PERPETUAL vs.

PERIODIC
INVENTORY SYSTEM

Reporter: Danica A. Caluag

 INVENTORY
SYSTEM

PERPETUAL
 Methods that maintain continuous
records of the inventory available
and the cost of goods sold
PERIODIC
 Requires updating the inventory account only at the
end of the period.
 It uses account title such as: Purchases, purchase
returns and allowances, purchase discount, and
Freight-in. It is recorded in separate temporary
account.
 On January 10, James Company purchase P3000 worth of inventory
Purchases: on credit on Nadine Company with terms of 2/10, n/30. FOB
shipping point.

PERPETUAL PERIODIC
SYSTEM SYSTEM

Merchandise Inventory 3,000 Purchases 3,000

Accounts Payable 3,000 Accounts Payable 3,000
 On January 11, paid a P300 freight charge to transport merchandise
Transportation: to its store.

PERPETUAL PERIODIC
SYSTEM SYSTEM

Merchandise Inventory 300 Freight-in 300

Cash 300 Cash 300
 Purchase Return & On January 15, James returned merchandise purchased on Jan. 10
because of defects costing P500 to Nadine Co.
Allowances

PERPETUAL PERIODIC
SYSTEM SYSTEM

Accounts Payable 500 Accounts Payable 500

Merchandise Inventory 500 Purchase Return & Allowances 500
Payment within Discount On January 19, James paid its liability to Nadine on inventory
purchased last January 10 less returns.
Period

PERPETUAL PERIODIC
SYSTEM SYSTEM

Accounts Payable 2,500 Accounts Payable 2,500

Merchandise Inventory 50 Purchase Discount 50
Cash 2,450 Cash 2,450
 Sales: On February 10, James sold inventory to Kath for P5,000 on account
with a cost of P2,000 granting Kath terms of 5/10, n/60.

PERPETUAL PERIODIC
SYSTEM SYSTEM

Account Receivable 5,000 Accounts Receivable 5,000

Sales 5,000 Sales 5,000

Cost of goods sold 2,000

Merchandise Inventory 2,000
 Sales Return: On February 14, Kath returned part of merchandise worth P1,500
with a cost of 600.

PERPETUAL PERIODIC
SYSTEM SYSTEM

Sales return and allowances 1,500 Sales return and allowances 1,500
Account Receivable 1,500 Account Receivable 1,500

Merchandise Inventory 600

Cost of goods sold 600
 Sales Discount: On February 18, James collected the remaining receivables from
Kath.

PERPETUAL PERIODIC
SYSTEM SYSTEM

Cash 3,325 Cash 3,325

Sales Discount 175 Sales Discount 175
Account Receivable 3,500 Account Receivable 3,500
 PERPETUAL
INVENTORY SYSTEM
January
10 Merchandise Inventory 3,000 Feb. 10 Account Receivable 5,000
Accounts Payable 3,000 Sales 5,000
Purchased inventory on account
Cost of goods sold 2,000
Merchandise Inventory 2,000
11 Merchandise Inventory 300
To record sales on discount
Cash 300
Payment for freight charge
14 Sales return and allowances 1,500
Account Receivable 1,500
15 Accounts Payable 500
Merchandise Inventory 500 Merchandise Inventory 600
Returned of Merchandise Cost of goods sold 600
To record return on sales

19 Accounts Payable 2,500 18 Cash 3,325

Merchandise Inventory 50 Sales Discount 175
Cash 2,450 Account Receivable 3,500
Payment of inventory on account with discount Collection of receivables with discount
 PERIODIC
INVENTORY SYSTEM
January
10 Purchases 3,000 Feb. 10 Account Receivable 5,000
Accounts Payable 3,000 Sales 5,000
Purchased inventory on account To record sales on discount

11 Freight-in 300 14 Sales return and allowances 1,500

Cash 300 Account Receivable 1,500
Payment for freight charge To record return on sales

15 Accounts Payable 500 18 Cash 3,325

Purchase Return & Allowances 500 Sales Discount 175
Returned of Merchandise Account Receivable 3,500
Collection of receivables with discount
19 Accounts Payable 2,500
Purchase Discount 50
Cash 2,450
Payment of inventory on account with discount
 2030
Thank
You!!

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