Compare and contrast the perpetual and periodic inventory ...

[jake]

Compare and contrast the perpetual and periodic inventory systems.
 
  What will be an ideal response?

Question 2

In preparing a bank reconciliation, the amount of outstanding checks is added to the balance per bank statement.
 a. True
  b. False
 
   Indicate whether the statement is true or false

[jonathanballen97]

Answer to Question 1

The perpetual and periodic systems should not be confused with the cost flow methods. The perpetual and periodic systems answer the question of when the company will update the inventory account and calculate the cost of goods sold for the period. Given that even a small company might have thousands or even millions of transactions involving inventory, it is an important decision.

The perpetual system is so named because this system updates inventory and records cost of goods sold each time there is a purchase or sale of merchandise. This system is increasing in use because of computer technology and provides managers better controls, but it is more costly to implement.

The periodic inventory system reduces record keeping by recording cost of goods sold only at the end of the period after the unsold units are counted hence the name periodic system.

Answer to Question 2

False