Periodic Inventory System

1. With a periodic inventory system, the quantity of inventory is determined only by physical count, usually annually. Units of inventory are counted and valued at the end of the accounting period. The actual cost of goods sold is calculated using the cost of goods sold account analysis format: beginning inventory plus purchases less ending inventory equals cost of goods sold. See also perpetual inventory system. A method of record keeping that involves updating the accounting records at the end of the accounting period.