[1]Periodic inventory is a system of inventory in which updates are made on a periodic basis. This differs from perpetual inventory systems, where updates are made as seen fit.
In Periodic Inventory System no effort is made to keep up-to-date records of either the inventory or the cost of goods sold. Instead, these amounts are determined only periodically-usually at the end of each year.
As the The foundation of the periodic inventory system is the taking of a complete physical inventory at year-end. This physical count determines the amount of inventory appearing in the balance sheet. The cost of goods sold for the entire year then is determined by a Short Computation.