End-of-month inventory is typically taken by counting items in stock in all storage areas. What is this type of inventory called?

• A. Physical
• B. Perpetual
• C. Continual
• D. Periodic

Answer: (A)

Physical inventory is the actual counting of items on hand at a specific date. At month-end, teams perform a count in all storage areas to verify that the recorded quantities match what is physically present and to identify any discrepancies such as shrinkage or misplacement. This kind of count serves as a verification step to reconcile the books with reality. It differs from perpetual or continual inventory, which are systems that update stock levels in real time as transactions occur; the month-end count is the verification used to adjust those records. A periodic inventory approach relies on counts at set intervals to determine ending inventory, but the described activity is the physical count itself.