![]() ![]() ![]() ![]() Perpetual vs Periodic Inventory at a Glance If a business has a stable level of inventory, then purchases are very close to COGS and the simple periodic method will net the same results as the more time-consuming perpetual method. Businesses with a stable level of inventory: The difference between COGS and current-year purchases is the change in inventory.Businesses with small percentages of revenues from inventory sales: Businesses with small inventory sales can benefit from a periodic system since inventory quantities aren’t significant.Small businesses in general: Since the periodic system is easier to implement, this method is easier for small businesses as it doesn’t require constant recordkeeping.In a perpetual inventory system, differences between inventory per books and per count may provide information about inventory losses due to breakages or shoplifting. The cost of goods stolen or broken cannot be separated from the COGS. Businesses selling high turnover goods that are susceptible to theft or breakages: Under a periodic inventory system, you can’t detect inventory shortages since COGS is based on ending inventory.That’s why a perpetual inventory system can benefit retailers since it can report COGS and ending inventory without conducting a count. For retail outlets, it would be inefficient to count the goods periodically due to inventory volume and costs. Businesses with multiple retail outlets or branches: Periodic physical counts interrupt normal operations.Using a perpetual inventory system in conjunction with an IMS creates a synchronized flow of information. Businesses that can afford inventory management systems: An inventory management system (IMS) is software that tracks your inventory throughout the supply chain.Moreover, you can also check Xero, one of our best QuickBooks alternatives, for perpetual inventory with the average cost method. QuickBooks Online is our best small business accounting software that can handle a perpetual inventory system with a LIFO cost flow assumption. Businesses with accounting software that includes inventory accounting: The perpetual inventory system requires a computerized accounting system to record COGS efficiently for every sales transaction.Companies must choose both an inventory system and a cost flow assumption. Cost flow assumptions like last-in, first-out (LIFO), first-in, first-out (FIFO), and average cost determine how you allocate costs among identical units of inventory. Inventory system vs cost flow assumption: Perpetual and periodic are inventory systems that determine when you calculate COGS. ![]()
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