Questions: When a company uses a perpetual inventory system, all merchandise transactions are updated as they occur. However, the inventory account may not show the correct balance at all times.

The answer is True: When a company uses a perpetual inventory system, all merchandise transactions are updated as they occur. However, the inventory account may not show the correct balance at all times.

Explanation:

1. True: In a perpetual inventory system, every purchase and sale of inventory is recorded in real-time, which means the inventory account is continuously updated. However, despite these continuous updates, the inventory account may not always reflect the correct balance due to several factors such as theft, loss, damage, or errors in recording transactions. Therefore, periodic physical inventory counts are still necessary to ensure the accuracy of the inventory records.

2. False: This option would be incorrect because it implies that the perpetual inventory system always shows the correct balance, which is not necessarily true due to the reasons mentioned above.