When the perpetual inventory system is used, where can the best estimate of the amount of inventory on hand be found?
A)On the previous period's balance sheet
B)In the Inventory account
C)By applying the gross margin method
D)By subtracting sales for the period from the beginning Inventory account balance

Question

Quizplus · Accepted Answer

In a perpetual inventory system, the inventory account is updated every time a purchase or a sale is made. Therefore, the most accurate estimate of the amount of inventory on hand is found in the Inventory account. Choice A is incorrect because the previous period's balance sheet may not reflect the current inventory level. Choice C is incorrect because the gross margin method is used to estimate the cost of goods sold, not inventory on hand. Choice D is incorrect because subtracting sales for the period from the beginning Inventory account balance may not account for any additional purchases made during the period.

When the Perpetual Inventory System Is Used, Where Can the Best