Types Of Inventory Syystem

There are mainly two types of inventory methods:

--> Periodic Inventory
In the periodic inventory system, the physical count is performed sometimes to assess the price of goods sold (COGS) and stock levels. The periodic inventory system takes stock balance at the beginning of a period, adds all recently purchased inventory throughout the period, and deducts ending inventory to derive the expense of goods sold (COGS).

To calculate the organization's gross margin, then you are able to deduct the cost of goods sold amount in the total earnings. Small businesses mainly utilize periodic inventory accounting systems. For businesses employing the regular system, the inventory amounts, and price of goods sold numbers are not updated continuously.

--> Perpetual Inventory
Perpetual Inventory system is most commonly employed by businesses such as retailers with multiple sockets . Together with the Perpetual inventory system, all of your product's stock levels are updated automatically whenever a product is received or delivered to the customer.

For retailers, it's almost impossible to execute the physical count of thousands of products available in their store and warehouse. Physical counting for all the goods is also a very time-consuming job which needs manual labor. Because of these reasons, many businesses don't perform a physical count of their stock regularly.

Together with the perpetual inventory system, your product stock levels are always updated whenever a product is obtained or fulfilled to the customer. All your earnings return and buy return are also immediately recorded. The inventory account balance is always updated except for any damage or theft.