Chapter 6: Accounting for retailing

Question 1

Perpetual inventory systems

Answer 1

• Involves keeping current and continuous records of all inventory transactions
• Separate card or computer file kept for each inventory item
• Uses inventory and cost of sale

Question 2

Periodic Inventory system

Answer 2

• Beginning balance of inventory not changed until the end of the period
• Purchases recorded in a purchases account
• Only one entry is made for sales to record the selling price of the goods sold
• Ending balance determined by stock count
• In the periodic inventory system the inventory account must be updated as part of the closing process