You’ll know the amount of inventory without completing the time-consuming task of counting physical inventory periodically. While the periodic system can be more cost-effective, the perpetual system can offer more precise inventory data and financial statements. However, it’s important to weigh the benefits of both systems carefully. ![]() Some popular perpetual inventory management systems include NetSuite and Fishbowl Inventory. While these systems can offer more accurate and updated inventory data, they also come with higher costs - as you’ll need to invest in hardware, software, and employee training. In contrast, perpetual inventory systems often involve the use of sophisticated software and technology to track inventory in real time. Instead, this cost method relies on simpler record-keeping methods - which can help you reduce the total cost of inventory management by eliminating an additional software cost. One of the key advantages of the periodic inventory system is that you don’t need to invest in expensive software or complex accounting systems. This approach offers better inventory control, allowing you to manage inventory costs efficiently. The smaller scale of operations lets you complete a physical inventory item count and estimate the cost of goods sold for specific periods. The periodic inventory system is particularly well-suited if you own a small business that maintains minimal inventory. The periodic inventory system offers several benefits, including: Good for small businesses What are the benefits of using a periodic inventory system? In the end, picking between a perpetual and periodic inventory system - and the right inventory valuation method - really depends on what works best for your specific business and resources. Just remember that the way you value your inventory should follow generally accepted accounting principles (GAAP). You can apply both methods to perpetual or periodic inventory systems, but they might give different results for your ending inventory balance and the cost of goods sold, depending on how your inventory moves and if prices change.
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