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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

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BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

What is the main difference between the periodic system of accounting for inventory and the perpetual system of accounting for inventory?

To determine

Explain the main difference between the periodic system of accounting for inventory and perpetual system of accounting for inventory.

Explanation

Periodic inventory system: This is a system of accounting for inventory, where the quantity of inventory is recorded on a periodic basis. The up-to-date records are not maintained either for inventory or for cost of goods sold. The figure for inventory is determined only at the end of financial year or the balance sheet date. This physical count is the amount that appears in the records. This physical count is called physical inventory.

Perpetual inventory system: Under this system of accounting for inventory, the inventory bought and sold is recorded when they are bought and sold. The up-to-date records are maintained for inventory and cost of goods sold. The records show the accurate figure at any point of time during the financial year...

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