Loading presentation...

Present Remotely

Send the link below via email or IM

Copy

Present to your audience

Start remote presentation

  • Invited audience members will follow you as you navigate and present
  • People invited to a presentation do not need a Prezi account
  • This link expires 10 minutes after you close the presentation
  • A maximum of 30 users can follow your presentation
  • Learn more about this feature in our knowledge base article

Do you really want to delete this prezi?

Neither you, nor the coeditors you shared it with will be able to recover it again.

DeleteCancel

Make your likes visible on Facebook?

Connect your Facebook account to Prezi and let your likes appear on your timeline.
You can change this under Settings & Account at any time.

No, thanks

Inventory System: Perpetual Versus Periodic

No description
by

Agatha Engel

on 25 February 2015

Comments (0)

Please log in to add your comment.

Report abuse

Transcript of Inventory System: Perpetual Versus Periodic

Inventory System: Perpetual Versus Periodic
What business uses
perpetual
or
periodic
inventory system?
periodic inventory system?

Businesses that cannot afford to have a real time inventory system in place, mostly smaller companies.

These companies will have to count their ending inventory in order to find out what the cost of sales is.

remember this one?
COS = Beginning Inventory + Purchases − Ending Inventory
Periodic
Perpetual inventory system?

Businesses that can afford to have a real time inventory system in place. Their accounts ‘inventory’ and ‘cost of sales’ are always up to date.
Perpetual
Company Info
Let’s assume company ABC in the month of April of year 20XX has the following information

Beginning Inventory of $1,000
Purchase of $500
Sales of $300 (whereof COS $150)
Ending Inventory $1,350
Employee meals $50
What do the calculations look like?
Periodic

*When a cash sale is made om 14 April 20XX company ABC will record

14 April 20XX

Cash $300
to Sales $300

After this entry the account balance for Cost of Sales account is $0.
The inventory account is unchanged.
Periodic

**When a cash purchase is made om 20 April 20XX company ABC will record:

20 April 20XX

Food Purchase
$500
To Cash $500

After this entry the inventory account is unchanged.
Perpetual

*When a cash sale is made om 14 April 20XX company ABC will record:

14 April 20XX

Cash $300
to Sales $300
and

Cost of Sales $150
to Inventory $150

After this entry the account balance for Cost of Sales account is $150.
The Inventory account is $1,000-$150= $850

Information is accurate and up to date.
Perpetual

**When a cash purchase is made om 20 April 20XX company ABC will record:

20 April 20XX

Inventory $500
To Cash $500

The account balance for Inventory is now
$1,000 (beginning)-$150 (sale on 14 April 20XX)+$500 (purchase on 20 April 20XX)= $1,350

Perpetual

****At the end of the month the company will have to make an adjusting entry IF there were any employee meals.

30 April 20XX

Employee meal expense $50
to Cost of Sales $50

The account balance for Cost of Sales is now $150-$50= $100
Periodic

***Because the periodic system does not keep updated inventory records. It will have to count the ending inventory at the end of the month in order to find out what the COS is. The adjusting entry is shown below.


30 April 20XX

Inventory (Ending Inventory) $1,350

to Inventory (Beginning Inventory) $1,000

Cost of Goods Sold (Balancing Figure) $150
to Purchases $500
Periodic
****At the end of the month the company will have to make an adjusting entry IF there were any employee meals.

30 April 20XX

Employee meal expense $50
to Cost of Sales $50

The account balance for Cost of Sales is now $150-$50= $100
Full transcript