Saturday, November 27, 2010

QuickBooks: Adjust the amount of your inventory

A client asked: “What is the proper way to adjust inventory after I do a manual count at the end of the year.”

Although QuickBooks automatically adjusts your inventory quantities after every purchase and sale, you may need to adjust them yourself from time to time. Quantities on hand change for many reasons, including breakage, theft, or because an item was given away or used as a sample.

When you adjust a quantity, QuickBooks assumes that the average cost of the item remains the same and adjusts the value accordingly. For example, if the average cost is $10 and you reduce the quantity by 2, QuickBooks reduces the value of the items on hand by $20.

It is possible to also adjust the asset value of items in inventory because of such things as spoilage or changes in seasonal demand. We will discuss this in another blog discussion.

To perform this task:
• From the Vendors menu, click Inventory Activities.
• Click Adjust Quantity.
• Click the Adjustment Account drop-down arrow and then click the account where you want to track inventory adjustments.

Which account should I use?
You may want to create a new account just for tracking inventory adjustments. You can use one account for all adjustments, or use an expense account for losses and shortages and an income account for gains. Consult your accountant if you aren't sure what type of account to use.

If you're making adjustments to more than one item and need to assign the adjustments to different accounts, you'll need to create multiple adjustments—one for each account.
• (Optional) If you want to assign this adjustment to a customer or job, click the Customer:Job drop-down arrow and then click a customer or job.
• (Optional) If you use class tracking, click the Class drop-down arrow and then click a class.
• In the New Qty column, enter the correct quantity OR in the Qty Difference column, enter the difference between the currently recorded quantity and the actual quantity.
For example, if you need to reduce the quantity by five, enter -5 as the difference.
• (Optional) Enter a memo in the Memo field to remind yourself later why you made this quantity adjustment.
• Save the adjustment.

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