Shrinkage (Inventory) - Explained
What is Inventory Shrinkage?
Written by J. Mance Gordon
Updated at April 18th, 2024
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What is Inventory Shrinkage?
Shrinkage is described as a reduction or loss of inventory due to theft of inventory, spoilage, and other factors. The difference between the inventory that a company records on its balance sheet and the actual inventory available in the company is shrinkage. Factors that cause shrinkage include goods being damaged, administrative error, fraud and theft, loss of inventory, cashier error and others.