Perpetual Inventory System

Perpetual Inventory System

See Also:
Periodic Inventory System
Just In Time Inventory System
How to Manage Inventory
Days Inventory Outstanding Analysis
Inventory Turnover Analysis
Supply Chain and Logistics

Perpetual Inventory System

A perpetual inventory system is a continuously updated inventory management system. This type of system uses technology such as bar coding, computerized production operations, and perpetual inventory software to track and record the costs and flows of inventory at each stage of production, from raw materials, to work-in-process, to finished goods, and finally to cost of goods sold.
Perpetual inventory systems provide continuous and detailed information regarding the location of inventory and the costs of inventory. This type of system can assist companies with financial statement preparation, inventory management, and cost control. Perpetual inventory systems facilitate responses to customer inquiries regarding product availability. They also facilitate effective and efficient inventory purchasing and ordering and decrease the risk of stocking out.

Perpetual vs Periodic Inventory Systems

In cost accounting, there are two methods of tracking and recording inventory costs: periodic inventory systems and perpetual inventory systems.
While perpetual inventory systems continuously update information regarding inventory levels and inventory costs, periodic inventory systems rely on periodic valuations of on-hand inventory. Instead of being continuously updated, inventory costs and levels are only checked and counted periodically.
Whether a company uses a perpetual inventory system or a periodic inventory system will depend on the sophistication of the organization. More sophisticated, larger, and more complex organizations are more likely to use a perpetual inventory system and perpetual inventory software. Meanwhile, less sophisticated companies may still be using periodic inventory systems.
Whether a company uses a perpetual inventory system or a periodic inventory system will also depend on the nature of the business. A company that deals with high volumes of low value products may be more likely to use a periodic inventory system, while a company that deals with low volumes of high value products may be more likely to use a perpetual inventory system.
Click here to download the Know Your Economics Worksheet.
Perpetual Inventory System
[box]Strategic CFO Lab Member Extra
Access your Strategic Pricing Model Execution Plan in SCFO Lab. The step-by-step plan to set your prices to maximize profits.
Click here to access your Execution Plan. Not a Lab Member?
Click here to learn more about SCFO Labs[/box]
Perpetual Inventory System


The Struggles of Private Company Accounting

Hiring the right accountant  When I meet a business owner operating at a successful $10 million in revenue, they often mention, “My CPA”… I immediately know that CEO/Entrepreneur is referring to their Tax CPA.  That is because one thing that all Entrepreneurs have in common is that they must file a tax return.  So, from

Read More »


Friend of the firm, Birgit Kamps, recently had Strategic CFO President, Dan Corredor, as a guest on her podcast, CEO Blindspots. CEO BLINDSPOTS HOST: Birgit Kamps. She was speaking five languages by the age of 10, and lived in five countries with her Dutch parents prior to becoming an American citizen. Birgit’s professional experience includes starting

Read More »

SHRM calls ICHRA the 401K for Group Health Benefits

Fed-up with group health insurance? ICHRA is the new way to offer great health benefits and avoid ACA penalties, SHRM calls it the 401K for group health benefits.  In 2020 the Department of Labor, HHS and IRS changed the rules for employer health benefits. They changed the Affordable Care Act mandates and penalties for every

Read More »


Financial Leadership Workshop

MARCH 28TH-31ST 2022



Strategic CFO™ Financial Leadership Workshop
The Art of the CFO®


September 12-15th 2022