[wlaw27]

What is the difference between periodic and perpetual inventory systems?

[morgaine300]

Periodic is a method where you take all your purchases and just lump them into an account for the month, and when you sell it you don't adjust that at all. i.e. purchases just accumulate. Then at the end of the month, you take your beginning inventory, add those purchases, subtract out what you have left, and that's how much of it got sold. So you're figuring it out "periodically." With all the computerization and scanners, it's a method not used near as much anymore.

Perpetual is where you are keeping track of every purchase and every sale through the inventory account, so that it is constantly kept updated and you know what you have at any given moment. Places that have scanners can do this easily. Even with this method, a physical count should be taken at year-end to make sure the balance in the account matches what you really have on hand.