Asked by: Vida Piazzabusiness and finance debt factoring and invoice discounting
When LIFO is used with the periodic inventory system?
Last Updated: 29th April, 2020
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Similarly one may ask, when would you use a periodic inventory system?
Under the periodic inventory system, all purchases made between physical inventory counts are recorded in a purchases account. When a physical inventory count is done, the balance in the purchases account is then shifted into the inventory account, which in turn is adjusted to match the cost of the ending inventory.
Also Know, what is the major difference between the periodic and perpetual inventory system? The periodic system relies upon an occasional physical count of the inventory to determine the ending inventory balance and the cost of goods sold, while the perpetual system keeps continual track of inventory balances. There are a number of other differences between the two systems, which are as follows: Accounts.
Accordingly, what is calculated only at the end of a period in the periodic inventory method?
Under periodic inventory system inventory account is not updated for each purchase and each sale. All purchases are debited to purchases account. The ending inventory is determined at the end of the period by a physical count and subtracted from the cost of goods available for sale to compute the cost of goods sold.
What are the advantages of periodic inventory system?
An advantage of the periodic inventory system is that there is no need to have separate accounting for raw materials, work in progress, and finished goods inventory. All that is recorded are purchases.