When using a perpetual inventory system, the adjusting entry required when merchandise inventory records do NOT agree with the physical count
A) has an effect on Cost of Goods Sold.
B) has no effect on Cost of Goods Sold.
C) requires reporting a loss when actual is higher than records.
D) requires reporting a gain when actual is lower than records.

Question

Quizplus · Accepted Answer

When using a perpetual inventory system, if the physical count of inventory is less than what the records indicate, an adjusting entry is made to align the records with the actual inventory count. This adjustment typically involves debiting Cost of Goods Sold and crediting Inventory, thus affecting the Cost of Goods Sold.

When Using a Perpetual Inventory System, the Adjusting Entry Required