methods listed.

Review practical applications: Businesses that require real-time inventory tracking, such as retail stores or e-commerce platforms, often use the perpetual inventory system to ensure accurate and timely updates to their inventory records.