Which describes a physical inventory system?

• A. Periodically count the items in storage to see what is on hand.
• B. Use electronic scanning to auto-reorder.
• C. Inventory levels are forecast only.
• D. Continuously update quantities after each sale.

Answer: (A)

A physical inventory system is defined by counting stock at set intervals to determine what is actually on hand. This approach relies on periodic counts rather than real-time tracking, so records are updated only when a count is performed. That’s why periodically counting items in storage to see what is on hand best describes a physical inventory system.

By contrast, using electronic scanning to auto-reorder reflects a continuous or perpetual inventory approach, where records are updated automatically as transactions occur. Forecasting inventory levels without actual counts describes a planning method, not the method of tracking actual on-hand quantities. Continuously updating quantities after each sale also describes a perpetual, real-time tracking system rather than a periodic, physical count.