Continuous balancing
Also known as the “continuous balancing method”. Receipts and issues are tracked continuously in the stock accounts, so the balance of the stock account shows the stock on hand.
Inventory methods
Perpetual and Periodic Inventory MethodsHow is stock tracked, and when is the cost of goods sold calculated?
Perpetual inventory and periodic inventory are two methods that determine how stock is tracked in the accounting records and when the cost of goods sold is calculated.
Two methods, two perspectives
| Concept | Perpetual inventory method | Periodic inventory method |
|---|---|---|
| Stock tracking | Quantity is updated with every stock receipt and issue. | Stock movements can be followed during the period; the closing quantity is confirmed by a count. |
| Inventory accounting | Stock and the cost of goods sold are recorded with every sale. | The cost of goods sold is calculated and recorded at period end. |
The perpetual inventory method
Cost recorded with the sale
The cost entry is made right after a sale; the cost entry is created together with the sales entry.
Stock on hand is calculated
Since counting materials continuously is impractical, the quantity on hand is determined by calculation.
Counts are for control
A physical count is usually made at year end for control. Results are compared with the records, revealing unrecorded movements such as evaporation, shrinkage, spoilage or theft.
The key difference: with perpetual inventory, receipts and issues are tracked one by one for every material movement and the remaining quantity is determined continuously. With periodic inventory, consumption is not determined during the period; it is found by counting stock at period end.
The perpetual inventory formula
With perpetual inventory, closing stock is recalculated with every movement.
Perpetual inventory
Opening stock1,240 units
Purchases500 units
Issues420 units
Closing stock1,320 units
The balance of the stock account always shows the stock on hand; it is determined by calculation rather than by continuous counting.
Cost of sales: at every sale or at period end?
Same period, same sales. Switch the method and see when the cost reaches the accounts.
- MarchSale
- JuneSale
- SeptemberSale
- DecemberPeriod-end count
Stock account
Debit
Credit
Cost of sales
Debit
Credit
Sales
Debit
Credit
Gross profit—
Opening stock + Purchases − Closing stock = Cost of sales:
Figures are illustrative.
Differences between the two methods
- Perpetual inventory: updated with every transaction
- Periodic inventory: count and adjustment at period end
| Feature | Periodic inventory | Perpetual inventory |
|---|---|---|
| Stock tracking | At set intervals | With every transaction |
| Stock quantity | Determined after the count | Continuously updated in the records |
| Cost of goods sold | Calculated at period end | Calculated with every sale |
| Transaction tracking | Simpler | More detailed |
| Physical count | Essential at period end | Still needed to verify the records |
Benefits of the perpetual inventory method
Perpetual inventory brings stock information into everyday decisions.
Real-time visibility
- 01Real-time stock controlStock quantity is updated with every purchase and sale.
- 02Cost of goods sold in real timeThe cost of the product sold can be calculated with every sale.
- 03Profit and loss in real timeThe company’s profitability can be followed closely.
Profitability analysis
- 04Customer profitabilitySee in real time how much profit each customer brings.
- 05Product profitabilitySee in real time how much each product earns.
- 06Invoice profitabilityCompare each invoice’s sales amount and cost to calculate its profitability.
Stock control
- 07Prevents stock-outsOrders can be placed before products run out.
- 08Reduces excess stock costsUnnecessary purchases and storage costs can be reduced.
- 09Reveals losses and theftSystem records can be compared with the actual quantity.
Decisions and efficiency
- 10Better decisionsPurchasing and sales decisions can be based on sales and cost information.
- 11Saves timeCurrent stock and cost information is quickly available.
- 12Customer satisfactionBetter stock tracking makes it easier to meet customer demand.
Direct gains perpetual inventory brings to companies
Perpetual inventory does more than track stock: it delivers financial benefits by reducing stock losses, preventing unnecessary purchases, using working capital efficiently and catching cost errors early.
An important distinction: perpetual inventory does not create profit on its own. Gains arise when the accurate, timely information the system provides is reflected in business decisions.
| Gain area | Benefit to the company | Financial effect |
|---|---|---|
| Fewer stock losses | Losses, wrong issues, waste and unrecorded movements are detected early | Loss costs fall |
| No excess purchasing | Actual stock on hand and needs are seen more accurately | Unnecessary purchases and stock financing fall |
| Shorter time in stock | Slow-moving products are identified | Storage and obsolescence costs may fall |
| Fewer stock-outs | Critical stock levels are tracked | Lost sales may fall |
| Fewer cost errors | Product costs and stock values are tracked more currently | Wrong pricing and profitability decisions fall |
| Labour savings | Manual stock reconciliation and period-end investigations may decrease | Staff time and operating costs may fall |
| Better working capital | Resources tied up in excess stock can be reduced | Financing needs and interest costs may fall |
All available in Factorbooks
Controls that create direct economic value
All of the controls below are built into Factorbooks. Perpetual inventory turns ERP from a system that only produces accounting entries into one that protects the company’s money and automates decisions.
- Preventing new purchase orders while existing stock is sufficient
- Blocking negative stock and incorrect warehouse issues
- Identifying waste, losses and stock differences with their owner and cost
- Tracking actual stock cost and gross profitability by product
- Identifying stock nearing expiry or not moving for a long time
- Detecting missing materials for production in advance to reduce downtime
Measure the financial benefit of perpetual inventory for your business.
Adjust the values for your business and see the estimated annual benefit instantly.
Annual savings calculator
Total estimated annual benefit620.000 TL/ year
- Estimated annual financing saving
- 400.000 TL
- Stock loss prevented
- 100.000 TL
- Labour saving
- 120.000 TL
- Cash released by reducing stock one-off
- 1.000.000 TL
The calculation assumes effective stock control and purchasing improvements alongside perpetual inventory. The rates are illustrative and are not guaranteed industry averages. Released cash is a one-off effect and is not included in the annual total.
In Factorbooks, the Perpetual Inventory Ledger is included in all packages
Every stock movement recalculates quantity, unit cost and stock value, and the cost of goods sold reaches accounting at the moment of sale.
Compliant Accounting and Reliable e-Ledger Processes with Perpetual Inventory
With the perpetual inventory method, Factorbooks Autonomous ERP records every stock movement as it happens and creates stock, cost and accounting records from the same transaction, consistently and traceably. Every movement, from goods receipt to sale and from stock issue to cost calculation, flows into journal and general ledger entries. Controlled accounting records that follow the record-keeping order required by the Tax Procedure Law (VUK) and e-Ledger legislation provide a solid basis for creating, signing and obtaining the berat for the e-Ledger. Your business thereby strengthens its regulatory compliance and financial traceability.
The perpetual inventory method alone does not guarantee compliance with e-Ledger legislation. Compliance depends on the quality of the records, accounting practices, legal format and berat requirements, and the related obligations.
Purchase invoiceALF-2026-0142
Supplier Ltd.
- Item
- Box 40×30
- Quantity
- 500 units
- Unit cost
- TRY 2.20
- Amount
- TRY 1,100.00
Main warehouse1,240 → 1,740 units
Purchasing+500 units · TRY 1,100.00
Sales−420 units
Stock and cost
- Stock
- 1,320 units
- Average unit cost
- TRY 2.13
- Cost of goods sold
- TRY 894.07
AccountingReady to post
Journal
| Account | Debit | Credit |
|---|---|---|
| 153 Trade goods | 1,100.00 | |
| 191 Deductible VAT | 220.00 | |
| 320 Suppliers | 1,320.00 | |
| 621 Cost of goods sold | 894.07 | |
| 153 Trade goods | 894.07 |
General ledger · 153 Trade goods
Debit
Opening2,604.00
Purchase1,100.00
Credit
Cost of sales894.07
Balance2,809.93
- Record integrityVoucher and ledger totals reconcile
- Period controlsPeriod-end checks complete
- Exception management1 unmatched entry reviewed and corrected
e-LedgerJournal and general ledger · in the required format
Berat (receipt)Signed and approved
Factorbooks Autonomous ERPFrom record to control, one integrated process.
- Stock
- Accounting
- Control
- e-Ledger
Every stock movement is recorded.
The flow is conceptual; figures are illustrative and the VAT rate is an assumption.
Technical flow
The four stages run on the same record; each stage uses the output of the previous one.
- 01
Stock Management
- Goods receipt
- Sales
- Stock issue
- Cost tracking
- 02
Accounting Integration
- Accounting vouchers
- Journal entries
- General ledger
- 03
Control and Validation
- Record integrity
- Period controls
- Exception management
- 04
e-Ledger Process
- Creation in the required format
- Signing / approval
- Berat and retention
Frequently asked questions
What is the key difference between perpetual and periodic inventory?
With perpetual inventory, every stock movement is recorded and both stock quantity and cost of goods sold are updated with each transaction. With periodic inventory, the cost of goods sold is calculated at period end based on the closing stock found by a count.
Is a physical count needed with perpetual inventory?
Yes. A physical count is usually made at year end for control. Count results are compared with the records to reveal unrecorded movements and differences.
How is the cost of goods sold found with periodic inventory?
Opening stock and purchases during the period are added together, and the closing stock found by the period-end count is deducted: Opening stock + Purchases − Closing stock = Cost of goods sold.
Are the calculator figures guaranteed?
No. The calculator is an example based on the assumption that effective stock control and purchasing improvements accompany perpetual inventory. Rates vary by business and are not guaranteed industry averages.
Which method does Factorbooks use?
In Factorbooks, the Perpetual Inventory Ledger is a feature of the General Accounting Management module and is included in all packages. Price differences are included in cost, and returns automatically reduce cost by the returned quantity.
Manage your stock without waiting for period end
In the needs analysis we clarify together how your stock movements will flow into cost, profitability and accounting, and prepare the right package and annual quote.