Asked by Leston Alexis on Apr 25, 2024
Verified
The perpetual inventory system is a system which:
A) updates inventory only at the end of each period.
B) uses only LIFO method.
C) needs a physical inventory taken.
D) Both A and B are correct.
Perpetual Inventory System
An inventory tracking system where inventory levels are updated in real-time with each sale or purchase transaction, giving a continuous account of inventory on hand.
- Discern the differences in how inventory transactions are recorded under perpetual versus periodic inventory systems.
- Familiarize with the necessity of a physical inventory under the periodic system and its absence in the perpetual system.
Verified Answer
GT
Guillermo Terront7 days ago
Final Answer :
C
Explanation :
The perpetual inventory system continuously updates inventory records for each purchase and sale, including returns and discounts. It does require physical inventory counts periodically to verify records due to possible discrepancies such as theft or damage, which are not automatically recorded by the system. Choices A and B are incorrect because the perpetual system updates inventory continuously, not just at the end of each period, and it can use various costing methods, not just LIFO.
Learning Objectives
- Discern the differences in how inventory transactions are recorded under perpetual versus periodic inventory systems.
- Familiarize with the necessity of a physical inventory under the periodic system and its absence in the perpetual system.