When there is a difference between the inventory records quantity and the physical count of inventory:
A)There is a variance.
B)The difference can be ignored if minor.
C)The difference is resolved through inventory reconciliation.
D)The difference is ignored if the physical quantity exceeds inventory record quantity.

Question

When there is a difference between the inventory records quantity and the physical count of inventory:
A)There is a variance.
B)The difference can be ignored if minor.
C)The difference is resolved through inventory reconciliation. 
D)The difference is ignored if the physical quantity exceeds inventory record quantity.

Quizplus · Accepted Answer

The difference between the inventory records quantity and the physical count of inventory is called a variance, and it needs to be resolved through inventory reconciliation. Ignoring the difference, even if it is minor, can lead to inaccurate financial statements and can affect decision-making. Similarly, ignoring the difference when the physical quantity exceeds the inventory record quantity can lead to overstocking and tie up capital in excess inventory. Therefore, it's best to reconcile the inventory records with the physical count and adjust the records accordingly.

When There Is a Difference Between the Inventory Records Quantity