How Do You Record Cost Of Goods Sold In A Perpetual Inventory System?
In a perpetual inventory system, cost of goods sold is recorded with every sale of inventory. The cost of inventory sold is calculated using the average cost method, first-in, first-out (FIFO), or last-in, first-out (LIFO) method. The average cost method takes the average cost of all inventory items available for sale during the period. The FIFO method assumes that the first goods purchased are the first goods sold, and the LIFO method assumes that the last goods purchased are the first goods sold. The cost of goods sold is then debited to the cost of goods sold account, and the corresponding credit is made to the inventory account.