Q.What is the Perpetual Inventory System? How does it differ from physical (periodical) stock taking?

Instead of counting all stock once a year, the perpetual system keeps running records and verifies a few items every day.

The Perpetual Inventory System is a system of records — Bin Cards and the Stores Ledger — showing the quantity and value of stock in hand at all times, backed by continuous stock verification in which a few items are physically checked every day against the records throughout the year. It differs from physical (periodical) stock taking, where the whole stock is counted at one time (usually year-end), often stopping production and letting errors go undetected …

Perpetual Inventory System: This is a system of records (Bin Cards and the Stores Ledger) that shows the quantity and value of stock in hand at all times, supported by continuous stock verification — a few items are physically counted every day against the records, so that over the year the whole store is verified in rotation.

Its advantages are that:

• an up-to-date balance of every item is available at any moment, without a total count;
• because a few items are checked daily, discrepancies (pilferage, breakage, clerical error) are caught early and spread evenly through the year;
• production need not be stopped for a single large annual count.

Note the important point: the perpetual RECORDS and the continuous physical VERIFICATION together make up the system — records alone are not enough; they must be checked against actual stock.

Physical / periodical stock taking: Here the whole stock of every item is physically counted, weighed or measured at one time, usually at the year-end, and compared with the balance shown by the records. Its drawbacks are that the entire stock is verified only occasionally, work piles up on the counting days, production often has to be halted, and errors go undetected between counts.

Students often describe the perpetual system as just 'keeping records' — the continuous PHYSICAL VERIFICATION of a few items every day is an essential part of it. Records that are …