When a perpetual inventory system is used,
A)a physical inventory count must be taken to determine cost of goods sold.
B)inventory shrinkage is difficult to determine.
C)it eliminates the need for frequent inventory counts.
D)the timeliness of data is sacrificed for lower costs of operation.

Question

Quizplus · Accepted Answer

A perpetual inventory system tracks inventory in real-time through the use of technology, such as a barcode scanner or RFID tags. This eliminates the need for frequent physical inventory counts, as the system is constantly updating inventory levels. This also makes it easier to determine inventory shrinkage, as any discrepancies between the system's records and actual inventory levels can be flagged and investigated. Unlike periodic inventory systems, a perpetual system provides timely and accurate data for cost of goods sold, as the cost of each item sold is recorded at the time of the transaction.

When a Perpetual Inventory System Is Used