1. Identify the attributes as well as both the advantages and disadvantages of a perpetual inventory system.
2. Identify the attributes as well as both the advantages and disadvantages of a periodic inventory system.
3. Provide journal entries for a variety of transactions involved in the purchase of inventory using both a perpetual and a periodic inventory system.
Question: Differences between a perpetual inventory system and a periodic inventory
system were discussed briefly. A perpetual system—which frequently relies on bar coding and computer
scanning—maintains an ongoing record of all items present. How is the recording of an inventory purchase
carried out in a perpetual system?
Answer: When a perpetual inventory system is in use, all additions and reductions are monitored in the inventory
T-account. Thus, theoretically, the balance found in that general ledger account at any point in time will be
identical to the merchandise physically on hand. In actual practice, recording mistakes as well as losses such as
theft and breakage create some (hopefully small) discrepancies. Consequently, even with a perpetual system, the
inventory records must be reconciled occasionally with the items actually present to reestablish accuracy.