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Periodic Inventory - Purchasing Summary quiz #1 Flashcards

Periodic Inventory - Purchasing Summary quiz #1
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  • How is Cost of Goods Sold (COGS) calculated in a periodic inventory system, and what role does the physical inventory count play in this process?
    In a periodic inventory system, COGS is calculated at the end of the period using the formula: Beginning Inventory + Purchases - Purchase Discounts - Purchase Returns and Allowances - Ending Inventory = COGS. The ending inventory is determined by a physical count, which is essential because inventory and COGS are not updated continuously during the period.
  • What is the main difference between the periodic and perpetual inventory systems in terms of recording inventory and COGS?
    The main difference is that in a perpetual system, inventory and COGS are updated continuously with each transaction, while in a periodic system, these accounts are only updated at the end of the period after a physical inventory count, and COGS is calculated using accumulated purchase-related accounts.
  • In a periodic inventory system, when is Cost of Goods Sold (COGS) calculated?
    COGS is calculated at the end of the period, not continuously throughout the period.
  • What accounts accumulate balances during the period in a periodic inventory system?
    Purchases, purchase returns and allowances, and purchase discounts accumulate balances during the period.
  • Why is a physical inventory count necessary in a periodic inventory system?
    A physical inventory count is necessary to determine the ending inventory, which is essential for calculating COGS.
  • What is the formula for calculating COGS in a periodic inventory system?
    COGS = Beginning Inventory + Purchases - Purchase Discounts - Purchase Returns and Allowances - Ending Inventory.
  • How does the periodic system differ from the perpetual system in recording inventory and COGS?
    In the periodic system, inventory and COGS are updated only at the end of the period, while in the perpetual system, they are updated continuously with each transaction.
  • What information is always provided in accounting problems involving periodic inventory systems?
    The ending inventory value from a physical count is always provided.
  • In the example given, what role does the T-account play in calculating COGS?
    The T-account helps organize beginning inventory, purchases, discounts, returns, and ending inventory to solve for COGS.
  • What is the impact of purchase discounts and purchase returns on the calculation of COGS?
    Purchase discounts and purchase returns are subtracted from purchases when calculating COGS.