Periodic and perpetual inventory systems use different ways to count stock.
A periodic inventory system physically counts the stock or inventory on a certain date in a stocktake.
The perpetual inventory systems updates inventory automatically when sales and purchases are made. So this means inventory items are scanned and recorded as sales and purchases are made.
Because of this, the key difference is that the perpetual inventory system automatically keeps a running balance of the Cost of Goods Sold (COGS), whilst the periodic system requires a formula to calculate Cost of Goods Sold (COGS).
See the different approach to measuring Cost of Goods Sold (COGS) below.
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