What is the major difference between a periodic and perpetual inventory system?

Question

What is the major difference between a periodic and perpetual inventory system?

a.) Under the periodic inventory system, the purchase of inventory will be debited to the Purchases account.

b.) Under the periodic inventory system, no journal entry is recorded at the time of the sale of inventory for the cost of the inventory.

c.) Under the periodic inventory system, all adjustments such as purchases returns and allowances and discounts are reconciled at the end of the accounting period.

d.) All of these answers are correct.

Explanation / Answer

Answer is d. All of these answers are correct.

Explanation:

Under periodic inventory system inventory account is not updated for each purchase and each sale. All purchases are debited to purchases account. At the end of the period, the total in purchases account is added to the beginning balance of the inventory to compute cost of goods available for sale. The ending inventory is determined at the end of the period by a physical count and subtracted from the cost of goods available for sale to compute the cost of goods sold.

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