|
INTRODUCTION |
  
|
|
INTRODUCTION |
|
AccountWorks uses a perpetual inventory system.
In the following discussion, each of the two alternative methods of costing inventories under the periodic system will be reviewed. Then the advantages of using the perpetual system will be discussed. Briefly stated, they are:
| 1. | The control feature is the most important advantage of the perpetual system. The inventory of each class of merchandise is always readily available in the subsidiary ledger. A physical count of any class of merchandise can be made at any time and compared with the balance of the subsidiary account to determine the existence and seriousness of any shortages. |
| 2. | In addition to the usefulness of the perpetual inventory system in the preparation of interim statements, the subsidiary ledger can be an aid in maintaining inventory quantities at an optimum level. Frequent comparisons of quantity balances with predetermined maximum and minimum levels facilitate both (a) the timely reordering of merchandise to avoid the loss of sales and (b) the avoidance of excessive accumulation of inventory. |