Under the periodic inventory system an income statement cannot be prepared without a/an ____________. It is only after a/an ___________ that the cost of sales can be estimated.

Question

Quizplus · Accepted Answer

Under the periodic inventory system, inventory is not continuously tracked, so a physical count or stocktake is required to determine the ending inventory balance. Once the ending inventory is known, the cost of goods sold (or cost of sales) can be calculated by subtracting the beginning inventory from the sum of the purchases and the ending inventory. Without a stocktake, the cost of sales cannot be accurately determined, and therefore an income statement cannot be prepared. A virus scan, error check, or audit are not directly related to the inventory system and would not have an impact on preparing an income statement under the periodic inventory system.

Under the Periodic Inventory System an Income Statement Cannot Be