Question

The following statements regarding perpetual inventory and periodic inventory methods of handling merchandise are all correct except (choose one):

Option A: A perpetual inventory method makes it unnecessary to take a physical count of inventory on hand.
Option B: The perpetual inventory method offers better inventory control and more accurate determination of cost of goods sold than the period inventory method.
Option C: The periodic inventory method is based upon the assumption that goods that were acquired and are not on hand have been previously sold.
Option D: The periodic inventory system is less expensive to operate but may lead to inefficiencies.

Answer 1

Option A is incorrect because a physical inventory count is still necessary in a perpetual inventory system to ensure records match the actual inventory on hand. The perpetual inventory method does indeed offer better control and real-time costs of goods sold data, and the periodic inventory method is less costly to maintain but can lead to inefficiencies.

Step-by-step explanation:

The correct answer to the statement that is not correct regarding perpetual inventory and periodic inventory methods of handling merchandise is Option A: A perpetual inventory method makes it unnecessary to take a physical count of inventory on hand.

Even with a perpetual inventory system, a physical inventory count is typically necessary to account for discrepancies due to theft, damage, or errors in the record-keeping process. This makes sure that the inventory records match the actual inventory on hand.

Option B is correct because the perpetual inventory method continuously tracks inventory transactions, offering more accurate inventory control and allowing for a real-time view of costs of goods sold. Option C is also correct since the periodic inventory method assumes that any inventory not present at the end of the accounting period has been sold.

Finally, Option D is correct because the periodic inventory system is generally less expensive to maintain. It does not require as comprehensive a record-keeping system as the perpetual method, though it may result in less accurate inventory information, leading to potential inefficiencies.