Shrinkage refers to the loss of inventory in merchandising companies, which can be caused by theft, deterioration of merchandise, or other factors. It cannot be directly measured by a perpetual inventory system, but it is recognized by debiting Cost of Goods Sold. Therefore, all of the options (A-D) are correct.

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Shrinkage

Question 93

Multiple Choice

Shrinkage

A) Refers to the loss of inventory for merchandising companies
B) Is not able to be directly measured by a perpetual inventory system
C) Is recognized by debiting Cost of Goods Sold
D) Can arise because of theft and deterioration of merchandise
E) All of the above

Correct Answer: