In a perpetual inventory system, an inventory flow assumption is used primarily for determining which costs to use in:
A) Recording purchases of inventory.
B) Recording the cost of goods sold.
C) Recording sales revenue.
D) Forecasts of future operating results.

Question

Quizplus · Accepted Answer

In a perpetual inventory system, the inventory flow assumption is used primarily for determining which costs to use in recording the cost of goods sold. This is because the perpetual inventory system maintains a continuous record of inventory balances and requires adjustments to cost of goods sold at the time of each sale based on the cost of the specific units sold. Therefore, the inventory flow assumption will determine which cost of the available inventory is used to calculate the cost of goods sold.

In a Perpetual Inventory System, an Inventory Flow Assumption Is