MANAGEMENT

Detailed explanation-1: -With a periodic inventory system, a company physically counts inventory at the end of each period to determine what’s on hand and the cost of goods sold. Many companies choose monthly, quarterly, or annual periods depending on their product and accounting needs.

Detailed explanation-2: -One of these is the periodic inventory system. This accounting method requires a physical count of inventory at specific times, such as at the end of the quarter or fiscal year. This means that a company using this system tracks the inventory on hand at the beginning and end of that specific accounting period.

Detailed explanation-3: -It is why physical inventories are necessary, to accurately reflect how many tangible goods are in a store or storage area. After a periodic inventory count, the purchase account records are changed to reflect the accurate monetary accounting of goods based on the number of goods that are physically present.

Detailed explanation-4: -A periodic inventory system only updates the ending inventory balance in the general ledger when a physical inventory count is conducted. Since physical inventory counts are time-consuming, few companies do them more than once a quarter or year.

Detailed explanation-5: -In the periodic inventory system, the inventory verification is done by an actual physical count of the inventory on any given date. So to determine the closing stock a physical count of the inventory (numbers, weight etc.) will be taken. Firms usually do this near the end of the accounting year.