Definition Of

Perpetual inventory system

It is a system of records maintained by the controlling department which reflects the physical movement of stock and their current balance.

According to H.J. Whekdon, “Perpetual inventory system is defined as the method of recording stores balance after every receipts and issues to facilitate regular checking and ovate closing down factory for stock taking.”

 In Accounting principle "Perpetual inventory system" is a system where each entry in the sales journal results in one entry at selling price and another entry at cost. The entry at selling price is a debit to Accounts Receivable (a control account) and a credit of equal amount to sales. The entry at cost is a debit to Cost of Goods Sold and a credit of equal amount to merchandise inventory (a control account).