Perpetual and Periodic Stock Methods
COGS = Cost of Goods Sold
GP = Gross Profit
GL = General Ledger
In version 5 of Accredo has introduced the ability to use a perpetual inventory method as well as it's existing periodic inventory method.
The main difference between the two is periodic realises the cost of goods sold when you make the purchase, where perpetual realises the cost of goods sold at the time of the sale. In old accounting systems the periodic method required you to do a stocktake before you could calculate you gross profit, where perpetual allowed you to have a more updated gross profit because the cost of goods sold was always updated when you made a sale.
This is no longer the case in modern systems as Accredo's inventory control module automatically updates the closing stock figures when you make a sale removing the need for physical stock takes.
Therefore because of this both methods provide up to date gross profit through out the month. They will both also give similar gross profit figures.
The difference in purchasing and selling inventory
| Periodic method: | Perpetual method: | ||
|---|---|---|---|
| Purchase inventory | Purchase inventory | ||
| Dr Purchase | $1000 | Dr Stock on Hand | $1000 |
| Cr Bank account | $1000 | Cr Bank account | $1000 |
| Dr Stock on Hand | $1000 | ||
| Cr Closing Stock | $1000 | ||
| Sell Inventory | Sell Inventory | ||
| Dr Bank account | $1500 | Dr Bank account | $1500 |
| Cr Sales | $1500 | Cr Sales | $1500 |
| Cr Stock on Hand | $1000 | Dr Cost of goods sold | $1000 |
| Dr Closing Stock | $1000 | Cr Stock on Hand | $1000 |
The difference in General Ledger
In Accredo V5, Periodic versus Perpetual integration to GL determines the timing and calculation of Cost of Sales in the General Ledger module. The Inventory Control module is always up to date, regardless of Periodic or Perpetual method.
Periodic:
in the General Ledger module, the Cost of Sales is done by calculating the difference between opening stock and closing stock plus any purchases made in the month. GL financial reports COGS = Opening stock + Purchase - Closing stock
Perpetual:
in the General Ledger module, the Cost of Sales is determined by the Stock on hand
| Periodic GP | Perpetual GP | ||
|---|---|---|---|
| Sales | $500 | Sales | $500 |
| Less Cost of Goods Sold | - Cost of Goods sold | $300 | |
| Opening Stock | $1000 | Gross Profit | $200 |
| + Purchases | $500 | ||
| - Closing Stock | $1200 | ||
| Cost of goods Sold | $300 | ||
| Gross Profit | $200 | ||
Pros and Cons
Periodic method: This is a simple method to operate and reconcile, but Cost of Sales may vary considerably from the actual cost value of goods sold in the period if you do not tend to purchase and on-sell stock promptly.
Perpetual method: This is a more complex model to operate and reconcile, but providers accurate Cost of Sales which will match to Cost values reported out of Sales Analysis.