.

2-6 Perpetual inventory system is the method for following inventories, since it can yield
sensibly exact results on a continuous premise, if managed properly. The framework works
properly when combined with an electronic database of stock amounts and container areas,
which is overhauled continuously by the distribution centre staff utilizing remote standardized
identification scanners, or by deals representatives utilizing purpose of offer terminals.
The periodic inventory system is the most valuable for small organizations that handle minimum
number of stock. This system only upgrades the ending balance of inventory in the ledger
account when organisation lead a physical inventory check.
The difference between perpetual and periodic inventory systems are as follows:

S.N. Perpetual Inventory System Periodic Inventory System

1. Accounts are updated on continuous Cost of goods sold account is not entered in
basis either on general ledger or an accounting period because it deals with
inventory journal as transactions physical count which is literally used to show
related to inventory occurred. cost of goods sold.

2. There might be many transactions at Periodic inventory system takes into account
the unit level in each accounting the utilization of manual record keeping for
period, so it is very difficult to every inventories.
physically keep all the records for
perpetual inventory system.
3. Under perpetual inventory system, Under periodic inventory system all
purchase of inventories are recorded purchased items are recorded into a purchase
in either the raw materials stock resource account, and there are no individual
account or retail account but it stock records to which any unit-tally data
depends upon the purchase nature, could be included.
while there is additionally a unit-tally
section into the individual record that
is kept for every stock items.

4. Example; this system is generally Example; this system is commonly used by

used by furniture dealers. super markets.