In a periodic inventory system ________.
A) quantities of merchandise inventory on hand are updated after each sale and each purchase
B) the cost to invest in the system is greater than the cost to invest in a perpetual inventory system
C) the business is in violation of U.S. GAAP
D) businesses must obtain a physical count of inventory to determine quantities on hand

Question

Quizplus · Accepted Answer

In a periodic inventory system, businesses must perform a physical count of inventory to determine the quantities on hand. This is because updates to inventory quantities are not made after each sale and purchase, making it necessary to physically count and adjust inventory levels periodically. Choices A and C are incorrect because they are not true statements, and choice B is also incorrect because the cost to invest in a periodic inventory system is typically lower than that of a perpetual system, as there is less need for technology and ongoing maintenance.

In a Periodic Inventory System ________