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inside a business. These systems handle Perpetual inventory-taking
inventory lifecycles from raw material system
acquisition to finished goods delivery to Conversely, a perpetual inventory
customers. There are two primary categories management system involves continuous
of inventory management systems that firms inventory-taking and valuation that is, after
use: periodic and perpetual. every transaction. All inventory movements,
FOR ONLINE READING ONLY
Periodic inventory management including inflows and outflows, are recorded
system in the inventory ledger. This system provides
In a periodic inventory management ongoing information about the cost of sales
system, inventory-taking and valuation and the remaining inventory on hand. It
are conducted after a set period, such operates by maintaining a subsidiary ledger
as monthly, quarterly, semi-annually or for inventory, where an account for each
annually. This process involves physically merchandise item is kept. As a result, it
counting the goods in the store at a specific
time to determine the ending inventory. is easy to determine the amount of goods
This system is particularly suitable for consumed or sold by simply looking at
businesses that sell a wide variety of goods the ledger. In a perpetual system, specific
with relatively low unit costs, such as journal entries will be made following each
minimarkets, supermarkets, and hardware transaction.
stores. LANGUAGE EDITING
Journal entries

No. Details Dr Cr
1. Inventory xx
Creditor xx
(Being credit purchases of merchandise)
2. Account receivables xx
Sales xx
(Being credit sales of merchandise)
3. Cost of sales xx
Inventory xx
(Being cost of merchandise sold)

The perpetual inventory management system is particularly beneficial for businesses
with fewer sales of relatively high-value items such as those dealing in motor vehicles,
office equipment, household appliances and furniture. It is important to note that it is not
feasible to use both the perpetual and periodic systems simultaneously. When compared,
the perpetual inventory-taking system offers additional advantages. It provides readily
available, up-to-date information about inventory movements and levels. If supplemented
by inventory counts, it can also provide information about the incidence and scale of

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