What does inventory reconciliation involve?

Inventory reconciliation is a critical process that ensures the accuracy of an organization's inventory records. This involves aligning physical counts of inventory—what is actually on hand—with the recorded inventory levels in the accounting or inventory management system. The primary goal is to identify discrepancies between the physical quantities of inventory and the figures documented in the records.

This process is essential for maintaining accurate inventory control, managing stock levels effectively, and preventing issues such as stockouts or overstocking. Regular inventory reconciliation helps businesses adjust their financial reports accordingly, facilitating better decision-making and operational efficiency. By ensuring that the figures match, organizations can also minimize losses from theft, damage, or clerical errors.

Other choices, while relevant to business operations, do not directly pertain to the process of inventory reconciliation. For instance, comparing sales forecasts with actual sales (the first choice) relates more to sales performance management, while assessing employee performance (the third choice) focuses on workforce evaluation. Evaluating supplier effectiveness (the fourth choice) concerns the supply chain and vendor management rather than internal inventory controls. Thus, option B accurately describes the process of inventory reconciliation.