Perpetual Inventory System

What perpetual inventory system covers

A perpetual system updates inventory and cost of goods sold continuously, with every sale generating two entries: one for the revenue and one moving cost out of inventory. Because the ledger carries a running balance, a physical count can be compared against it and any shrinkage identified as a separate adjustment.

These challenges cover the dual entries on sale, returns, and the reconciliation of the ledger balance to a physical count.

Where marks are usually lost

• Recording only the revenue entry on a sale and omitting the cost entry.
• Failing to adjust the ledger down to the counted quantity when they differ.
• Reversing only the revenue side of a sales return.