Inventory records may be maintained on a perpetual or periodic inventory system basis.In a perpetual inventory system，purchases and issues of goods are recorded directly in the inventory accounts as they occur.A cost of goods sold account is used to accumulate the cost of issuances from inventory.The balance in the inventory account at the end of the year should represent the ending inventory amount.

When the inventory records are maintained on a periodic inventory system，a purchases account is used to record acquisitions and the balance in the inventory account(which represents the beginning inventory)is unchanged during the period.At the end of the accounting period the inventory account must be adjusted by closing out the beginning inventory amount and recording the ending inventory amount.Cost of goods sold is therefore determined by adding the beginning inventory to the net purchases and deducting the ending inventory.