Perpetual Inventory

AAA

DEFINITION of 'Perpetual Inventory'

A method of accounting for inventory that records the sale or purchase of inventory in near real-time, through the use of computerized point-of-sale and enterprise asset management systems. Perpetual inventory provides a highly detailed view of changes in inventory and allows real-time reporting of the amount of inventory in stock, hence, accurately reflecting the level of goods on hand.

INVESTOPEDIA EXPLAINS 'Perpetual Inventory'

A perpetual inventory system is superior to the older periodic inventory systems because it allows for real-time tracking of sales as well as inventory levels for individual items, helping to prevent stock outs. A perpetual inventory also does not need to be adjusted manually by the company's accountants except to the extent it disagrees with the physical inventory count due to loss, breakage or theft.

RELATED TERMS
  1. Periodic Inventory

    A method of inventory valuation for financial reporting purposes ...
  2. Inventory

    The raw materials, work-in-process goods and completely finished ...
  3. Consignment

    An arrangement whereby goods are left in the possession of another ...
  4. Asset

    1. A resource with economic value that an individual, corporation ...
  5. Inventory Turnover

    A ratio showing how many times a company's inventory is sold ...
  6. Carrying Cost Of Inventory

    This is the cost a business incurs over a certain period of time, ...
Related Articles
  1. Fundamental Analysis

    Inventory Valuation For Investors: FIFO And LIFO

    We go over these methods of calculating this component of the balance sheet, and how the choice affects the bottom line.
  2. Markets

    What Is A Cash Flow Statement?

    Learn how the CFS relates to the balance sheet and income statement as a part of a company's financial reports.
  3. Options & Futures

    Advanced Financial Statement Analysis

    Learn what it means to do your homework on a company's performance and reporting practices before investing.
  4. Investing

    What's a Debit Note?

    A debit note is a document used by a seller to inform a purchaser of a dollar amount owed. As the name indicates, it is a note from the seller that a debit has been made to the purchaser’s account. ...
  5. Investing

    What's Capitalization?

    Capitalization has different meanings depending on the context.
  6. Fundamental Analysis

    The Best 5 Online Accounting Systems For Small Business

    Running a small business can be difficult, but thanks to these online accounting services, taking care of payroll doesn't have to be.
  7. Investing

    Understanding Cost Accounting

    Cost accounting is the method of financially allocating expenses to goods that are manufactured for resale. Cost accounting is also referred to as managerial accounting, because managers use ...
  8. Investing

    What are Prepaid Expenses?

    A prepaid expense is an asset on the balance sheet. Due to accounting principles, expenses are often accrued on the balance sheet and expensed in a later period.
  9. Investing

    What's a Sunk Cost?

    A sunk cost was incurred in the past, is independent of future events and cannot be recouped. Economists teach that sunk costs should not be considered when making a financial decision. Rather, ...
  10. Investing

    What are Fixed Costs?

    Fixed costs are business expenses that do not change as the level of production goes up or down. They are one of two types of business expense, the other being variable costs. Variable costs ...

You May Also Like

Hot Definitions
  1. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  2. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  3. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  4. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  5. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  6. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
Trading Center