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Perpetual Inventory Activity

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Presentation on theme: "Perpetual Inventory Activity"— Presentation transcript:

1 Perpetual Inventory Activity

2 Periodic vs. Perpetual Inventory
What is Periodic Inventory? How did we figure out COGS? When did we actually know our inventory? What do you think Perpetual Inventory System does?

3 Instructions Each piece of paper represents an actual account
Cost of Goods Sold is an Actual Account in this type of Inventory System We do not use calculations to figure out inventory, like we did in the PERIODIC INVENTORY SYSTEM.

4 Instructions Every time we have sales, we have to update the inventory, as well.

5 Instructions/Information
In this type of inventory system we journalize changes in inventory; they are updated all of the time. So is COGS! Each Candy represents $1000 worth of inventory (the cost to buy the merchandise) You sell inventory for 2 times the inventory cost Eg. $1000 of inventory sells for $2000 in sales $6000 worth of inventory means $3000 worth of inventory sold.

6 Group Task Use the candy to you to complete the transactions that are listed below. For the money, just write down the revenue in the proper account, same for sales returns. When you purchase inventory, you will not show the exchange of money for it, we are only looking at revenues and COGS for this activity (Income Statement accounts) You will Construct an Income Statement when completed

7 Group Task REMEMBER: a. Every time we sell inventory it is automatically put into COGS b. Inventory account goes down or up for every transaction c. What happens to COGS if you have sales returns? How does it affect Inventory?

8 Individual Task Journalize all of the transactions that are given in the General Journal Transfer all journal entries into their respective Ledger Accounts Complete a full Income Statement Assume that all purchases and sales are with CASH


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