Income Statement Example Periodic Inventory System

Companies do not record their unique sales during the period to debit but rather perform a physical count at the end and from this reconcile their accounts.

Income statement example periodic inventory system. How a periodic inventory system works because the physical accounting for all goods and products in stock is so time consuming most companies conduct them sparingly which often means once a year or maybe up to three or four times per year. Instructions on how to create the gross profit section of an partial income statement using the periodic system of accounting for inventory. Companies using the periodic inventory method make no attempt to determine the cost of goods sold at the time of each sale. Such many such cost may be charged to the cogs cost of goods sold 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. The statement is the reality. A periodic inventory system is a commonly used alternative to a perpetual inventory system. Periodic inventory system allows a poor control over inventory of a business where you are not accounting for your lost wastage scrap units of inventory.

The company would return to the customer the sales price less the sales discount amount. Periodic system examples include accounting for beginning inventory and all purchases made during the period as credits. Instead they calculate the cost of all the goods sold during the accounting period at the end of the period. Under the periodic inventory system all purchases made between physical inventory counts are recorded in a purchases account.

Gross profit section of income statement periodic system free download as pdf file pdf text file txt or read online for free.