Question

Which of the following statements is correct?

a. A periodic inventory system computes cost of goods sold each time a sale occurs.
b. A perpetual inventory system computes cost of goods sold only at the end of the accounting period.
c. A periodic inventory system provides better control over inventories than does a perpetual inventory system.
d. A perpetual inventory system provides better control over inventories than does a periodic inventory system.

Answer 1

Answer:

The correct answer is D

Explanation:

Under the periodic inventory system, the companies evaluate the COGS (Cost of goods sold) at the end of the accounting year or the fiscal period. And the details of the goods on hand which are not available, in this system.

And under the perpetual inventory system, this offer better control over the inventories rather than the periodic inventory system. And this system requires the COGS (Cost of goods sold) to be acknowledged at the time of sale and it contain the more accurate value of goods on hand.

Therefore, the statement which is correct is that the perpetual inventory system, offer better control over inventories.