Periodic Inventory System Definition – What is Periodic Inventory System?

Accounting Glossary 

Periodic inventory system definition including break down of areas in the definition. Analyzing the definition of key term often provides more insight about concepts. Periodic inventory system can be defined as: Method that records the cost of inventory purchased but does not continuously track the quantity available or sold to customer; records are updated at the end of each period to reflect the physical count and costs of goods sold. The periodic inventory system can be contrasted to the perpetual inventory system, the period inventory system only recording the decrease in invenotory and related cost of goods sold after a physical count, the perpetual inventory system recording these items at the point of sale. The periodic inventory system will record the purchase of inventory but only the sales side of the a sales transaction will be recorded under a period inventory system, the periodic inventory system not recording the reduction in inventory or related cost of goods sold at this point of sale. The inventory will later be counted and the ending inventory will be adjusted to the physical count under the periodic inventory system.