What is the difference between periodic and perpitual inventory system?

Answer 1

Periodic Inventory System Inventory account and cost of goods sold are non-existent until the physical count at the end of the year. Purchases account is used to record purchases. Purchase Return account is used to record Purchases Returns account. Cost of goods sold or cost of sale is computed from the ending inventory figure For goods returned by customers there are no inventory entries. Perpetual Inventory System Account and the balance of costs of goods sold and inventory account exist all the time. No individual purchases account but the purchases are recorded in the Inventory Account. No individual Purchase Returns account but the purchases return are recorded in the Inventory Account. Record cost of goods sold/cost of sale - inventory is reduced when there is a sale. Returns from customers are recorded by reducing the cost of goods sold and adding back into inventory.