ACCA Applied Knowledge · Financial Accounting · Inventories
Which inventory record system updates the inventory balance after every receipt and issue, so that the book balance can be compared with a physical count at any time?
The perpetual inventory system is correct because it updates inventory records after every receipt and issue. This gives a continuous book balance that can be compared with a physical count at any time, unlike a periodic system, which relies on counts at the period end.
- APeriodic inventory system
- BPerpetual inventory systemCorrect
- CImprest system
- DCut-off system
Explanation
A perpetual system records each receipt and issue as it happens, so the book balance is always available. A periodic system only determines closing inventory from a count at the period end, so it cannot give a running balance.
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