The journal entries under FIFO would be the same but the entry to cost of goods sold and merchandise inventory done on January 31 and would be: Jan 31 Under the LIFO Method, cost of goods sold is calculated using the most recent inventory first and then working our way backwards until the sales order has been filled. The journal entries under the periodic inventory method using FIFO would be (see how cost of good sold is recorded once at the end of the period, in this case end of the month): Date There were a total of 55o units sold (remember, price doesn’t have anything to do with cost) and we will assign cost as follows: Under the periodic inventory, cost of goods sold is assigned at the end of the period only and not with each sales transaction. Under the FIFO Method, we use the oldest inventory first and work our way forward until the sales are complete. The data we have been working with from the videos in the previous section is: Periodic inventory: Follows the same basic principle but it calculates ONE cost of goods sold amount at the end of the month for all items based on the beginning inventory + all purchases and does not record cost of goods sold with each sales transaction.

Perpetual inventory: Calculates cost of good sold for each sales and records a journal entry for cost of goods sold with each sales transaction.The good news for you is the inventory valuation methods under FIFO, LIFO, weighted average (or average cost), and specific identification are calculated basically the same under the periodic and perpetual inventory systems! The bad news is the periodic method does do things just a little differently.

Periodic inventory method