I am using QB Desktop Pro 2018 UK. Our company is dealing with food products that have expiry dates.
I need to reduce my stock on a few items due to expiration and I need to show that the cost of those expired items is reducing my profit for the year.
I did the adjustment as shown in the upper half of the attached file.
My questions are:
Thank you all in advance
Thank you for contacting us here on the community.
With regards your questions regarding reducing quantity/value of expired food stocks in QuickBooks desktop Pro 2018, please see the answers below.
1. Tab “Adjustment Type” should be Quantity or Quantity & Value?
You will need to simultaneously reduce the quantity of the items on hand, and the value to show the reduced stock asset on your balance sheet. As such, you should select 'Quantity and Value'
2. Tab 'Adjustment account' should be 'Stock' or something else?
There is no need to select 'Stock' for this account, as the stock asset account will be adjusted in general by the 'Value' side of the adjustment.
Instead, you will need to select an 'expense' account to show this stock expiration effecting your profit and loss report/ profit for the year.
3. With this adjustment as shown in the file, the items’ quantity is indeed being reduced but under the Stock Account and the Cost of Goods there isn’t any value reduction (see the bottom half of the attached file). Is there anything else I should do? What am I doing wrong?
Due to the way these adjustments work, there will be no change in the Cost of Goods sold. Cost of Goods sold is set up in QuickBooks desktop to only be effected when a stock item which has been previously bought, is sold to a customer. At this point the cost of goods sold will reflect as an expense on the profit and loss.
If you follow the advice mentioned in the answers to questions 1 and 2, then you will not have to do anything further, as the quantity will be adjusted as will the value of the stock asset on the balance sheet. Furthermore, if you select/ crate an expense account to select at the top of the page, the stock reduction will also be recorded as an expense to your business on your profit and loss.
Let me know if you need anything else!