Under a perpetual inventory system inventory shrinkage and lost or stolen goods are more readily determined.

Under a perpetual inventory system, each inventory item is tracked constantly and in real-time. This allows for a more accurate determination of inventory shrinkage (losses due to spoilage, theft, or other causes) and lost or stolen goods, as any discrepancies between the recorded inventory and the physical inventory can be quickly identified and investigated. In contrast, a periodic inventory system relies on physical inventory counts conducted at regular intervals, which may miss smaller losses or inaccuracies in tracking.