How would we record stolen goods on a financial position worksheet?
Wednesday, February 10th, 2010Using double entry accounting, how would we record stolen goods on a financial position worksheet? For example, if $1000 worth of goods is stolen, how would I record that? Thanks in advance!
Stolen goods just become part of the Cost of Goods Sold account (after all, it’s pretty much the same as if a physical inventory count reveals that inventory is $1,000 less than the amount shown on the books). The entry is:
Debit "Cost of Goods Sold’ $1,000 [expense account]
Credit ‘Merchandise Inventory’ $1,000
This entry serves to reduce the amount carried on the books regarding inventory, and also serves to reduce net income because COGS is an expense account.