The Difference Between Periodic Inventory System And Perpetual Inventory System

Tabulated below the major differences between Periodic Inventory System and Perpetual Inventory System:


Periodic Inventory System

Perpetual Inventory System

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.

Purchases account is used to record purchases.

No individual purchases account but the purchases are recorded in the Inventory Account.

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.

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.

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.

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