When using inventory adjustments, what type of account records the impact on inventory shrinkage?

The Inventory Shrinkage COGS account is used to record the financial impact of inventory shrinkage, which occurs when there is a decrease in the physical inventory levels compared to what is reported in the financial records. This can happen due to various factors, such as theft, loss, damage, or administrative errors. By recording shrinkage in the Cost of Goods Sold (COGS) section, it accurately reflects the reduction in inventory costs associated with unsold products, ensuring that the financial reports provide a true picture of the company's profits and costs.

Utilizing a specific account for inventory shrinkage helps businesses track losses accurately and allows for better management and control over inventory levels. This account is crucial for understanding the overall efficiency of inventory management and ensuring appropriate adjustments in financial reporting. The classification of this account under COGS links the shrinkage directly to the costs associated with generating revenue, aiding in better financial analysis and decision-making.