A perpetual inventory system
A) only knows the inventory on hand at the end of the year physical count
B) keeps a continuous record of the physical quantities in its inventory
C) does not maintain a continuous record of the physical quantities of inventory on hand
D) does not maintain a continuous record of the cost of inventory on hand

Question

Quizplus · Accepted Answer

A perpetual inventory system keeps a continuous record of the physical quantities in its inventory, allowing for real-time tracking of inventory levels and enabling timely reordering of goods. This system updates inventory levels with each purchase, sale, or return transaction, providing accurate and up-to-date information on the quantity and value of inventory on hand. Option A is incorrect because perpetual inventory systems provide continuous and accurate record-keeping, making physical counts less necessary. Options C and D are incorrect because maintaining a continuous record of physical quantities and costs is a key feature of perpetual inventory systems.

A Perpetual Inventory System