Which of the following statements regarding inventory counts is not correct?
A. In a perpetual inventory system, the inventory count is compared to the inventory account balance to reveal shrinkage.
B. If a company uses a perpetual inventory system and the inventory count at the end of the accounting period is greater than the balance in the inventory ledger account, there must have been shrinkage.
C. A perpetual inventory system does not require a physical count during the accounting period to determine cost of goods sold.
D. Companies need to perform a physical count of their inventory at least yearly regardless of which inventory system is being used.
Answer: B
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