The difference between periodic inventory Continuous inventory

 

At the end of the year, a physical inventory of the goods is done to determine the balance of the warehouse of the goods, and there are two inventory methods that the facility follows, one of them

First, the periodic inventory

In the periodic inventory, only a purchase entry is made and a sales record is made, and an actual inventory is made for the stores at the end of the year to reach the last stock of the period, meaning individuals from the company are selected to carry out the inventory process, i.e. counting and sorting the stock, and the stock is evaluated and priced at the market price or cost, whichever is less, to avoid any profits Or unrealized losses

Entry of purchases in the periodic inventory

From purchases

   To cash, bank or supplier

Then a sales record is made when selling

From / cash or bank

       To H / Sales

  Cost of sold goods or cost of sales in case of periodic inventory = goods purchased or period + purchases during the period _ inventory of the end of the period.

Continuous inventory

In the continuous inventory, we do not need to go to the warehouse to make an inventory of inventory, as three restrictions are made through which the stock balance or the end of the period are accessed at any time.

Pending purchase

From / stock

To the supplier / supplier, cash or bank

That is, in the case of continuous inventory, we do not say from the h / the purchases, but from the h / the stock, then a record is made for the cost of the goods sold

 

From / cost of the goods sold

To / Stock

That is, the store was reduced by the goods that it came out of

Then a sales entry is made at cost + profit margin

From /cash, bank or customers

  To / Sales

That is, the stock at the end of the period is the balance of the stock at the end of the year

The stock of the end of the period is also evaluated at the market price or cost, whichever is lower, to avoid any unrealized profits or losses, in application of the principle of prudence.

With the development of computers, accounting programs and warehouse programs, things have become easier as you enter purchases into the program as well as sales, and the program creates their own restrictions and deportation. You can by making an inventory of each item and knowing its movement.