December 7, 2021

Everything You Need To Know About A Periodic Inventory System

In any business, the stock system is how you maintain the tune of your items and materials. This is a critical part of your enterprise, as inventory is how you are making your cash. If you are not correctly keeping a check of your inventory, you are no longer maximizing your income. These days there are various varieties of inventory systems and inventory software to help you, so there's no excuse as a way not to hold a proper check of your stock.


There are many inventory methods for businesses to use, and choosing the correct valuation approach may have a long-lasting outcome. One of the simplistic valuation methods is a periodic stock device. Startups and small companies usually use periodic stock systems.


What Is A Periodic Inventory System?

Periodic stock is a system of inventory valuation where the business stock and fee of goods offered (cogs) are not up to date in the accounting information after each sale and stock buy. Instead, the account is updated after a delegated accounting length has been exceeded.

The periodic inventory system also permits companies to hold separate delivery prices and essential inventory accounts. The businesses may even maintain a file of costs associated with ingoing inventory bills. One of the vital elements of the periodic inventory system is that it does not matter or document inventories daily, unlike the perpetual inventory device.

Where To Use Periodic Inventory System

Any company can use a periodic inventory system because there is no need for an added system or coding to function, and consequently, it costs less to enforce and hold. Similarly, you could train a group of workers to offer easy inventory counts while time is constrained or you have got high staff turnover.

You could also use a periodic inventory system when: 

  • promoting a few merchandises
  • having eyes on your goods as they go with the flow via your enterprise. 

However, a periodic system is not beneficial if you need to research to perceive lacking stock or unbalanced numbers. This problem will get up as your operation grows and will become tougher to manipulate positively.

Businesses with fewer inventory devices and an uncomplicated delivery chain control procedure can undertake the periodic inventory system. Additionally, for the ones doing a seasonal business, this inventory device can be helpful to calculate the earnings.

Advantages Of Periodic Inventory System

Simple To Use

It is less challenging to put in force because the periodic system involves less information and less complex calculation than the perpetual inventory system. The simplicity additionally lets in for the use of guide document retaining for small inventories.

Good For Small Businesses

The periodic inventory system is the best option for smaller companies that hold minimum quantities of stock. The physical stock is counted as easy to finish, and small businesses can estimate the value of products offered figures for transient durations. Even as the system may match smaller companies, it could be particularly tricky for large agencies due to its excessive stage of inaccuracy. Because the periodic system is manual, it's liable to human mistakes, and the stock records can be misplaced or lost.

Low Cost

If you need the most straightforward system, then the periodic inventory system will be ideal. You don't spend money on highly-priced software solutions with this selection. Technically, you don't have to invest a good deal besides the time spent worrying about taking a physical inventory. Furthermore, so long as you're inclined to invest that time, your expenses are in no way going to go up.

Disadvantages Of Periodic Inventory System

Inaccuracy In Data

One of the cons you could say about a periodic stock system is the data you are handling, which may be incredibly inaccurate. Remember the fact that an accounting file is changed annually to reflect your physical stock material. Because of this, the process is inherently false. You could not ensure accuracy at all times.

Not Suitable For Big Business

When you have a very restrained stock, with only some dozen orders for the year, the usage of the periodic inventory system is not all that hard. You could even punch things into an excel record. However, while your commercial enterprise grows, a regular system can show to be notably problematic. Taking a physical stock can amount to a timed request that you, in reality, should not attempt to meet.

Difference Between Periodic And Perpetual Inventory Systems

Periodic and perpetual stock systems are specific accounting techniques for tracking stock. Usually, the perpetual inventory system is advanced as it follows all records and transactions. However, with a perpetual system, you need to make more excellent selections to use it effectively.

Between the two accounting systems, there are variations in how you update and which accounts you want. In a perpetual system, the software continuously updates the general ledger when there are changes to the inventory. Within the periodic system, the software program most effectively updates the public ledger when you input facts after taking a bodily depend. 

The COGS account is modern-day after each sale in a perpetual inventory system, even between the conventional accounting durations. This technique also makes the calculations less time-consuming. Within the periodic software, you most effectively carry out the COGS during the accounting duration. 

Another critical distinction between the two types of inventory systems is the bills you operate. In a perpetual, you report purchases or stock underneath the merchandise or raw substances account while you make them; updating the unit relies upon access to the individual document. In contrast, in a periodic gadget, you report purchases into a purchase asset account; because of this, a personal record for unit counts is not present.

Periodic inventory accounting methods are usually better acceptable to small organizations, at the same time as organizations with excessive income quantity and multiple retail outlets (like grocery shops or pharmacies) need a perpetual inventory system to keep things on track.


In conclusion, there are two essential varieties of stock systems, periodic and perpetual. Each is a good choice for your inventory control. You can choose a periodic system if you have just started a business, and it will help you keep things in order and on track.

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