Periodic inventory method calculate ending stock at the end of
the accounting period, which could be Month to Date or Year to
Date, while Perpetual inventory system calculates the ending stock
on a continuous basis after each transaction (Purchase or
Sell).
Within Retail industry, periodic inventory method used for
inventory valuation at the stores, whereas distributer like
SuperValu (in US) follows perpetual inventory method to track
inventory in their distribution centers.
As a best practice, some of the retail companies are using
perpetual accounting method to track inventory available in
warehourses and distribution centers.
In an idealistic world, perpetual inventory method can provide
the true and real time inventory information, however due to
complexities in consolidating all the purchases, sales, shrinkages
and other market factors, it is advisable for retail companies to
follow periodic accounting method to analyze and review the results
before presenting the inventory valuation results to internal and
external agencies like Shareholders, Income Tax Authorities, et
el.
