retail adjusting entry question

May 9, 2011
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Client owns a retail gift shop. Does not take physical inventory. Bookkeeper prepared profit and loss for the year which I will use to prepare tax return. I think it would be advisable to account for some inventory shrinkage, i.e. theft, spoilage, etc. Should I advise bookkeeper to make adjusting entry to account for some loss of inventory? I would suggest debit to Cost of Goods Sold and credit to Inventory. Any advice would be appreciated including where I can find industry standards for inventory shrinkage, etc.


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