Perpetual vs. Periodic Inventory

Perpetual Inventory System

• Record the quantity and cost of each item when they are bought, kept in inventory and sold.
• Provide detail information so that merchandise availability can be known.
• Record increase and decrease of merchandise to “Inventory account”.

Periodic Inventory System

• Use temporary account to add the increase and decrease in merchandise, usually called “Purchase account”.

Taken from Weygandt, Kieso and Trenholm. (1999). Accounting Principle (p. 197). Toronto: John Wiley & Sons Canada, Ltd.