A variation between the physical inventory and the perpetual inventory totals is called:
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A. B. C. D.C
The variation between the physical inventory and the perpetual inventory totals is referred to as "shrinkage."
Shrinkage is defined as the difference between the actual physical inventory count and the inventory balance in the accounting system. This variation may occur due to various reasons, such as theft, damage, spoilage, or errors in recording transactions.
Perpetual inventory is a system in which the inventory balance is updated continuously, and the recorded balance should match the actual inventory count. A physical inventory count is an actual count of the inventory items on hand, typically conducted at the end of an accounting period or when needed to verify inventory levels.
If there is a discrepancy between the physical inventory count and the perpetual inventory balance, it indicates that there is an issue with the inventory management system. In some cases, this variation may be due to intentional fraud by employees, such as theft or misappropriation of inventory.
Therefore, it is important for organizations to conduct regular physical inventory counts to identify any discrepancies and investigate any significant differences to determine the root cause and prevent future losses.