Example of perpetual inventory procedure, Accounting Basics

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Q. Example of perpetual inventory procedure?

The Perpetual inventory procedure Companies use perpetual inventory procedure in a range of business settings. In the past companies that sold merchandise with a high individual unit value such as furniture, automobiles and appliances used perpetual inventory procedure. Today computerized cash scanners, registers and accounting software programs automatically keep track of inflows and outflows of each inventory item. Computerization composes it economical for many retail stores to use perpetual inventory procedure even for goods of low unit value such like groceries.

Under perpetual inventory method the Merchandise Inventory account provides close control by showing the cost of the goods that are imaginary to be on hand at any particular time. Companies debit the Merchandise Inventory account for every purchase and credit it for each sale therefore that the current balance is shown in the account at all times. Habitually firms as well maintain detailed unit records showing the quantities of each kind of goods that should be on hand. Company personnel as well take a physical inventory by actually counting the units of inventory on hand.


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