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