Inventory control systems

Perpetual inventory control system.

• Recorded directly into the inventory account at cost price.

Naomi ltd purchases inventory of R20 000

• Inventory is debited with
• R20 000
• Bank account credited with
• R20 000

Periodic inventory control system

• Purchases of inventory is not recorded in the inventiry control account. A seperate account known as the purchases account is used.
• When inventory is returned it is put into another seperate account known as purchases returns account.
• Cost of sales is determined at the end of financial year when physical inventory count is done.

Naomi ltd buys R20 000 of inventory

• Debit Purchase account with
• R20 000
• Credit bank account with
• R20 000

Method for calculating cost price for periodic

• Cost price at the beginning of the year
• Add: Cost price of inventory purchased during the year
• Less: Cost price of inventory at the end of the year
• CP(beginning)+ Total purchases - CP(end of year)