When using periodic inventory,the closing process begins with closing out the Beginning inventory to Cost of sales.The second step is to set up the Ending inventory by debiting Cost of sales and crediting Inventory.

Question

Quizplus · Accepted Answer

When using periodic inventory, the closing process begins with closing out the Purchases account to Cost of Sales, not Beginning inventory. The second step is to calculate the cost of ending inventory by taking physical count of inventory and deducting it from the sum of Beginning inventory and Purchases. This cost of ending inventory is then added to the Cost of Sales account to get the total cost of goods sold, and the Inventory account is credited with the cost of ending inventory.

When Using Periodic Inventory,the Closing Process Begins with Closing Out