ECONOMICS

Detailed explanation-1: -A periodic inventory system is a form of inventory valuation where the inventory account is updated at the end of an accounting period rather than after every sale and purchase. The method allows a business to track its beginning inventory and ending inventory within an accounting period.

Detailed explanation-2: -Answer and Explanation: The statement is TRUE. In the perpetual inventory system, inventory purchases are recorded in the inventory asset balance sheet account, and the income statement expense (Cost of Goods Sold) is only recorded as and when goods are sold.

Detailed explanation-3: -Continuous inventory keeps a constant track of quantities; as soon as they get below a cutoff level, the store orders more. Periodic inventory has to be done with computers, because it’s too difficult and time consuming to constantly track inventory by physical counts unless the number of items is very small.

Detailed explanation-4: -What is the formula for closing entries under the periodic inventory method? The debit, merchandise inventory (ending), is subtracted from that total to determine the balancing debit to the cost of goods sold. For convenience, merchandise inventory is labeled beginning and ending.