How to Record Damaged Inventory in Accounting: Journal Entries and Inventory Loss Treatment

Damaged inventory is accounted for according to its condition. Goods with no remaining economic benefit are written off, while damaged items that can still be sold may require a write-down to net realizable value.

For example, if inventory costing 2,000 is completely damaged, a simplified perpetual-inventory entry debits Inventory Damage Loss and credits Inventory for 2,000. Document the quantities, cost, cause of damage, and applicable tax treatment. Try Cash Cloud for free to explore inventory, stocktaking, and accounting tools.