What does the periodic system assume about stock that is no longer held?

The periodic system assumes that all stock that is no longer held has been sold. This is because the periodic inventory system does not continuously track inventory levels throughout the accounting period. Instead, it periodically assesses inventory, typically at the end of the accounting period, to determine the cost of goods sold and the remaining inventory balance.

In this system, when stock is not present, it indicates that those items have been sold during the period. The inventory account is updated at the end of the period through physical counts, and the cost of goods sold is calculated by taking the beginning inventory, adding purchases made during the period, and subtracting the ending inventory. Therefore, the assumption is that any reductions in stock correlate directly with sales during that time frame. This understanding is integral to managing inventory and reporting financial performance accurately.