Final answer:
Inventory shrinkage must be recorded with a decrease to Inventory in both periodic and perpetual systems, as it reflects the actual inventory status and affects financial records. Option c is correct..
Step-by-step explanation:
Inventory shrinkage as a result of theft, damage, or obsolescence that is discovered during a physical inventory count at the end of the accounting period is recorded with a decrease to Inventory in c) both periodic and perpetual systems. This is because inventory shrinkage reflects the actual state of the inventory and must be accounted for in the financial records, regardless of the inventory accounting system in use. In a periodic inventory system, this adjustment is usually made at the end of the accounting period when the physical inventory count is done and the Cost of Goods Sold (COGS) is adjusted accordingly. In a perpetual inventory system, the inventory records are updated continuously, so the adjustments for shrinkage can be made in real-time when the loss is recognized.
In a periodic system, the decrease in inventory is recorded at the end of the accounting period when performing the physical inventory count. In a perpetual system, the decrease in inventory is recorded immediately when the theft, damage, or obsolescence is discovered.
For example, let's say a company follows a periodic inventory system and discovers $1,000 worth of damaged goods during the physical inventory count. In this scenario, $1,000 would be recorded as a decrease in inventory at the end of the accounting period.