The periodic inventory system is an accounting method used to track stock levels over time. It involves taking physical inventory counts on a set schedule, usually either monthly or quarterly, to check for discrepancies between recorded and actual stock levels. This provides businesses with greater control and accuracy when it comes to managing their inventory, allowing them to detect any irregularities as soon as possible and take preventative action before stock losses become too large. Additionally, it helps maintain accurate records at all times, which is essential for meeting federal and state compliance regulations.