The first adjusting entry clears the inventory account’s beginning balance by debiting income summary and crediting inventory for an amount equal to the beginning inventory balance. The second adjusting entry debits inventory and credits income summary for the value of inventory at the end of the accounting period.Click to see full answer. Similarly, what type of account is an inventory adjustment?The Inventory Adjustment account is a special income statement account—one of the accounts carried forward to the company’s income statement from the general ledger—that, when added to the Purchases account, reveals the company’s cost of goods sold.Subsequently, question is, how do you Journalize inventory shrinkage? Inventory shrinkage journal entry When your business experiences shrinkage, you must adjust your accounting books. Record inventory losses by increasing your Shrinkage Expense account and decreasing your Inventory account. Debit your Shrinkage Expense account and credit your Inventory account. Thereof, what is the journal entry for merchandise inventory? The company may return the merchandise to their inventory by debiting Merchandise Inventory and crediting COGS. If a customer obtains an allowance for damaged merchandise before remitting payment, the company would debit Sales Returns and Allowances and credit Accounts Receivable or Cash.Is Inventory Adjustment an expense? Overstated Inventory COGS is an expense item computed by subtracting the closing stock from the sum of the opening stock and purchases. Therefore, when an adjustment entry is made to remove the extra stock, this reduces the amount of closing stock and increases the COGS.
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