Which statement best defines a physical inventory?

Which statement best defines a physical inventory?

• A. A periodic inventory conducted by counting, weighing, or measuring items of merchandise on hand.
• B. A perpetual system that updates inventory after every sale.
• C. A forecast of future sales and purchases.
• D. A physical count of only damaged or lost items.

Answer: (A)

The main idea is counting the actual goods on hand to verify what the records say. A physical inventory is performed by counting, weighing, or measuring the items you have in stock at a given time, usually as part of a periodic process rather than updating continuously after each sale. This helps confirm quantities and detect discrepancies like shrinkage or errors. The other scenarios don’t fit. A perpetual system updates inventory after every sale, which is continuous record-keeping, not a one-time physical count. A forecast of future sales and purchases is about planning, not measuring on-hand stock. Counting only damaged or lost items doesn’t reflect the full stock on hand, which is what a physical inventory aims to verify.

The main idea is counting the actual goods on hand to verify what the records say. A physical inventory is performed by counting, weighing, or measuring the items you have in stock at a given time, usually as part of a periodic process rather than updating continuously after each sale. This helps confirm quantities and detect discrepancies like shrinkage or errors.

The other scenarios don’t fit. A perpetual system updates inventory after every sale, which is continuous record-keeping, not a one-time physical count. A forecast of future sales and purchases is about planning, not measuring on-hand stock. Counting only damaged or lost items doesn’t reflect the full stock on hand, which is what a physical inventory aims to verify.