The purchase account and purchase returns and

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and a cost of goods sold account, they are updated during different periods. The purchase account and purchase returns and allowance account are only used in the periodic system and are updated continuously. Sales transactions are recorded in the perpetual system as two journal entries, versus only one in the periodic. In the periodic system, the closing entries are required to update the inventory and cost of goods. When an item is sold in the periodic system, the merchandise revenue is recorded as a cost of goods sold entry. The perpetual system records each sale and is recorded in the inventory account, and the system automatically deducts those items from the stock level (Hamlett, K. N.d.). For retail stores, a perpetual inventory system is the ideal choice as it keeps balance of the inventory levels, and the items are deducted from the financial sheets. This allows the company to keep track of how much inventory is counted as an asset. Although the initial investment is larger, and implementation of the system could be timely, the accuracy of the financial documentation is cost saving for the company. The majority of retailers utilize the perpetual system for maintaining inventory, such is

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