What is the difference between annual physical verification and cycle counting?

• A. Annual physical verification is a full-year stock check; cycle counting is ongoing, periodic verification of selected items.
• B. Annual physical verification is monthly; cycle counting is yearly.
• C. Annual physical verification checks cash; cycle counting checks stock.
• D. Annual physical verification counts all items every week; cycle counting never stops.

Answer: (A)

Inventory verification can be approached in two ways: an annual full stock check and cycle counting. An annual physical verification is a comprehensive stock check conducted once a year, counting every item, comparing the quantities to the records, and reconciling any differences. In contrast, cycle counting is an ongoing process where a subset of items is counted at regular intervals throughout the year, on a rotating schedule, so the entire inventory is reviewed gradually rather than all at once. This approach keeps inventory records accurate on an ongoing basis and minimizes the disruption that a full-count can cause. The yearly full stock check provides a complete snapshot of all items, while cycle counting maintains continuous accuracy with less operational impact. The other descriptions—monthly versus yearly cadence, or counting cash instead of stock, or counting all items every week—don’t reflect how cycle counting and annual verification are typically implemented.