Which inventory system requires regular physical inventory counts?

The periodic inventory system mandates regular physical inventory counts to track the quantity of inventory on hand. This system updates inventory records at specific intervals, such as monthly or quarterly, rather than continuously. Therefore, to ensure the accuracy of the inventory balance and to account for discrepancies that may arise due to theft, damage, or errors, regular counts are essential.

In contrast, the perpetual inventory system provides continuous updates to inventory records, as inventory transactions are recorded in real-time every time there is a purchase or sale. While this system does not require regular physical counts to maintain up-to-date records, it is still good practice to conduct physical counts periodically to verify the accuracy of the inventory data and to reconcile any potential discrepancies.

Hence, the key aspect of the question is recognizing that while the periodic system explicitly requires regular counts, the perpetual system also benefits from them, even if it does not strictly require them to maintain an accurate inventory record. Thus, both systems are linked to the practice of conducting physical counts, making the option that includes both correct.