what is a periodic inventory system

what is a periodic inventory system is a common inquiry among business owners and students learning about inventory control methods. A periodic inventory system updates inventory counts at scheduled intervals, such as monthly or quarterly, rather than in real time. This system is commonly used by small businesses with limited stock or low transaction volumes. During each update cycle, businesses conduct a physical count and adjust financial records accordingly. While it requires fewer technological resources than a perpetual system, it can lead to discrepancies if not managed carefully. Calculating cost of goods sold (COGS) under this method involves subtracting ending inventory from available inventory during the period. Though not suitable for high-volume sellers, a periodic inventory system can be efficient and cost-effective when supported by diligent record-keeping. Understanding what is a periodic inventory system helps businesses make informed choices about their inventory management strategy.