In a perpetual inventory system, the flow of inventory cost is:

Question

Quizplus · Accepted Answer

In a perpetual inventory system, the flow of inventory cost first goes through the statement of financial position (as inventory is recorded as an asset) and then through the income statement when the inventory is sold (as the cost of goods sold is recorded as an expense). Choice A is incorrect as inventory cost flows first through the statement of financial position, not the income statement. Choices C and D are incorrect as inventory cost flows through both the statement of financial position and the income statement in a perpetual inventory system.

In a Perpetual Inventory System, the Flow of Inventory Cost