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Shrinkage is recorded in the accounting records as a loss, typically by adjusting the inventory account. This is done by debiting a loss account (often called "inventory shrinkage" or "shrinkage loss") and crediting the inventory account to reflect the decrease in inventory value. This adjustment helps maintain accurate financial statements by ensuring that the reported inventory levels match the physical counts. Additionally, regular shrinkage analysis can help identify underlying issues such as theft or inventory management problems.

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2mo ago

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Shrinkage is what principle?

Shrinkage is the difference between the recorded or expected value and the actual value. In accounting, it commonly refers to the loss of inventory due to theft, damage, or errors in recording. Implementing measures to reduce shrinkage is important for businesses to maintain profitability.


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The basic accounting principles is that the accounting transactions should be recorded in the accounting periods Second important principle is record all the expenses and liabilities as soon as they occur.


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The accrual accounting method is - Debit the Bad Debt expense account Credit Accounts Receivable With cash basis accounting no record is made of the bad debt since the sale is not recorded until payment is received. Any materials and labor costs are recorded when paid. There is no deduction for loss of income since the income was not recorded.


Is inventory shrinkage recorded as an expense?

As a reduction to merchandise inventory


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In double-entry accounting, money leaving your company to pay bills should be recorded in the accounts payable account.


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To properly record a tax refund in accounting, you would debit the cash account to increase it and credit the income tax expense account to reduce it. This reflects the refund as income received and reduces the expense previously recorded for taxes paid.


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True. Under the Cash Basis for Accounting only transactions that involve the movement of cash are recorded. In Accrual Accounting (GAAP) you would record transactions once an economic event has taken place (e.g., supplier invoice received = expense, customer invoice prepared = revenue).


The adjustment to record inventory shrinkage would increase merchandise inventory?

yes