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by Ms. Tree on April 8th, 2009

Ms. Tree

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Does a decrease in inventory mean an increase in loss?

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  • by tritri on April 19th, 2009

    tritri

    When dealing with accounting, it can be considered an increase in sales; however, when you consider other aspects, it can turn tricky. If the company isn't making purchases for future inventory, this could represent a loss in future sales.

    For example, if you had 100 shirts, and sold 70...you now have a decrease in inventory and an increase in sales. If you dare not order more and only keep your 30 shirts to sale and you have 40 people wanting to buy a shirt, you just lost sale revenue on those 10 shirts you don't have in stock. In that case, the decrease in inventory caused a loss on sales.

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