Home > Inventory - Periodic and Perpetual Inventory Method, Uncategorized > Inventory – Periodic and Perpetual Inventory Method

Inventory – Periodic and Perpetual Inventory Method

Kuya pwede po paki discuss fully yong Periodic Inventory System and Perpetual Inventory System.. just insights lang po kasi dito ako medyo mahina…

Bago ang lahat, let’s define what Periodic and Perpetual Inventory method first.

Periodic Inventory System  – a method of accounting for inventory in which cost of goods sold is determined and inventory is adjusted to the proper balance at the end of the accounting period. Purchases are recorded in the purchase account, ending inventory is determined by physical count.

Perpetual Inventory System – a method of accounting for inventory in which detailed records of each inventory purchase and sale are maintained. This system provides a current record of inventory on hand and cost of goods sold to date.

Tandaan sa lahat na kahit ano pang inventory system ang ginagamit nyo, iisa parin ang value ng ending inventory nyo. Nagkakaiba lang kasi ang Periodic at Perpetual Inventory system sa paraan ng pagrecord ng Cost of Goods Sold.

Paano ba ginagamit ang dalawa?

Ung Periodic Inventory System, kino-compute lang ang Cost of Goods Sold after ng Physical Count at the end of the year. Throughout the year, walang idea ang kumpanya (theoretically) regarding kung magkano ang Cost of Goods Sold nila unless magcount na sila. Since ang Computation ng COGS ay:

COGS =  Beg. Invty + Net Purchases – Ending Inventory

at ang figures lang na meron ang company ay ang beg. invty at net purchases, hindi nila macoocmpute ang cogs unless nga magcount sila. Kaya tinawag na “Periodic” kasi every period (usually period end) lang nila nalalaman yung exact figures ng COGS at Ending Inventory kasi inuupdate mo lang ung record mo ng Inventory at COGS “periodically” which is kapag nagphysical count ka.

Perpetual Inventory System

Sa perpetual inventory system naman, kada galaw ng imbentaryo (whether coming in or going out of the company) ay gumagalaw din ang records nila. Meaning to say, kada galaw ng inventory mo, may computation ka ng COGS mo at Ending inventory kasi inuupdate mo yung balance ng mga accounts mo kada galaw ng inventory. Kaya “perpetual” (meaning forever), kasi forever kang may available updated balance ng Inventory mo as of date, unlike ng periodic na kung saan every count ka lang may idea ng balanse mo.

Kelan ba ginagamit ang dalawang ito?

Ang Periodic Inventory System ay ginagamit usually kung ang inventory mo ay composed of high-volume and/or low value inventory. Kung saan impractical na iaccount mo kada galaw ng inventory mo. Tulad kunyari ng inventory ng M&M’s kumusta naman kung kada benta nila ng M&M candy iaaccount nila diba? Impracticable yun. So, sa period end nalang (after ng physical count) mo bibilangin ang Ending Inventory mo at COGS mo.

Ang Perpetual Inventory System naman, importante to sa mga low-volume High Value na inventory kung saan importanteng alam mo palagi kung magkano ang value ng iyong inventory. Kunyari, inventory ng Diamonds. High value un, kailangan nun kada oras alam mo yung value ng inventory mo para malaman mo kung nananakawan ka o hindi. Dito, kelangan kada galaw ng inventory, inaaccount mo kasi fragile at prone sa nakaw ang mga ito. Kaya dun kelangan ng Perpetual Inventory System. Dito, nagcoconduct din ng physical count at year end pero just for the purpose of reconciling your perpetual inventory records and the actual physical amount of your inventory.

Clear po? Kung hindi, please tell me po.

Definition source: Stice, Stice, Skousen. Intermediate Accounting, 16th ed. Ohio: Thomson-Southwestern, 2007.

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  1. wilbert
    December 12, 2009 at 6:10 am

    Very well discussed. Salamat po. Sir pwd dn po b nyo explain ung derrivatives s FA1 d ko maintndhan e

    • December 12, 2009 at 7:23 am

      Sure, pero tulog lang ako, gabi na po kasi. Good night po! 🙂

  2. Rm
    December 13, 2009 at 6:10 am

    Hi kuya joseph!

    Are you a student or a teacher? just curious. 🙂

    I would like to request na topics about the following ang next na i-feature:
    *Securities: TS, AFS, HTM
    *Derivatives
    *Hedging
    *Business Combination: Subsequent to date of acquisition
    *Franchise Revenue Recognition
    *Installment Sales (and special problems such as trade-ins)
    Thanks in advance!

    Rm

    • December 13, 2009 at 7:01 am

      I used to be a student (technically) and I would love to be a professor. Ako po ay isang PhilCPA (since not-so-long-ago year) and currently working on my US CPA(hopefully pumasa rin). I still consider myself a student kasi marami pa ko kailangang matutunan.

      Sure, I will discuss the requested topics. Pero unahin ko muna yung mga medyo nauna nang konti, kelangan kasi FIFO movement ng inventory. Hehehe

  3. julianrey15
    January 7, 2010 at 6:04 am

    kuya pdiscuss nman po ng FIFO,LIFO,Weighted Average,tska ng inventory po 😐 ty

  4. July 2, 2010 at 6:08 am

    …pde po mgkaron nang mga discussions sa cost accounting

    1.job order costing
    2.Process cost system
    3. Dual systems

    With sample problems…..

  5. January 18, 2011 at 6:03 pm

    Hello po. I’ve been a learner of your site.. nakakatulong po talaga.
    Pero may hindi po ako nahanap.. yung INVETORY WRITE DOWN po. kasi isasama raw po sa exam namin on thursday, e hindi pa kami umaabot diyan. @@ so i dont have any idea about it.
    please po, pa discuss po. =|

    • January 25, 2011 at 11:37 pm

      Meron ako discussion abt inventory pero it’s about Perpetual and Periodic inventory lang ata. Pero andun yung basic concepts. I’ll post something about invty as soon as i find time

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