Which statement best describes the perpetual method of accounting for inventory?

• A. Cost of goods sold is recorded only at the end of the period after a physical inventory count.
• B. Purchases are recorded in a Purchases account, and Inventory is adjusted only at period-end.
• C. Cost of goods sold is recognized when inventory is purchased rather than when it is sold.
• D. Inventory and cost of goods sold are updated for each purchase and each sale as they occur.

Answer: (D)

Verified step by step guidance

1. Understand that the perpetual inventory system continuously updates inventory records and cost of goods sold (COGS) for each transaction.
2. Recognize that under the perpetual method, every purchase of inventory increases the Inventory account immediately.
3. Note that every sale of inventory decreases the Inventory account and simultaneously records the COGS at the time of sale.
4. Contrast this with the periodic method, where inventory and COGS are only updated at the end of the accounting period after a physical count.
5. Conclude that the perpetual method provides real-time tracking of inventory and COGS, reflecting changes as they happen.