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In this module, you will learn that the costs of goods purchased are added to Inventory $($on the balance sheet$)$ and the costs of goods sold are removed from Inventory and reported as an expense called Cost of Goods Sold $($on the income statement$).$ You also learn about the periodic inventory system, which only updates the inventory records at the end of the period, and the perpetual inventory system, which provides the best inventory control since it tracks inventory constantly. Finally, you learn about inventory shrinkage, which is loss of inventory from theft, fraud, and errors.

Knowledge Check $01$

Which of the following statements regarding cost of goods sold is true?

multiple choice

Cost of Goods Sold is a current asset reported on the balance sheet.

Cost of Goods Sold is a current asset reported on the income statement.

Cost of Goods Sold is an expense account reported on the balance sheet.

Cost of Goods Sold is an expense account reported on the income statement.