Scribd
Upload
13 views

Perpetual Inventory System

The document describes a perpetual inventory system that provides continuous, real-time updates to inventory accounts. It tracks inventory levels without needing physical counts. Advantages include greater control over inventory and timely information for decisions. Disadvantages are that it is expensive to implement and time-consuming to maintain detailed records. The system records purchases and sales transactions to update opening and closing inventory balances.

Uploaded by

Sinethemba Dube
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
13 views

Perpetual Inventory System

The document describes a perpetual inventory system that provides continuous, real-time updates to inventory accounts. It tracks inventory levels without needing physical counts. Advantages include greater control over inventory and timely information for decisions. Disadvantages are that it is expensive to implement and time-consuming to maintain detailed records. The system records purchases and sales transactions to update opening and closing inventory balances.

Uploaded by

Sinethemba Dube
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 1

Perpetual inventory system

Continuous updating of
inventory accounts – real time
tracking of inventory levels

Advantages: Disadvantages:
1. Greater control over inventory 1. Expensive to implement
2. Provides real time information 2. Time consuming to keep
that could aid management the detailed level records
decision making regarding
purchases, discounts and
returns
3. Reduces the need for physical
inventory counts

Inventory account
Opening balance xxx
Bank/creditors control xxx Cost of sales xxx
1. Closing balance previous period = (purchases)
Opening inventory this period Closing balance xxx
xxx xxx
Opening balance xxx

Cash transaction: Credit transaction:


2. Record inventory purchases in
the inventory account Debit: Inventory Debit: Inventory
Credit: Bank Credit: Creditors control

INVENTORY:

3. Recognise revenue (sales) and


cost of goods sold as the sales
Cash transaction:
take place
Debit: Bank

Credit: Sales Recognition of cost of sales:

Debit: Cost of sales


Credit transaction: Credit: Inventory
INVENTORY:
Debit: Debtors control

Credit: Sales

4. Inventory account balance updates


in real time

You might also like