A perpetual inventory system is one that continuously tracks each withdrawal or addition to inventory. Perpetual inventory is a continuous accounting practise that records inventory changes in real time, eliminating the need for physical inventory, so that the book inventory accurately reflects the actual stock.
This system starts with a physical count as a baseline and updates based on purchases made in and shipments made out.
The perpetual system may be better suited for businesses with larger, more complex inventory levels and higher sales volumes. Grocery stores and pharmacies, for example, typically use perpetual inventory systems.
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