Perpetual Inventory System

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Perpetual Inventory System

"The perpetual inventory system is best suited for the sort of enterprises that usually keep a high inventory and have a high turnover. It is also well suited for the type of industries where there isn't much processing to do, so the inventory exists at only one level (for sale) rather than at three levels (raw materials, work in progress and for sale). It is well suited for the fact that inventory checking is an important part of the operations of this industry." (Kulkarni, 2010) A perpetual inventory system, also known as a continuous inventory system is when the inventory availability and quantity are updated continuously. Each transaction that is made is instantaneously reported into the inventory account records. With the perpetual inventory system the inventory has a up to date balance all year long. Because inventory is being updated continuously and the balance is up to date, there is no need for the business to perform an end of year inventory check. Under the perpetual system, all records should be correct unless there was theft at the business that would make the inventory count off. "Furthermore, the perpetual inventory system is further aided by the presence of RFID checkers. These RFID checkers make the inventory calculation and recording purchases and sales easier and eliminate the need for manual checking at regular intervals. Of course, one cannot avoid situations where there may be a theft or unaccounted spoilage or a system failure which may send the thing into a disarray and manual backup may be called for." (Kulkarni, 2010)

Reference

Kulkarni, A. (2010). Perpetual inventory system. Buzzle.com. Retrieved from http://www.buzzle.com/articles/perpetual-inventory-system.html
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