Periodic Inventory


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.

BREAKING DOWN '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).

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  6. Cost Of Goods Sold - COGS

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  1. What are the generally accepted accounting principles for inventory reserves?

    As with most matters related to generally accepted accounting principles (GAAP), accountants assigned with the task of applying ... Read Full Answer >>
  2. Can a company's working capital turnover ratio be negative?

    A company's working capital turnover ratio can be negative when a company's current liabilities exceed its current assets. ... Read Full Answer >>
  3. Can working capital be negative?

    Working capital can be negative if a company's current assets are less than its current liabilities. Working capital is calculated ... Read Full Answer >>
  4. How do I read and analyze an income statement?

    The income statement, also known as the profit and loss (P&L) statement, is the financial statement that depicts the ... Read Full Answer >>
  5. Does working capital include prepaid expenses?

    The calculation for working capital includes any prepaid expenses that are due within one year, since such prepaid expenses ... Read Full Answer >>
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    Short-term debt is considered part of a company's current liabilities and is included in the calculation of working capital. ... Read Full Answer >>

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