In business and accounting/accountancy, perpetual inventory or continuous inventory describes systems of inventory where information on inventory quantity and availability is updated on a continuous basis as a function of doing business. Generally this is accomplished by connecting the inventory system with order entry and in retail the point of sale system. In this case, book inventory would be exactly the same as, or almost the same, as the real inventory.
In earlier periods, non-continuous, or periodic inventory systems were more prevalent. Starting in the 1970s digital computers made possible the ability to implement a perpetual inventory system. This has been facilitated by bar coding and lately radio frequency identification (RFID) labeling which allows computer systems to quickly read and process inventory information as part of transaction processing.
Perpetual inventory systems can still be vulnerable to errors due to overstatements (phantom inventory) or understatements (missing inventory) that can occur as a result of theft, breakage, scanning errors or untracked inventory movements, leading to systematic errors in replenishment.
Famous quotes containing the word perpetual:
“Human life is thus only a perpetual illusion; men deceive and flatter each other. No one speaks of us in our presence as he does of us in our absence. Human society is founded on mutual deceit; few friendships would endure if each knew what his friend said of him in his absence, although he then spoke in sincerity and without passion.”
—Blaise Pascal (1623–1662)