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

In a perpetual inventory system, the cost of inventory sold is:

Determined only at the end of the accounting period

Calculated using a physical count of inventory at year-end

Recorded immediately at the time of each sale

Ignored until the financial statements are prepared

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Verified step by step guidance

Understand the concept of a perpetual inventory system: In this system, inventory records are updated continuously to reflect additions and subtractions of inventory in real-time.

Recognize that the cost of inventory sold is recorded immediately at the time of each sale. This is a key feature of the perpetual inventory system, as it ensures accurate tracking of inventory and cost of goods sold (COGS).

Contrast this with a periodic inventory system, where inventory and COGS are determined at the end of the accounting period using a physical count.

Note that the perpetual inventory system uses technology, such as barcode scanners or inventory management software, to update inventory records automatically during transactions.

Understand the importance of this system for businesses that require real-time inventory tracking, as it provides timely and accurate financial information for decision-making.