Where do I enter a loss of inventory due to theft or damage?

[tagteam · Accepted solution]

Do you maintain an inventory?

If so, then your ending inventory (which is a physical count) will reflect the fact that the merchandise was stolen, damaged, or discarded in the sense that it will be lower than it would have been without the theft or damage. As a result, your COGS will be higher, thus lowering your gross profit.