MANAGEMENT

Detailed explanation-1: -Shrinkage is the loss of inventory that can be attributed to factors such as employee theft, shoplifting, administrative error, vendor fraud, damage, and cashier error. Shrinkage is the difference between recorded inventory on a company’s balance sheet and its actual inventory.

Detailed explanation-2: -Answer and Explanation: It is not true that b) inventory shrinkage is recognized by debiting an operating expense. The shrinkage, which is loss caused by things like theft or deterioration, is recognized by debiting the cost of goods sold and crediting the inventory account.

Detailed explanation-3: -Inventory shrinkage occurs when the number of products in stock are fewer than those recorded on the inventory list. The discrepancy may occur due to clerical errors, goods being damaged or lost, or theft from the point of purchase from a supplier to the point of sale.

Detailed explanation-4: -Inventory shrinkage is the excess amount of inventory listed in the accounting records, but which no longer exists in the actual inventory. Excessive shrinkage levels can indicate problems with inventory theft, damage, miscounting, incorrect units of measure, evaporation, or similar issues.

Detailed explanation-5: -Shrinkage can be caused by theft or deterioration. Shrinkage is computed by comparing a physical count of inventory with the recorded amount. Shrinkage is recorded by debiting Cost of Goods Sold. All of the statements are correct.