MANAGEMENT

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: -Financial Accounting Answer: A loss in value is reported in the period when goods are damaged or become obsolete. If damaged goods can be sold at a reduced price, they are included in the inventory. Damaged goods are not included in inventory if they cannot be sold.