Question

Smaller businesses invest in a periodic inventory system because of the ability to determine quantities of inventory on hand after each purchase and sale of merchandise inventory. True or False

Answer 1

Under Periodic Inventory system physical inventory counting is done and then value of closing inventory is updated. between two physical inventory counting whatever purchases being made is recorder under purchase account and then when next physical counting is done closig inventory is recorded as per counting and difference is termed as cost of goods sold.

Cost of goods sl under periodic inventory:

Beginning Inventory + purchases - Closing inventory as per counting = Cost of goods sold.

AS in smaller business there are less item and to have accurate records of what stock consumed in a period and to have a daily insight to the business periodic inventory system is being followed.

it does not give you proper record after each purchase and sale transactions. it only give record when physical counting is being done so th the statement is false.