Periodic Inventory Required Reading Chapter 11

Periodic Inventory One of the two major ways of accounting for inventory In periodic inventory, the cost of inventory is only determined once per year. At the end of the accounting year, a physical inventory, or count, is taken We assume that our inventory levels will more or less be the same over the year.

Periodic Inventory Beginning Inventory +Merchandise Purchased =Total goods available for sale -Merchandise Sold =Ending Inventory The inventory figure here will go on the balance sheet as a current asset.

AND… Cost of beginning inventory +Cost of merchandise purchased -Cost of ending inventory =Cost of merchandise sold This figure will go to the income statement in a new section called “Cost of goods sold”.

Accounts Merchandise Inventory – In the periodic system, this account shows the amount of inventory on hand at the beginning of the accounting period. A current asset. Purchases – An expense account where ongoing purchases of inventory for resale are recorded.

Accounts (continued) Sales – The name for the revenue account in a merchandising business Freight-in – Transportation costs on incoming merchandise. This includes any customs charges and duty.