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ap3
Level 1

Adjusting Inventory

I need some direction on how to adjust inventory. We recently did a physical count of all inventory and found some item missing but also found more stock than we have in QB. I entered the inventory adjustment by using the + sign at the right top corner and the Inventory Qty Adjustment option. I have used the Inventory Shrinkage account (COGS), but because of the extra inventory we found the balance is negative. Am I recording it right? I can't have a negative COGS balance. Any advise how to record both missing inventory and extra inventory found in the warehouse.  

6 Comments 6
Malcolm Ziman
Level 10

Adjusting Inventory

It actually probably is negative COGS because the COGS for any sales for the item may have been overstated. If it's a large amount, then it should be researched and properly fixed, but if not it's not worth the trouble

ap3
Level 1

Adjusting Inventory

For anyone who is struggling with same question, here is the answer. After many discussions with QBO, the correct way to go about it was to create a Purchase Order for the Qty that was found extra at a $0.00. The PO would be for $0.00. I still had to create a $0.00 bill to close the PO. This increased the Qty just like I needed to. 

Malcolm Ziman
Level 10

Adjusting Inventory

You don't need a PO. You can just create a Bill.   But anyhow, it will have the same effect as creating a qty adjustment, which creates negative COGS.   Because you are buying the item for $0 the COGS for previous sales of the item will now be reduced.  Either way COGS is getting reduced.  I would use a qty adjustment, so there is a record of adjustments

Anonymous
Not applicable

Adjusting Inventory

Using a zero price bill (PO) is the same as applying a quantity-only inventory adjustment; but it isn't the right way to account for inventory 'shrinkage' (plus or minus).

First well assume that although you have 'found' some stock just now - its the result of previous errors in recording shipments and receivings - not new stock that hasn't yet been received into QB. Also we'll assume that the net shrinkage for all stock for the year will not be negative.

Shrinkage has a cost - and that cost need to be recognized. Sometimes shrinkage gets reversed if previously missed items are found - and then a negative shrinkage entry is correct.  But putting in zero price means no cost is recognized.

Further - since QBO uses FIFO inventory a zero bill entry will leave you with some zero cost items in stock which will later be sold for (apparently) 100% profit  - and that wont look right either. 

paulc4
Level 2

Adjusting Inventory

If speaking of a case where we have extra stock on hand that we did not have record of, and that have not been sold yet, which is the correct account to post an inventory adjustment too? Would it be COGS or Inventory asset?

paulc4
Level 2

Adjusting Inventory

If speaking of a case where we find that we have extra inventory on hand, and that has not been sold yet, which account should we make the inventory adjustment under? Would it be COGS or an Inventory Asset account?

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