Periodic inventories are used by companies that buy large stocks of small items such as discount retailers (wal-mart), clothing stores, grocery stores, department stores, and drug stores. ..
Perpertual inventory system is used by companies that make fewer sales of products with higher unit costs such as car dealerships.
periodic takes place on an irregular schedule where perpetual is a constant state of inventory
Periodic
periodic inventory system
Purchases
Perpetual System is that system in which company continuously updates the value of inventory while in periodic system inventory valuation is done only for closing inventory when company done physical inventory calculation.
periodic takes place on an irregular schedule where perpetual is a constant state of inventory
perpetual
Periodic
Perpetual: All inventory entries directly affect inventory Periodic: All inventory entries affect other accounts, which are then closed to inventory. Example: A company purchased $100 worth of inventory on account Perpetual: Inventory (Debit) 100 Accounts Payable (Credit) 100 Periodic Purchases (Debit) 100 Accounts Payable (Credit) 100 Later with Periodic (usually at the end of the reporting period) Inventory (Debit) 100 Purchases (Credit) 100 This last entry closes purchases and updates your inventory account.
periodic inventory system
Purchases
Perpetual System is that system in which company continuously updates the value of inventory while in periodic system inventory valuation is done only for closing inventory when company done physical inventory calculation.
The perpetual inventory system is more complicated, requires more accounting entries and is more costly the periodic inventory system does.
The perpetual inventory system is more complicated, requires more accounting entries and is more costly the periodic inventory system does.
1 - Perpetual inventory system 2 -Periodic accounting system
The history of inventory systems depends on the type of inventory system being discussed. There are two main types of inventory systems, the perpetual inventory system and the periodic inventory system.
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.