Breakage

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Breakage

1. In accounting, an amount of money set aside to cover the cost of goods that break during transport. Because these goods cannot be sold, the company loses the revenue they would produce. A company may prevent this revenue loss from adversely affecting its finances by setting aside a breakage allowance. This exists due to fiscal conservatism and not because a company expects an unusual number of goods to break.

2. In retail, a gift card that is purchased but not used. The revenue a retailer generates from breakage is all profit, except for the minimal costs necessary to produce the cards.
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