Periodic inventory system
Update inventory account at
regular intervals after
completing a stock take
Disadvantages:
Advantages:
1. Lack of accurate, real time
inventory information could
lead to inefficient management
of inventory
2. Little control
3. Delayed results
1. Easy to maintain
2. Cost efficient
1. Closing balance previous
period = Opening inventory
this period (Beginning of
Year BOY)
Dr
Inventory account
Cr
xxx
xxx
Opening balance (Step 1)
xxx
Balance EOY/BOY
2. Record inventory purchases
in the purchases account
Trading account
xxx
xxx
Cash transaction:
Credit transaction:
Debit: Purchases
Debit: Purchases
Credit: Bank
Credit: Creditors
control
Cash transaction:
Credit transaction:
Debit: Bank
Debit: Debtors control
Purchases:
3. Recognise revenue (sales)
as the sales take place.
Credit: Sales
Credit: Sales
INVENTORY: No recognition
Debit: Trading account
4. Close the purchases
account with a journal entry
Stock take End
of Year (EOY)
5. Update closing inventory
and calculate cost of sales
Credit: Purchases
Dr
Bank/Creditors
(Step 2)
Purchases
xxx Trading account
(Step 4)
Cr
xxx
xxx
xxx
Opening inventory
+ Purchases
+ Sales returns
– Purchases returns
– Closing inventory
= Cost of sales
Dr
Inventory (BOY)
Purchases (Step 4)
Trading account
Cr
xxx Cost of sales (Step 5)
xxx Inventory (EOY)
xxx
xxx
xxx
xxx