1. What is Perpetual Inventory?

Perpetual inventory is an accounting method that records inventory changes in real-time through computerized systems, providing continuous tracking of inventory levels. It differs from periodic inventory systems which only update records at specific intervals.

2. How Does the Calculator Work?

The calculator uses the perpetual inventory formula:

Where:

• \( Beginning\ Inventory \) — Inventory at start of period
• \( Purchases \) — Additional inventory purchased
• \( Cost\ of\ Goods\ Sold \) — Inventory sold during period

Explanation: The equation provides real-time inventory tracking by continuously updating inventory levels with each transaction.

3. Importance of Perpetual Inventory

Details: Perpetual inventory systems provide accurate, up-to-date inventory information, help prevent stockouts, reduce carrying costs, and improve financial reporting accuracy.

4. Using the Calculator

Tips: Enter beginning inventory, purchases, and cost of goods sold in units. All values must be non-negative numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between perpetual and periodic inventory?
A: Perpetual updates continuously while periodic only updates at specific intervals (e.g., monthly, quarterly).

Q2: What systems use perpetual inventory?
A: Most modern inventory management and ERP systems use perpetual inventory methods.

Q3: What are the benefits of perpetual inventory?
A: Real-time tracking, reduced stock discrepancies, better demand forecasting, and improved financial controls.

Q4: Are there limitations to perpetual inventory?
A: Requires robust systems, can be costly to implement, and still needs periodic physical counts for verification.

Q5: How often should physical counts be done with perpetual systems?
A: Typically annually, though cycle counting (counting portions of inventory regularly) is becoming more common.