Lesson 6 - Inventory Control Which inventory costing...

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Inventory Control Which inventory costing methods produce the same result as the perpetual inventory system for a company using the periodic inventory system? First one needs to understand inventory systems and inventory costing methods. There are two type of inventory systems, periodic and perpetual ("Principles of Accounting"). Periodic inventory systems wait until the end of an accounting period and manipulates how inventory is tracked. Perpetual inventory gives the precise inventory statistics at any given moment. Knowing which system to choose and then employing the proper inventory tracking method can make big difference in what the gross profit for a company looks like in a month. First in First out, is an inventory tracking method where anytime product is sold, the cost of goods is charged at the price of the oldest item in the inventory. This is most effectively used when the goods sold at the beginning of the month are significantly lower than the later purchases. The next method is called last in last out.

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