Two systems are used in accounting for inventory-perpetual and periodic. Which of the following statements is correct?
A) In a periodic inventory system, cost of goods sold is developed from a comparison of beginning inventory and ending inventory only.
B) In a perpetual inventory system, the inventory account is not changed for each purchase during the accounting period.
C) In a perpetual inventory system, cost of goods sold is recorded at the time of each sale during the accounting period.
D) In a periodic inventory system, the inventory account is increased for each purchase during the accounting period.

Question

Quizplus · Accepted Answer

In a perpetual inventory system, cost of goods sold is recorded at the time of each sale during the accounting period. This is because the system continuously updates the inventory records in real-time as goods are bought and sold. In contrast, in a periodic inventory system, cost of goods sold is developed from a comparison of beginning inventory and ending inventory only, and does not track individual purchases and sales throughout the accounting period. Therefore, option A and D are incorrect. Option B is also incorrect, as the inventory account is updated for each purchase under both perpetual and periodic inventory systems.

Two Systems Are Used in Accounting for Inventory-Perpetual and Periodic