Question

1.) PERIODIC
2.) PERPETUAL
So your task to start this discussion is to define each AND which one do you think Walmart/Target/etc. uses and why?

Answer 1

Let us first discuss about the two topics: periodic and perpetual. These both are the two inventory systems that are used for tracking the quantity of goods.

Coming on the first one, periodic inventory system, here the goods are being counted occasionally when it is required to know the ending inventory and cost of the goods sold.

Also there is no such accounting being made for cost of goods being sold in accounting system instead a physical count on inventories are being conducted to have the knowledge of cost of goods sold. As the inventories have less transactions as compared to periodic, record keeping is done manually.

The second one, perpetual inventory system, here goods are being counted continuously and all records are tracked continuously.

In a perpetual inventory system, there accounting is must. Continuously, all the updates regarding the inventory gets updated in the ledgers in the particular accounts. As there is huge amount of transaction in perpetual system, though continuous updating is necessary.

So here we saw what these two inventory systems mean.

While discussing about companies like Walmart or target or any other such companies, they all are using perpetual inventory system, the one which keeps continuous records of all the inventories.

This is because, it is an easy task of having the track record of all the items or goods in the business.

Whenever, goods are purchased, it gets updated to the system with full information like quantity and cost price. Then when inventory is finally produced, the number of inventory newly produced is added to the end products of beginning inventory. This helps in keeping records of how much inventory was at the starting of period, how much new inventory were produced, how much materials were purchased and all these helps in determining the cost of goods sold.

This system keeps a track on beginning and ending inventory. Inventories which are sold automatically gets subtracted. All the systems are automated. Therefore, this perpetual inventory system is more reliable then the periodic in which all things needed to be done manually and there are chances of errors being done.

In perpetual, there is no such risk, all the systems are updated, automatically all the updates are taken and accou ts are properly maintained.

Therefore companies like Walmart or Target uses perpetual inventory system.