Wize University Introduction to Financial Accounting Textbook > Merchandising

Recording Cost of Goods Sold - Periodic Inventory

Recording Cost of Goods Sold (Periodic)

Since inventory and cost of goods sold are not continuously updated under the periodic system, an adjusting journal entry is required at the end of the accounting period to bring these accounts up to date.

Computing Cost of Good Sold

Image illustrating Recording Cost of Goods Sold (Periodic)

Adjusting Inventory and COGS

Adjust beginning inventory to ending inventory
Debit COGS using formula to find the amount
Reduce all temporary accounts to zero
Purchases: ________
Purchase discounts: ________
Purchase returns and allowances: ________
Freight-in: ________

Example: Recording Cost of Goods Sold (Periodic)

Prepare the adjusting journal entry to record cost of goods sold at the end of the year.

Additional information:

Beginning inventory: $40,000
Purchases: $90,000
Purchase returns and allowances: $5,000
Purchase discounts: $3,500
Freight in: $750
Ending inventory: $48,500

Practice: Recording Cost of Goods Sold

ABC Inc. is a furniture retailer in Seattle, management needs your help to prepare its journal entries for the year before preparing its financial statements. The following transactions took place during January 2020. The company uses the periodic inventory system.

Additional information:

Inventory on January 1st totalled $60,000
A physical count of inventory on January 31st revealed that inventory balance was $37,500.

Prepare the journal entry to adjust inventory and cost of goods sold at the end of January 2020.

Account	Debit	Credit
Account 1
Account 2
Account 3
Account 4
Account 5
Account 6

I don't know

Recording Cost of Goods Sold - Periodic Inventory

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