Asked by Krista Hageman on Jul 13, 2024
Verified
The adjusting entry to reflect inventory shrinkage is a debit to Income Summary and a credit to Inventory Shrinkage Expense.
Inventory Shrinkage
This refers to the loss of products between procurement and sale, often due to theft, damage, or errors.
Income Summary
An account used in the closing process to combine all income and expense accounts and show the period's net income or loss.
- Identify the differences between purchase allowances, sales returns, and additional adjustments.
- Recognize the importance of accurately maintaining and reporting inventory in financial statements.
Verified Answer
IA
Ibrahem Ashraf Ibrahem Shaheen 21811321Jul 15, 2024
Final Answer :
False
Explanation :
The adjusting entry to reflect inventory shrinkage typically involves a debit to Inventory Shrinkage Expense (or Cost of Goods Sold) and a credit to Inventory, not Income Summary.
Learning Objectives
- Identify the differences between purchase allowances, sales returns, and additional adjustments.
- Recognize the importance of accurately maintaining and reporting inventory in financial statements.
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