An entity's physical count of inventories was higher than the inventory quantities per the perpetual records. This situation could be the result of the failure to record:
A)sales.
B)sales discounts.
C)purchases.
D)purchase returns.

Question

Quizplus · Accepted Answer

If the physical count of inventory is higher than the inventory quantity per perpetual records, it means that some inventory purchases have not been recorded. Hence, the inventory account on the balance sheet is understated. The failure to record purchases would cause the inventory to be understated. The other options such as sales, sales discounts or purchase returns would result in a decrease in the inventory, thus making the physical count lower than the inventory quantities per perpetual records.

An Entity's Physical Count of Inventories Was Higher Than the Inventory