Perpetual Inventory System

When a merchandising company uses a Perpetual Inventory system, the inventory account balances are updated after each sale made by the company. This type of inventory system is much more complex and often employs the use of computer technology such as scanning cash registers, bar coded merchandise to update the inventory records after each sale.

The perpetual inventory system is more expensive and complex but it gives managers several main advantages:

1. A higher degree of control over inventory in the company's possession
2. Helps purchasing agents to order replacement merchandise in a more timely fashion
3. Detects and deters employee theft
   
4. Identifies other problems related to inventory quickly
   

Additional Accounting Tutorials and Accounting Examples:

What are Direct Materials?
What are Indirect Materials?
FIFO Method and Weighted Average Inventory Method
Perpetual Inventory System
Basic Equation for Inventory Accounts
Inventory Cost Flow Assumptions
Accounting Inventory Shrinkage Example Problem
Merchandising Accounting Journal Entry