inventory shrinkage is recorded when

inventory shrinkage is recorded when it occurs and is identified through regular inventory audits or during routine stock takes. Inventory shrinkage refers to the loss of inventory due to various reasons, including theft, damage, errors in recording, or supplier discrepancies. Businesses typically notice shrinkage when they compare the physical count of their stock to the records in their inventory management system. To track inventory shrinkage, companies often use loss prevention strategies, security measures, and more accurate inventory tracking methods. Shrinkage is usually recorded in the financial records as a loss, and it can have a direct impact on a company’s bottom line. Regular audits and an effective inventory management system are essential in minimizing shrinkage and identifying its causes early on to prevent future losses.