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billhdz
Level 5

Inventory Adjustment Question

Happy New Year!!!

 

Last year in July I ordered 50 posters to sell.  The order was printed wrong with defects.  I was not charged for them.  Instead, the company just sent me a new batch of 50 posters corrected and printed well.

 

Before I got the good replacement posters order in, I had a client that needed to get some posters for an event he was doing, and did not mind that they were defective,  so I sold him some to get him out of a bind.  I didn't want to do this, but I also wanted to help him since he couldn't wait until the good order came in.

 

I never entered the bad posters into inventory because I am going to trash them and I did not get charged for them.  They just sent me new ones later.

 

Now I have an inventory issue, because it shows that I sold more than the amount entered into inventory.  I am off by 9 posters that client purchased when he purchased the bad posters from me.

 

Questions:

1. Do I enter the bad posters into inventory to fix this as a zero charge order?  

and if YES, how do I make the rest ( 41 quantity )  bad one as damaged inventory to take them out of inventory ( except for the 9 bad ones that the client purchased ).

 

2. OR, do I just make an inventory adjustment to add the posters needed to fix my inventory count and not enter the bad batch of posters?

 

Thank you for your time!

Bill

Solved
Best answer January 10, 2023

Best Answers
Rainflurry
Level 12

Inventory Adjustment Question

@billhdz 

 

You got it.  Just enter another bill for 25 items of that particular poster at $0.00 each and QB will put 25 more into inventory and the bill (since it was entered at $0.00) will show as paid.  I would date the bill as of the day you decided to put them into inventory.

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21 Comments 21
Rainflurry
Level 12

Inventory Adjustment Question

@billhdz 

 

Presumably, your QB inventory shows 9 fewer posters than you have on-hand, correct?  If that's the case, I think the best solution is to create a bill from your vendor for 9 posters at $0.00/each.  That will put 9 posters into inventory and will recalculate your average cost to include the 9 posters you received free of charge.  

 

 

billhdz
Level 5

Inventory Adjustment Question

@Rainflurry 

Thanks for the reply.

 

1. If I do it this way, will any of the invoices I already created from poster sales get messed up?

How does Quickbooks handle those entered from the created bill from my vendor for posters at $0.00/each?

 

2. When Quickbooks recalculates the average cost to include the 9 posters when they are entered at $0.00/each, what does that do to the invoices or sales numbers?

 

3. Will doing an inventory adjustment instead something to consider?

 

Thanks!

 

 

 

Rainflurry
Level 12

Inventory Adjustment Question

@billhdz 

 

If I do it this way, will any of the invoices I already created from poster sales get messed up?  How does Quickbooks handle those entered from the created bill from my vendor for posters at $0.00/each?

 

Those are great questions.  Did the sale of the 9 defective posters happen in 2022?  The previously-issued invoices are most likely already incorrect from a COGS perspective.  When you sold the 9 posters, QB created a COGS entry for those 9 posters and used your historical average cost to do so.  If the inventory went negative when you issued the invoice for the 9 defective posters, QB used the historical average cost of that item for the COGS expense.  But, we know that's incorrect since those last 9 posters were free of charge and you had not received them into inventory prior to issuing the invoice.  If, in fact, the inventory went to -9 when you issued the invoice, I think the proper way to fix this is to enter a bill for 9 posters at $0.00/each and date it prior to the invoice issued for the defective posters.  I failed to mention the date in my previous post.

 

Let me know if I'm not understanding the sequence correctly.  There may be others that understand QB inventory better than me, but that's my understanding.    

billhdz
Level 5

Inventory Adjustment Question

@Rainflurry 

I forgot to mention something as well.

 

Actually, I forgot to enter one invoice for poster sales in 2022 to a client.  He purchased 15 posters.

The invoice is from a sale on 12-9-22.

When I went to enter this invoice, that's when I saw the discrepancy on the inventory.  Quickbooks says I had 6 and that's what shorted me the 9 posters.

 

I also need to receive the payment in quickbooks once I get to enter the invoice.

 

Thanks for your help!

Rainflurry
Level 12

Inventory Adjustment Question

@billhdz 

 

Got it.  If you enter a vendor bill for 9 posters @ $0.00/ea and date it prior to 12-9, then issue the 12-9 invoice, everything should balance out.  Then, receive the payment on the 12-9 invoice as usual. 

 

After the 12-9 invoice, you should have 0 quantity on-hand.  And, the invoice issued for the 15 posters on 12-9 will post a lower COGS compensating for the higher COGS posted when you sold the 9 defective ones because, at that time, QB did not know to average the cost of 9 posters received @ $0.00/ea.     

billhdz
Level 5

Inventory Adjustment Question

@Rainflurry 
Thanks for your help. I was out of town for a few days and just got back.
 
We are very new to selling posters. We started selling them at the end of 2021 and we are learning about inventory as we move along. Luckily, we only sell one poster design and quantities are very small until we get further ahead with other products. This makes it easier to handle inventory issues right now before we grow the poster business with more deigns. It also gives us the knowledge to handle all Inventory with Quickbooks as we add more products.

 

That being said, my wife and I wan into another issue.

When going thru all the bad posters that we were going to toss away, we found a few posters that are usable. It also looks like the vendor sent us a few extra ones in this pile other than the quantity we ordered. Maybe we can use them as giveaways for marketing purposes, etc. Maybe even for sale??? That would total to 25 leftover posters that we would have after zeroing the inventory with after entering the last invoice and payment. 25 posters that are not in QB inventory right now for the reasons stated above.

 

We are learning real quick that it doesn’t matter how many posters we order, we need to take the time to count them all after we receive the orders from the vendors. We were trusting the vendors and assumed that they would always send the correct amount. But we see that that’s not always the case. Mistakes can happen. At least they didn’t short our order. I don’t blame them. It has to be hard handling a lot of print orders. They also depend on computers, etc to do the orders.

 

In summary,
1. Quickbooks says we have 6.


2. We can enter a vendor bill for 9 posters @ $0.00/ea and date it prior to 12-9 so that we can complete the invoice of 15 posters to and receive the payment. ( 6+9 = 15 posters on that order ). This will zero the poster inventory for 2022 and we can start fresh when we get more posters to sell in 2023.


3. I am trying to decide what to do with the 25 posters that we found to be usable for selling, giveaways, promotional samples, etc. Maybe I should not sell any of these and just use them for giveaways, promotional samples, etc. This way we don’t mess up the inventory. Or maybe there is a way to enter them as inventory in case we want to sell them if needed in an emergency situation?

 

I don’t want to complicate things, I want to do what is easier and better for Quickbooks to keep good inventory so that we know what's going on with products.  Any suggestions?

 

Hopefully, this will help other people in the future on this forum if they go thru a similar situation as mine when starting to use the inventory feature in QB and doing a search here.

 

Thanks!

Rainflurry
Level 12

Inventory Adjustment Question

@billhdz 

 

If you want to put those 25 posters into inventory, you can enter a bill for 25 more at $0.00.  Then, you can sell them on an invoice/sales receipt or, if you give them away, make an inventory quantity adjustment (Vendors > Inventory Activities > Adjust Quantity/Value on Hand) and choose your Marketing expense account under 'Adjustment Account'.

 

And, yes, you can never trust that the quantity you ordered will be the quantity received.

 

 

billhdz
Level 5

Inventory Adjustment Question

@Rainflurry , thank you!

 

When you say "If you want to put those 25 posters into inventory, you can enter a bill for 25 more at $0.00.", 

This bill I am entering,  is that another sales bill from the vendor of the posters?  ( Like the way I am entering the  vendor bill for the 9 posters @ $0.00/ea and dating it prior to 12-9 so that I can complete the invoice of 15 posters to and receive the payment. )?  

 I just enter another different bill that same way?  Is that correct?

 

Thanks again!

 

Rainflurry
Level 12

Inventory Adjustment Question

@billhdz 

 

You got it.  Just enter another bill for 25 items of that particular poster at $0.00 each and QB will put 25 more into inventory and the bill (since it was entered at $0.00) will show as paid.  I would date the bill as of the day you decided to put them into inventory.

billhdz
Level 5

Inventory Adjustment Question

Thank you @Rainflurry 

 

By the way, what type of business do you do if you don't mind me asking?  You must deal with inventory as well since you are good at it.  Thank you for taking the time to help me out.  Out of all the people on this forum, you were the only one kind enough to help me. 

 

billhdz
Level 5

Inventory Adjustment Question

@Rainflurry 

 

By the way, why not just enter one vendor bill for 9 posters @ $0.00/ea PLUS the other 25 posters @ $0.00/ea together as one vendor bill for 34 posters @ $0.00/ea?   Is there a benefit to separate them into 2 vendor bill using 9 and then 25 instead of together?

 

Just trying to learn a little.  Thanks!

 

Rainflurry
Level 12

Inventory Adjustment Question

@billhdz 

 

Good point.  Yep, that would work fine (34 items on one bill).  And, since that is really what happened - you salvaged 34 posters from the 50 ordered - it is most accurate to enter all 34 received prior to 12-9.  The only benefit to separating them into two bills would be if you want different dates that the items were received.  So, if you create a bill for all 34 posters received prior to 12-9, your COGS for the 12-9 invoice will be calculated using all 34 posters received at $0.00, which will lower your COGS and increase your profit.  The bottom line is that you should do it right and date the bill as of the vendor bill date for the posters you are putting into inventory.  Changing dates to influence your COGS calculation is improper accounting.

 

Thanks for the kind words.  We started and grew a number of retail businesses over the past 20 years and recently sold them all.  After several years in retail and not understanding accounting, I went back to school and got a master's degree in accounting so I could be in charge of all bookkeeping/accounting/tax for the corporations.  Now, it's fun to help out other business owners and bookkeepers as needed.  

billhdz
Level 5

Inventory Adjustment Question

@Rainflurry 

 

I definitely don't want to be Changing dates to influence your COGS calculation.  I always like to do things by the book.  I don't want any problems in the future. This is why I am seeking help with this to do it properly in Quickbooks and to understand it in case it happens again in the future.  Our business is just me and my wife, and we don't want any issues to deal with.  We just want to take care of our customers the best way possible and show our artwork via posters, etc for everyone to enjoy.  I think it's great that you like to help people with your talent.  I like to think of myself as doing the same thing in a different way as an artist. I admire you for that.

 

When the order of bad posters came in the order number #09748826 was issued on 7/5/22

When the good replacement posters came in, the NEW order number #09788695 was issued on 7/14/22. 

 

I did enter the vendor bill for the good replacement posters as 7/5/22 thinking that I was just going to trash the entire bad order.  

Maybe I need to change the date on that vendor bill from 7/5/22 to 7/14/22 and just create the new one to allocate for the extra posters ( bad order )  as 7/5/22 since this is the order with the bad posters.

 

Will this work?  Am I understanding correctly?

 

Thanks again!  

 

Rainflurry
Level 12

Inventory Adjustment Question

@billhdz 

 

Maybe I need to change the date on that vendor bill from 7/5/22 to 7/14/22 and just create the new one to allocate for the extra posters ( bad order ) as 7/5/22 since this is the order with the bad posters.

 

Agreed.  Since that is what really happened (bad posters received 7-5, good posters received 7-14), that is the right way to do it.  

billhdz
Level 5

Inventory Adjustment Question

Thank you @Rainflurry 

 

I will make these changes and additions this evening.

 

Best wishes and thank you again!!!  

billhdz
Level 5

Inventory Adjustment Question

@Rainflurry 

 

I entered everything.  All inventory good and up to date. :).   Almost there

 

QUESTION:

When I changed the date on that vendor bill from 7/5/22 to 7/14/22. ( Good Posters )

and created a new bill to allocate for the extra posters ( bad order ) as 7/5/22,

the Bill for the 7/5/22 order shows as an "ITEM RECEIPT ONLY" and not marked at PAID like the 7/14/22 bill.

 

Is that the way is supposed to look or be?

 

Thank you!

 

Rainflurry
Level 12

Inventory Adjustment Question

@billhdz 

 

I haven't seen that before.  QB Desktop has a "Bill Received" checkbox that, when unchecked, creates an Item Receipt that puts items into inventory prior to the vendor's bill arriving but that is slightly different than you're describing.  As long as your inventory is accurate, you should be fine.     

billhdz
Level 5

Inventory Adjustment Question

@Rainflurry 

 

By the way, thank you for your patience with me on this.  I thank you again for your help.

 

So, it should be marked as "PAID", not just received correct?  I made a backup of the file before I entered these changes just in case.  Maybe I need to go back and do it again with the backup to get it right?

 

What I did is go to the "Receive Inventory" section of the HOME screen to enter the bill.

 

This morning, I was able to get it to say PAID by going to "Enter Bills against Inventory" on the HOME screen and picking that Bill.  Maybe I should have gone to the "Enter Bills" section of the Home Screen to do this instead of the "Receive Inventory" section from the start with.  Correct?

 

Thanks

 

 

 

 

 

 

 

Rainflurry
Level 12

Inventory Adjustment Question

@billhdz 

 

Please see my previous post - just enter a $0.00 bill for the posters.   

 

If you use the 'Receive Inventory' icon on the home screen, you have to choose to either receive inventory with a bill or without a bill.  If you choose 'without a bill', it creates an Item Receipt and QB assumes you will be entering one in the future, and bills that are more than $0.00 will show up in your "Unpaid Bills Detail" report.  If you choose 'with a bill', it's the same as clicking the "Enter Bills" icon or going to Vendor > Enter Bills.  That's what you want to do.

billhdz
Level 5

Inventory Adjustment Question

@Rainflurry 

 

That makes sense.  If I have to do this again in the future for some reason, I will choose to go to Vendor > Enter Bills. 

 

But since I already was able to get it to say PAID by going to "Enter Bills against Inventory" on the HOME screen and selecting that Bill, it should be good now, correct?  

 

Or do I need to do it again?

 

Thanks

 

billhdz
Level 5

Inventory Adjustment Question

@Rainflurry 

 

I decided to go back to my backup and doing again.  This time I chose  Vendor > Enter Bills and the Bill was automatically marked as PAID.  All good now.

 

I cannot take you enough for helping me out with this.  Thank you Thank you Thank you!

 

Best wishes!

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