Lesson 3: Inventory Systems:Periodic & Perpetual Accounting in a Corporate Environment
Duration of Days: 3
Lesson Objective
Students will analyze how perpetual inventory systems operate within a merchandising corporation and explain how inventory transactions impact financial statements in real time.
What is the difference between periodic and perpetual inventory systems?
When is cost of goods sold calculated under each system?
How do journal entries differ between systems?
Why might a company choose one system over the other?
Periodic Inventory System
Perpetual Inventory System
Merchandise Inventory
Purchases
Cost of Goods Sold (COGS)
Physical Count
Inventory Shrinkage
Point-of-Sale System
Real-time tracking
HS.CTE.2A – Recall and apply prior knowledge for intended purpose
HS.CTE.2B – Pose questions and make predictions about problems
HS.CTE.2C – Apply a solution using evidence and reasoning
Students interpret structured word problems and compare procedural differences between two systems. Students analyze quantitative data and evaluate outcomes based on system selection, reinforcing logical reasoning and analytical skills aligned with SAT standards.
Description: Students begin by reviewing the definition of merchandise inventory and cost of goods sold.
Purpose: The purpose of this lesson is to help students understand how inventory systems impact accounting procedures and financial reporting.
DOK Level Questions:
Level 1
Define periodic inventory system.
Define perpetual inventory system.
Level 2
Identify the journal entry difference when purchasing inventory under each system.
Level 3
Explain why cost of goods sold is recorded differently under the perpetual system.
Students examine how large retailers such as Walmart Inc. and Amazon.com Inc. use perpetual inventory systems supported by barcode scanning and real-time data tracking.
Students may think both systems update inventory continuously.
Side-by-side comparison chart template
Color-coded journal entry examples
Guided practice before independent work
Visual flow diagram of inventory movement
Small group reteach for journal entry differences
Digital or paper-based practice options
Completion of comparison chart
Journal entry practice under both systems
Exit Ticket explaining one major advantage of perpetual inventory
Short quiz comparing procedural differences
Century 21, Accounting General Journal, 11th edition (print or MindTap)
Comparison chart worksheet
Journal entry practice problems
Whiteboard or presentation slides
Do Now and Exit Ticket