Introduction
The Perpetual Inventory System is the best merchandise registration system for any company due to its good organization. It is also known as the Constant or Permanent Inventory System, this organizes the information in such a way that it can be located at any time, without problems and by whoever needs it, the value of the final inventory, the cost of what is sold and the utility or the Stupid lost.
The perpetual inventory system is a system that maintains a continuous and daily record of inventory movements and the cost of the item sold costed, either by specific identification, FIFO, LIFO or weighted average (Jiménez and Espinoza, p. 52)
Summary
The perpetual or constant inventory system is the most complete system of all because it has the advantage of constant control of the acquisition costs of the merchandise delivered in sales and of the correlative departures from the warehouse.
It has three accounts:
- Warehouse Cost of sale Sale
In addition, as will be seen, it has more advantages than disadvantages.
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We suggest the following video as an introduction to the perpetual or constant inventory system:
Methodological aspects
During the following paragraphs, a documentary investigation was applied, since at the beginning of said investigation, as its name indicates, it is carried out relying on documentary sources, that is, on documents such as those obtained through bibliographic sources, hemerographic, and other documents that are in archives such as official letters, circulars, files, etc. Based on the research, bibliographic sources were consulted in accounting texts such as that of MA Octavio Rolando Lara Martínez.
The generic method was also used since it looks for the genesis of the events, that is, the antecedents. This method announces in its own title, what is its purpose: to find the initial cause, the generating event.
Information Techniques Applied
Some of the techniques applied in the investigation are the following:
- Internet Document review Collection and analysis of information.
Internet
In the present investigation, use was made of the benefits that technology provides us today, such is the case of the internet, using it as a means to obtain more information more quickly.
Document review
The documentary review was an important point to structure the conceptual theoretical framework from the consultation of some books, articles, newspapers, magazines, or some other tool where information on the subject could be found.
Information collection and analysis
This technique is important since it is used to study merchandise registration systems.
Theoretical framework
Definition of Sale:
"Selling is one of the most sought after activities by companies, organizations or people who offer something (products, services or others) in their target market, because their success depends directly on the number of times they carry out this activity, on what how well they do it and how profitable it is for them to do so ”.
The American Marketing Association defines the sale as "the personal or impersonal process by which the seller verifies, activates and satisfies the buyer's needs for the mutual and continuous benefit of both (the seller and the buyer)"
Definition of Cost of Sale:
“It is the cost incurred to market a good, or to provide a service. It is the value that has been incurred to produce or buy a good that is sold. "
Definition of Warehouse:
“It is a place or physical space for the storage of goods within the supply chain. Warehouses are an essential infrastructure for the activity of all types of economic agents (farmers, ranchers, miners, industrialists, transporters, importers, traders, intermediaries, consumers, end users, etc.) "
Development of the topic
The Constant or Perpetual Inventory System is the most complete of the systems for the control of merchandise operations, and has the advantage of the "constant" control of the acquisition costs of the merchandise delivered for sale and of the correlative exits of warehouse.
The Perpetual Inventories procedure consists of recording merchandise operations in such a way that the value of the final inventory, the cost of what is sold and the gross profit or loss can be known at any time.
Accounts used
The accounts used in this procedure to record merchandise transactions are as follows:
- WarehouseSales
1.- Warehouse
This account is for current assets, it is managed exclusively at cost price; its balance is debtor and expresses, at any time, the existence of merchandise, that is, the final inventory.
It loads:
- From the value of the initial inventory (at cost price) From the value of purchases (at acquisition price) From the value of purchase expenses From the value of returns on sales (at cost price).
It pays:
- Of the value of sales (at cost price) Of the value of returns. On purchases: the value of the purchases.
Debt balance: Ending inventory. Represents the value of the merchandise in the warehouse.
2.- Cost of sales
It is a merchandise account, it is managed at cost price; its balance is debtor and expresses the cost of what was sold. It is charged from the value of sales (at cost price) and is credited from the value of returns on sales (at cost price).
Charges: During exercise
- Of the value of sales (at cost price).
Payable: During exercise
- Of the value of returns on sales (at cost price).
Debt balance: Cost of what was sold. Represents the amount of the cost of goods sold.
3.- Sales
It is a merchandise account, it is managed at the sale price; Its balance is creditor and expresses net sales, however, at the end of the fiscal year, when it receives the transfer of the cost of the sold, it becomes an income statement, since its balance expresses the gross profit if it is a creditor or the gross loss if is a debtor. It is charged for the value of the returns on sales (at sale price) and the value of the sales; and is paid from the value of sales (at sale price).
Charges: During exercise
- Of the value of returns. Over sales (at selling price) Of the value of over sales
Payable: During exercise
- From the value of sales (at sale price)
Credit balance: Net sales. Represents the amount of net sales made during the year.
In perpetual, permanent or constant inventory, the flow of costs is established for the valuation of consumption, thus facilitating their control, and subsequently obtaining, and by difference, the value of the final stocks, after the appropriate adjustment of the accounting information with inventory differences. (Prieto, Aguilar and Santidrián, p. 122)
Advantages of the perpetual inventory procedure
- The value of the final inventory can be known at any time, without the need to carry out physical inventories. It is not necessary to close the business to determine the final inventory of merchandise, since there is an account that controls the stock. Loss, theft can be discovered or errors occurred during the handling of the merchandise, since the exact value of the merchandise that should exist is known. You can know, at any time, the value of the cost of what is sold. You can know, at any time, the value of profit or gross loss. "
Disadvantages of the perpetual inventory procedure
- "It is not possible to know, at a given moment, in detail the composition of the sales item and cost of sales." "It is not possible to determine exactly the value of those that should be made, because there is no account that controls the stocks."
conclusion
With this research it was concluded that the Perpetual or Constant Inventory system is the most complete of all the systems that have existed and exist because it is completely organized and is easily accessible to whoever needs it. In addition to not having disadvantages or in case there is one, it is almost impossible due to the organization, as already mentioned before.
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Below is a playlist in which the management of a perpetual inventory system is presented by the FIFO, LIFO and weighted average evaluation methods (Emphasis on Colombian accounting)
Notes
- Ivan Thompson http://www.promonegocios.net/mercadotecnia/definicion-concopio-venta.htm. Retrieved on May 12, 2015. http://www.promonegocios.net/mercadotecnia/definicion-concopio-venta.htm. Retrieved on May 12, 2015 http://www.gerencie.com/costo-de-venta.html. Retrieved on May 12, 2015 http://es.wikipedia.org/wiki/Almac%C3%A9n. Retrieved May 12, 2015. Business-Oriented Accounting Notes, CP Lara Martínez Octavio Rolando http://seduca.uaemex.mx/material/LIA/CB/Sec41_R.php. Retrieved on May 12, 2015 https://sites.google.com/site/estradarodriguezcinthiayareli/unidad-4-inventarios-perpetuos/tarea-1-ventajas-y-desventajas-de-los-inventarios-perpetuos. Retrieved May 12, 2015.
Bibliographic references
- Francisco Jiménez Boulanger and Carlos Luis Espinoza Gutiérrez. Industrial Costs. Technological Publishing House of Costa Rica. 2007. Page 52 Ivan Thompson
Retrieved on May 12, 2015, Begoña Prieto Moreno, Pablo Aguilar Conde, Alicia Santidrián Arroyo. Cost and management accounting: a practical approach. Delta Publicaciones, 2005.http: //www.promonegocios.net/mercadotecnia/definicion-concopio-venta.htm Retrieved May 12, 2015.http: //www.gerencie.com/costo-de-venta.html Recovered on May 12, 2015.http: //es.wikipedia.org/wiki/Almac%C3%A9n Retrieved on May 12, 2015. Business-oriented accounting notes, CP Lara Martínez Octavio Rolandohttp: // seduca. uaemex.mx/material/LIA/CB/Sec41_R.php Retrieved May 12, 2015.https: //sites.google.com/site/estradarodriguezcinthiayareli/unidad-4-inventarios-perpetuos/tarea-1-ventajas-y -disadvantages-of-perpetual-inventories Recovered on May 12, 2015.
