Periodic Inventory Accounting

 Periodic Inventory Accounting

In this article we would explain the periodic inventory accounting or system. In Opening stock & purchase both appear in trial balance and these both balances are transferred to the cost of sales. Closing stock counted at the end of year and transferred to the cost of sales. The periodic inventory accounting has been briefly explained below

Opening Inventory

Opening inventory are transferred to cost of sales, this is done at the end of year after trial balance is prepared. The opening stock is transferred by the following entry.

Date	Particulars	Dr	Cr
	Cost of Sales  A/c	10,000
	Opening Stock A/c		10,000

Purchases

In first place inventory purchases are charged to purchases account and at the end of year those purchases are transferred to cost of sales.

Date	Particulars	Dr	Cr
	Purchases  A/c	30,000
	Cash A/c		30,000

Date	Particulars	Dr	Cr
	Cost of Sales  A/c	30,000
	Purchases A/c		30,000

Sales

In case of periodic inventory system, there is no entry in stock account for sales and there is only one entry which is relates to sales directly.

Date	Particulars	Dr	Cr
	Cash  A/c	30,000
	Sales A/c		30,000

Closing Inventory

Closing inventory counted at the end of the period and credited to the cost of sales. It is important to note that closing inventory does not appear in the trial balance, rather it is an adjusted entry.

Date	Particulars	Dr	Cr
	Closing Inventory  A/c	20,000
	Cost of Sales A/c		30,000

                                          Cost of Sales A/c

Date	Particulars	Dr	Date	Particulars	Amount
	Opening Stock	10,000		Closing Stock	20,000
	Purchases	30,000		Profit & Loss	20,000

                                          Profit & Loss A/c

Date	Particulars	Dr	Date	Particular	Amount
	Cost of sales	20,000		Sales	30,000
	G.Profit	10,000
		30,000			30,000

The above entries of periodic inventory system have been summarized below

a)    Opening stock and Purchases both appearing in trial balance.

b)   Opening stock and purchases are transferred to cost of sales (debit side)

c)    Closing inventory is counted and created as an asset.

d)   Cost of sales is debited by opening stock and purchases.

e)    Cost of Sales account is credited by closing stock.

f)     Costs of sales are transferred to comprehensive income.

g)   Sales are also transferred to Comprehensive income account.

h)   Gross profit is calculated in comprehensive income account as balancing figure.