Chapter 5: 5.3 Perpetual and Periodic Inventory
Selling inventory on account is an _______
accounts receivable
What is the abbreviated formula to compute cost of goods sold in the perpetual inventory system?(2)
beginning inventory+purchases= goods available for sale, goods available for sale - ending inventory= cost of goods sold
In a perpetual inventory system when a company buys inventory it decreases ______ for the amount paid and increases _________ for the amount purchased on account.
cash, accounts payable
In a perpetual inventory account when a company sells inventory it immediately decreases ______ and increases ________.
inventory, cost of goods sold
Instead, the company compute inventory and cost of goods sold at year- end
periodic inventory
Which inventory system is simple and less costly, but doesn't calculate the cost of goods sold until the end of the period?
periodic inventory
When using this method the company continuously updates its cost of goods sold account's balance.
perpetual
When using this method the company continuously updates its inventory account's balance.
perpetual
When using this method this method tends to be used by companies that sell expensive items and/or items where each unit of inventory is unique.
perpetual
When using this method the company continuously updates its revenue account's balance.
perpetual and periodic
Which inventory system always updates the accounting inventory and cost of goods sold?
perpetual inventory
What is a temporary account in the periodic inventory system?
purchases
In a periodic inventory system when a company BUYS inventory it increases a temporary account called ________ and it decreases ______ for the amount paid and increases ________ for the amount purchased on account.
purchases, cash, accounts payable
In a periodic inventory system when a company SELLS inventory it immediately increases _______ and either increases _____ for the amount collected and increases ________ for the amount sold to customers on account.
sales revenue, cash, accounts receivable
In a perpetual inventory account when a company sells inventory it immediately increases __________ and either ________ for the amount collected and increases _________ for the amount sold to customers on account.
sales revenue, cash, accounts receivable
In a periodic inventory system use a ____________ account to record shipping charges paid to acquire inventory.
Freight in
When a company buys inventory, it increases a temporary account called "Purchases"2 and it (i) decreases cash for the amount paid and (ii) increases accounts payable for the amount purchased on account. The company does not increase the inventory account's balance when it buys inventory.
Periodic inventory
When a company buys inventory, it immediately increases its inventory account by all of the costs associated with acquiring inventory and preparing it for sale (e.g., invoice price, shipping charges to obtain inventory, packaging it for sale, etc.) and it (i) decreases cash for the amount paid and (ii) increases accounts payable for the amount purchased on account.
Perpetual inventory