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How are periodic and perpetual inventory systems different?A periodic system requires businesses to obtain a physical count of inventory to determine the quantities on hand. (Miller-Nobles, Mattison, & Matsumura 2018). This system is normally used by smaller retailers such as restaurants and other small businesses. A perpetual system keeps a running computerized record of merchandise inventory-that is, the number of inventory units and the dollar amounts associated with the inventory are perpetually (constantly) updated. This system achieves better control over the inventory. (Miller-Nobles, Mattison, & Matsumura 2018). This system is used by large companies such as grocery stores, which use the barcodes on products sold to keep up with inventory and can be looked at any time to see what isbeing sold. The difference between the two systems is the way the inventory is being verified. Why does a merchandising company prepare a cost of goods section for the income statement?The cost of the goods section is prepared so that a company can show its income from operations, net income, and gross profit of the merchandising company. A merchandising business needs to maintain a high gross profit amount to be considered successful (Miller-Nobles, Mattison, & Matsumura 2018).Provide an example of a perpetual cost of goods section.DateAccount name and ExplicationDebitCreditDec 1Accounts receivable200,000Cash200,000Cash SaleDateAccount Name and ExplicationDebitCreditDec 1Cost of Good Sold2068Merchandise Inventory2068Record the Cost of Goods Sold
Reference:Miller-Nobles, T. L., Mattison, B. L., & Matsumura, E. M. (2018).Horngren’s accounting(12th ed.). Retrieved from