In a periodic inventory system

Question

Quizplus · Accepted Answer

In a periodic inventory system, the cost of merchandise on hand is determined by relating the quantities on hand to records showing each item's original cost. This means that the inventory value is not consistently updated and is only determined at the end of a period through a physical count. Option A is referring to a perpetual inventory system. Option B is incorrect because in a periodic inventory system, the cost of new merchandise is recorded in the temporary Purchases account. Option D is also incorrect because the inventory value is based on a physical count.

In a Periodic Inventory System