In periodic inventory accounting, when are transactions recorded in the inventory account?

In periodic inventory accounting, transactions are recorded in the inventory account at the end of each accounting period. This method is characterized by the periodic adjustment of inventory balances rather than immediate updates with each purchase or sale. At the end of a designated accounting period, a physical count of inventory is conducted, and the amount of inventory on hand is used to adjust the inventory account. The difference between the beginning inventory, purchases, and the ending inventory determines the cost of goods sold for that period.

This approach contrasts with perpetual inventory systems, where inventory records are continuously updated with each transaction. The periodic method is beneficial for businesses that do not require real-time inventory tracking and prefer simplicity in their accounting processes. The focus is on summarizing inventory transactions to assess performance and financial position at defined intervals rather than constantly monitoring inventory levels.