Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall

Exercise 70

For the following questions, circle the best response.

As contrasted with the periodic inventory system, the perpetual system

a. shows higher ending inventory and lower cost of goods sold in all cases.

b. does not require a continuous record of all purchases and sales made during the period.

c. is easier to use and does not often require the use of computers.

d. provides better information for management to control unauthorized use and theft of inventory.

Step 1 of 2

The perpetual inventory system provides more accurate information to management to prevent non-permitted use of inventory. The perpetual inventory system monitors inventory levels. As it is a continuous record of purchases and sales of inventory, so it does not have to be counted.

The periodic inventory system is not a continuous record of inventory purchases and sales, so it requires counting at the end of a period to determine inventory levels.

The correct option is d i.e. Provides better information for management to control unauthorized use and theft of inventory.