Difference between perpetual and periodic inventory system

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The material is Associate in Nursing integral a part of the assembly value, because it consists of eightieth of the overall product value. Therefore each producing concern keeps a track of its inventory purchased, came back and issued throughout the year, through the inventory record system. The inventory system is of 2 two types: Perpetual Inventory System, during which the movement of the stock is recorded unendingly and Periodic Inventory System, that updates the inventory records from time to time solely when the physical count of the stock.Inventory management system ought to be by the store’s department elect, keeping in mind, the look and management of stock. Many of us utter confusion in understanding the 2 strategies, therefore here during this article.

Difference between the Perpetual and Periodic Inventory system in tabular type:

comparison Perpetual Periodic inventory system
meaning The inventory system that traces each single movement of inventory, as and after they arise is thought as Perpetual Inventory System. The Periodic Inventory System is a list record technique whereby, the inventory records square measure updated at periodic intervals.
basis Book Records Physical Verification
updations Continuously At the top of the accounting amount.
information Inventory and price of sales Inventory and price of products sold-out
Balancing figure Inventory Cost of products sold-out
Possibility of inventory control yes No
Affect on business operation This technique doesn’t influence the business operation. Underneath this technique, the business operations got to be stopped throughout valuation.

 

Definition of Perpetual Inventory System

The internal control technique during which each influx and outflow of stock square measure perpetually updated, through associate degree electronic purpose of sale system, is thought as Perpetual Inventory System. The records maintained underneath this technique square measure perpetually up so far. During this system a list ledger is maintained to stay complete and continuous record of the receipts and issue of inventory during which the closing balance is that the inventory in hand.

Definition of Periodic Inventory System

The inventory record system within which the movement of inventory is captured at a daily interval, say once or double in an exceedingly year, solely once taking physical verification of stock is thought as Periodic Inventory System. Normally, at the tip of the yr, the physical count of stock takes place once that the records are adjusted and updated consequently.

key  difference:

The inventory system during which there’s real time recording of the receipts and problems with inventory is understood as Perpetual Inventory System. Periodic Inventory System tracks the main points of inventory movement at periodic intervals.The Perpetual Inventory System is predicated on book records whereas Periodic Inventory System, takes physical verification as its base.

In Perpetual Inventory System the records square measure updated unendingly, i.e. because the stock dealing takes place. Conversely, in Periodic Inventory System the records square measure updated when a brief period.

In Perpetual Inventory System, period of time data concerning Inventory and price of sales is provided whereas the Periodic Inventory System provides data concerning Inventory and price of products sold-out.

In Perpetual Inventory System, the loss of products is enclosed in closing inventory. Conversely, in Periodic Inventory System constant is enclosed in value of products sold-out.

In Perpetual Inventory System, there’s no interference within the regular advancement at the time of stock taking and verification whereas in Periodic Inventory System, the regular business operations could got to be stopped.

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