Principles of Financial Accounting · free preview
Perpetual versus Periodic Inventory Systems
Perpetual inventory systems update the inventory account with every purchase and sale, while periodic systems update it only at count time, trading continuous accuracy for lower record-keeping cost.
1. Two philosophies of tracking inventory
Two philosophies of tracking inventory
2. What each system records at a sale
What each system records at a sale
3. Technology tips the balance
Technology tips the balance
4. Choosing between them
Choosing between them
5. Sale entry under perpetual
Under a perpetual inventory system, how many entries record a sale of merchandise?
6. Periodic cost of goods sold
Under a periodic system, how is cost of goods sold determined?
7. Where shrinkage hides
In which system does inventory shrinkage silently inflate the reported cost of goods sold?
8. Real-time gross margin
Which system lets a manager see gross profit on today's sales without waiting for a count?
9. Periodic formula
Complete the formula. Under a periodic system, cost of goods sold equals beginning ____ plus purchases minus ending inventory.
10. Goods available for sale
A store starts the month with 12,000 dollars of inventory and buys 38,000 dollars during the month. Compute goods available for sale in dollars, number only.
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