PERPETUAL INVENTORY Definition

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PERPETUAL INVENTORY is an inventory accounting system whereby book inventory is kept in continuous agreement with stock on hand. A daily record is maintained of the dollar amount and physical quantity. There are periodic physical inventories taken to reconcile at short intervals.

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ENTITY THEORY is where a legal entity is regarded as having a separate existence from the owners. The financial statements are prepared from the perspective of the entity, not its owners. See PROPRIETARY THEORY.

FINANCIAL INSTITUTION is an institution (public or private) that collects funds (from the public or other institutions) and invests them into financial assets.

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