Discuss

1. 1. Reinstate briefly, what your classmate has discussed
2. 2. Extend your classmate's posting with additional information
3. 3. If available, suggest alternatives to your classmate's opinion.

 

 

Inventory shrinkage refers to the loss of inventory items that occurs within a company's supply chain or during the inventory management process. These losses can result from various factors, both internal and external, and they can have a negative impact on a company's profitability and efficiency.

Reasons for inventory shrinkage include shoplifting, theft by employees, errors in recording inventory transactions, damaged or spoiled goods, and inaccuracies in tracking inventory levels.

To record and report inventory shrinkage, a company typically conducts regular physical inventory counts and reconciles them with the recorded inventory levels. Any discrepancies between the physical count and the recorded inventory are considered shrinkage.

Accounts affected by inventory shrinkage may include Cost of Goods Sold (COGS), which reflects the reduction in inventory value, and possibly an expense account for losses due to shrinkage.

To avoid inventory shrinkage, companies can implement procedures such as enhanced security measures, employee training, better inventory tracking systems, and regular audits.