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Adjustments for Lost or Stolen Inventory (Accounting) - Explained

How to make Accounting Adjustments for Lost or Stolen Inventory

Written by Jason Gordon

Updated at April 7th, 2022

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Table of Contents

How to Account for Lost or Stolen Inventory?

How to Account for Lost or Stolen Inventory?

Inventory shrinkage is any loss of merchandise inventory from theft, damage, or deterioration. There is a specific adjustment to deal with inventory that was lost or stolen.


Back to: Accounting & Taxation

When reporting our balance of inventory, we want it to be as accurate as possible. So, we have to make sure what we have on our shelves is the same as what we have in our books.

The only way to do that is to be able to take a physical account and make sure that our T table is correct.  So this is determined by comparing a physical count of inventory with the amount recorded on the records, (i.e., to what it says in my T tables).  

If they're the same, I do nothing. If there is a shortage,I'm going to debit the expense as a Cost of Goods Sold. Note:  I'm going to put a little parentheses that show this is not something that I sold. Then, I'm going to credit inventory for much there is a shortage. 

Related Topics

  • What is Merchandising? – Financial Accounting
  • Recognizing Inventory Sales – Financial Accounting
  • Perpetual vs Period Systems – Financial Accounting
  • Special Merchandising Transactions – Financial Accounting
  • Adjustments for Inventory – Financial Accounting
  • Multi-Step Income Statement – Financial Accounting
  • Accounting Cycle for Merchandising Business Example Part 1
  • Accounting Cycle for Merchandising Business Example Part 2
  • Accounting Cycle for Merchandising Business Example Part 3
lost inventory stolen inventory lost or stolen inventory

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