Question

A TV company began operations on March 1 and uses a perpetual inventory system. What is a perpetual inventory system primarily characterized by?

a) Periodic stock counts
b) Continuous tracking of inventory levels
c) Yearly audits
d) No need for record-keeping

Answer 1

A perpetual inventory system is primarily characterized by continuous tracking of inventory levels. It uses computerized systems or barcode scanning to update the inventory records in real-time. This provides accurate inventory records, better decision-making, and reduces stockouts or overstocking.

Step-by-step explanation:

A perpetual inventory system is primarily characterized by continuous tracking of inventory levels. In this system, the company keeps a real-time record of its inventory, allowing it to have up-to-date information on the quantity and value of goods it has on hand at any given time.

Unlike a periodic inventory system where stock counts are done sporadically, a perpetual inventory system uses computerized systems or barcode scanning to track inventory levels as items are bought and sold. Every time a transaction occurs, such as a sale or a purchase, the inventory records are automatically updated.

This continuous tracking of inventory levels in a perpetual inventory system provides several benefits, including more accurate inventory records, better decision-making regarding inventory management, and reduced chances of stockouts or overstocking.