Perpetual Inventory System.

Q25. Write short notes on perpetual inventory system.
Ans. Perpetual inventory represents a system of maintenance of proper records and continuous stock taking. It contains the following procedure:

Its advantages are as follows:

  1. Valuation of stock is possible in short interval of times so profit and loss account can be prepared more quickly.
  2. Removing the possibility of stock discrepancies.
  3. It reveals the existence of surplus, non-moving and slow moving items.
  4. It helps in fixation of various stock levels and preparation of purchase requisition.