Periodic inventory is a system of inventory in which updates are made on a periodic basis. In this type of system, a physical count of the inventory is performed at specific intervals. This accounting method for inventory valuation keeps track of the inventory at the beginning of a period. It does not update inventory records as transactions occur.
It helps in making a cross-reference with the sales revenue to get a rough estimate of what was sold or not. It is different from the perpetual inventory method, which keeps track of inventory at the point of sale. This system is typically used by small businesses which do not have an electronic tracking system. Periodic inventory is done usually at the end of each year.