Explain in detail inventory accounting with entries

Question

Accepted Answer

Inventory accounting involves tracking and valuing a company's inventory.

Inventory is recorded as an asset on the balance sheet
Cost of goods sold (COGS) is recorded as an expense on the income statement
When inventory is purchased, it is recorded as a debit to the inventory account and a credit to the accounts payable account
When inventory is sold, the cost of the inventory is transferred from the inventory account to the COGS account
Periodic inventory system involves taking a physical count of inventory to determine the ending inventory balance
Perpetual inventory system involves continuously updating inventory balances with each purchase and sale

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