Perpetual inventory

Definition

A perpetual inventory system continuously tracks inventory levels, updating records in real-time as transactions occur. This method provides instant access to the quantity and value of inventory on hand.

5 Must Know Facts For Your Next Test

1. Perpetual inventory systems require sophisticated software to track real-time updates.
2. This system helps in reducing discrepancies between recorded and actual inventory levels.
3. Perpetual inventory is often used by companies with high volume sales and numerous stock-keeping units (SKUs).
4. It allows for immediate detection of theft, loss, or damage in inventory.
5. Financial reports generated using a perpetual inventory system are more accurate and up-to-date.

Review Questions

Related terms

Periodic Inventory:

An accounting method where updates to the inventory account are made at specific intervals, not continuously.

Stock Keeping Unit (SKU): A unique identifier for each distinct product and service that can be purchased.

Inventory Turnover Ratio:

A measure of how many times a company's inventory is sold and replaced over a period.