ACCA Applied Knowledge · Financial Accounting · Inventories
Which of the following is a purpose of a reconciliation between perpetual inventory records and the physical count?
The reconciliation identifies differences between the inventory records and the physical count, such as those caused by errors, theft or damage, so that the records can be investigated and corrected. It does not determine net realisable value or change the valuation method.
- ATo identify differences caused by errors, theft or damage so records can be correctedCorrect
- BTo determine the net realisable value of each item
- CTo change the inventory valuation method from FIFO to weighted average
- DTo record inventory held on consignment as the company's own asset
Explanation
Comparing records with the count reveals discrepancies such as errors, theft or wastage, which are then investigated and adjusted. It does not determine NRV, change valuation methods, or bring consignment inventory onto the consignee's books.
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