Why are perpetual inventory systems so much more popular today than back in the early 1960s and earlier? Why would a company employing a perpetual inventory system still take a physical inventory periodically?
What are the journal entries a merchandising organization would use to record the purchase and subsequent sale of merchandise? How would these transactions differ with a periodic versus a perpetual inventory system?
Perpetual inventory systems are more popular today for several reasons:
1. Computerized accounting systems allow sales to be costed out at the time of the sale transaction. POS (point of sale software) automatically reduces inventory when a sale is recorded.
2. Perpetual systems allow for monthly or even daily financial statements to track sales and cost of sales. Fifty years ago, a company really didn't know the financial results of a year of business until after inventory was counted and adjusted in the accounting records.
3. Modern inventory systems allow businesses to quickly adjust to changing prices, competitive issues and other marketing and supply problems.
Why would a company employing a perpetual inventory system ...
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