When perpetual inventory master files are accurate, the physical inventory can be tested before the balance sheet date.

Question

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Perpetual inventory systems continuously track inventory levels, which means that the balance in the inventory account should be up-to-date and accurate. This makes it possible to perform physical inventory count tests before the balance sheet date, as any discrepancies can be identified and adjusted in real-time. In contrast, periodic inventory systems only update inventory balances periodically, which means that there may be a time lag between physical inventory counts and adjustments to the inventory account.

When Perpetual Inventory Master Files Are Accurate, the Physical Inventory