Inventory Basics – Taking Inventory and the Periodic Inventory System

Questions to focus on:

  • How do we calculate the Cost of Goods Sold in a business that utilizes the periodic system?
  • What makes up the cost of goods purchased?
  • What are the key journal entries one should be familiar with in the periodic system?
  • What types of business would use the periodic system?
  • What has enabled more companies to move to the perpetual system?

Determining ownership of inventory – FOB shipping point vs. FOB destination

Calculating the Cost of Goods Sold:
BEGINNING INVENTORY + COST OF GOODS PURCHASED –COST OF GOODS AVAILABLE FOR SALE – ENDING INVENTORY = COST OF GOODS SOLD