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Financial Accounting

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Physical Count under Perpetual Inventory System

FINACT-4QTQEK

At the end of the 2015 fiscal year, your accountant told you, "We are using the perpetual inventory system, so we don't need to physically count the inventory items in our warehouse." You were taking an accounting class and were aware that the perpetual inventory system provides the information regarding the change of inventory items (in terms of quantity). Was your accountant's statement correct?

A

Yes, because we are maintaining a running balance in the inventory account, we already know the quantity so a physical count is not necessary.

B

No, the perpetual inventory system does not provide the quantity information.

C

No, we need to count the inventory because the items in the warehouse may not match our perpetual record.

D

None of the above.