Adjusting Journal Entries for Current Year Inventory
Lesson:
Sometimes auditors find mistakes that need to be corrected, either because of fraud or mistakes by the original accounting team.
When inventory is underreported:
- Debit inventory
- Credit cost of goods sold
- Debit inventory shrinkage
- Credit inventory
You're an accountant trying to implement the recommendations made by an external internal.
You've been briefed with the following facts:
- An auditor reported that the inventory account had been over reported by $100.00.
- The error occurred in the current year's records.
What journal entry or journal entries should be made?
Answer:
-
Inventory shrinkage $100.00 Inventory $100.00