Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

5. Inventory

Physical Inventory Count, Ownership of Goods, and Consigned Goods

Financial Accounting

5. Inventory

Physical Inventory Count, Ownership of Goods, and Consigned Goods

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Multiple Choice

Which of the following statements correctly describes the primary purpose of taking a physical inventory count?

To determine the market value of inventory for tax purposes.

To calculate the depreciation expense for inventory items.

To verify the actual quantity of inventory on hand and ensure it matches accounting records.

To record the sales revenue generated from inventory during the period.

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Verified step by step guidance

Understand the concept of physical inventory count: A physical inventory count involves manually counting the actual quantity of inventory items present in a business at a specific point in time.

Recognize the primary purpose: The main goal of a physical inventory count is to verify the actual quantity of inventory on hand and ensure it matches the accounting records maintained by the business.

Eliminate incorrect options: Review each option provided in the problem and identify why it does not align with the primary purpose of a physical inventory count. For example, determining market value for tax purposes or calculating depreciation expense are unrelated to the physical inventory count process.

Focus on the correct option: The correct statement is 'To verify the actual quantity of inventory on hand and ensure it matches accounting records,' as this aligns with the purpose of reconciling physical inventory with recorded inventory.

Apply this understanding: Use this knowledge to analyze inventory discrepancies, improve inventory management practices, and ensure accurate financial reporting.