Perpetual and Periodic Inventory Systems

In a perpetual inventory system, companies keep detailed records of the cost of each inventory purchase and sale. These records continuously or perpetually—show the inventory that should be on hand for every item. A company determines the cost of goods sold each time a sale occurs. Where as, in a periodic inventory system, companies do not keep detailed inventory records of the goods on hand throughout the period. They determine the cost of goods sold only at the end of the accounting period or periodically. At the end of the period, the company takes a physical inventory count to determine the cost of goods on hand.