Tabulated below the major differences between Periodic Inventory System and Perpetual Inventory System:
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Periodic Inventory System |
Perpetual Inventory System |
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Inventory account and cost of goods sold are non-existent until the physical count at the end of the year. |
Account and the balance of costs of goods sold and inventory account exist all the time. |
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Purchases account is used to record purchases. |
No individual purchases account but the purchases are recorded in the Inventory Account. |
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Purchase Return account is used to record Purchases Returns account. |
No individual Purchase Returns account but the purchases return are recorded in the Inventory Account. |
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Cost of goods sold or cost of sale is computed from the ending inventory figure |
Record cost of goods sold/cost of sale – inventory is reduced when there is a sale. |
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For goods returned by customers there are no inventory entries. |
Returns from customers are recorded by reducing the cost of goods sold and adding back into inventory. |