Shrinkage

Shrinkage is the difference between the book and actual amount of inventory. Its disappearance may be due to theft, damage, miscounting, administrative errors, or evaporation. In the retail industry, the amount of inventory shrinkage represents a major reduction in profitability, so a number of methods are used to combat it, including security cameras, merchandise tagging, and security guards.

Related Courses

Accounting for Inventory 
Cost Accounting Fundamentals