Question

Continuous inventory reduces the need for physical inventory counts, but in practice periodic counts are needed to ensure that the recorded quantities of inventory match the physical quantities that are held (and, for example, there have not been significant losses of inventory due to theft).

A. True
B. False

Answer 1

The statement is true as periodic physical inventory counts are necessary to address discrepancies between recorded and actual inventory levels, even with continuous inventory systems.

Step-by-step explanation:

The statement is true. Continuous inventory systems are designed to track inventory levels in real-time through the use of technology such as barcoding and scanning. However, even with these systems, periodic physical inventory counts are necessary to ensure the accuracy of the recorded quantities. Physical counts can reveal discrepancies caused by factors such as theft, damage, or errors in recording transactions, which can lead to inventory shrinkage. It is during these counts that any variances between the digital records and the actual inventory on hand are rectified. This practice also aligns with the concept of significant figures in measurement, where directly counted quantities are exact, but measured quantities have inherent uncertainties due to limitations in the measurement process.