This preview shows pages 1–2. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: LECTURE NOTES -The Periodic Inventory System Characteristics of the PERIODIC Inventory System: 1. Merchandise Inventory account is idle throughout the accounting period and is updated ONLY AT THE END OF THE PERIOD. 2. The beginning inventory (last periods ending) $value remains in the account until the end of the period. At this time, a PHYSICAL COUNT of goods is performed so that a $Value of Ending Inventory can be determined. The Merchandise Inventory is updated with this Ending $Value. 3. Periodic inventory maintains a LOW level of CONTROL because the Inventory account is only updated at the end of the period and is not constantly updated (as in a Perpetual system) 4. BECAUSE the control level is low, the Periodic System is most appropriate for LOW-VALUE, HIGH-VOLUME goods (Ex: Dollar Store items). 5. The Periodic System uses the following new accounts: PURCHASES this account is used for purchases of inventory from a supplier (remember that...
View Full Document
- Fall '10