Under a periodic inventory system, COGS is calculated as:

Under a periodic inventory system, COGS is calculated as:

• A. Beginning Inventory + Purchases − Ending Inventory
• B. Beginning Inventory − Purchases + Ending Inventory
• C. Ending Inventory − Beginning Inventory + Purchases
• D. Purchases − Beginning Inventory − Ending Inventory

Answer: (A)

In a periodic inventory system, you figure cost of goods sold by reconciling all the goods that were available for sale with what’s left at the end of the period. Start with Beginning Inventory, add all Purchases made during the period to get Goods Available for Sale. Then subtract Ending Inventory to arrive at COGS. So the formula is Beginning Inventory + Purchases − Ending Inventory. This works because ending inventory is the portion not sold during the period, and removing that from the total goods available for sale leaves the cost of the goods actually sold. In a periodic system, COGS isn’t tracked with each sale; it’s calculated at period end by this reconciliation. The other expressions mix the signs or components in a way that doesn’t reflect the correct relationship between beginning stock, purchases, and ending stock.

In a periodic inventory system, you figure cost of goods sold by reconciling all the goods that were available for sale with what’s left at the end of the period. Start with Beginning Inventory, add all Purchases made during the period to get Goods Available for Sale. Then subtract Ending Inventory to arrive at COGS. So the formula is Beginning Inventory + Purchases − Ending Inventory. This works because ending inventory is the portion not sold during the period, and removing that from the total goods available for sale leaves the cost of the goods actually sold. In a periodic system, COGS isn’t tracked with each sale; it’s calculated at period end by this reconciliation. The other expressions mix the signs or components in a way that doesn’t reflect the correct relationship between beginning stock, purchases, and ending stock.