Periodic inventory system is defined as.

Periodic inventory system is defined as.

• A. An inventory system that updates continuously with every sale
• B. A system that estimates inventory at year-end only
• C. A system that tracks inventory with a perpetual ledger
• D. An inventory system that requires a physical count to determine quantities on hand

Answer: (D)

Periodic inventory means you don’t update your inventory balance with every sale. Instead, you perform a physical count at the end of the period to determine how much on hand, and you calculate cost of goods sold for the period from Beginning Inventory plus Purchases minus Ending Inventory. Because there’s no real-time tracking, this method is simpler and cheaper and is often used by smaller businesses. In contrast, a perpetual system updates inventory and cost of goods sold after each sale using a running ledger.

Periodic inventory means you don’t update your inventory balance with every sale. Instead, you perform a physical count at the end of the period to determine how much on hand, and you calculate cost of goods sold for the period from Beginning Inventory plus Purchases minus Ending Inventory. Because there’s no real-time tracking, this method is simpler and cheaper and is often used by smaller businesses. In contrast, a perpetual system updates inventory and cost of goods sold after each sale using a running ledger.