Question

A client's physical count of inventories was higher than the inventory quantities per the perpetual records. This situation could be the result of the failure to record
A. Sales.
B. Sales discounts.
C. Purchases.
D. Purchase returns.

Answer 1

Answer:

C. Purchases.

Explanation:

If the client wouldn't recognize sales or purchase returns, the physical count of inventories will be lower than the inventory quantities per the perpetual records, because those represent exits of inventory units that wouldn't be registered on the perpetual records.

Sales discounts are related to price, not with quantity, therefore they would not have influenced the quantities.

Then it is Purchases. If the client wouldn't recognize the purchases they wouldn't recognize the entrance od units, therefore the client's physical count of inventories would higher than the inventory quantities per the perpetual records.