Final answer:
In a periodic inventory system, the cost of purchases is temporarily recorded as an asset in a Purchases account, which is crucial to calculating the cost of goods sold, not just increasing inventory account.
Step-by-step explanation:
In a periodic inventory system, the cost of purchases is recognized in different ways throughout the inventory and accounting cycle. At the time of purchase, the cost is recorded as an increase in an asset account, typically referred to as Purchases. This asset account is used temporarily to accumulate the costs of inventory purchases during the accounting period. At the end of the accounting period, these costs are then transferred to the inventory account through an adjusting entry, and the inventory account is eventually used to calculate the cost of goods sold (COGS).
Therefore, the correct answer to this question is: In a periodic inventory system, the cost of purchases is recognized as (c) an integral part of the calculation of cost of goods sold. This approach ensures that the ending inventory and the cost of goods sold are accurately reported on the financial statements. It is important not to confuse temporary purchases increases with the permanent increase in the inventory asset account.