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The assignment of costs to cost of goods sold and inventory using weighted average usually yields different results depending on whether a perpetual or periodic system is used.
Weighted Average
A calculation that takes into account the varying degrees of importance of the numbers in a data set.
Perpetual System
An inventory accounting system that records the sale or purchase of inventory immediately through the use of computerized point-of-sale systems and enterprise asset management software.
Periodic System
An inventory system that updates the inventory levels in the accounting records at specific intervals, typically at the end of an accounting period.
- Comprehend the effect of inventory valuation techniques (FIFO, LIFO, Weighted Average) on financial reports.
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Learning Objectives
- Comprehend the effect of inventory valuation techniques (FIFO, LIFO, Weighted Average) on financial reports.
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