[sonam]

How does it work

[Clough]

Here is one answer from Periodic Inventory System: Information from Answers.com

Periodic Inventory System
"One that does not require a day-to-day record of inventory changes. Costs of materials used and costs of goods sold cannot be calculated until ending inventories, determined by physical count, are subtracted from the sum of opening inventories and purchases (or costs of goods manufactured in the case of a manufacturer)."

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[CaptainForest]

All purchases made during the year are debited to a “Purchases” account.

At the end of the year, you subtract inventory on hand from inventory of record (beginning inventory + purchases). The difference is your expense. You debit that to COGS and credit it to inventory.

For JE see: Perpetual and Periodic Journal Entries