Question

Explain in your own words the difference between periodic and perpetual inventory system.

Answer 1

Difference between periodic and perpetual inventory system.
Under periodic system inventory merchandise inventory and cost of goods sold are updated only at the end of the period while under perpetual inventory system merchandise inventory and cost of goods sold are updated continuously during the period.
Under periodic system Sale Transaction is recorded under one entry while under perpetual inventory system sales transaction is recorded under two entries sale value of inventory and  cost of goods sold.
Under periodic system purchases are recorded under Purchases Account and Purchase Returns and Allowances Account and under perpetual inventory system purchases are directly debited to inventory account and purchase returns are directly credited to inventory account.