Perpetual Inventory System
Definition
An inventory system that updates stock levels and costs in real time with every sale, receipt and adjustment, instead of only at periodic counts.
Want a deeper explanation?
Perpetual systems give you current inventory and COGS every day. The alternative, a periodic system, calculates COGS only after a count.
Perpetual systems still need cycle counts to catch errors. Watch for: trusting system quantities that have not been counted in a year, because errors pile up quietly.
Example
When a unit ships, the system reduces on-hand quantity and records its cost to COGS immediately, so the month-end balance is already close to correct.