Under the periodic inventory system:

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Under the periodic inventory system, an entry must be made at the end of the period to transfer Purchases to Cost of Goods Sold. This is typically done through a closing entry process that calculates the total cost of goods sold for the period and reduces the Purchases account accordingly. Since inventory levels are only updated periodically, the Inventory account may not always be up-to-date and there is no requirement to credit Inventory at the time of a sale. The Purchases account is indeed an asset account, but this fact does not necessarily differentiate the periodic inventory system from other inventory systems.

Under the Periodic Inventory System