Perpetual Inventory System

The pricing of inventories under the perpetual inventory system differs from pricing under periodic system because under the perpetual system a continuous record of quantities and costs of merchandise is maintained as purchases and sales are made. Cost of goods sold is accumulated as sales are made and costs are transferred form the Inventory account to Cost of Goods Sold. The cost of ending inventory is the balance of the Inventory account. Under the perpetual inventory system, the specific identification method and the FIFO method will produce the same result as under the periodic method. The results will differ for the average-cost method because a moving average is calculated prior to each sale rather than at the end of the accounting period, and for the LIFO method because the cost components of inventory change constantly as goods are bought and sold.