Perpetual inventory system

In this ppt is explain so the concept of Perpetual inventory system

1. Perpetual Inventory System PRESENTED BY – RAHUL DEY EMINENT COLLEGE OF MANAGEMENT & TECHNOLOGY BBA( H ) 4 TH SEM 2 ND YEAR

2. What is inventory? Inventory: The goods that a trading firm buys and sells . A trading firm buys its inventory and sells it at a higher price in order to earn revenue . Exclude from inventory: non-current assets.

3. WHAT IS Perpetual Inventory System In business and accounting/accountancy, perpetual inventory or continuous inventory describes systems of inventory where information on inventory quantity and availability is updated on a continuous basis as a function of doing business

4. Perpetual vs. Periodic Inventory Systems Most companies nowadays use the periodic inventory system, which involves scheduled inventory checks throughout every year. In most cases, periodic inventories are conducted a few times per year or even every month. The primary issue that companies face under such the periodic inventory system is the fact that there is a lapse in updated inventory information and accounting for COGS between inventories. It means that managers and higher-level executives only receive periodic updates on the state of a company’s inventory and earnings.

5. Advantages of Perpetual Inventory System As merchandise stock is restricted to a certain limit the additional investment of capital is not required, This is a complete and dependable verifying method over the store. Closure of normal business activities is not required during the physical counting of merchandise inventory .

6. Disadvantages of Perpetual Inventory System Keeping accounts of stock under the perpetual system in the organization dealing with the verities of goods is expensive and time-consuming. But nowadays using computer and electronics scanner almost all business organizations follow this method.

7. Functions Of Perpetual Inventory System The main functions of perpetual inventory system are as follows. Recording store receipts and issues to determine the stock in hand at any time, in quantity or value or both, without the need for physical counting of the stock . Continuous verification of the physical stock with reference to the balance recorded in the store record is convenient for the management.

8. DIFFERENCES BETWEEN PERIODIC AND PERPETUAL Inventory a . Periodic – During the period, the inventory account is not change; thus, it reflects the beginning inventory amount. During the period, each purchase is recorded in the Purchases account. As a consequence, the ending inventory eache period must be measured by physical count, then ” costed ” at unit price cost. b . Perpetual - During the period, the Inventory account is increased for each purchase and decreased (at cost) for each sale. Thus, at the end

9. Cost of Goods Sold Periodic – During the period, no entry is made for cost of goods sold. At the end of the period, after the physical inventory count, cost of goods sold is measured as: Beg. Inventory + Purchases – End. Inventory = Cost of Goods Sold b. Perpetual - During the period, cost of goods sold is recorded at the time of each sale and the Inventory account is reduced (at cost). Thus the system measure the cost of goods sold amount for the period.

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