Week 1, DQ2 - COGS. The difference is the timing. Perpetual...

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What types of companies use periodic inventory? Clothing and convenience stores use periodic inventory methods. Due to the volume of sales they do, the periodic method is easier to manage. Simpler put: companies whose sales of products are numerous, with a small unit cost, normally use the periodic method. Drug stores also use this method. What types of companies use perpetual inventory? Companies like Wal-Mart, that need to have an accurate inventory count at all times employ the perpetual inventory method. These companies can also be companies who have fewer sales of products with higher per-unit-costs. What are the similarities and differences between periodic and perpetual inventory systems? Similarities are that they both account for inventory and
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Unformatted text preview: COGS. The difference is the timing. Perpetual is “real-time”. ..in other words, at the time of sale. Periodic is done at the end of a period. In the periodic method, actual inventory is not known throughout most of the year, that is, until the period is over and stock counts are performed. How does each method affect the inventory and cost of sales calculations? The perpetual method employs the average, which is determined once an inventory item is sold. The COGS for each sale is then reached by multiplying the average by the items sold. The periodic method, COGS is a calculation and not a formal account as in the perpetual method. The periodic method does not maintain a running inventory balance during the period....
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This note was uploaded on 08/15/2010 for the course ACCT Acc281 taught by Professor Tontis during the Spring '10 term at DeVry Long Beach.

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