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Perpetual Inventory is a method of accounting, which can record the transaction details using management software and computerized systems. It offers detailed information on the inventory changes and shows the actual goods available. 

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What is Perpetual Inventory?

Perpetual Inventory is an accounting inventory method that tracks the inventory perpetually when it moves in a supply chain. Warehouse managers in this method keep a constant track of the balance in inventory. It means the stocks gets automatically updated each time items are sold and received through each sale. 


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The inventory account balance during the end of a period reveals the inventory cost in hand. This balance accuracy is assured periodically through physical counting once a year. When there is a difference between the balance on physical count and inventory account, this is rectified through the journal entries. Some of the reasons for such differences are normal shrinkage, inaccurate record keeping, and shoplifting, and others.

Both manufacturing and merchandising companies use the perpetual inventory system. Manufacturing companies use this system to buy direct materials and merchandising companies use it for maintaining the records of a merchandising inventory. We, at BookMyEssay offer an in-depth explanation of all topics of Perpetual Inventory assignment.

What are the Benefits of a Perpetual Inventory System?

The benefits are discussed in our Perpetual Inventory assignment help online as follows:

Accurate Restocking: In this method, the changes regarding levels of inventory are recorded, whenever an inventory is being purchased or sold. It can also help in identifying the inventory items, which are running low or are out-of-stick.

Accurate Financial Statements: This system can help to keep the transaction balance correct and offers accurate financial statements all through the year. Additionally, it becomes important when the banks maintain the ratios.

Detect Theft and Errors: An inventory balance can compare with the year-ending balance, which can help to locate the discrepancies including theft, errors, and shrinkage because the adjustments are shifted for cist of goofs sold.

Accurate levels of inventory: Many businesses manage the inventory levels using this accounting method.. it can prevent the building up of inventories. In a perpetual inventory system, the turnover ratio is calculated accurately and the transactions are correct.


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The Formulas in Perpetual Inventory

Perpetual inventory is useful in making accurate decisions. The formulas are summarized in our help for assignment with Perpetual Inventory:

  • EOQ Model: EOQ or Economic Order Quantity model can decide the inventory amount to purchase for meeting the demand and it can minimize the enhancing inventory holding prices. It can help to know the flow of inventory through which you can calculate EOQ
  • COGS or Cost of Goofs Sold: COGS is calculated perpetually. When the products are sold, the cost of sales enhances. It includes the money, which is unvested to produce goods together with material and labour costs.
  • Gross Profit Method: This is calculated differently in a perpetual inventory system. For calculating gross profit, an estimate of the inventory is made for a specific period when preparing accounting statements and documents.

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