![]() The reference columns are removed from the illustration to simplify what you're seeing. Consider several entries under both systems. Under the perpetual system, purchases, purchase returns and allowances, purchase discounts, sales, and sales returns are immediately recognized in the inventory account, so the inventory account balance should always remain accurate, assuming there is no theft, spoilage, or other losses. Perpetual inventory systems have traditionally been associated with companies that sell small numbers of high‐priced items, but the development of modern scanning and computer technology has enabled almost any type of merchandiser to consider using this system. Under the periodic system, merchandise purchases are recorded in the purchases account, and the inventory account balance is updated only at the end of each accounting period.
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