The periodic inventory system requires updating the inventory account only at the end of the period to reflect the quantity and cost of both the goods available and the goods sold.

Question

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In the periodic inventory system, the inventory account is updated only at the end of the period. This means that inventory purchases and sales are not recorded in real-time, but rather only at the end of the period when a physical count is taken. The cost of goods sold is then calculated based on the difference between the beginning inventory, plus purchases made during the period, and the ending inventory. This method is in contrast to the perpetual inventory system, which updates inventory balances after each transaction.

The Periodic Inventory System Requires Updating the Inventory Account Only