ACCA Applied Knowledge · Financial Accounting · Inventories
Which of the following best describes a perpetual inventory system?
A perpetual inventory system updates inventory records after every receipt and issue, so a running balance is always available. This differs from a periodic system, where inventory is only established by a physical count at intervals and cost of sales is derived from it.
- AInventory is counted only once a year and the closing balance is derived from the count
- BInventory records are updated after every receipt and issue so a running balance is always availableCorrect
- CInventory is valued only at the reporting date using selling prices
- DInventory is recorded only when it is sold to customers
Explanation
A perpetual (continuous) system updates the inventory record for every receipt and issue, giving a running balance. Counting only once a year describes a periodic system, which is the key distractor.
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