In a periodic inventory system, when is the cost of goods sold typically calculated?

In a periodic inventory system, when is the cost of goods sold typically calculated?

• A. Immediately upon each sale
• B. At the end of the period
• C. Monthly
• D. Quarterly

Answer: (B)

Cost of goods sold is determined at the end of the accounting period. In a periodic inventory system, COGS isn’t tracked with each sale—instead, purchases are recorded and ending inventory is updated only at period end after a physical count. Once you know the ending inventory, COGS is calculated as beginning inventory plus purchases minus ending inventory. This timing matches reporting periods (monthly, quarterly, or annually) and relies on a final inventory count to determine what was sold. For example, if beginning inventory is 1,000, purchases are 3,500, and ending inventory is 900, then COGS = 1,000 + 3,500 − 900 = 3,600.

Cost of goods sold is determined at the end of the accounting period. In a periodic inventory system, COGS isn’t tracked with each sale—instead, purchases are recorded and ending inventory is updated only at period end after a physical count. Once you know the ending inventory, COGS is calculated as beginning inventory plus purchases minus ending inventory. This timing matches reporting periods (monthly, quarterly, or annually) and relies on a final inventory count to determine what was sold. For example, if beginning inventory is 1,000, purchases are 3,500, and ending inventory is 900, then COGS = 1,000 + 3,500 − 900 = 3,600.