Perpetual Inventory System

Accounting Print Email

Definition of Perpetual Inventory System

The Perpetual Inventory System can be defined as keeping the records of the stocks. You have to keep a balance of the stocks which are present as materials in the business along with the ledger records kept in a book. According to the English dictionary the word Inventory is associated with the materials which are present in the business for resale. The materials present should match with the ledger book otherwise the entire book becomes a trash. This is done to expedite the record keeping of the stores books.

How to string along a proper Perpetual Inventory System strategy

In a Perpetual Inventory System, a particular item automatically updates the inventory records and it is responsible for all the sums and differences from the inventory no matter the kind of stocks it represent. The stocks can include anything like any sort of inventory products, the materials sold from the stocks or the goods picked up from the inventory for production. The main advantage of using the system is that it can update all the information. But there is a chance of theft so you should always check the balance details for the mismatch.

The Perpetual Inventory System is the most modern policy of keeping the records of your stocks. You can keep a track of multifarious stocks and goods which are kept in your organization for sale. In the old method of keeping the journal entries, you can’t cover everything and you have to bring out a book from the old dusted file to check the details. The record keeping policy of stocks in this system brings out the continuation and so you don’t have to take a leap into reminiscence for getting track of your records.

The old system and the latest system of maintaining the journals are known as a Perpetual Inventory System and Periodic System respectively. The periodic system is associated with the book keeping style of the previous days. The style is more or less the same and it follows the pattern of similar debit and credit strategies. It also follows the golden rule of accounts that the debit and credit should match with each other. But there is one difference and that is the perpetual method also includes the previous records with the ledger of the new dates. 

Quote Balakrishna Bandaru, SPSM2, 5 July, 2017
Generally; I understand the Perpetual Inventory is finest method which could makes auto adjustments upto Firm Balance Sheet from Entries of Receipt and Dispatches. Ultimately there is no need for separate postings of accounting vouchers in to ledgers.

Results: More accurate; Real Time effect to Balance sheet; less activities; no chances may for clerical errors in system; helps to spot check / continues verification of stocks and taking corrective action plan if any mismatches.

Any how; thanks for your information.
Quote Ramachandran KM, 11 August, 2018
Perpetual stock take usually  focus raw material or consumables
In automotive sector ?

Login to ReadyRatios


Have you forgotten your password?

Are you a new user?

Login As
You can log in if you are registered at one of these services: