Periodic Inventory

AAA

DEFINITION of 'Periodic Inventory'

A method of inventory valuation for financial reporting purposes where a physical count of the inventory is performed at specific intervals. This accounting method for inventory valuation only keeps track of the inventory at the beginning of a period, the purchases made and the sales during the same period and is recorded under the asset section of the balance sheet.

INVESTOPEDIA EXPLAINS 'Periodic Inventory'

With this valuation method, it is much harder to track which individual items were destroyed or stolen, but a cross-reference can be made with the sales revenue to get a rough estimate of what was sold versus what was not. Many see this method as being inferior to the perpetual inventory method, which keeps track of inventory at the point of sale.

This system is typically used by small businesses that can't afford or don't need an electronic tracking system (i.e. the bar code system).

RELATED TERMS
  1. Carrying Costs

    The price of holding, or "carrying," inventory. Carrying costs ...
  2. Ending Inventory

    The value of goods available for sale at the end of the accounting ...
  3. Cost Of Goods Sold - COGS

    The direct costs attributable to the production of the goods ...
  4. Beginning Inventory - BI

    The book value of goods, inputs or materials available for use ...
  5. Inventory

    The raw materials, work-in-process goods and completely finished ...
  6. Inventory Turnover

    A ratio showing how many times a company's inventory is sold ...
Related Articles
  1. What are the generally accepted accounting ...
    Investing

    What are the generally accepted accounting ...

  2. Measuring Company Efficiency
    Fundamental Analysis

    Measuring Company Efficiency

  3. Inventory Valuation For Investors: FIFO ...
    Fundamental Analysis

    Inventory Valuation For Investors: FIFO ...

  4. Material Adverse Effect A Warning Sign ...
    Markets

    Material Adverse Effect A Warning Sign ...

comments powered by Disqus
Hot Definitions
  1. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  2. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  3. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  4. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  5. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
  6. Earnings Before Interest After Taxes - EBIAT

    A financial measure that is an indicator of a company's operating performance. EBIAT, which is equivalent to after-tax EBIT ...
Trading Center