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Inventory adjustments

Inventory is maintained automatically, as long as all related events are recorded by purchase and sales documents in QuickBooks. At least three situations might cause exceptions.  The actual number of items on hand may not be as listed in the inventory.  If you attempt to sell inventory before you receive it, QuickBooks has a problem, because the sale will result in a negative quantity in inventory.  The effect on valuation may be uncertain.

Inventory adjustments can be made to change the value of the inventory.  The Physical Inventory Worksheet is handy if inventory parts must be counted.  When it is completed, any changes must be entered . Click Activities|Inventory|Adjust Qty/Value on Hand.    

Adjustment Account usually receives the name of an expense account for inventory shrinkage.

New Qty receives the actual count from inventory.  Qty Difference will be calculated.  The difference may be entered, in which case the new quantity will be calculated.

Value Adjustment may be checked for a change in unit value, to reflect rising or falling market conditions.  The columns will be different, adding columns to enter value.  Inventory value changes may require caution.  Businesses financed with bank loans may find bankers less than enthusiastic about increases.  A devaluation would decrease taxable income, and might have to be justified to the IRS.

 

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Last modified: May 21, 2004