Perpetual Inventory System

The stock taking may either be done annually or continuously. A perpetual inventory system is a practice of tracking and documenting inventory and costs of goods sold on a ceaseless basis. Through this, the current inventory balance can be calculated in real time and to provide up-to-date inventory balance information.

Advantages of Perpetual Inventory System

• Under this inventory system the stock is checked regularly or continuously throughout of the year. It helps in easy preparation final accounts of a company without any loss of time.

• By applying this system, it will help in maintaining proper stocks in stores.

• Helpful in formulating purchase policies, the term purchase policy is a collection of rules that control the requisition process. The store keeper is responsible for the various department, so he can tell the time, quantity and quality of material needed by the production department.

• Advantageous in production planning, it can be done by way of Check on Stores Personnel, through the continuous stock verification by the stores staff and it will forbid the pilferage of stores.

• Errors and shortages in the stores can be detected easily.

• Helps to keep the investment under check. Maintaining proper inventory level by preventing stock out.

• Cost of goods sold and cost of production can easily be known.

• It minimizes the inventory carrying and holding cost to a certain extent.

Continuous verification of stock in order to assure and check that physical balance tallies the book balance. Most businesses use perpetual inventory systems nowadays due to their veracity and inventory management automation.

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Prepared by

Arjun A R

Faculty

Kairos Institute, Thodupuzha