![]() If the physical valuation of the stock is done more than once in a year, then this system can also cost higher. However, with the help of sales revenue, an estimation could be made regarding the lost inventory but this figure is not accurate. There are various shortcomings of this system as the amount of the cost of goods sold may include the goods lost or theft during the year. Inventory at the Beginning + Purchases – Inventory at the end = Cost of Goods Sold The following formula is used to track the cost of goods sold during the year: Normally, at the end of the financial year, the physical count of stock takes place after which the records are adjusted and updated accordingly. The inventory record system in which the movement of inventory is captured at a regular interval, say once or twice in a year, only after taking physical verification of stock is known as Periodic Inventory System. ![]() Although the system is costly and complicated. If there is any shortage due to loss or theft, then it can be easily located, and corrective actions can also be taken immediately. To ensure accuracy, physical verification of stock takes place at regular intervals, and they are compared with the recorded figures. The inventory records are kept in Bin Card (Stores Keeper) and Stores Ledger (Cost Accounting Department). Inventory at the Beginning + Receipts – Issues = Inventory at the end ![]() The calculation of closing inventory can be done as under: In this system an inventory ledger is maintained to keep complete and continuous record of the receipts and issue of inventory in which the closing balance is the inventory in hand. The records maintained under this system are always up to date. The inventory control method in which every inflow and outflow of stock are constantly updated, through an electronic point of sale system, is known as Perpetual Inventory System. Under this system, the business operations need to be stopped during valuation. This method does not influence the business operation. The Periodic Inventory System is an inventory record method whereby, the inventory records are updated at periodic intervals. The inventory system which traces every single movement of inventory, as and when they arise is known as Perpetual Inventory System. Content: Perpetual Inventory System Vs Periodic Inventory System Many people utter confusion in understanding the two methods, so here in this article, we provide you all the important differences between the Perpetual and Periodic Inventory system, in tabular form. Inventory management system should be by the store’s department selected, keeping in mind, the planning and control of stock.
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