WEEK 5 DISCUSSION 2 - WEEK 5 DISCUSSION 2 Perpetual versus...

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WEEK 5 DISCUSSION 2 Perpetual versus Periodic Inventory Systems Describe the perpetual and the periodic inventory systems. How are they different? Are there circumstances in which one system is better than the other? Include real-life examples. Perpetual inventory system is one where merchandise and cost of goods are updated continuously on each sale and purchase transaction. The purchases that are made are automatically deducted from the inventory account, and there are two entries made in the financial reports, one for inventory and one for cost of goods sold. Periodic inventory system is where merchandise and cost of goods sold are not updated automatically, and each purchase is recorded as an entry in the purchase account, with each entry entered individually. The cost of goods sold account does not exist and at the end of the financial period (AccountingExplained.com. 2011). The main differences between the two systems are that although both have an inventory account and a cost of goods sold account, they are updated during different periods. The purchase account and

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