Which statement about perpetual inventory systems is true?

Which statement about perpetual inventory systems is true?

• A. They automate all stock checks
• B. They eliminate the need for physical counts
• C. They require no physical counts
• D. They do not replace physical counts; physical counts are still needed

Answer: (D)

Perpetual inventory systems update inventory records in real time with every purchase and sale, giving you current on-hand quantities and cost of goods sold. But these records can still be inaccurate due to theft, damage, mislabeling, data-entry errors, or supplier mistakes. To ensure the books match reality, physical counts are performed to verify and adjust the records. This means physical counts are still necessary even when using a perpetual system, because the system does not automatically guarantee perfect accuracy. The idea that no counts are needed or that everything is fully automated is incorrect, since reconciliation through physical counts is a key control.

Perpetual inventory systems update inventory records in real time with every purchase and sale, giving you current on-hand quantities and cost of goods sold. But these records can still be inaccurate due to theft, damage, mislabeling, data-entry errors, or supplier mistakes. To ensure the books match reality, physical counts are performed to verify and adjust the records. This means physical counts are still necessary even when using a perpetual system, because the system does not automatically guarantee perfect accuracy. The idea that no counts are needed or that everything is fully automated is incorrect, since reconciliation through physical counts is a key control.