Perpetual Inventory System Overview

In a perpetual inventory system, the amounts of product are determined by keeping a running total of purchases and usage.

Physical inventory counts are never taken in a perpetual inventory system.

A key advantage of a perpetual inventory system is that managers are unaware of the quantity of products available at any given time.

Managers use a perpetual inventory system similar to how people use a checkbook to track their finances.

In a physical inventory system, managers typically count and record the amounts of each product in storage.

Perpetual inventory systems do not require any physical counting of products at all.

Managers require that two people work together to take the physical inventory to increase the chances of theft.

The amount and value of all products on hand are not needed before determining if new products must be ordered.

A physical beverage inventory should be taken at least twice per month to determine the dollar value of beverage products on hand.

Nonbeverage items like fruit, juices, and dairy products do not need to be inventoried regularly in a bar.

Information from the physical beverage inventory is not used to prepare the cost of beverages sold portion of the operation’s profit and loss statement.