Maintaining the stock account is not an easy task. There may be small as well as large projects. Depending upon the requirement, the company will choose either a periodic inventory system and a perpetual inventory system. Show Table of Contents
Both are used by many companies. These two methods are considered the best accounting practices in the market. The main difference between the Periodic Inventory System and Perpetual Inventory System is that in a periodic inventory system, real-time recording will be done, but the perpetual system tracks the records in particular levels. The periodic inventory system is mainly used with small amounts, but the perpetual inventory system is used with large amounts.  The periodic Inventory System does not record the transaction at the unit level so that it will become tedious to find the errors. It does not show the stock turnover rate. It will only allow us to record the goods that are sold at certain intervals and certain periods of time. The perpetual inventory system is one of the most common accounting methods used by many companies for moving larger stocks because of its huge advantages. Since this method consistently updates all the stock-related services, it will be easy for the company to track the changes. But one disadvantage is that theft can happen easily. Comparison Table Between Periodic Inventory System and Perpetual Inventory System
What is Periodic Inventory System?In a periodic inventory system, at some specific levels, a physical count of the inventory will be performed. This method is used to count the physical stock, which in turn will determine the cost of goods sold. It would be better if you use it for small stocks as it requires physical entry so that human errors can be possible. In this system, any number of purchases can be done, but stocky purchasing will not be done many times. Only a few stocks will be purchased in this time period. There will be some disadvantages as well in the periodic inventory system. At the end of the year, the physical counting of stock records will be done so that the records will be adjusted and it will be updated according to that. The number of goods sold in the report can also include lost goods or the theft that happened during that period. The periodic inventory system is updated only on a physical stock take. This method uses a single entry take. So that whenever goods get sold, the amount will be reflected right after that. What is Perpetual Inventory System?Perpetual Inventory system evaluates the inventory changes in real-time, and it doesn’t require physical inventory for recording purposes. It will show the real stock accurately. It uses two devices called Point of Sale System and Scanners. This method is mostly used in the warehouse and retail industry. In this method, the overstatement is also called the Phantom Inventory. It will be preferred by most companies where material planning requirement production is used. It has a strong ability to interact with other business sectors. It is used in both financial and accounting systems. Since this method uses real-time, it will be easy for salespeople to provide accurate information either for the company or the customers. It also provides precise information on what are all the goods are fast selling and what is not selling. This will help them to find the errors easily and made the products sell fast without any hassles. This, in turn, will help them to understand the behavior of the customers and their interest in products so that they will use that for their profit. Since it has many advantages, most companies prefer this method for their long-term projects. Since it allows them to find the errors at first, and they don’t have to wait for the transaction to completely take place. Main Differences Between Periodic Inventory System and Perpetual Inventory System
ConclusionBoth periodic inventory systems and perpetual inventory systems are good for the companies to calculate the stock purchase. But it depends upon the kind of work we do. Since there are advantages and as well as disadvantages in these methods. However, a periodic inventory system is preferred by many companies since the error can be identified the first time. But on perpetual inventory, it is not easy to identify the error easily. Based on these factors, they will use any one of these methods. Both come under the commerce stream. And it will continue in their higher studies as well. They will implement this method in their workplace depending upon their work. References
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