Question

Q33 Answer the following questions:

(a) What is the primary difference between a periodic inventory system and a perpetual inventory system? [2 Marks]

(b) A company usually reports on different types of inventory. Elaborate these and explain how they are different. [2 Marks]

DO NOT WRITE THE ANSWERS - USE WORD FORMAT.

NO PLAGIARISM IN THE ANSWERS PLEASE

Answer 1

The main difference between these two methods of inventory system as follows

=✓ In periodic inventory system we can not modify inventory amount but instead adjust for purchases and sales of inventory at the end of the reporting period based on physical count of inventory on hand.

However in perpetual inventory system keeps track of inventory count continuously with automatically update.

=✓ periodic inventory system used in small industries and perpetual inventory system used in big business.

=✓ periodic inventory system is less expensive as compared to perpetual inventory system as technology and staff involved in it.

Different types of inventories

1. Direct inventory

A) production inventory

B) work in process inventory

C) finished goods inventory

D) MRO (maintenance, repair and operating) inventory

E) miscellaneous inventory ( such as scrap, obsolete and undesirable products)

2 indirect inventory

A) transit inventory

B) buffer inventory

C) decoupling inventory

D) seasonal inventory

E) lot size inventory

F) anticipation inventory