What do you mean by periodic inventory system?

What do you mean by periodic inventory system?

A periodic inventory system is a mechanism for measuring the level of inventory and the cost of goods sold (COGS) by using an occasional physical count. Periodic systems use regular and random inventory audits to update inventory-tracking information.

What is perpetual and periodic inventory system?

A perpetual inventory system inventory updates purchase and sales records constantly, particularly impacting Merchandise Inventory and Cost of Goods Sold. A periodic inventory system only records updates to inventory and costs of sales at scheduled times throughout the year, not constantly.

Why would a company use periodic inventory system?

The periodic inventory system is ideal for smaller businesses that maintain minimum amounts of inventory. The physical inventory count is easy to complete, small businesses can estimate the cost of goods sold figures for temporary periods.

What is the advantage of periodic inventory system?

An advantage of the periodic inventory system is that there is no need to have separate accounting for raw materials, work in progress, and finished goods inventory. All that is recorded are purchases.