What is "Perpetual LIFO" and What is "Periodic LIFO"?

 

Perpetual inventory system is used in the calculation of purchases and can not figure out where the balance of the stores only by manual inventory, a final inventory of Kan's financial statements and may not modify it in any way and are

therefore physically and legally Accounting

Periodic inventory 

Inventory system is based on a physical inventory of stocks where there is an absence of cost of sales can not be calculated, but the completion of the actual physical inventory of the stock at the end of the year 

And T is calculated net purchases by deducting from the total purchases Mrdoat T. purchased goods and adding net purchases and sales returns to the first duration stocks or opening balance of inventory produced us the goods available for sale and stock offering last the duration of which produce goods sold us T. 

 

There is no noticeable presence of the account in the name of T. sales during the year and there are no restrictions concerning the stock only the beginning and ending inventory as the opening balance of being an opening beginning of the year

agreed with mr georgei

under perpetual Lifo system each sale matched with the immediate proceeding purchases and periodic lifo total sales matched with total purchases  

Perpetual LIFO transactions are recorded under the perpetual inventory control system, where inventory records are constantly updated as and when the inventory-related transactions occur.  Periodic LIFO transaction are recorded at a periodically stipulated time. 

The results of a perpetual LIFO system may vary from those generated by a periodic LIFO system, because inventory records in aperiodic system are only updated at the end of a reporting period. The only difference between the two cost flow concepts is how rapidly a costing layer is stripped away or replenished in the costing database. Under perpetual LIFO, there can be a great deal of this activity throughout a reporting period, with inventory layers being added and eliminated potentially as frequently as every day. This means that the costs at which items are sold could vary throughout the period, since costs are being drawn from the most recent of a constantly varying set of cost layers. Under a periodic LIFO system, however, layers are only stripped away at the end of the period, so that only the very last layers are depleted. For example, ABC International acquires10 green widgets on January15 for $5, and acquires another10 green widgets at the end of the month for $7. ABC sells five green widgets on January16. Under a perpetual LIFO system, you would charge the cost of the five widgets sold on January16 to the cost of goods sold as soon as the sale occurs, which means that the cost of goods sold is $25 (5 units x $5 each). Under a periodic LIFO system, you would wait until the end of the month and then record the sale, which means that you remove five units from the last layer recorded at the end of the month, which results in a charge to the cost of goods sold of $35 (5 units x $7 each). In a period of continually increasing prices, a periodic LIFO system will result in the highest cost of goods sold and therefore the lowest net income, since it will always use up the most recently purchased inventory first. Conversely, in a period of decreasing prices, the reverse would be true. The costing results of a perpetual LIFO system are more common than a periodic LIFO system, since most inventory is now tracked using computerized systems that maintain inventory records on a real-time basis.

Agree with all

The basic concept underlying perpetual LIFO is the last in, first out (LIFO) cost layering system.  

Under perpetual LIFO, there can be a great deal of this activity throughout a reporting period, with inventory layers being added and eliminated potentially as frequently as every day. This means that the costs at which items are sold could vary throughout the period, since costs are being drawn from the most recent of a constantly varying set of cost layers.  

Under a periodic LIFO system, however, layers are only stripped away at the end of the period, so that only the very last layers are depleted. 

The results of a perpetual LIFO system may vary from those generated by a periodic LIFO system, because inventory records in a periodic system are only updated at the end of a reporting period.