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The Periodic and the Perpetual Inventory Systems Are Two Methods

question 243

Essay

The periodic and the perpetual inventory systems are two methods that companies use to account for inventories. Briefly describe the major features of each system and explain why a physical inventory is necessary under both systems.


Definitions:

Original Capital Investment

The initial sum of money invested in a business venture, project, or asset, used to start or acquire the investment.

Salary Allowances

Additional benefits or compensations provided to employees on top of their regular salary, which may include housing, transport, or medical allowances.

Liquidation

The process of closing a business and distributing its assets to claimants, often done when a company is insolvent.

Going Out Of Business

The process of closing a company permanently, often involving selling off assets and paying off creditors.

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