Question

A company uses a periodic inventory system and during the December 31, year-end physical inventory count discovered that they have incurred a $300 shrinkage in inventory. Prepare the necessary adjusting entry to record this shrinkage by selecting the account names from the pull-down menus and entering dollar amounts in the debit and credit columns.

Answer 1

Answer:

Debit: Shrinkage expense $300

Credit: Inventory $300

Explanation:

When your business experiences shrinkage, you must adjust your accounting books. Record inventory losses by increasing your Shrinkage Expense account and decreasing your Inventory account.

Debit your Shrinkage Expense account and credit your Inventory account.

To adjust for shrinkage, create a journal entry that looks like this:

Debit Shrinkage expense account by $300

Credit Inventory account $300