Introduction
Inventory management plays a critical role in determining a business’s profitability and financial accuracy. Choosing the right inventory system helps businesses track stock levels, calculate Cost of Goods Sold (COGS), and prepare accurate financial reports.
In Bukku, there are two inventory methods you can use:
Perpetual Inventory System
Periodic Inventory System
Both methods track inventory and calculate COGS, but they differ significantly in how and when inventory data is updated.
A perpetual inventory system is constantly updated as each sale or purchase happens — perpetually updating the data.
A periodic inventory system is updated manually at the end of an accounting period — periodically updating the data.
Understanding these differences will help you choose the most suitable method for your business.
What is a Perpetual Inventory System?
A Perpetual Inventory System continuously updates inventory records.
Every purchase and sale automatically updates:
Inventory quantity
Inventory value
Cost of Goods Sold (COGS)
This provides real-time visibility into stock levels and profitability.
Under this method:
Purchases are recorded directly into the Inventory account
Every sale automatically:
Reduces inventory
Records COGS at the time of sale
Inventory balances and gross profit are always up to date
Stock costing methods (FIFO, LIFO, or Average Cost) are applied automatically
Example: Perpetual Inventory in Action
You start with:
10 apples at RM 2 each
Inventory value: RM20
Sale: Sell 2 apples
At the time of sale, the system automatically:
Updates stock from 10 to 8 apples
Records COGS of RM4
Reduces inventory value accordingly
Purchase: Buy 20 apples at RM3 each
When the purchase is recorded:
Stock updates from 8 to 28 apples
Inventory value increases
A new average cost is recalculated automatically
All inventory and COGS updates happen immediately, without waiting for period-end adjustments.
Note: Bukku’s uses the Weighted Average Cost method to track inventory and calculate Cost of Goods Sold automatically in real time. For a detailed walkthrough, see our guide: Calculating Cost of Goods Sold (COGS) in Bukku.
What is a Periodic Inventory System?
A Periodic Inventory System updates inventory balances and COGS at specific intervals, such as monthly, quarterly, or yearly. Inventory quantities may be tracked during the period, but inventory value and COGS are only finalised at the end of the period.
Under this method:
Purchases are recorded in a Purchases account, not directly into Inventory
Inventory balances are updated only at period end
COGS is calculated after determining the closing stock value
A physical stock count is usually required to determine closing inventory
Example: Periodic Inventory Calculation
Assume the following for January 2023:
Opening Stock: RM50,000
Purchases during the period: RM15,000
Closing Stock (after physical count): RM40,000
COGS calculation:
COGS = Opening Stock + Purchases – Closing Stock
COGS = RM50,000 + RM15,000 – RM40,000
COGS = RM25,000
Under the periodic method, businesses record the closing stock at the end of the period, and inventory and COGS are updated once during period-end adjustments.
For detailed instructions on recording closing stock values under the Periodic Inventory Method, refer to our guide on Entering Stock Periodic Values in Bukku.
Key Difference Between Periodic and Perpetual Inventory Systems
The main difference lies in timing:
Perpetual Inventory System: Updates inventory and Cost of Goods Sold (COGS) as transactions occur.
Periodic Inventory System: Updates inventory and COGS at the end of an accounting period.
Detailed Comparison: Perpetual vs Periodic Inventory System
Comparison | Perpetual Inventory System | Periodic Inventory System |
Purchase | DR Inventory CR Creditor or Bank/Cash | DR Purchase CR Creditor or Bank/Cash
(No entry to inventory account) |
Purchase Return | DR Creditor CR Inventory | DR Creditor CR Purchase Return |
Purchase Discount (when treated as an item of Cost of Goods Sold) | DR Creditor CR Inventory | DR Creditor CR Purchase Discount |
Sale | DR Debtor or Bank/Cash CR Sales DR Cost of Goods Sold CR Inventory | DR Debtor or Bank/Cash CR Sales |
Sales Return | DR Sales Return CR Debtor DR Inventory CR Cost of Goods Sold | DR Sales Return CR Debtor |
Stock Adjustment | DR Inventory CR Increase in Stock Value Adjustment
or
DR Decrease in Stock Adjustment / Stock Loss CR Inventory | Perform stock adjustments in system, it will affect the value in Inventory Report, the adjusted inventory value will then be used as periodical stock value and entered in Periodic Values Table at the end of period.
No double entry involved. |
Stock Value Input | No manual input required.
Daily entries update stock value and Cost of Goods Sold automatically.
| Enter closing stock value manually in Periodic Values Table at the end of period (from Inventory Report or manual count). |
When to input Stock Value | Continuously with each stock movement. | Periodically (monthly / quarterly / yearly) |
Chart of Account |
  |
  |
Cost of Goods Sold Determination | Calculated automatically in real time as each sale occurs.
| Calculated at the end of the period using opening stock, purchases, and closing stock. |
Profit & Loss Presentation | Sales − Cost of Goods Sold = Gross Profit
| Sales − (Opening Stock + Purchases − Closing Stock) = Gross Profit
 |
Stock Valuation | Based on system records | Based on physical stock count or Inventory Report. |
Reporting Accuracy | High and real-time | Lower during the period |
Suitable for | Larger businesses or those operating multiple outlets that manage a wide variety of stock and need real-time visibility of inventory levels and profitability. | Smaller businesses with fewer inventory items, where stock valuation is performed occasionally and businesses may rely more on physical counts to track inventory. |
Notes on Bukku Implementation
In Bukku, both Perpetual and Periodic inventory systems can track stock quantities, but they work differently depending on your settings.
For Perpetual Inventory, you can toggle inventory tracking on, allowing Bukku to automatically track stock quantities and calculate COGS in real time.
For Periodic Inventory, you can also toggle inventory tracking on or off. If toggled on, Bukku tracks quantities, but COGS is not automatically posted; you need to manually enter the closing stock value in the Periodic Values Table for COGS. You can choose to use the stock value from Bukku’s Inventory Report or your own stock count.
The main difference between the two systems lies in financial report presentation and how COGS is posted.
If you prefer the Periodic presentation, the workflow is:
Obtain the closing stock value from the Inventory Report (or use your own stock count).
Manually enter it into the Periodic Values Table.
Bukku will then calculate COGS for your financial statements based on this value.
Note: This approach works well if your business is comfortable using the Weighted Average Cost method for stock valuation, even when presenting accounts periodically.
Conclusion
Both inventory systems serve the same purpose — tracking stock and calculating COGS — but differ in timing, automation, and report presentation.
Use Perpetual for real-time visibility, automation, and high-volume operations.
Use Periodic if you prefer traditional accounting presentation or occasionally value inventory, even while still tracking quantities in Bukku.
Frequently Asked Questions (FAQ)
Q1: Do I need to enter closing or opening stock in Bukku?
It depends on the inventory method your account is using:
Perpetual Inventory Method:
No manual entry is needed for opening or closing stock.
Opening and closing stock won’t appear in your Profit & Loss, because Bukku automatically calculates Cost of Sales using the Weighted Average Cost method.
Periodic Inventory Method:
If you prefer to see opening and closing stock in your Profit & Loss, switch to the Periodic Method.
You’ll need to enter your closing stock value manually under Stock > Periodic Value.
Cost of Sales will then be calculated as Opening Stock + Purchases − Closing Stock.
You can still enable inventory tracking under Periodic to fill in the table, but Cost of Sales won’t auto-post — you manage it via the Periodic Values Table.
Q2: How does Bukku calculate Cost of Goods Sold (COGS)?
Bukku calculates Cost of Goods Sold differently depending on your inventory method:
Perpetual Method: Bukku calculates COGS in real time using the Weighted Average Cost method whenever a sale occurs.
Periodic Method: COGS is calculated at the end of the period using the formula of Opening Stock + Purchases − Closing Stock.
Q3: How do I know if my account is using Perpetual or Periodic Inventory?
Check if you have the menu option Stock > Periodic Value.
If you see this option → your account is using Periodic Inventory.
If you don’t see this option → your account is using Perpetual Inventory.
