MANAGEMENT

Detailed explanation-1: -Periodic inventory is an accounting stock valuation practice that’s performed at specified intervals. Businesses physically count their products at the end of the period and use the information to balance their general ledger.

Detailed explanation-2: -As an accounting method, periodic inventory takes inventory at the beginning of a period, adds new inventory purchases during the period, and deducts ending inventory to derive the cost of goods sold (COGS). It is both easier to implement and cost-effective by companies that use it, which are usually small businesses.

Detailed explanation-3: -The periodic inventory system uses an occasional physical count to measure the level of inventory and the cost of goods sold.

Detailed explanation-4: -A periodic inventory system is best suited for smaller businesses that don’t keep too much stock in their inventory. For such businesses, it’s easy to perform a physical inventory count. It’s also far simpler to estimate the cost of goods sold over designated periods of time.

Detailed explanation-5: -Under the periodic inventory system, all purchases made between physical inventory counts are recorded in a purchases account. When a physical inventory count is done, the balance in the purchases account is then shifted into the inventory account, which in turn is adjusted to match the cost of the ending inventory.