Inventory Shrinkage
Definition: Loss from theft, damage, or errors
Scope:NarrowDifficulty:Easy
Loss from theft, damage, or errors
Common Journal Entries
| Account | Debit | Credit |
|---|---|---|
| 1. Record inventory shrinkage | ||
| Physical count shows $450 less than book balance. | ||
| Inventory Shrinkage ExpenseExpense+ | $450 | |
| Merchandise InventoryAsset− | $450 | |
| Adjusts book to physical count. Shrinkage from theft, damage, or error. | ||
T-AccountsA visual representation of a ledger account shaped like the letter T. Left side shows debits, right side shows credits.
Inventory Shrinkage ExpenseInventory Shrinkage ExpenseExpenseA cost incurred in the process of earning revenue. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$450.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$450.00
Merchandise InventoryAsset account — goods purchased for resale. Under the perpetual method, credits reduce inventory when goods are sold.AssetA resource owned by the business. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$450.00
$450.00
DurationN/A
External Links
- Shrinkage (accounting) — Wikipedia