How is the perpetual inventory system different from the periodic method?
The periodic inventory system is the method used for determining the quantity of inventory on hand periodically, much less frequently than the perpetual tracking system. Once acquisitions of inventory have been accounted for during a period, the items are debited from the Purchases account. The total sum in the Purchases account is then added to the cost of the inventory on hand at the beginning of the next accounting period. Why would a company choose one inventory tracking method over another and which method is better? Depending on the product being sold or perhaps even the type of industry, a company may choose how to best track their inventories. Wal-Mart, for example, tracks their inventory on a real time basis (a perpetual system). This is due to the quantity and variety of the goods they sell, and their desire to keep a close eye on all of it! On the other hand, a company that provides wooden crates to grocery stores, hardware stores, supply stores etc., need only take an inven
