Differentiate between Periodic Inventory System and Perpetual Inventory System.

The difference between Periodic Inventory System and Perpetual Inventory System are as follows: S. No. Periodic Inventory System Perpetual Inventory System 1. This system is based on physical verification. It is based on book records. 2. This system provides information about inventory and cost of goods sold at a particular date. It provides continuous information about inventory and cost of sales. 3. This system determines inventory and takes cost of goods sold as residual figure. It directly determines cost of goods sold and computes inventory as balancing figure. 4. Cost of goods sold includes loss of goods as goods not in inventory are assumed to be sold. Closing inventory includes loss of goods as all unsold goods are assumed to be in Inventory. 5. Under this method, inventory control is not possible. Inventory control can be exercised under this system. 6. This system is simple and less expensive. It is costlier method. 7. Periodic system requires closure of business for counting of inventory. Inventory can be determined without affecting the operations of the business.