PERPETUAL AND PERIODIC INVENTORY SYSTEM COMPARED

Journal Entries:

PERPETUAL SYSTEM PERIODIC SYSTEM

Purchase Transactions: Purchase Transactions:

Merchandise Inventory xxx Purchases xxx

Cash xxx Cash xxx
(purchase merchandise for cash) (purchase merchandise for cash)

Sales Transactions: Sales Transactions:

Cash xxx Cash xxx

Sales xxx Sales xxx
(sold merchandise for cash) (sold merchandise for cash)

Cost of Goods Sold xxx

Merchandise Inventory xxx
(To charge merchandise sold to
Cost of Goods Sold)
*Merchandise Inventory and Cost of Goods Sold are not
* observe that Merchandise Inventory and Cost of Goods constantly updated. Cost of merchandise acquired is
Sold are always updated in the accounting records. charged to Purchases. The cost of unsold merchandise will
constitute the merchandise inventory at the end of the
accounting period and can be determined by a physical
count.

Perpetual - Illustrative Example:

On May 4, Hyundex Auto Center, a dealer of imported vans paid cash for the purchased of two units of Hyundai
Starex vans at P720,000 per unit. On May 7, it sold one unit for P800,000 cash

Journal Entries:

May 4 Merchandise Inventory 1,440,000

Cash 1,440,000
(Purchased 2 vans @ P720,000/unit for cash)

May 7 Cash 800,000

Sales 800,000
(Sold one van for cash)

Cost of Goods Sold 720,000

Merchandise Inventory 720,000
(To charge merchandise sold to cost of goods sold)

Periodic - Illustrative Example:

On May 4, Hard Hardware, paid cash for the purchased of 200 pieces of hammers at P100 per unit. On May 7, it
sold 50 pieces of hammers for 150 per unit.

Journal Entries:

May 4 Purchases 20,000

Cash 20,000
(Purchased 200 hammers @ P100/unit for cash)

May 7 Cash 7,500

Sales 7,500
(Sold 50 pieces hammers @ P150/unit for cash)