The periodic inventory system operates by:
A) Keeping track of inventory as it comes into the organisation and as it leaves.
B) Counting inventory at regular intervals to establish how much of each item is on hand.
C) Assuming that the inventory that came in first is the first to be sold.
D) Tracking the cost of specific items of inventory to the products sold by grouping items according to cost drivers.
E) None of the given answers.

Question

Quizplus · Accepted Answer

The periodic inventory system involves counting inventory at regular intervals, typically at the end of an accounting period, to determine the on-hand quantity of each item. This system does not constantly track inventory in and out of the organization, nor does it track the specific cost of items sold. Option A may describe a perpetual inventory system, while option C describes a common assumption (FIFO) used in periodic inventory systems. Option D may describe activity-based costing, but it does not pertain to the periodic inventory system.

The Periodic Inventory System Operates By