When a company uses the periodic inventory system in accounting for its merchandise inventory, which of the following is true?
A) Purchases are recorded in the cost of goods sold account.
B) The inventory account is updated after each sale.
C) Cost of goods sold is computed at the end of the accounting periods rather than at each sale.
D) The inventory account is updated throughout the year as purchases are made.

Question

Quizplus · Accepted Answer

In a periodic inventory system, the cost of goods sold is calculated at the end of the accounting period by taking the beginning inventory, adding purchases, and subtracting the ending inventory. This system does not require updating the inventory account after each sale or purchase throughout the period.

When a Company Uses the Periodic Inventory System in Accounting