The adjusting entry for the loss of inventory due to shoplif

The adjusting entry for the loss of inventory due to shoplifting, employee theft, or errors should be made to: O a. Customer Returns. O b. Inventory Shrinkage. O c. Customer Allowances. o d. None of these choices, since no journal entry is needed for this.

Solution

Answers

Correct Answer: Option ‘b’ Inventory Shrinkage

The adjusting entry for the loss of inventory due to shoplifting, theft and errors are part of Inventory Shrinkage.

Inventory amount is decreased by the amount of theft or error.

Correct Answer: Option ‘a’ Customer Returns

Adjusting entry is required if the business policy is to account for Customer returns based on past data and trend. Using historical data and trend analysis, the company records Customer Return to be estimated as future customer behaviour.