Which of the following statements about cost of goods sold under perpetual and periodic inventory systems is FALSE?

• A. Under the periodic inventory system, inventory records are updated after every purchase and sale.
• B. The perpetual inventory system does not require physical inventory counts to determine cost of goods sold.
• C. Under the perpetual inventory system, cost of goods sold is updated continuously with each sale.
• D. Under the periodic inventory system, cost of goods sold is determined at the end of the accounting period.

Answer: (A)

Verified step by step guidance

1. Understand the two inventory systems: Perpetual and Periodic. The perpetual inventory system continuously updates inventory records and cost of goods sold (COGS) with each transaction, while the periodic inventory system updates inventory and calculates COGS only at the end of the accounting period.
2. Analyze the statement: 'Under the periodic inventory system, inventory records are updated after every purchase and sale.' This is incorrect because the periodic system does not update inventory records continuously; it only updates them at the end of the accounting period.
3. Review the statement: 'The perpetual inventory system does not require physical inventory counts to determine cost of goods sold.' This is true because the perpetual system continuously tracks inventory and COGS, although physical counts may still be performed for accuracy.
4. Evaluate the statement: 'Under the perpetual inventory system, cost of goods sold is updated continuously with each sale.' This is correct because the perpetual system automatically adjusts COGS with every transaction.
5. Assess the statement: 'Under the periodic inventory system, cost of goods sold is determined at the end of the accounting period.' This is accurate because the periodic system calculates COGS after performing a physical inventory count at the end of the period.