SACE Stage 2 Accounting Practice Exam

The perpetual inventory method is the correct choice because it involves continuously updating the inventory records in real-time as transactions occur. This method tracks inventory levels, costs, and sales on an ongoing basis, which necessitates the use of technology such as inventory management software, point-of-sale systems, and barcode scanning systems. These technological tools help ensure accuracy in tracking inventory, provide up-to-date information, and facilitate efficient stock management.

In contrast, other inventory tracking methods may not require the same level of technological investment. For example, the physical inventory method relies on periodic physical counts of inventory, which can be managed without technology. The FIFO (First-In, First-Out) method is an inventory valuation technique that can be applied with either periodic or perpetual systems, and it doesn’t inherently necessitate technological investment. Similarly, the identified cost method is focused on assigning specific costs to individual items but does not require a technological setup beyond what is necessary to track inventory. Hence, while they might all play a role in inventory management, the perpetual inventory method stands out as needing advanced technological support for its effective implementation.