Under a perpetual inventory system

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Under a perpetual inventory system, accounting records continuously disclose the amount of inventory, allowing for real-time tracking and management of inventory levels. This eliminates the need for periodic physical counts, as inventory information is updated as goods are bought and sold. Additionally, increases in inventory resulting from purchases are debited to the Inventory account, not Purchases, and the purchases returns and allowances account is credited when goods are returned to vendors.

Under a Perpetual Inventory System