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Periodic inventory accounting systems are normally better suited to small businesses due to the expense of acquiring the technology and staff to support a perpetual system.The technological aspect of the perpetual inventory system has many advantages such as the ability to more easily identify inventory-related errors.Businesses with high sales volume and multiple retail outlets (like grocery stores or pharmacies) need perpetual inventory systems.Under the perpetual system, managers are able to make the appropriate timing of purchases with a clear knowledge of the quantity of goods on hand at various locations.
Periodic inventory accounting systems are normally better suited to small businesses due to the expense of acquiring the technology and staff to support a perpetual system. A business, such as a car dealership or art gallery, might be better suited to the periodic system due to the low sales volume and the relative ease of tracking inventory manually.
However, the lack of accurate information about the cost of goods sold or inventory balances during the periods when there has been no recent physical inventory count could hinder business decisions.
Businesses with high sales volume and multiple retail outlets (like grocery stores or pharmacies) need perpetual inventory systems. The technological aspect of the perpetual inventory system has many advantages such as the ability to more easily identify inventory-related errors. The perpetual system can show all transactions comprehensively at the individual unit level.
Under the perpetual system, managers are able to make the appropriate timing of purchases with a clear knowledge of the quantity of goods on hand at various locations. Having more accurate tracking of inventory levels also provides a better way of monitoring problems such as theft.
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