Small bakery always list shrinkage under their expenses. They say it is for items that do not sell and get old. I can't find any information on shrinkage. I assume it is also run thru purchase and would not be deducted again. Cash basis. Is that correct?
-
-
Inventory
If they are maintaining accurate records of their inventory, then, yes, product that they have to throw out because it goes stale would already be built into their purchases, or cost of goods sold...
The term shrinkage is used in various different industries to mean various different things.
In retail stores, such as grocery stores and general merchandise stores, it is often used to refer to inventory that literally vanishes without an explanation. It is often presumed to be theft by customers or employees, or a combination of the two. Another example would be breakage, i.e., customer or employee accidentally knocks over a jar of pickles, and the store makes no effort to get anyone to pay for it. It just gets written off.
But even for that type of "shrink," it would still be built into the purchases, i.e., it should come out in the cost of goods sold when you compare beginning inventory with ending inventory...
BMKLast edited by Koss; 04-12-2011, 01:31 PM.Burton M. Koss
koss@usakoss.net
____________________________________
The map is not the territory...
and the instruction book is not the process. -
And now all that's left for gman to do is go back and explain this to their client.
Good luck on that!
I'd like to have a nickel for every time I've had a client who seemed to understand it when they were sitting there in front of me, and then a couple of weeks later they're calling me back asking, "Did you remember to take that tax deduction for my inventory shrinkage?""The only function of economic forecasting is to make astrology look respectful" - John Kenneth GalbraithComment
-
Observation
I'm not sure this would help many clients understand it, but...
On a theoretical level, it could be said that product that has to be thrown out is already built into the gross receipts or sales, as well as the purchases.
It's merchandise that was sold for a price of zero.
Almost like an expired put or call option, or a worthless security...
Hmmmm?
I've been doing this for too many years.
BMKBurton M. Koss
koss@usakoss.net
____________________________________
The map is not the territory...
and the instruction book is not the process.Comment
-
I had a bakery once.....actually it was a pet bakery. I didn't like that at all.
You have all your ingredients and then finished product. You have to inventory items differently.
They only had it part of one year and sold it. Maybe if they had stayed in business longer, I would have understood it better.
Linda, EAComment
Comment