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4. Shrinkage Accruals
The KFS division accounting policy for estimating shrinkage
accrual was as follows:
For each store in which no physical inventory is taken
during a period, a shrinkage and spoilage loss will be
accrued for each department:
a. At the beginning of each year determine the
KMA rate of shrinkage and spoilage, at
retail, for the previous year for each
department.
b. From this experience and evidence of trend,
estimate the percentage (to the nearest
hundredth of one percent) expected for the
KMA for the current year for each department.
c. Use the estimated percentages for all stores
for the current year. If a change in rate
appears desirable within the year request
approval of a change from the Corporate
Accounting Policy and Methods Department. No
approval is required to change the
percentages at the beginning of the year.
C. Management of Shrinkage
Minimization of shrinkage factors was a management goal
common to all KMAs. Detailed records were maintained in the KMAs
on the incidence (cost) of shrinkage factors. Records were
maintained by store and by store manager. Control (minimization)
of shrinkage factors was an important criterion in assessing the
performance of a store manager. A store manager could be fired
or might not be promoted for failure to minimize shrinkage
factors. Programs were continually developed and implemented to
control shrinkage factors.
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Last modified: May 25, 2011