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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.  

4 Comments
Level 10

Re: 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

Re: 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. 

Level 10

Re: 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

Re: 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. 

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