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What are the 2 inventory counting systems
periodic inventory system & perpetual inventory system
How often is counting in the periodic inventory system?
less frequent, but regularly scheduled (end of month, quarter, year)
How often is counting in the perpetual inventory system?
continuous
How is inventory counted in the periodic inventory system?
physically
How is inventory counted in the perpetual inventory system?
facilitated by computerized system(s)
On counting days, how does the periodic inventory system work?
pay staff or outside labour & close all portions of the store
How do you ensure accuracy with the perpetual inventory system?
do a reconciliation (physical count) at end of year - differences are usually caused by inventory shrinkage (theft)
Advantages of the periodic inventory system
cheaper set up, easy to do
Disadvantages of the periodic inventory system
inventory value is not exact between counts
expensive
misses inventory shrinkage (whatever isn’t there is assumed as sold)
human error is more likely
hard to know when to re-order
Advantages of the perpetual inventory system
up-to-date info always available
eliminates need for multiple physical counts
quantifies shrinkage
pre-set re-order levels
Disadvantages of the perpetual inventory system
expensive to buy / install
suited to larger companies
