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Under the perpetual system the cost of inventory calculated continuously . Under the periodic system the cost of inventory calculations are made only at the end of the period - every month, quarter or year
acountant Ramadan Abdul Azim
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Primary use of the periodic inventory system occurred prior to the introduction of point-of-sale scanners and computers. Companies such as drug and hardware stores that sold lots of small merchandise found it easier to update their inventory balances periodically instead of trying to account for every item sold on a daily basis. The periodic inventory system allows a company to record sales of merchandise in a special account. When merchandise gets sold, the company records the revenue but does not record a cost of goods sold (CoGS) entry.
Perpetual SystemThe introduction of point-of-sale systems and computers greatly advanced the use of the the perpetual inventory system. Perpetual inventory records each sale of merchandise and places an entry in the company’s inventory account. This system also immediately reduces sold inventory from stock and adds inventory back to stock when a customer returns merchandise.
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