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Inventory Shrinkage is the of loss Inventory due to deterioration, pilferage, theft ,waste etc
Inventory shrinkage is the difference between accounting record inventory and the actual inventory.It arises when damage,spoil or theft inventory.
Inventory shrinkage indicates that items in inventory were being lost or damaged or expired...etc. i.e. that difference between the recorded inventory and the actual .
The inventory is an item of current assets as well as working capital, which is extremly important for the organization.
As the nature of the inventory it's subject to theft, damage, miscounting, incorrect units of measure, evaporation, or similar issues (shrinkage).
Cash, Inventory, and Fixed assets are the most important3 items that Financial Manager should give a special care and control of them, as well as the internal / external auditor.
Any Shrinkage in the inventory or any asset item will cause a realized loss.
The inventory shrinkage is the the loss of goods that exist in the accounts list only but do not exist in real stock it could be robbed or damaged.
Inventory shrinkage is the excess amount of inventory listed in the accounting records, but which no longer exists in the actual inventory. Excessive shrinkage levels can indicate problems with inventory theft, damage, miscounting, incorrect units of measure, evaporation, or similar issues.
It is also possible that shrinkage can be caused by supplier fraud, where a supplier bills a company for a certain quantity of goods shipped, but does not actually ship all of the goods. The recipient therefore records the invoice for the full cost of the goods, but records fewer units in stock; the difference is shrinkage.
To measure the amount of inventory shrinkage, conduct a physical count of the inventory and calculate its cost, and then subtract this cost from the cost listed in the accounting records. Divide the difference by the amount in the accounting records to arrive at the inventory shrinkage percentage.
Yes, I can fully agree with previous answers.
An effective inventory management system tracks sales, schedules replenishment of products and generates reports about the stock of inventory on hand. When inventory shrink occurs, a business should adjust its books to reflect the loss and attempt to identify and remedy the cause of the shrinkage.
Inventory shrink occurs when the physical inventory count is less than the inventory count that the company carries on its books. Several factors can cause inventory shrinkage. Storm damage or other events can damage merchandise so severely that a business cannot salvage it. Dishonest employees may steal inventory, and, in a retail setting, shoplifters take products without paying for them. Whatever the cause, inventory shrink creates a disparity between the actual assets of the company and the assets booked on the company's balance sheet.
Excess inventory listed in the books which no longer exist in actual inventory.
Sale or Loss in inventory, amount is not enough in parallel to the needs and wants.
Inventory shrinkage: is inefficient performance as a result of extravagant or loss, which leads to the need for internal audit
