Inventory Adjustment

Hello there, @Jdch17.

You can create a separate account in your Chart of Accounts to modify the quantity on hand and the total value.

Here’s how:

1. Go to the Company menu, then Chart of Accounts.
2. From the Account dropdown, choose New.
3. From the Other Account Types dropdown, select Cost of Goods Sold.
4. You can name this Account as "Inventory Adjustments," then click Save and Close.

For additional information about the adjustment process, check out the Adjust your inventory quantity or value in QuickBooks Desktop article. It also contains detailed instructions on how to create a separate account to track changes with the quantity or value.

I’d recommend consulting with your accountant for the best action to take. Your accountant can give you expert advice on recording it while ensuring your accounts stay accurate.

For future reference, read through this article to learn more about inventory assets and COGS: Understanding inventory assets and cost of goods sold tracking.

Let me know if you additional questions. I'll be around to help. Stay safe.

@Clara Cleverence 

"The issue is that QuickBooks isn't really built to handle inventory adjustments to COGS directly, which can be kind of a pain since it sees cogs as an operational expense, not an item-level cost adjustment."

QBD can handle inventory adjustments to COGS just fine.  It's not a pain at all.  Just select COGS as the adjustment account when making an inventory quantity/value adjustment.  This is, in fact, an item-level adjustment.  Have you used QB Desktop?  

"Here's what you wanna do: make sure your adjustment account's set up right for handling non-operational cost changes. I'd say setting up a special "scrap adjustment" account could be smart. Maybe stick it under "other expenses" or a special "inventory adjustments" category, so your operational costs stay neat and you get a clear idea on scrap losses."

Yikes!  Scrap is an operational expense and part of COGS.  Recording it as a non-operational expense (other expense) is very wrong.

BTW, why are you posting to a thread that's over 5 years old?  This creates unnecessary clutter in the forum, especially when the advice is misleading.  

@Clara Cleverence 

"The issue is that QuickBooks isn't really built to handle inventory adjustments to COGS directly, which can be kind of a pain since it sees cogs as an operational expense, not an item-level cost adjustment."

The pop-up is just a reminder.  All you need to do is click 'OK' and QB will make the adjustment to COGS at the ITEM LEVEL.  Have you used QB Desktop?  

"Maybe stick it under "other expenses""

Scrap as an 'Other Expense'?  Yikes.  Scrap is an operational expense and making an inventory adjustment to COGS is the proper way to record that.  If scrap needs to be tracked separately, creating a separate 'COGS - Scrap' account is proper accounting.