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 of the following best describes how purchases from suppliers are recorded under the periodic inventory system?

Purchases are not recorded until the goods are sold.

Purchases are recorded in a separate 'Purchases' account and not directly in the Inventory account.

Purchases are immediately added to the Inventory account as they occur.

Purchases are only recorded at the end of the accounting period.

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Verified step by step guidance

Understand the periodic inventory system: In this system, inventory is updated periodically, typically at the end of the accounting period, rather than continuously as transactions occur.

Recognize how purchases are treated: Under the periodic inventory system, purchases are recorded in a separate 'Purchases' account rather than directly in the Inventory account. This is because inventory updates are deferred until the end of the period.

Distinguish from perpetual inventory system: In a perpetual inventory system, purchases are immediately added to the Inventory account as they occur, which is different from the periodic system.

Clarify timing of recording: Purchases are recorded when they occur, but the Inventory account itself is updated only at the end of the accounting period based on a physical count and adjustments.

Summarize the correct answer: The correct description is that purchases are recorded in a separate 'Purchases' account and not directly in the Inventory account under the periodic inventory system.