Which Is Not an Advantage of the Periodic Review System

Inventory record of trade inventory is not maintained year-long under this periodic inventory system.

The price of goods sold is adamant at twelvemonth-end. The value of the end stock is determined past the physical counting of merchandise on the endmost date of the bookkeeping menses.

Under this system, the price of goods sold is adamant past adding the toll of merchandise purchased with cost prices of commencement stock deducting the cost price of end-stock from the total.

This can be expressed as.

Beginning stock + buy – end-stock = cost of appurtenances sold.

Small and retail business concerns such as chemist's shop, hard-wire, grocery, cloth store, etc. which deal with a variety of low-price bolt generally follow periodic inventory system to decide the toll of goods sold and value of inventory.

Use of perpetual inventory system for business concerns like these is expensive and fourth dimension-consuming.

A separate ledger business relationship for merchandise inventory is not maintained under this system rather at the stop of the flow at a particular date toll of merchandise inventory is determined past multiplying purchase price with the quantity of merchandise stock.

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This can exist expressed as;

The value of internal stock = quantity of merchandise stock x buy price.

Advantages of Periodic Inventory System

1. Since no permanent employee is required for physical counting of merchandise inventory under this organization it is less expensive.
2. It is applicable for all business organizations big or pocket-size dealing with specific or a variety of goods.
3. Since stock taking is washed at the end of a menstruation nether this system the normal activities of the concern are non hampered.
4. Since the stock-taking of merchandise is washed on a item date the quantity of stock of merchandise is reliable.

Disadvantages of Periodic Inventory System

1. On the very day of the physical counting of merchandise stock, normal activities of business remain near suspended.
2. The act of counting merchandise stock is to exist completed hurriedly due to a shortage of time.
3. Nether this system chance of fraud and forgery lies, because here continuous control over merchandise is absent.
4. Under this arrangement on expiry of the particular period, the reasons for differences betwixt merchandise at hand and merchandise shown in the books of accounts tin can hot be sorted out easily.
5. Under this system, the stock control device is very weak. Their employees get a chance to adopt corruption.

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Departure between Perpetual Inventory System and Periodic Inventory System

The differences marked betwixt the perpetual inventory system and periodic inventory systems are stated below:

1. Under a perpetual inventory organisation, the act of physical counting of merchandise continues throughout the year. Simply nether periodic inventory system act of physical counting of merchandise takes place at the end of an bookkeeping period.
2. The perpetual inventory organisation is used in the concern organizations were limited items of appurtenances are traded. The awarding of this arrangement is very expensive. Relatively small organizations dealing with varieties of goods use periodic inventory organisation in stock-taking. This organization is suitable for a large number of appurtenances – it minimizes the complexity of work.
3. A group of experienced permanent employees is needed for the awarding of the perpetual inventory organisation. But the use of a computer scanner has made trade stock recording easier.
4. Under a periodic inventory system, no split group of employees is needed for the stocking purpose.
5. The perpetual inventory organization is a continuous process. Accounts of inventory stock are maintained throughout the accounting period under this system.
6. Only the quantity and amount of inventory stock tin exist known at the end of the accounting period under a periodic inventory system.
7. Application of perpetual inventory system does not hamper normal operating activities of a concern. But the application of a periodic inventory organisation hampers normal activities of the business organisation on the 24-hour interval of inventory taking.
8. Since the quantity and condition of merchandise nether perpetual inventory tin can be known throughout the year, timely measures tin can he took to remove discrepancy is detected.

But nether periodic inventory organisation since discrepancy of inventory is detected at the end of the bookkeeping period corrective measures are hampered.

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