Question

system inventories are received first are issued first.
O perpetual
O FIFO
periodic
O WAC

Answer 1

Answer:

What is Perpetual Inventory?

Perpetual inventory 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. Perpetual inventory provides a highly detailed view of changes in inventory with immediate reporting of the amount of inventory in stock, and accurately reflects the level of goods on hand. Within this system, a company makes no effort at keeping detailed inventory records of products on hand; rather, purchases of goods are recorded as a debit to the inventory database. Effectively, the cost of goods sold includes such elements as direct labor and materials costs and direct factory overhead costs.

A perpetual inventory system is distinguished from a periodic inventory system, a method in which a company maintains records of its inventory by regularly scheduled physical counts.

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Perpetual Inventory

Understanding Perpetual Inventory

A perpetual inventory system is superior to the older periodic inventory system because it allows for immediate tracking of sales and inventory levels for individual items, which helps to prevent stockouts. A perpetual inventory does not need to be adjusted manually by the company's accountants, except to the extent it disagrees with the physical inventory count due to loss, breakage or theft.

How Perpetual and Periodic Inventory Systems Work

A point-of-sale system drives changes in inventory levels when inventory is decreased, and cost of sales, an expense account, is increased whenever a sale is made. Inventory reports are accessed online at any time, which makes it easier to manage inventory levels and the cash needed to purchase additional inventory. A periodic system requires management to stop doing business and physically count the inventory before posting any accounting entries. Businesses that sell large dollar items, such as car dealerships and jewelry stores, must frequently count inventory, but these firms also maintain a point-of-sale system. The inventory counts are performed frequently to prevent theft of assets, not to maintain inventory levels in the accounting system.