Use of a perpetual inventory system versus a periodic inventory system may affect the application of the inventory cost flow methods.

Question

Quizplus · Accepted Answer

Due to the constant updating of inventory records in a perpetual inventory system, it is easier to track the cost flow of each item and apply methods such as FIFO or LIFO. In a periodic inventory system, cost flow methods are typically applied on a periodic basis and rely on physical counts of inventory. Therefore, the choice of inventory system can impact the application of cost flow methods.

Use of a Perpetual Inventory System Versus a Periodic Inventory