Inventory Management System Used by NetSuite

Based on US GAAP, there are two inventory systems being utilized by companies: Perpetual and Periodic System.

Perpetual Inventory system keeps a running balance of inventory as time progresses. This means that Receipts of the Inventory will affect the Asset directly, and the Sales will affect the Cost Of Goods Sold Account directly. Under this system, no purchases account is maintained because inventory account is directly debited with each purchase of merchandise.

Periodic, on the other hand, requires physical count to determine the Cost of Goods sold as derived by the formula: (Beginning inventory + Purchase - Ending Inventory). This pertains that Cost of Goods sold will be derived at the end of the period and a Purchase type account will be maintained in the books.