The essence of the perpetual method of accounting for inventory is:
A) it produces a higher gross profit than the periodic method.
B) a stocktake is performed.
C) cost of sales is calculated at the end of the accounting period.
D) all movements in each item of stock are tracked via detailed inventory records.

Question

Quizplus · Accepted Answer

The perpetual method of accounting for inventory involves keeping detailed inventory records that track all movements in each item of stock. This allows for real-time recording of cost of sales, as well as more accurate and efficient inventory management. While a stocktake may still be performed, it is not the essence of the perpetual method. The perpetual method may or may not produce a higher gross profit than the periodic method, as it depends on the specific circumstances and accuracy of the records. Cost of sales is not calculated at the end of the accounting period, but rather continuously updated throughout the period.

The Essence of the Perpetual Method of Accounting for Inventory