If the recorded inventory is greater than the physical inventory count, the adjusting entry required will decrease cost of goods sold.

Question

Quizplus · Accepted Answer

If the recorded inventory is greater than the physical inventory count, it means that there may be unrecorded losses or theft of inventory, and the adjusting entry required will increase the cost of goods sold to correct the overstated inventory balance.

If the Recorded Inventory Is Greater Than the Physical Inventory