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