Which of the following is an appropriate journal entry to recognise inventories items that have been lost:

A) I.
B) II.
C) III.
D) IV.

Question

Which of the following is an appropriate journal entry to recognise inventories items that have been lost:

A) I. 
B) II. 
C) III. 
D) IV.

Quizplus · Accepted Answer

Option II is the appropriate journal entry to recognize inventory items that have been lost. This entry involves debiting the Cost of Goods Sold (COGS) account and crediting the Inventory account for the value of the lost items. This recognizes the loss of inventory, reduces the value of the inventory on the balance sheet, and recognizes the cost of lost inventory on the income statement.

Option I is incorrect because there is no journal entry recorded for notifying the police about lost inventory.

Option III is incorrect because writing off the lost inventory as an expense is not appropriate, as it does not reflect the reduced inventory on the balance sheet.

Option IV is incorrect because recording a sale for lost inventory does not accurately reflect the nature of the transaction and inflates sales revenue for the period.

Which of the Following Is an Appropriate Journal Entry to Recognise