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ACC566 - Acc Systems and Processes
To: Mr and Mrs Spot
Date: 4 May 2019
Subject: Understanding of periodic and perpetual methods & First-in-first-out and Weighted average cost method
I am explaining you the periodic and perpetual methods of inventory management, that can be significant for your firm to manage the inventory and Cost of goods sold effectively. The periodic inventory method is used to make a record of the inventory related transactions and track the quantity of the inventory for better management of the stock. this method allows the firm to make a counting on occasional basis rather than regular basis for the inventory and cost of goods sold. Purchase account is used to record the purchasing transactions including inventory and cost of goods sold. In this method, the inventory account and cost of goods sold are updated at the end of the financial year (Cho?odowicz & Or?owski, 2016). This can be done on month, quarter or year basis. However, there may be issue related accuracy of the data any time because it is not updated on regular basis. Similarly, this method takes more time as it is not effective if the firm wants the instant results for the inventory management.
Contrary to this, perpetual inventory method is commonly used method by the firms due to its advantages in terms of automatic update on regular basis. It ensures the accuracy of the data and provides the right information