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Which of the following statements best describes how the cost of goods sold (COGS) is determined under the perpetual inventory system compared to the periodic inventory system?
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4. Merchandising Operations
Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory
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In a periodic inventory system, beginning inventory plus the cost of goods purchased equals which of the following?
A
Ending inventory
B
Cost of goods available for sale
C
Gross profit
D
Cost of goods sold
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Understand the components involved in inventory accounting under a periodic inventory system: Beginning Inventory, Purchases, Ending Inventory, and Cost of Goods Sold (COGS).
Recall the fundamental inventory equation: Beginning Inventory + Purchases = Cost of Goods Available for Sale.
Recognize that Cost of Goods Available for Sale represents the total inventory that could be sold during the period before accounting for ending inventory.
Know that Ending Inventory is subtracted from Cost of Goods Available for Sale to calculate Cost of Goods Sold, using the formula: \(\text{COGS} = \text{Cost of Goods Available for Sale} - \text{Ending Inventory}\).
Therefore, Beginning Inventory plus Purchases equals Cost of Goods Available for Sale, which is the correct answer to the problem.
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