No matter how careful a business owner tries to be or the quality of the business' security system, a business can still become the victim of theft. Theft of assets must be recorded on the accounting books in order to properly reflect the loss of the asset and the resulting cost of the loss. Any costs resulting from theft, such as door or lock repair, can also be recorded as theft expense.
Reduce the asset account on the balance sheet associated with the theft. For example, if cash was stolen, reduce the balance in the cash account by the amount that was taken. If office equipment was stolen, reduce the office equipment asset account by the total amount paid for the office equipment.
Reduce the accumulated depreciation account by the amount of accumulated depreciation on any depreciable stolen assets. For example, if you paid $500 for a copier that was stolen and you have taken $100 in depreciation expense, then reduce the accumulation depreciation account by $100.
Reduce the owner’s equity account on the balance sheet by the net of the reduction to assets and the reversal of accumulated depreciation. For example, the $500 copier with $100 in accumulated depreciation would result in a reduction to owner’s equity of $400. The entire amount of stolen cash is deducted from owner’s equity.
Create a theft expense account on the income statement.
Record the entire amount of stolen cash as a theft expense and/or the net amount of assets less accumulated depreciation. If you had other expenses associated with the theft, such as door or window repairs and lock rekeying, also record those expenses to the theft expense account.
If you are uncertain how to properly record a loss from theft, consult with an accounting professional in order to properly reflect the loss on your accounting books.
- Principles of Accounting; A. Douglas Hillman, Richard F. Kochanek and Corine T. Norgaard
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