Week 1, DQ2 - Week 1 DQ2 What is the perpetual method of...

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Week 1, DQ2 What is the perpetual method of tracking inventory? How does it differ from the periodic method of tracking inventory? Why would a company choose one method over the other method? Which is the best method? Why? The perpetual method of tracking inventory is setup to require accounting records report the levels of inventory on hand at any and all times. The perpetual method keeps a different account for each item in stock and accounts are updated each time its respective item is increased or decreased. Unlike the perpetual method, the periodic method does not update inventory as a sale occurs. With the periodic method, physical inventory must be taken at the end of a period or year in order to determine COGS. Normally speaking, inventories are a company’s largest current asset. Proper management of inventory is a necessity, if accurate financial statements are to be reported. When inventories are misstated, revenues and expenses will not be able to be effectively matched. Whether the perpetual or periodic method is used, it is good business practice to have a physical inventory count at the end of a company’s fiscal year. Depending on what the business does will dictate
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This note was uploaded on 01/12/2011 for the course ACCTING Acc423 taught by Professor Rob during the Spring '10 term at DeVry Long Beach.

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Week 1, DQ2 - Week 1 DQ2 What is the perpetual method of...

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