An inventory tracking method where stock levels are updated continuously in real-time with every purchase, sale, and adjustment.
A Perpetual Inventory System maintains a running record of inventory quantities and values at all times — every inward (purchase, return) and outward (sale, issue, wastage) movement is recorded immediately. This contrasts with the Periodic System where stock is counted only at period-end. Modern ERP and POS systems use perpetual inventory with barcode/QR scanning. Benefits: real-time stock visibility, automatic reorder alerts, immediate COGS calculation, reduced stockouts, and better theft detection. Physical counts (cycle counting) are still done periodically to verify system accuracy.
Product XYZ in ERP system: Opening (April 1): 500 units @ ₹100 = ₹50,000. April 3: Purchase +200 units @ ₹105. New balance: 700 units, value ₹71,000. April 5: Sale -50 units. Balance: 650 units. April 8: Wastage -5 units. Balance: 645 units. April 15: Cycle count finds 640 units (5 short — investigation needed). System shows real-time balance every moment.
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Perpetual: Updates stock with EVERY transaction (real-time balance). Uses technology (ERP/POS). COGS calculated per transaction. Periodic: Updates stock only at PERIOD END (monthly/annually) via physical count. Simpler but no real-time visibility. COGS = Opening + Purchases – Closing (calculated backward). Most modern businesses use Perpetual; very small retailers may still use Periodic.
Yes! Perpetual systems can have discrepancies from: theft/pilferage, data entry errors, damage not recorded, measurement errors, and system glitches. Cycle counting (counting a portion of items daily/weekly on rotation) is the best practice — you verify the entire inventory over a period (monthly/quarterly) without shutting down operations for a full count.
The process of ordering, storing, tracking, and controlling goods to ensure the right quantity is available at the right time while minimizing holding costs.
A ratio that measures how many times a company's inventory is sold and replaced over a specific period, indicating sales efficiency and inventory management.
The method used to assign a monetary value to unsold inventory at the end of an accounting period.
The inventory level at which a new purchase order should be placed to replenish stock before it runs out, accounting for lead time and demand.
The optimal order quantity that minimizes the total cost of inventory including ordering costs and holding costs.
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