@potterysara wrote:
I am trying to correct the COGS from last year for a company but I am not sure of the best way to do it. At the beginning of the year all purchases for resale were being recorded directly to COGS, and inventory asset tracking wasn't being utilized at all. In May someone decided to set up the inventory tracking system in Quickbooks. During this setup they recorded beginning inventory balances to the inventory asset account. For the remainder of the year, the COGS was (correctly) automatically recorded with each sale as the inventory asset account was simultaneously reduced. The problem is that by year-end the COGS balance is artificially high due to the pre-May purchases directly to COGS. Staff did do an inventory count at year-end, and I made adjusting journal entries to correct the inventory asset account balance. This did reduce the COGS slightly, but the amount is still too high based on the amount of sales that occurred before inventory tracking was set up in May. I need to make another adjustment that does not affect the inventory asset account, as that balance is actually correct.
@ sara
First thing is delete the journal entry that used inventory asset in it. Inventory asset is a summing account and you can NOT affect individual item cost with a journal entry, all that does is make the balance sheet valuation different from the actual inventory valuation to look good. Going forward never use inventory asset in a journal entry, an adjustment or a purchase.
The starting balances for the items created posted by default to Opening balance equity.
You are right the direct expense to COGS is the issue now, since that starting value is still in COGS.
in the chart of accounts, use the register for OBE and calculate the total value for all entries that are labeled START. Those entries are the starting entries for each item.
when you have that total do a journal entry
debit OBE and credit COGS
that removes the total value of what was on hand to start inventory tracking from the COGS account
