ECONOMICS

Detailed explanation-1: -The inventory may lose its value due to damage, deterioration, loss from theft, damage in transit, changes in market demands, misplacement etc. Inventory write-offs are done to support accounting accuracy objectives while also reducing the tax liability for business owners.

Detailed explanation-2: -If inventory loses all its value because it’s spoiled, damaged, obsolete or stolen, the accounting process required to reflect that loss is known as a write-off.

Detailed explanation-3: -Shrinkage is caused from the loss of inventory due to shoplifting, administrative error, employee theft, vendor fraud, broken items, among others.

Detailed explanation-4: -Yes, all the damaged goods are included in inventory at their net realizable value (NRV) but the NRV of damaged goods is not calculated solely by the sales price of the good but it is calculated by the extent of the damaged goods.