GOOD MORNING TEACHERS!

Asset Method/ Perpetual

Inventory Method
ASSET METHOD
• This method is used to value a business on the basis of the
difference between the fair market value of its assets and its
liabilities.

PERPETUAL INVENTORY METHOD

• is a continuous accounting practice that records
inventory changes in real-time, without the need for
physical inventory.
A perpetual inventory system is a program that continuously
estimates your inventory based on your electronic records, not
a physical inventory. This system starts with the baseline from
a physical count and updates based on purchases made in and
shipments made out.
How to do a perpetual inventory record?
• Inventory purchases are recorded on the operating account with an
Inventory object code, and sales are recorded on the operating account
with the appropriate sales object code. A cost-of-goods-sold transaction
is used to transfer the cost of goods sold to the operating account.
What are perpetual inventory system costing methods?
• The total cost of the inventory purchased is divided by the number of
units and this cost is applied cost of goods sold in a perpetual inventory
system. It produces a more balanced valuation of both inventory on hand
and cost of goods sold than either FIFO or LIFO.
What are the examples of perpetual inventory?
• The most common perpetual inventory system example is the usage of
wireless barcode scanners in a grocery store. It records all scanned
transactions on the system immediately as they occur. This way, firms
can easily compute the current and required stockpile.
• With a perpetual inventory, all transactions involving costs of
merchandise get recorded immediately as they occur. For instance, take
grocery stores - each time a product is bought and scanned, the system
updates inventory levels in the database.
Where is Perpetual inventory method is used?
• Perpetual inventory systems are especially suitable for large companies
that track high-volume sales. Periodic physical counts are still necessary
with a perpetual system but are conducted less often and at lower cost
and scale.
Thank you for listening…