Mohammad has a business or a company using a periodic inventory system and his business period starts on Jan. The cost of goods sold in that period is counted by taking the inventory status at the beginning of a period, adding new inventory purchases during the period, and deducting the ending inventory.Ĭosts of goods sold of a period= (Beginning Inventory + Purchase for the period) – Ending Inventory Periodic system accounting: Periodic inventory method:Ī Periodic inventory system is following a simple method. Periods may be monthly, quarterly, or annual based on their business type, size, and accounting strategies. Under a periodic inventory system, inventory is counted at the end of a period. Before doing a periodic update, the system shows the previous inventory balance recorded in the previous period. Physically inventory counting is time-consuming, so businesses do this once in a period. In a periodic inventory system inventory is physically counted and updated at the end of a period. Periodic Inventory System vs Perpetual Inventory System What is a periodic inventory system: This method updates data in real time, which allows businesses to get an accurate picture of their inventory levels at any given time. In contrast, In a perpetual inventory system, inventory status is continuously updated after every sale and purchase. A periodic inventory system is an inventory control method where the inventory status is updated at the end of a specific period, rather than after every sale and purchase.

Periodic inventory definition