Two Systems Are Used in Accounting for Inventory-Perpetual and Periodic

question 113

Multiple Choice

Two systems are used in accounting for inventory-perpetual and periodic. Which of the following statements is correct?

• A) In a perpetual inventory system, the inventory account is not changed for each purchase during the accounting period.
• B) In a perpetual inventory system, cost of goods sold is recorded at the time of each sale during the accounting period.
• C) In a periodic inventory system, cost of goods sold is developed from a comparison of beginning inventory and ending inventory only.
• D) In a periodic inventory system, the inventory account is increased for each purchase during the accounting period.

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Definitions:

Intangible Costs

Expenses or costs that are not easily quantifiable, including things like brand value, intellectual property, or goodwill.

Variable Costs

Costs that change in direct proportion to sales.

Price Elastic

Refers to how sensitive the demand for a product is to changes in its price; high elasticity indicates demand significantly changes with price adjustments.

Price Inelastic

Describes a situation where the demand for a product does not significantly change with a change in its price.