perpetual and periodic inventory method – inventories perpetual inventory method

8/13/2019 Perpetual and Periodic Inventory Method Inventories Perpetual Inventory Method

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Perpetual and Periodic Inventory Method

Inventories Perpetual Inventory M


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Perpetual inventory method is a method where the inventory accounting is incessantly up-to-date and integrates the recurrent recording of additions issues or sales of supplies on an every day basis. The method is appropriatbusinesses where the sale articles are of huge value and posses a volume transactions every day.

Under this system, a ledger account (inventory account) is kept which prescost of goods sold at any point of time during the financial accounting perioperpetual inventory is maintained, a physical inventory must be taken as a once a year.


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PeriodicInventoryMethod:

Under this method, a physical inventory is generally taken only towards the ystandard intervals. The inventory on hand and for this reason the cost of gooascertained by the way of physical count at periodic intervals or towards theThis method is expensive as well as tiresome. To determine the cost of goodmethod, the account books must present the following:

I. Opening and closing inventory account for the accounting periodII. The cost of the purchased inventory during the accounting period.


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The Valuation Is Done As Under:

$Inventory at the beginning of the accounting period ***Add: Purchases of inventory during the accounting period ***Cost of Goods sold obtainable for sale ***

Less: Inventory at the ending accounting period ***Cost of Goods Sold ***


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The Below Is The Scheme Of Working Of The P

Inventory Method:

I. Most recent years closing inventory becomes the beginning inventory fyear. Trading account is given debit with the beginning year.

II. Purchases during the accounting period are recorded in the Purchasesthis account is closed by transferring to trading account as stated abov


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III. The closing inventory which is depended on physical count is documented called closing stock account. This account is transferred to the trading accdebit to closing stock account and given credit to trading account. This acclife for one day only. This is for the reason that, it becomes beginning stocsubsequent accounting period.

IV. The resultant outcome (i.e. the balancing figure in the trading account) is tgoods sold.

The Below Is The Scheme Of Working Of The P

Inventory Method:


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Documenting Inventory Acquisitions and SaleS.No Perpetual Inventory System Periodic Inventory System

1. Purchase of Inventory

Inventory A/c

To Supplies A/c

Purchase of Inventory

Purchases A/c

To Suppliers A/c

2. Return of Inventory

Suppliers A/c

To Inventory A/c

Return of Inventory

Suppliers A/c

To Return Outwards

3. Freight Paid

Inventory A/c

To Cash A/c

Freight Paid

Carriage Inward A/c

To Cash A/c

4. Sale of Inventory Sale of Inventory


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Documenting Inventory Acquisitions and SaleS.No Perpetual Inventory System Periodic Inventory System

(i)

(ii)

Accounts Receivables A/c

To Sales A/c

Accounts Receivables A/c

To Sales A/c

Cost of Goods Sold A/c

To Inventory A/c

No entry is applicable

5. Return of Goods by Customer Return of Goods by Custome

(i) Return Inwards A/cTo Accounts Receivables A/c

Return Inwards A/cTo Accounts Receivables A/c

(ii) Inventory A/c

To Cost of Goods Sold A/c

No entry is applicable


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perpetual and periodic inventory method – inventories perpetual inventory method

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