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Discuss the important accounting features of a periodic inventory system including accounts and procedures

Discuss the important accounting features of a periodic inventory system including accounts and procedures

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Answer #1
  • In the periodic inventory system, all the purchases made between physical inventory counts are recorded in the purchases account.
  • When the physical inventory count is done, the stocks in the purchases account is shifted to the inventory account which in turn is adjusted to match with the cost of inventory at the end.
  • Some advantages of periodic inventory system is reduced setup costs and an informed forecasting.
  • Periodic inventory system includes accounting for opening inventory and all purchases as credits.
  • Companies do not account for their sales but do a physical count of inventory at the end and adjust the ending inventory according to the physical count.
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