TASAccountingSyllabus dot point

How does the perpetual inventory system record purchases, sales and cost of goods sold?

Record inventory transactions under the perpetual system and reconcile to a stocktake.

Recording purchases, sales and cost of goods sold under the perpetual inventory system, including the two entries per sale and the inventory loss on stocktake.

Generated by Claude Opus 4.77 min answerUpdated 2026-05-30

Reviewed by: AI editorial process; not yet individually human-reviewed

Have a quick question? Jump to the Q&A page

What this dot point is asking

The TASC course records inventory using the perpetual system, with the cost of goods sold given to you. Perpetual means continuous: every movement of stock is recorded as it happens, so the Inventory ledger account always shows what should be on hand. This contrasts with the periodic system, where inventory is only counted at period end.

Recording purchases

When goods are bought for resale, the cost goes straight into the asset account Inventory, not a Purchases account. A credit purchase of stock is recorded as debit Inventory, debit GST clearing, and credit Creditors Control for the total.

Recording a sale: two entries

Because the system tracks both the sale and the cost at the moment of sale, every sale has two parts.

Entry 1 records the revenue: debit Cash or Debtors, credit Sales, credit GST clearing.
Entry 2 records the cost: debit Cost of Goods Sold (an expense), credit Inventory.

Inventory loss and the stocktake

Even with continuous records, a physical count (stocktake) may find less stock than the ledger shows, because of theft, breakage or errors. The difference is an inventory loss. The recorded balance is brought down to the counted figure with an adjustment.

Worked example

A purchase, a sale and a stocktake

Purchase

Buy stock on credit, base cost $4\,000$ plus $400$ GST.

Debit Inventory $4\,000$
Debit GST clearing $400$
Credit Creditors Control $4\,400$

Sale

Sell goods for $2\,200$ cash (including $200$ GST); these goods cost $1\,300$ .
Entry 1 (revenue): debit Cash $2\,200$ , credit Sales $2\,000$ , credit GST clearing $200$ .
Entry 2 (cost): debit Cost of Goods Sold $1\,300$ , credit Inventory $1\,300$ .

Inventory balance before stocktake

Assume the opening Inventory was $1\,000$ .
Ledger balance $= 1\,000 + 4\,000 - 1\,300 = \$ 3,700$.

Stocktake

A physical count finds $3\,500$ of stock on hand.
Inventory loss $= 3\,700 - 3\,500 = \$ 200$.

Debit Inventory Loss $200$
Credit Inventory $200$

Inventory now shows $3\,500$ , matching the count.

Why this matters

Perpetual recording lets a business know its stock position and gross profit at any time without waiting for a count, which supports reordering and theft detection. Exam questions reward the second (cost) entry on every sale and the correct treatment of an inventory loss, both of which directly affect the gross profit reported later.