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Thursday, May 13, 2010

Meaning, Functions And Advantages Of Perpetual Inventory System

Meaning of perpetual inventory system

Perpetual inventory system is also known as "Automatic Inventory System". Perpetual inventory system is a technique of controlling stock items by maintaining store record in a manner such that stock balances at any point of time are readily available. The terms 'Perpetual Inventory' refer to the system of record-keeping and a continuous physical verification of stocks, with reference to store records.

Functions Of Perpetual Inventory System

The main functions of perpetual inventory system are as follows.
1. Recording store receipts and issues to determine the stock in hand at any time, in quantity or value or both, without the need for physical counting of the stock.

2. Continuous verification of the physical stock with reference to the balance recorded in the store record is convenient for the management.

Advantages Of Perpetual Inventory System

* Perpetual inventory system provides an opportunity to verify the physical stock of materials.

* Perpetual inventory system helps in rapid stock checking which, in turn, helps in the preparation of interim accounts.

* A moral check on the store staff to maintain proper stock records.

* The investment in materials and supplies may be kept at the lowest point.

* It is not necessary to stop the production so as to carry out a complete physical stocktaking.

* Perpetual inventory system helps to avoid deterioration, obsolescence etc.

* Perpetual inventory system helps to discover or find out discrepancies and errors and remedial action can be taken quickly.

* Timely replenishment of stock is facilitated by means of recording the level specified in the bin card.