Regarding the Inventory System Used by Small Retailers,which of the Following

question 57

Multiple Choice

Regarding the inventory system used by small retailers,which of the following statements is incorrect?

• A) Some small retailers find it too expensive to invest in a perpetual inventory system.
• B) To be competitive, small retailers must use a perpetual inventory system.
• C) In a periodic inventory system, businesses must obtain a physical count of inventory to determine quantities on hand.
• D) Small retailers can use either the periodic or perpetual inventory system.

---

Definitions:

Credit Balance

A situation in accounting where the total credits in an account exceed the total debits, commonly seen in liability accounts.

Doubtful Accounts

Doubtful accounts are receivables that a company believes might become uncollectible in the future, leading to their designation as a bad debt expense.

Sales Discounts

Reductions to the selling price of goods or services, offered to customers to encourage prompt payment or to incentivize bulk purchases.

Accrual Basis

An accounting method where revenue and expenses are recognized when they are earned or incurred, regardless of when cash transactions occur.