A period-end adjustment is needed for both periodic and perpetual systems.Group startsTrue or FalseTrue, unselectedFalse

Analysis of Period-End Adjustments

1. Understanding Period-End Adjustments: Period-end adjustments are entries made at the end of an accounting period to update account balances before financial statements are prepared. These adjustments are intended to match revenues and expenses to the period in which they occur.

2. Periodic vs. Perpetual Systems:

   • Periodic Inventory System: This system updates inventory balances and cost of goods sold (COGS) at the end of an accounting period, based on a physical count of inventory. Because the inventory accounts are not updated after each transaction, period-end adjustments are necessary.
   • Perpetual Inventory System: In this system, inventory and COGS are updated in real time with each sale or purchase transaction, thus tracking inventory levels continuously. Although this system minimizes the need for adjustments, there may still be the need for adjustments at the period end to account for discrepancies, shrinkage, or valuation adjustments.

3. Conclusion: Both periodic and perpetual inventory systems may require period-end adjustments, though for different reasons and to varying extents.

Final Answer

True. Period-end adjustments are necessary for both periodic and perpetual systems, though the nature and frequency of adjustments may differ.