What type of inventory is counted, priced, extended, and totaled to determine the organization's on-hand stock?

What type of inventory is counted, priced, extended, and totaled to determine the organization's on-hand stock?

• A. Perpetual inventory
• B. Cycle inventory
• C. Operating inventory
• D. Physical inventory

Answer: (D)

Counting actual stock to determine on-hand stock is accomplished through a physical inventory. In this process, every item is counted, a price is assigned to each unit, each line item is extended (price times quantity), and all extensions are totaled to yield the organization’s total on-hand stock value and quantity. This provides a true snapshot of what is physically present and is used to verify and reconcile the records from the perpetual inventory system, and to identify losses or discrepancies such as shrinkage, spoilage, or theft. Perpetual inventory tracks stock continuously but doesn’t by itself provide the true on-hand count at a given moment; it relies on the physical inventory to confirm accuracy. Cycle counting is a rotating subset approach that still aims to maintain accuracy but does not necessarily count every item at once. Operating inventory isn’t the standard term for this counting process. Thus, the described procedure corresponds to a physical inventory.

Counting actual stock to determine on-hand stock is accomplished through a physical inventory. In this process, every item is counted, a price is assigned to each unit, each line item is extended (price times quantity), and all extensions are totaled to yield the organization’s total on-hand stock value and quantity. This provides a true snapshot of what is physically present and is used to verify and reconcile the records from the perpetual inventory system, and to identify losses or discrepancies such as shrinkage, spoilage, or theft. Perpetual inventory tracks stock continuously but doesn’t by itself provide the true on-hand count at a given moment; it relies on the physical inventory to confirm accuracy. Cycle counting is a rotating subset approach that still aims to maintain accuracy but does not necessarily count every item at once. Operating inventory isn’t the standard term for this counting process. Thus, the described procedure corresponds to a physical inventory.