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Anonymous
Not applicable

Inventory Adjustment

Hello Everyone, 

 

I apologize if this is a rudimentary question, but I have searched and searched and have not found an example of what I am working on. My wife runs a small retail clothing business, where she purchases clothing items from wholesalers for resale. We track each individual item purchased as inventory. Typically, she will make a purchase of 10 or more items at a time from a wholesaler. I will create a purchase order with line item detail for each item purchased, and receive the PO once the items arrive and reconcile it with the payment. From time to time (and usually long after the PO was received and closed), the wholesaler will cut her a check, which represents the devaluation of some of the items she had purchased in the past. There is no detail regarding the specific items that were devalued. So I am sitting here with these checks, without a good understanding of how to process them. I feel I need to reduce my inventory value somehow, but without the specific items that the refund applies to, I'm uncertain as to how to accomplish it. I'm also uncertain of how this would impact her P&L. Would the reduction in inventory flow through the COGS account, and show as an expense credit on the P&L? Any help or advice would be greatly appreciated. 

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Best answer January 01, 2019

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Level 15

Inventory Adjustment


@Anonymous wrote:

Hello Everyone, 

 

 From time to time (and usually long after the PO was received and closed), the wholesaler will cut her a check, which represents the devaluation of some of the items she had purchased in the past. There is no detail regarding the specific items that were devalued. So I am sitting here with these checks, without a good understanding of how to process them. I feel I need to reduce my inventory value somehow, but without the specific items that the refund applies to, I'm uncertain as to how to accomplish it. I'm also uncertain of how this would impact her P&L. Would the reduction in inventory flow through the COGS account, and show as an expense credit on the P&L? Any help or advice would be greatly appreciated. 


I agree with your theory of reducing the item value, but

1. there is no way to do that in QBO, even if you could

2. if the item was sold, there is no value to reduce

3. you do not know the items being revalued

 

deposit the checks and use other income, or create an income account called vendor refunds, and use that account as the source account for the deposit.

View solution in original post

4 Comments
Highlighted
Level 15

Inventory Adjustment


@Anonymous wrote:

Hello Everyone, 

 

 From time to time (and usually long after the PO was received and closed), the wholesaler will cut her a check, which represents the devaluation of some of the items she had purchased in the past. There is no detail regarding the specific items that were devalued. So I am sitting here with these checks, without a good understanding of how to process them. I feel I need to reduce my inventory value somehow, but without the specific items that the refund applies to, I'm uncertain as to how to accomplish it. I'm also uncertain of how this would impact her P&L. Would the reduction in inventory flow through the COGS account, and show as an expense credit on the P&L? Any help or advice would be greatly appreciated. 


I agree with your theory of reducing the item value, but

1. there is no way to do that in QBO, even if you could

2. if the item was sold, there is no value to reduce

3. you do not know the items being revalued

 

deposit the checks and use other income, or create an income account called vendor refunds, and use that account as the source account for the deposit.

View solution in original post

Level 10

Inventory Adjustment


@Anonymous wrote:

 the wholesaler will cut her a check, which represents the devaluation of some of the items she had purchased in the past. There is no detail regarding the specific items that were devalued.  


 

If the amount is material and/or you want accuracy, then you should ask the wholesaler for a breakdown of the amount.   In any case it should be checked, as maybe contractually they should have given more than they did

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Anonymous
Not applicable

Inventory Adjustment

Thank you, I had a sense I was over thinking it. Appreciate the response!

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Anonymous
Not applicable

Inventory Adjustment

I agree they should provide more information, sometimes they are not easy to deal with. I am going to investigate this further. 

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