Question

True or false: Companies that use a perpetual inventory system never need to do a physical count of inventory because in a perpetual system cost of goods sold and inventory are kept up-to-date every time a sale is recorded.

Answer 1

Answer: False

Explanation: Companies who use a perpetual inventory system do a physical count of inventory at the end of the time despite having an up to date inventory. This is done to be certain and estimate what was recorded down corresponds to what they have in the merchandise kept in the premises of a shop available for sale or distribution. However, after the comparison, variations could exist due to some issues like the disappearance of inventory with no established explanation.