Which of the following accounts would be included in the chart of accounts of a merchandising company using the (a) periodic inventory system, (b) perpetual inventory system, or (c) both systems? 1. Purchases 2. Inventory Periodic Inventory System 3. Sales Perpetual Inventory System 4. Purchases Discounts Both Systems 5. Cost of Goods Sold 6. Freight In 7. Delivery Expense
Periodic Inventory System: A periodic inventory system is a form of inventory valuation where the inventory account is updated at the end of an accounting period rather than after every sale and purchase. Under this system, no detailed record of the inventory is being maintained during the year. An actual physical count of the goods remaining on hand is required at the end of each period.
Perpetual inventory system: Under this accounting method for companies moving large amounts of stock. The inventory accounts are constantly updated when buying or selling stock. Another movement in stock is also recorded, such as obsolete or damaged stock raw materials used in the production, and stock transferred to a different locations.
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