Which of the following line items would appear on the income statement of a company that uses the periodic inventory system,but not on that of a company that uses the perpetual inventory system?
A) Net Sales Revenue
B) Cost of Goods Sold
C) Cost of Goods Available for Sale
D) Operating expenses

Question

Quizplus · Accepted Answer

The periodic inventory system does not keep track of inventory on a real-time basis, so the cost of goods sold and cost of goods available for sale are calculated at the end of the accounting period based on a physical inventory count. These line items would appear on both the income statements of companies using both inventory systems. However, the perpetual inventory system updates inventory and cost of goods sold on a continuous basis, so the cost of goods sold would be a line item on the income statement for the perpetual inventory system, while the periodic inventory system only reports the cost of goods available for sale, which is needed to calculate the cost of goods sold. Therefore, the correct answer is C, Cost of Goods Available for Sale. Net Sales Revenue and operating expenses would appear on both income statements.

Which of the Following Line Items Would Appear on the Income