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

The balance of the Cost of Goods Sold account at the end of the year represents:

The total purchases made during the year

The ending inventory value

The gross profit for the year

The total cost of inventory sold during the year

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Verified step by step guidance

Understand the concept of Cost of Goods Sold (COGS): COGS represents the direct costs attributable to the production of goods sold by a company during a specific period. It includes the cost of materials and labor directly used to create the goods.

Recognize that COGS does not represent purchases made during the year. Purchases are part of the calculation but do not directly equate to COGS. COGS is calculated using the formula: \( \text{COGS} = \text{Beginning Inventory} + \text{Purchases} - \text{Ending Inventory} \).

Understand that COGS does not represent the ending inventory value. Ending inventory is the value of unsold goods at the end of the period and is subtracted from the sum of beginning inventory and purchases to calculate COGS.

Clarify that COGS does not represent gross profit. Gross profit is calculated as \( \text{Gross Profit} = \text{Net Sales} - \text{COGS} \). COGS is a component used to determine gross profit but is not the same as gross profit.

Conclude that the balance of the Cost of Goods Sold account at the end of the year represents the total cost of inventory sold during the year. This is the correct interpretation of COGS.