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In a periodic inventory system inventory system, an order exists placed for a variable amount after a fixed passage of time.
What is periodic inventory system?
Periodic inventory exists as a system of inventory in which updates are created periodically. This varies from perpetual inventory systems, where updates exist made as seen fit. In a periodic inventory system, no effort is created to keep up-to-date records of either the inventory or the cost of goods sold.
A periodic inventory system exists as a form of inventory valuation where the inventory account stands updated at the end of an accounting period rather than after every sale and purchase. The method permits a business to track its opening inventory and ending inventory within an accounting period.
The periodic inventory system utilizes an occasional physical count to estimate the level of inventory and the cost of goods sold. The perpetual system keeps track of inventory balances continuously, with updates created automatically whenever a product exists received or sold.
Hence, In a periodic inventory system inventory system, an order exists placed for a variable amount after a fixed passage of time.
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