Debitoor Dictionary

Accounting terms explained in a simple way

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What is periodic stock management?

Definition: Periodic stock management is a stock tracking method where a company’s stock is counted at regular intervals (for example at the end of every month).

Stock management method

The periodic stock management method allows companies to track how much stock they have at the beginning and the end of certain accounting periods. Since tracking is only done at certain times, this method of stock management does not require day-to-day tracking of how much physical stock a company has on hand.

Periodic tracking

When using periodic stock management, a company’s purchases, cost of goods sold, and stock on hand is not tracked until the end of each accounting period (e.g. the month end) when a physical stock count is performed and the ending stock findings are compared against the recorded beginning stock plus purchases.

Once the ending stock is determined, the value can be calculated by using a stock valuation method such as FIFO, LIFO or average cost.

Limitations and Risks

Since periodic stock management allows a company to track beginning and ending stock, but does not track stock on a daily basis, there is the risk of lost information. Company owners will not be able to track their stock on an item-by-item basis, thereby requiring them to make assumptions as to which items of stock have been sold.