There are many types of businesses in the world. Some are periodic and some are perpetual. What is the difference? A periodic business is one that has a limited life span. It operates for a set period of time and then it ceases to exist. A perpetual business, on the other hand, never expires. It continues operating indefinitely…
What is Periodic?
The periodic inventory system is a way of tracking and managing stock that involves reviewing the levels of a company’s inventory periodically by taking physical counts.
- This method can help businesses manage the costs associated with inventory like insurance and storage while also helping ensure they always have enough stock to meet customer demand.
- Periodic inventory systems are used to reconcile periodic sales and identify any losses due to theft, spoilage, waste, or mismanagement. Periodic inventories can be conducted by companies as often as daily, weekly, or monthly depending on the size of their product line.
- Periodic inventory systems are cost-effective, but may not be suitable for businesses with high volumes of varying product lines since it’s difficult to track changes in quantity between periodic reviews.
What is Perpetual?
The perpetual system refers to a type of economic model that is designed to function indefinitely, as opposed to traditional models that operate in cycles. Perpetual systems are based on the idea of creating value over time instead of consuming resources quickly.
- They also emphasize sustainability and long-term success rather than short-term profits. Perpetual systems can be found everywhere from financial markets to corporate organizations, and even industrial production processes.
- Perpetual systems are becoming increasingly popular as governments, businesses and individuals become more aware of the need for sustainable growth.
- The Perpetual systems’ goal is to maintain a balance between meeting customer needs and safeguarding natural resources, enabling organizations to remain productive for many years without having a negative impact on the environment.
Difference between Periodic and Perpetual
Periodic and Perpetual are two terms commonly used in accounting.
- Periodic inventory systems involve taking a physical count of inventory at set intervals, such as monthly, quarterly, or annually. This type of system requires that employees manually record each item’s quantity and price in an accounting ledger.
- In contrast, perpetual systems involve continuous tracking of the exact quantities and values of the items held in stock throughout the year.
- This type of system will often have an automated component, such as barcode scanning devices to quickly track items held in stock as they are sold in retail stores or online.
While Periodic and Perpetual both serve similar purposes when it comes to keeping track of stock levels efficiently and accurately, they remain two distinct approaches with key differences that should be considered before deciding on a preferred system for your business.
In a periodic system, the elements are recycled and reused. This type of system is more efficient because it reduces waste and allows for the use of all the elements. A perpetual system does not recycle or reuse the elements; instead, it creates new ones. While this type of system might be less efficient in terms of resource use, it has some benefits that make it appealing to some people.