What is the difference between periodic and perpetual inventory systems?

The primary difference between periodic and perpetual inventory systems lies in how inventory levels are tracked. In a periodic inventory system, updates to inventory balances are made at specific intervals, typically at the end of an accounting period, relying on physical counts. In contrast, a perpetual inventory system continuously updates inventory records in real-time with each purchase and sale transaction, providing a more accurate and up-to-date view of inventory levels at all times. This difference affects decision-making, financial reporting, and inventory management practices.