Shrinkage is the difference in book value and actual value of inventory in an organization.
Shrinkage of 100% means that the current value of inventory is the same as the book value of the inventory.
Shrinkage of less than 100% means that the current value of inventory is less than the book value of the inventory.
Shrinkage of more than 100% is very rare but possible. It means that the current value of the inventory is more than the book value.
Inventory Shrinkage = Book Value / Current Value x 100%
- Accounting Tools – Inventory Shrinkage – An overview of inventory shrinkage and some examples of how to reduce it.
- Wikipedia – Shrinkage (accounting) – A quick explanation of shrinkage in the accounting sense and how it can be prevented.
- inFlow – Inventory shrinkage and how you can stop it – Some ideas on how to reduce inventory shrinkage.
- Houston Chronicle – How to reduce inventory shrinkage & What causes inventory shrinkage? – A pair of articles that explain and point to the cause of inventory shrinkage.
- AZ Central – How to determine inventory shrinkage percent – A collection of ideas of where inventory shrinkage comes from.