Inventory System
Scope * The scope of an inventory system considers which needs the inventory system addresses. These include valuing the inventory, measuring the change in inventory and planning for future inventory levels. The value of the inventory at the end of each period provides a basis for financial reporting on the balance sheet. Measuring the change in inventory allows the company to determine the cost of inventory sold during the period. The inventory level and changes allow the company to plan for future inventory needs.
Limitations of Periodic System * The limitations of the periodic system include not knowing an exact inventory level in the middle of the month and running the risk of shorting customer orders. With the periodic system, the company knows the inventory level with certainty only when it physically counts the inventory at the end of each period. Throughout the period, the company takes customer orders without knowing the exact inventory count or whether enough products are available to meet customer orders.
Limitations of Perpetual System * The limitations of a perpetual inventory system include a false sense of reliability, and dependence on human entry. Since a perpetual system updates each time a transaction enters the system, employees rely on the data contained in the inventory system. However, the system lacks information regarding employee or external theft, or damaged/scrapped units. The company remains unaware of the theft or waste, known as shrink, until it performs a physical count, which occurs only once per year. The other limitation of a perpetual system considers that the system depends on human entry. As each transaction occurs, an employee enters the data into the system. Human error sometimes makes this information inaccurate.
Scope defines the boundries of what the programmer must provide to meet the requirements of the system.
Limitations are also tied into scope as, as a programmer you are not going to create a new
Limitations of Periodic System * The limitations of the periodic system include not knowing an exact inventory level in the middle of the month and running the risk of shorting customer orders. With the periodic system, the company knows the inventory level with certainty only when it physically counts the inventory at the end of each period. Throughout the period, the company takes customer orders without knowing the exact inventory count or whether enough products are available to meet customer orders.
Limitations of Perpetual System * The limitations of a perpetual inventory system include a false sense of reliability, and dependence on human entry. Since a perpetual system updates each time a transaction enters the system, employees rely on the data contained in the inventory system. However, the system lacks information regarding employee or external theft, or damaged/scrapped units. The company remains unaware of the theft or waste, known as shrink, until it performs a physical count, which occurs only once per year. The other limitation of a perpetual system considers that the system depends on human entry. As each transaction occurs, an employee enters the data into the system. Human error sometimes makes this information inaccurate.
Scope defines the boundries of what the programmer must provide to meet the requirements of the system.
Limitations are also tied into scope as, as a programmer you are not going to create a new