Asked by Trent Franklin on May 12, 2024
Verified
The adjusting entry to account for normal inventory shrinkage involves
A) a debit to Inventory and a credit to Cost of Goods Sold
B) a debit to Cost of Goods Sold and a credit to Inventory
C) a debit to Inventory Shrinkage and a credit to Inventory
D) a debit to Inventory and a credit to Inventory Shrinkage
Inventory Shrinkage
The loss of products between the point of manufacture or purchase from suppliers and the point of sale, often due to theft, damage, or errors.
Adjusting Entry
A journal entry made at the end of an accounting period to allocate income and expenditure to the period in which they actually occurred.
Inventory
The complete stock of goods and raw materials a company maintains for purposes of resale or to be used in the creation of products.
- Record adjustment entries for inventory and anticipated returns and allowances from customers.
Verified Answer
AD
Anand DesaiMay 13, 2024
Final Answer :
B
Explanation :
Normal inventory shrinkage refers to the loss of inventory due to theft, damage, or spoilage. As this loss directly impacts the cost of goods sold, the adjusting entry involves debiting Cost of Goods Sold and crediting Inventory. This ensures that the cost of lost inventory is properly accounted for in the current period's financial statements. Therefore, choice B - a debit to Cost of Goods Sold and a credit to Inventory - is the correct option.
Learning Objectives
- Record adjustment entries for inventory and anticipated returns and allowances from customers.