1. What is Perpetual Inventory System?

The perpetual inventory system is a method of accounting for inventory that records the sale or purchase of inventory immediately through the use of computerized point-of-sale systems and enterprise asset management software.

2. How Does the Calculator Work?

The calculator uses the perpetual inventory formula:

Where:

• \( inventory \) — Current inventory level
• \( previous \) — Previous inventory level
• \( inflows \) — New inventory received
• \( outflows \) — Inventory sold or used

Explanation: The system continuously tracks inventory changes in real-time as transactions occur.

3. Importance of Inventory Tracking

Details: Accurate inventory tracking is crucial for financial reporting, preventing stockouts, reducing excess inventory, and detecting theft or loss.

4. Using the Calculator

Tips: Enter all values in units. Previous inventory and inflows must be positive numbers. Outflows cannot exceed available inventory (previous + inflows).

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between perpetual and periodic inventory?
A: Perpetual updates continuously, while periodic updates at specific intervals (weekly/monthly). Perpetual provides real-time data.

Q2: What businesses use perpetual inventory?
A: Retailers with barcode systems, manufacturers with MRP systems, and any business needing real-time inventory data.

Q3: What are the benefits of perpetual inventory?
A: Real-time tracking, reduced physical counts, better theft detection, and improved supply chain management.

Q4: What are the limitations?
A: Requires good systems and processes. Still needs occasional physical counts to verify accuracy.

Q5: How does this relate to accounting?
A: Each inventory change affects both the balance sheet (inventory asset) and income statement (COGS).