Inventory shrinkage can be determined by comparing the information from perpetual inventory system to the physical count. Beginning Inventory plus purchases minus cost of goods sold to the actual inventory balance from a physical count.
A perpetual inventory system, as opposed to a physical inventory, is a program that continuously assesses your inventory based on your electronic records. This approach starts with a physical count as a baseline and updates based on receipt of purchases and shipment of goods.
Perpetual inventory, also known as continuous inventory, in business and accounting/accountancy refers to systems of inventory where data on inventory quantity and availability is updated continuously as a function of conducting business.
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