Which of the following is a disadvantage of the perpetual inventory system?

• A. It requires more record-keeping and can be costly to implement.
• B. It does not provide up-to-date inventory information.
• C. It eliminates the need for physical inventory counts.
• D. It is less accurate than the periodic inventory system.

Answer: (A)

Verified step by step guidance

1. Understand the perpetual inventory system: It is a method of tracking inventory in real-time, where updates are made to inventory records immediately after a sale or purchase transaction.
2. Identify the advantages of the perpetual inventory system: It provides up-to-date inventory information, reduces the risk of stockouts, and allows for better inventory management.
3. Analyze the disadvantages of the perpetual inventory system: It requires more record-keeping, advanced technology, and can be costly to implement due to the need for sophisticated software and systems.
4. Compare the perpetual inventory system with the periodic inventory system: The periodic system updates inventory records at specific intervals, which is less costly but does not provide real-time data.
5. Conclude that the correct disadvantage of the perpetual inventory system is its higher cost and complexity due to the need for continuous record-keeping and technology implementation.