Efficient inventory management is essential for smooth business operations. Two primary systems used to track inventory are the Periodic Inventory System and the Perpetual Inventory System Each system has unique features, benefits, and best-use scenarios, depending on your business size, technology, and sales volume.
📘 What is a Periodic Inventory System?
The Periodic Inventory System updates inventory records at specific intervals—usually monthly, quarterly, or annually. Inventory is not updated in real time after each transaction. Instead, purchases are recorded in a "Purchases" account, and inventory is adjusted after a physical count.
🔹 Key Features:
- No continuous tracking
- Relies on physical inventory counts
- COGS calculated at the end of the period
- Simpler and lower cost
🔹 Pros:
- Low-cost implementation
- Easier for small businesses with low sales volume
- No need for complex technology
🔹 Cons:
- Less accurate day-to-day inventory tracking
- Inability to detect theft or shrinkage quickly
- Not suitable for high-volume or fast-paced businesses
🎥 Learn Through Video: Periodic vs. Perpetual Inventory System
Want to see these systems in action with examples?
📺 Watch this detailed explanation on YouTube:
3 Comments
Nice overview! The simplicity of periodic systems makes them great for small businesses.
ReplyDelete"Helpful explanation—especially the comparison with perpetual."
ReplyDeleteAppreciate that! Glad the contrast helped clarify things
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