Question

One difference between periodic and perpetual inventory systems is:

Multiple Choice
a.Cost of goods sold is always significantly higher under a perpetual system.
b.Cost of goods sold is not recorded under a perpetual system until the end of the period.
c.Cost of goods sold is always significantly higher under a periodic system.
d.Cost of goods sold is not recorded under a periodic system until the end of the period.

Answer 1

One difference between periodic and perpetual inventory systems is the timing of recording the cost of goods sold. In a perpetual system, the cost of goods sold is continuously updated with each sale, while in a periodic system, it is calculated at the end of the period.

Step-by-step explanation:

One difference between periodic and perpetual inventory systems is that cost of goods sold is not recorded under a perpetual system until the end of the period, while cost of goods sold is not recorded under a periodic system until the end of the period.

In a perpetual inventory system, the cost of goods sold is continuously updated with each sale, providing real-time information about inventory levels and the cost of sold goods. On the other hand, in a periodic inventory system, the cost of goods sold is calculated at the end of the period based on a physical count of inventory.

For example, let's say a business sells a product for $10 and has an inventory of 10 units. In a perpetual system, when a unit is sold, the cost of goods sold is recorded as $10. In a periodic system, the cost of goods sold is only calculated at the end of the period, so the cost of goods sold would be $100 when all 10 units are sold.