Question

When a perpetual inventory system is used, the unit costs of the items sold are known at the date of each sale. In contrast, when a periodic inventory system is used, unit costs are known only at the end of the accounting period. Why are these statements correct?

Answer 1

Answer and explanation:

The statements are correct because using the perpetual inventory system implies recording purchases and returns at the same moment items are received or sold. The Cost of Goods account is updated every time their inventory exists. On the other hand, the periodic inventory system records buying or selling activities following a schedule that could be every month, quarter or once per year. The Cost of Goods account is used occasionally.