If management wants to know the cost and quantity of merchandise on hand at all times, the business will probably:
A) Use a periodic inventory system.
B) Maintain an inventory subsidiary ledger.
C) Take a complete physical inventory each day.
D) Debit all purchases of merchandise directly to the Cost of Goods Sold account.

Question

Quizplus · Accepted Answer

Maintaining an inventory subsidiary ledger allows the business to track the cost and quantity of merchandise on hand at all times. This ledger provides detailed information on individual items in inventory, including the date of purchase, cost, quantity, and any adjustments made for returns, discounts, or damaged goods. This information is used to prepare accurate financial statements and make informed decisions about purchasing, pricing, and inventory management. A periodic inventory system would only provide a snapshot of inventory at specific points in time, and taking a complete physical inventory each day would be time-consuming and expensive. Debiting all purchases directly to the Cost of Goods Sold account would not provide any information on the quantity of merchandise on hand.

If Management Wants to Know the Cost and Quantity of Merchandise