{"id":199601,"date":"2025-03-12T07:20:45","date_gmt":"2025-03-12T07:20:45","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=199601"},"modified":"2025-03-12T07:20:48","modified_gmt":"2025-03-12T07:20:48","slug":"if-a-company-determines-cost-of-goods-sold-each-time-a-sale-occurs","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/03\/12\/if-a-company-determines-cost-of-goods-sold-each-time-a-sale-occurs\/","title":{"rendered":"If a company determines cost of goods sold each time a sale occurs"},"content":{"rendered":"\n

If a company determines cost of goods sold each time a sale occurs, it<\/p>\n\n\n\n

a.must have a computer accounting system.<\/p>\n\n\n\n

b.uses a combination of the perpetual and periodic inventory systems.<\/p>\n\n\n\n

c.uses a periodic inventory system.<\/p>\n\n\n\n

d.uses a perpetual inventory system.<\/p>\n\n\n\n

The correct answer and explanation is :<\/strong><\/mark><\/p>\n\n\n\n

Correct Answer:<\/h3>\n\n\n\n

d. uses a perpetual inventory system.<\/strong><\/p>\n\n\n\n

Explanation:<\/h3>\n\n\n\n

A company that determines the cost of goods sold (COGS) each time a sale occurs<\/strong> uses a perpetual inventory system<\/strong>. This system continuously updates inventory records and cost data in real time, reflecting changes after every transaction, whether it is a sale, return, or purchase.<\/p>\n\n\n\n

How the Perpetual Inventory System Works<\/strong><\/h4>\n\n\n\n

Under a perpetual inventory system<\/strong>, each sale triggers an immediate update in inventory records. When a sale occurs:<\/p>\n\n\n\n

    \n
  1. The inventory balance decreases<\/strong> by the quantity sold.<\/li>\n\n\n\n
  2. The COGS is recorded simultaneously<\/strong> with the sales transaction.<\/li>\n\n\n\n
  3. The accounting system updates inventory<\/strong> to reflect real-time stock levels.<\/li>\n<\/ol>\n\n\n\n

    This process contrasts with the periodic inventory system<\/strong>, where inventory updates happen only at the end of an accounting period through a physical count. In the periodic system, COGS is calculated using the formula:<\/p>\n\n\n\n

    [
    COGS = \\text{Beginning Inventory} + \\text{Purchases} – \\text{Ending Inventory}
    ]<\/p>\n\n\n\n

    Since the periodic system does not track COGS after every sale, it cannot determine<\/strong> COGS immediately after each transaction.<\/p>\n\n\n\n

    Advantages of the Perpetual Inventory System<\/strong><\/h4>\n\n\n\n
      \n
    • Accurate Inventory Tracking<\/strong>: Helps prevent stock shortages or overages.<\/li>\n\n\n\n
    • Real-Time Financial Information<\/strong>: Businesses get instant insights into inventory costs.<\/li>\n\n\n\n
    • Efficient Loss Control<\/strong>: Detects theft or discrepancies quickly.<\/li>\n<\/ul>\n\n\n\n

      Who Uses Perpetual Inventory?<\/strong><\/h4>\n\n\n\n

      Retailers, e-commerce businesses, and manufacturers often use perpetual inventory systems, especially with barcode scanning and computerized accounting software<\/strong> to automate updates.<\/p>\n\n\n\n

      Thus, since COGS is determined immediately upon each sale<\/strong>, the correct answer is (d) uses a perpetual inventory system<\/strong>.<\/p>\n","protected":false},"excerpt":{"rendered":"

      If a company determines cost of goods sold each time a sale occurs, it a.must have a computer accounting system. b.uses a combination of the perpetual and periodic inventory systems. c.uses a periodic inventory system. d.uses a perpetual inventory system. The correct answer and explanation is : Correct Answer: d. uses a perpetual inventory system. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-199601","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/199601","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=199601"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/199601\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=199601"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=199601"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=199601"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}