Question

One difference between periodic and perpetual inventory systems is: A) Cost of goods sold is not recorded under a perpetual system until the end of the period. B) Cost of goods sold is not recorded under a periodic system until the end of the period. C) Cost of goods sold is always significantly higher under a perpetual system. D) Cost of goods sold is always significantly higher under a periodic system.

Answer 1

Answer:

B) Cost of goods sold is not recorded under a periodic system until the end of the period.

Explanation:

The periodic inventory system refers to an inventory system in which a physical count of inventory is carried out occasionally in order to determine the inventory level and cost of goods sold (COGS). Therefore, the inventory account and cost of goods sold account are not recorded under a periodic system until the end of this occasional period which may be once a month, once a quarter, or once a year.

On the other hand, the perpetual inventory system is an inventory system in which inventory balances and COGS are continuously updated automatically whenever a product is received or sold using digital technology. Therefore, under perpetual inventory system, purchases and cost of goods sold are continuously recorded automatically without having to wait till the end of any particular period.

Therefore, one difference between periodic and perpetual inventory systems is: B) Cost of goods sold is not recorded under a periodic system until the end of the period.