Multiple Choice
Using the perpetual inventory system, which account is directly debited when inventory is purchased for cash?
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4. Merchandising Operations
Perpetual Inventory - Purchases
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Which inventory system requires continuous monitoring of inventory levels?
A
Just-in-time inventory system
B
Perpetual inventory system
C
Specific identification method
D
Periodic inventory system
Verified step by step guidance1
Understand the concept of inventory systems: Inventory systems are methods used by businesses to track and manage their stock levels. The two main types are perpetual and periodic inventory systems.
Define the perpetual inventory system: This system continuously updates inventory records in real-time whenever a transaction occurs, such as a sale or purchase. It requires constant monitoring of inventory levels.
Compare with other inventory systems: The periodic inventory system updates inventory records at specific intervals, such as monthly or annually, rather than continuously. The specific identification method is a way to track individual items, and the just-in-time inventory system focuses on minimizing inventory levels by ordering stock only when needed.
Identify the key feature of the perpetual inventory system: The perpetual system's ability to provide real-time updates and continuous monitoring of inventory levels distinguishes it from other systems.
Conclude that the perpetual inventory system is the correct answer based on its requirement for continuous monitoring of inventory levels.
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