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Perpetual vs Periodic Inventory Systems

The document compares a perpetual inventory system to a periodic inventory system. The perpetual system makes journal entries at the time of each transaction to track inventory levels. The periodic system only makes entries periodically to record the cost of goods sold. It shows journal entries under each system for purchases, freight costs, returns, sales, and sales returns. It then provides a numerical example comparing the calculation of cost of goods sold under each method.

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Christy Habel
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280 views5 pages

Perpetual vs Periodic Inventory Systems

The document compares a perpetual inventory system to a periodic inventory system. The perpetual system makes journal entries at the time of each transaction to track inventory levels. The periodic system only makes entries periodically to record the cost of goods sold. It shows journal entries under each system for purchases, freight costs, returns, sales, and sales returns. It then provides a numerical example comparing the calculation of cost of goods sold under each method.

Uploaded by

Christy Habel
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd

Perpetual Inventory System

Date Particulars
Jan. 1, 20x1
i. Inventory
Accounts Payable
To record the acquisition of goods on account.

ii. Inventory
Cash
To record freight costs incurred on purchases.

iii. Accounts Payable


Inventory
To record purchase returns.

iv. Accounts Receivable


Sales

Cost of goods sold


Inventory
To record sales on account.

v. Sales returns and allowances


Accounts Receivable

Inventory
Cost of goods sold
To record sales returns.
Periodic Inventory System
Particulars Acct. No. Debit Credit

Purchases 130,000
Accounts Payable 130,000
ds on account.

Freight-in 5,000
Cash 5,000
on purchases.

Accounts Payable 3,000


Purchase returns 3,000

Accounts Receivable 320,000


Sales 320,000

NO ENTRY 128,000
128,000

Sales returns and allowances 2,500


Accounts Receivable 2,500

NO ENTRY 1,000
1,000
Perpetual Inventory System Periodic Inventory System

Cost of goods sold Beginning Inventory


iv. 128,000 Purchases
1,000 v. Freight-in
127,000 ending balance Purchase returns
Purchase discounts
Net purchases
Total goods available for sale
Ending Inventory
Cost of goods sold
₱9,000.00
₱130,000.00
5,000.00
-3,000.00
0.00
132,000.00
141,000.00
-14,000.00
₱127,000.00
Entity A
Statement of Cost of goods sold and Gross profit
For the period ended January 31, 20x1

Sales ₱320,000.00
Sales returns and allowances -2,500.00
Net Sales 317,500.00
Cost of goods sold:
Beginning Inventory ₱9,000.00
Add: Net purchases 132,000.00
Total goods available for sale 141,000.00
Less: Ending Inventory -14,000.00 -127,000.00
Gross Profit ₱190,500.00

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