Answer to Question #136949 in Accounting for Dzunnie

Question

differetiate between the two types of accounting system for inventory

Answer 1

Solution:

There are two types of the inventory accounting system, which are differentiated below:

1.     Periodic inventory system – This utilizes frequent physical count to measure or establish the inventory levels or closing inventory balance and the cost of the goods sold. The simplicity of a periodic inventory system permits for the employment of manual record keeping.

2.     Perpetual inventory system – This maintains continual track of inventory levels or balances, with updates made automatically should a product be received or sold. A perpetual inventory system is also more complicated than a periodic inventory system since it requires much more record keeping to maintain, and hence it utilizes a computer system.