Inventory Shrinkage: It represents the loss of inventory. In other words, it refers to the difference between the amount of inventory shown in the accounting records and the actual inventory. The difference indicates the issues with the inventory caused due to lost, theft, clerical errors, damaged goods or spoilage. In this case Company T is pressuring the accounting department to increase the earnings. Ms. M is an accountant in Company T. Ms. M’s boss already informed her that if the earnings will not increase then he will be terminated. After the end of the fiscal year Ms. M compares the physical count to the balance in the inventory account, and finds a huge amount of inventory shrinkage. This amount is so huge that the earnings will drop significantly. Ms. M’s boss requests her to not to make any adjusting entry for the inventory shrinkage. To Explain: The action of Ms. M for the above situation and its reason.

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Chapter 5, Problem 5.1TIF

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Inventory Shrinkage: It represents the loss of inventory. In other words, it refers to the difference between the amount of inventory shown in the accounting records and the actual inventory. The difference indicates the issues with the inventory caused due to lost, theft, clerical errors, damaged goods or spoilage.

In this case Company T is pressuring the accounting department to increase the earnings. Ms. M is an accountant in Company T. Ms. M’s boss already informed her that if the earnings will not increase then he will be terminated.

After the end of the fiscal year Ms. M compares the physical count to the balance in the inventory account, and finds a huge amount of inventory shrinkage. This amount is so huge that the earnings will drop significantly. Ms. M’s boss requests her to not to make any adjusting entry for the inventory shrinkage.

To Explain: The action of Ms. M for the above situation and its reason.

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