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Inventory methods and the effects to cost of goods sold

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What types of companies use periodic inventory? What types of companies use perpetual inventory? What are the similarities and differences between periodic and perpetual inventory systems? How does each method affect the inventory and cost of sales calculations?

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Solution Summary

In a 240 word solution, the response explains the types of entities who typically use the two major inventory methods including the reasons why they would. Financial statement effects are also discussed.

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The types of companies who use periodic inventory tend to be mostly small companies who can't deal with the software (either expense or complexity) that is called POS (point of sale). POS software is what is commonly used in large retail grocery or Wal-Mart, for example. Each time a sale is recorded, the inventory is automatically reduced for the items sold. ...

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