Explain the need for a physical inventory count

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Question: Onsite Hardware Store currently uses a periodic inventory system. Dana Cogburn, the owner, is considering the purchase of a computer system that would make it feasible to switch to a perpetual inventory system. Dana is unhappy with the periodic inventory system because it does not provide timely information on inventory levels. Dana has noticed on several occasions that the store runs out of good-selling items, while too many poor-selling items are on hand.

Dana is also concerned about lost sales while a physical inventory is being taken. Onsite Hardware currently takes a physical inventory twice a year. To minimize distractions, the store is closed on the day inventory is taken. Dana believes that closing the store is the only way to get an accurate inventory count. Will switching to a perpetual inventory system strengthen Onsite Hardware's control over inventory items? Will switching to a perpetual inventory system eliminate the need for a physical inventory count? Explain.

Reference no: EM131527681

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