Question

In: Accounting

Discuss why it is necessary for a governmental agency to take a periodic physical inventory of...

Discuss why it is necessary for a governmental agency to take a periodic physical inventory of
supplies, materials and equipment even though the agency keeps a perpetual inventory system.

Solutions

Expert Solution

Annual Physical Inventory Count

Companies that use a perpetual system may still conduct an annual physical inventory. In the periodic inventory system, physical counts are used to determine the amount of goods sold. In the perpetual system, a year-end physical inventory validates the inventory records.Physical inventory is a process where a business physically counts its entire inventory. Companies perform a physical inventory for several reasons including to satisfy financial accounting rules or tax regulations, or to compile a list of items for restocking.Periodic counts might be once every two months or every three weeks, depending on warehouse size and company needs. This will create better visibility than yearly or seasonal options but it also requires more time and manpower. Workers must ensure they are performing inventory consistently between each count.

An annual physical inventory count is usually required for tax purposes. You can also record your losses to lessen your tax burden. Shrinkage control. Physical inventory counts help you identify shrinkage problems.Periodic and perpetual inventory systems are two contrasting accounting methods that businesses use to track the quantity of products they have available. ... Cost of goods sold is an iimportant accounting metric, which, when subtracted ... perform physical count only once a quarter or even once a year.

The periodic system uses an occasional physical count to measure the level of inventory and the cost of goods sold (COGS). Merchandise purchases are recorded in the purchases account. The inventory account and the cost of goods sold account are updated at the end of a set period—this could be once a month, once a quarter, or once a year. Cost of goods sold is an important accounting metric, which, when subtracted from revenue, shows a company's gross margin.


Related Solutions

Why is it important to periodically take a physical inventory when using a perpetual inventory system?...
Why is it important to periodically take a physical inventory when using a perpetual inventory system? Name a local company that you believe uses periodic inventory systems and a local company that you believe uses perpetual inventory systems. Explain your basis. need help with the questions to form a discussion for my accounting class
Why is it important to take a physical inventory periodically when using a perpetual inventory system?...
Why is it important to take a physical inventory periodically when using a perpetual inventory system? explain in 150 words
Is it necessary to do a physical count of inventory if the company is using a...
Is it necessary to do a physical count of inventory if the company is using a perpetual system? Why or why not? What sort of company would likely use a perpetual system? What sort of company would likely use a periodic system? (Provide specific examples). Please provide one main post and two additional peer interactions. Your main post must be a minimum of 200 words
Is it necessary to do a physical count of inventory if the company is using a...
Is it necessary to do a physical count of inventory if the company is using a perpetual system? Why or why not? What sort of company would likely use a perpetual system? What sort of company would likely use a periodic system? (Provide specific examples).
Briefly discuss six reasons why it is necessary for students of Ghanaian tertiary institutions to take...
Briefly discuss six reasons why it is necessary for students of Ghanaian tertiary institutions to take African Studies as general course of their studies.
What governmental public health agency do you feel is the most important and why
What governmental public health agency do you feel is the most important and why
Discuss the advantages and disadvantages of the perpetual inventory system compared with a periodic inventory system.
Discuss the advantages and disadvantages of the perpetual inventory system compared with a periodic inventory system.
what is the periodic inventory system and what is the perpetuall inventory system? why might the...
what is the periodic inventory system and what is the perpetuall inventory system? why might the organization choose one over the other
1) What is a periodic inventory system, and what is a perpetual inventory system? Why might...
1) What is a periodic inventory system, and what is a perpetual inventory system? Why might an organization choose one over the other? 2) How do accountants keep track of the number of units sold, if they are using the periodic inventory method? (Hint-basic equation). 3) What are the four basic cost flow methods for inventory valuation? Briefly describe each method and indicate the implications for financial reporting. 4.) How might IFRS affect inventory costing if incorporated into US GAAP?
Periodic Inventory by Three MethodsDymac Appliances uses the periodic inventory system. Detailsregarding the inventory...
Periodic Inventory by Three MethodsDymac Appliances uses the periodic inventory system. Details regarding the inventory of appliances at January 1, purchases invoices during the next 12 months, and the inventory count at December 31 are summarized as follows:Required:1. Determine the cost of the inventory on December 31 by the first-in, first-out method.If the inventory of a particular model comprises one entire purchase plus a portion of another purchase acquired at a different unit cost, use a separate line for each...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT