Periodic LIFO Inventory System

A periodic LIFO inventory system begins by computing the cost of ending inventory at the end of a period and then uses that figure to calculate cost of goods sold. Perpetual LIFO also transfers the most recent cost to cost of goods sold but makes that reclassification at the time of each sale. A weighted average inventory system determines a single average for the entire period and applies that to both ending inventory and the cost of goods sold. A moving average system computes a new average cost whenever merchandise is acquired. That figure is then reclassified to cost of goods sold at the time of each sale until the next purchase is made.

1Because ending inventory for one period becomes the beginning inventory for the next, application of a cost

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flow assumption does change that figure also. However, the impact is only indirect because the number is simply

carried over from the previous period. No current computation of beginning inventory is made based on the cost

flow assumption in use.