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Periodic Inventory System Journal Entries
The periodic inventory system is a method of accounting for inventory that involves taking physical counts of inventory at regular intervals and updating the inventory accounts accordingly. In this method, periodic inventory system journal entries are made to record the purchase, sale, and ending inventory balances.
The journal entries below act as a quick reference, and set out the most commonly encountered situations when dealing with the double entry posting under a periodic system.
In each case the periodic inventory journal entries show the debit and credit account together with a brief narrative. For a fuller explanation of journal entries, view our examples section.
Typical Periodic Inventory System Journal Entries
Purchase goods from a supplier using periodic system journal entries
Account
Debit
Credit
Purchases
XXX
Accounts payable
XXX
Record a supplier purchase cash settlement discount
Account
Debit
Credit
Accounts payable
XXX
Purchase discounts
XXX
Cash
XXX
To account for freight costs (shipping point)
Account
Debit
Credit
Freight-In
XXX
Accounts payable
XXX
Record a purchase return to a supplier using periodic system journal entries
Account
Debit
Credit
Accounts payable
XXX
Purchase returns and allowances
XXX
Account for the sale of goods to a customer using periodic inventory journal entries
Account
Debit
Credit
Accounts receivable
XXX
Sales
XXX
To record a sales return from a customer using periodic inventory journal entries
Account
Debit
Credit
Sales returns
XXX
Accounts receivable
XXX
Record a customer sale cash settlement discount
Account
Debit
Credit
Cash
XXX
Sales discount
XXX
Accounts receivable
XXX
To record a physical inventory count shortage
Account
Debit
Credit
Loss on inventory write down
XXX
Inventory
XXX
To record end of period journal entries using periodic system
Account
Debit
Credit
Cost of goods sold
XXX
Inventory (Beginning)
XXX
Cost of goods sold
XXX
Inventory (Ending)
XXX
Periodic vs Perpetual Inventory System Journal Entries
This reference guide is for the periodic inventory system, if the business is using a perpetual inventory system the journal entries are different and can be seen in our perpetual inventory system journal entries reference guide.
The periodic vs perpetual inventory journal entries diagram used in this tutorial is available for download in PDF format by following the link below.
These are the basic journal entries that would be made under the periodic inventory system. It is important to realize that this system requires regular physical counts of inventory to ensure that the inventory accounts are accurate.
Last modified March 7th, 2023 by Michael Brown
About the Author
Chartered accountant Michael Brown is the founder and CEO of Double Entry Bookkeeping. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.
