Average Cost Periodic Inventory Method

This video shows how to use the average cost method to calculate Cost of Goods Sold (COGS) and ending inventory for a company that uses a periodic inventory system.

Companies that use a periodic inventory system do not make changes to the inventory account when inventory is purchased or sold. Thus, a company using average cost and a periodic system would wait until the end of the period before adjusting the inventory account or recording Cost of Goods Sold. At the end of the period, the company would calculate the weighted average cost of the inventory on hand during the period (this includes purchases made during the period, plus any beginning inventory) and multiply this by the number of units sold to obtain the Cost of Goods Sold for the Income Statement. The same weighted average cost would then be multiplied by the number of units still on hand to obtain the ending inventory for the Balance Sheet.—
Edspira is the creation of Michael McLaughlin, an award-winning professor who went from teenage homelessness to a PhD. Edspira’s mission is to make a high-quality business education freely available to the world.
—
SUBSCRIBE FOR A FREE 53-PAGE GUIDE TO THE FINANCIAL STATEMENTS, PLUS:
• A 23-PAGE GUIDE TO MANAGERIAL ACCOUNTING
• A 44-PAGE GUIDE TO U.S. TAXATION
• A 75-PAGE GUIDE TO FINANCIAL STATEMENT ANALYSIS
• MANY MORE FREE PDF GUIDES AND SPREADSHEETS
—
SUPPORT EDSPIRA ON PATREON
—
GET CERTIFIED IN FINANCIAL STATEMENT ANALYSIS, IFRS 16, AND ASSET-LIABILITY MANAGEMENT
—
LISTEN TO THE SCHEME PODCAST
—
GET TAX TIPS ON TIKTOK
—
ACCESS INDEX OF VIDEOS
—
CONNECT WITH EDSPIRA
—
CONNECT WITH MICHAEL
—
ABOUT EDSPIRA AND ITS CREATOR

[jacksongarnett]

thank you so much for your continuous support to the accounting community. I have actually been studying for my CPA, and due to your never ending and relentless pursuit towards enabling young accountants to gradually increase their overall knowledge of accounting.
alhamdulillah
alhamdulillah
alhamdulillah

[MyFinancialFocus]

I like how this channel makes videos explaining basic concepts and then builds on those concepts in later videos.

[chandlerredhead]

These videos are really helping me so far. Hopefully they will be able to help me recover my ACC201 grade :/
Thank you!

[jacksonford]

Im genuinley confused on how this guy is able to explain something better in 15 minutes than my prof can in 2 hours, college is ridiculous

[Effortlesslyeclectic]

Thank you for explaining things so well! Nice & clear & simple. Just what I needed. Your videos are very helpful!

[CharlesDike]

wow, better than my teacher. thank you.

[Noname-ykwu]

Sir I would like to ask. This example provides the situation only for sales one time (40 units). What if after purchasing of 25 units at$50 (4th transaction) there is sale again for 10 units. Does it mean to multiplies the average cost ($42) by 50 (40 +10) units sold ?

[rescuedrelics]

What do you do with the previous inventory? Do you add that into the new period and average that amount out?

[sherandajinanayakkara]

What if opening inventory is also given .. do you also include it in the calculation of the cost of goods sold ?