Characteristics of periodic inventory System

Characteristics of periodic inventory System

In this article we would explain the characteristics of periodic inventory system. Theses characteristics have been explained in term of closing stock counting, no stock account, and trial balance reflection of opening balance.

Important Characteristics of periodic Inventory System

Important characteristics of periodic inventory system have been briefly described below;

1.   Closing Stock is counted:

The first important characteristics of periodic inventory that closing stock figure is obtained by the physical count of inventory at the end of the period/year.

2.   No Regular updating:

Inventory is not regularly updated in the stock account. Thus the updated status of inventory is not known until and unless the inventory is counted. This is the only way of knowing the updated inventory status under the periodic inventory system.

3.   Trial Reflect Opening Stock:

Trial balance reflect the opening stock and closing stock, while at the year end opening stock is transferred to profit& loss account and closing stock is created.

4.   Cost of Sales:

At the end of the period, the purchases and opening stock is debited to cost of sales, while closing stock is credited to cost of sales. The balancing figure is transferred to comprehensive income account.

Characteristics list of periodic inventory system:

Some important characteristics of periodic inventory system are listed below

a.    Closing stock figure is obtained from physical count of inventory.

b.    Opening stock & purchases appear in trial balance.

c.    Opening stock & purchases are debited to cost of sales.