Question

How does a perpetual inventory system differ from a periodic inventory system? Specifically which accounts are tracked perpetually under the perpetual system that are tracked only periodically under the periodic system?

Answer 1

Perpetual inventory system involves continuous stock taking ie. Inventory account is effected for each and every purchase and sale transaction in perpetual inventory system. In perpetual inventory system the purchase and sale will directly effect the Inventory account.

In periodic inventory system the Inventory account is effected at the end of the period. Daily transaction will never effect the Inventory account. Purchase and sale accounts are used in periodic inventory system for recording daily transaction.

Inventory account and Cost of goods sold account are continuously used in perpetual inventory system whereas the same accounts are used at the end of the period in periodic inventory system.