Periodic vs Perpetual Inventory

This support notes are suitable for :

• ABSS Accounting
• ABSS Premier

Introduction

This support note will explain about the difference between periodic inventory and perpetual inventory.

Periodic

A method of accounting for inventory whereby the goods on-hand are determined by a physical count and the cost of goods sold equals opening inventory plus net purchases, less closing inventory. Using this method, when inventory is purchased it is usually charged to a cost of sales account.

• “I Inventory” is not ticked 
• On hand amounts are NOT tracked by MYOB
• A journal must be done at the end of the period in order to show inventory as an asset on the Balance Sheet, & to adjust the COS 
• Expense/COS is increased when the item is purchased 
• Income is increased when item is sold

Perpetual (ABSS use)

A method of accounting for inventory whereby the records of on-hand quantities of items is kept up to date by recording every time an item leaves or enters inventory. The total value of the items held in stock is reflected in the inventory asset account and the cost of sale is recognised at the time of selling the good.

• “I Inventory” is ticked
• On hand amounts are tracked by MYOB
• Asset account is increased when item is purchased & decreased when item is sold
• Income is increased & Expense/COS is increased when item is sold