11/5/2023 0 Comments Periodic inventory definitionTheir employees get a chance to adopt corruption. Under this system, the stock control device is very weak.Under this system on expiry of the particular period, the reasons for differences between merchandise at hand and merchandise shown in the books of accounts can hot be sorted out easily.Under this system chance of fraud and forgery lies, because here continuous control over merchandise is absent.The act of counting merchandise stock is to be completed hurriedly due to a shortage of time.On the very day of the physical counting of merchandise stock, normal activities of business remain almost suspended.Since the stock-taking of merchandise is done on a particular date the quantity of stock of merchandise is reliable.Äisadvantages of Periodic Inventory System.Since stock taking is done at the end of a period under this system the normal activities of the business are not hampered.It is applicable for all business organizations large or small dealing with specific or a variety of goods.Since no permanent employee is required for physical counting of merchandise inventory under this system it is less expensive.The value of internal stock = quantity of merchandise stock x purchase price. Related: Accounting Cycle – 10 Steps of Accounting Process Explained A separate ledger account for merchandise inventory is not maintained under this system rather at the end of the period at a particular date cost of merchandise inventory is determined by multiplying purchase price with the quantity of merchandise stock.
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