What is a necessary measure to ensure the legitimate value of recorded inventory?

Keeping detailed records of the inventory's acquisition cost is essential for ensuring the legitimate value of recorded inventory. Accurate documentation of how much was paid for inventory items allows an organization to establish a reliable basis for valuing those items on the balance sheet. This, in turn, facilitates accurate financial reporting and compliance with accounting principles such as the cost principle, which states that assets should be recorded at their historical cost.

Having complete and precise records of acquisition costs enables a company to conduct proper valuation methods, such as FIFO (first-in, first-out) or LIFO (last-in, first-out), depending on the nature of the inventory and market conditions. It also helps in identifying potential issues, such as shrinkage or obsolescence. If inventory acquisition costs are not documented thoroughly, the financial statements could reflect inflated or deflated values, which mislead stakeholders regarding the company's actual financial position.

In contrast, regularly adjusting prices to align with market value may result in discrepancies from historical cost, complicating inventory valuation. Higher than necessary inventory counts could yield inaccurate stock levels, leading to overstated asset values. Saying "none of the above" dismisses the importance of maintaining acquisition cost records, which is critical for financial integrity.