For Companies That Use A Perpetual Inventory System, All Of The Following Are Purposes For Taking A Physical Inventory Except To:
The correct option of this multiple choice question (mcq) is (D), as the basic purpose of physical counting of Inventory (I) is to check the actual inventory on hand and to compare it with inventory on hand recorded in books of accounts in order to check errors or mistakes made in recording inventory, wastage of raw materials and goods and losses occurred due to theft. Which Accounts Are Affected By Inventory Shrinkage (IS)? The company using Perpetual Inventory System (PIS) needs to make adjustment for IS. The shrinkage of inventory is charged to cost of goods sold. The adjusting entry (in which two accounts are affected) to record for such case is shown below: Cost of Goods a/c XXX Inventory a/c XXX (IS Recorded To Update Inventory Value By Physical Counting) By taking physical counting of merchandise, the company recorded true and accurate va...