Question

In 200 words or more, Explain what Perpetual Inventory is and how it differs from other inventory methods? Advantages and Disadvantages? Original work please.

Answer 1

-Perpetual inventory system is a system which records the sale or purchase of an inventory immediately through point of sale systems. The word" perpetual" means continuous and the perpetual inventory system stays true to this meaning. It provides an intricate view of the inventory levels and the pricing.

As compared to the periodic inventory system, which only records inventory after a time period lapses, perpertual inventory system is highly efficient.It avoids this lapse in time and helps in taking timely decisions.

The advantages of perpetual inventory system are mentioned below:

- It helps to keep the products in stock.

- It gives the owners a better understanding of consumer behavior.

It helps in centralization of the inventory system.

-It reduces physical inventory counts.

The disadvantages of using a perpetual inventory system are mentioned below:

- Setting up a perpetual inventory system requires a huge capital investment.

-It involves imparting a higher level of training.

- It is time consuming.