At year-end, a department store shows a balance in the merchandise inventory account of $2 million and a physical inventory shows there is less than $2 million in merchandise on hand. What kind of inventory system does the department store use

Question

Business

Tiara Atkins

1 January, 11:54

At year-end, a department store shows a balance in the merchandise inventory account of $2 million and a physical inventory shows there is less than $2 million in merchandise on hand. What kind of inventory system does the department store use

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Answers (1)

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Josephine · Answer 1

perpetual inventory system

Explanation:

A periodic inventory system requires a physical count to determine ending inventory and cost of goods sold. When a company uses a periodic inventory system, they do not keep updated records of merchandise inventory account.

On the other hand, a perpetual inventory account keeps updated and current real time transactions. It generally is more efficient than the periodic system and allows you to calculate cost of goods sold immediately.