Purchase Solution

perpetual method of tracking inventory

Not what you're looking for?

Ask Custom Question

I need help answering the following discussion question:

What is the perpetual method of tracking inventory? How is it different from the periodic method? Why would a company choose one method over the other? Which is the best method? Why?

Purchase this Solution
Solution Summary

The following solution discusses the perpetual method of tracking inventory. It discusses how it is different from the periodic method. It discuss ewhy a company would choose one method over time.

Solution Preview

Let's take a closer look.

RESPONSE:

1. What is the perpetual method of tracking inventory?

The terms periodic and perpetual imply a time frame for determining the amount of ending inventory. They are different methods of tracking inventory.

Under the periodic method, the amount of goods remaining in inventory is defined periodically. Under the periodic method an account called "Purchases" is used to record the additional inventory items purchased for sale during the period. At the end of the accounting period, this method requires that the purchases account and the inventory account are closed to costs of sold and the ending inventory number from the physical inventory count be entered in the inventory account. At this point, the cost of goods sold can be determined. In other words, periodic is defined once every accounting period and usually at the end of the accounting period. When that number is determined it is used as the beginning inventory number for the next period. Thus, inventory balances are only determined periodically. (www.uic.edu/classes/actg/actg500/inventory.html)
Periodic inventory is "placed on the books when paid and valued at the end of the period by taking a physical count of the inventory then. Changes are made to the value of inventory at the end of the period, usually at month end." (http://accounting.suite101.com/article.cfm/inventory_methods_used_in_accounting#ixzz0q1IoolqY)

2. How is it different from the periodic method?

Instead, Perpetual inventory is "maintained and valued each time a change in the inventory occurs. This requires a system that counts items when they are added or taken from the ...

Purchase this Solution
Free BrainMass Quizzes
Employee Orientation

Test your knowledge of employee orientation with this fun and informative quiz. This quiz is meant for beginner and advanced students as well as professionals already working in the HR field.

Transformational Leadership

This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.

Business Ethics Awareness Strategy

This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.

Writing Business Plans

This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.

Operations Management

This quiz tests a student's knowledge about Operations Management

View More Free Quizzes
Related BrainMass Solutions

  • Accounting multiple choice: depreciation, trading securities, COGS, inventory, allowance

    B Perpetual Inventory is a method for tracking and knowing the value of inventory and quantity of merchandise on hand at any time by tracking sales, returns and receipts with information systems. This is also known as book inventory.

  • Managerial Accounting Problems

    The specific identification method is easy to match each item sold with its cost. It may work well for companies that sell relatively few big-ticket items like cars or pianos. A method of tracking inventory when each item can be identified.

  • Perpetual & Periodic Inventory System

    30 and the cost of goods sold for June under a. first-in, first-out (FIFO) method b. last-in, first-out (LIFO) method c. average cost method 3.Under the perpetual inventory system, determine the cost of inventory on hand at June 30 and the cost of

  • Receivable Transactions and Differences in Inventory

    Perpetual inventory helps to maintain up-to-date record of the inventory level of the company that reflects the level of inventory on hand at that point of time. It is used to sustain the accurate balance of inventory on daily basis.

  • Perpetual and Periodic Inventory Systems

    Using LIFO, what is the Cost of Goods Sold using the Perpetual Method? What is the Cost of Goods Sold using the Periodic Method? What is the cost of ending inventory for each method? B. Is there a difference in the Net Income for each Method?

  • Difference in perpetual vs periodic inventory method

    In an ideal world, perpetual inventory method can provide real time inventory numbers.

  • Transactions for perpetual inventory system

    In the perpetual inventory method all purchase and sales transactions are recorded in the inventory account.

  • Managerial accounting problems

    SE 3, calculate the cost of ending inventory and costs of goods sold according to the LIFO method under the perpetual inventory system.

  • Inventory Records of Neer Company

    This solution is comprised of a detailed explanation to answer the inventory at January 31, using the weighted-average method if Neer maintains and does not maintain perpetual inventory records.

View More Related Solutions