A physical count checks how much inventory actually exists. Compare the count at its carrying cost with the ledger balance. A shortage reduces inventory and is commonly charged to cost of goods sold or a separately tracked shrinkage account. Keep quantities separate from unit cost so you do not expense the whole inventory balance by mistake.
Inventory may also need a write-down when its net realizable value is below carrying cost. Net realizable value is expected selling price less costs to complete and sell. These exercises use the simplified lower-of-cost-and-NRV treatment for non-LIFO inventory; US GAAP has additional rules for LIFO and retail methods. Periodic COGS starts with beginning inventory plus net purchases and freight in, less ending inventory.