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23 November 2008 Give points that doffirentiate perpetual inventory & continuous stock taking?

CA RAMESH KUMAR AHUJA

CA RAMESH KUMAR AHUJA (Expert)
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24 November 2008 There are two principal methods of stock-taking : periodic stocktaking and continuous stock-taking. Under the first method, physical verification of inventories is carried out at a single point of time, usually at the year-end or at a selected date before or shortly after the year-end. Under the second method, physical verification is carried out throughout the year, with different items of inventory being physically verified at different points of time. However, the verification programme is normally so designed that each material item is physically verified at least once in a year and more often in appropriate cases. The continuous stock-taking method is effective when a perpetual inventory system of record-keeping is also in existence.

Periodic Inventory System:Inventory account and cost of goods sold are non-existent until the physical count at the end of the year.
Perpetual Inventory System:Account and the balance of costs of goods sold and inventory account exist all the time.

Periodic Inventory System: Purchases account is used to record purchases.
Perpetual Inventory System:No individual purchases account but the purchases are recorded in the Inventory Account.

Periodic Inventory System: Purchase Return account is used to record Purchases Returns account.
Perpetual Inventory System:No individual Purchase Returns account but the purchases return are recorded in the Inventory Account.

Periodic Inventory System: Cost of goods sold or cost of sale is computed from the ending inventory figure
Perpetual Inventory System:Record cost of goods sold/cost of sale – inventory is reduced when there is a sale.

Periodic Inventory System: For goods returned by customers there are no inventory entries.
Perpetual Inventory System:Returns from customers are recorded by reducing the cost of goods sold and adding back into inventory.

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