How do I adjust inventory for damaged items so that it affects Cost of Goods but also shows up in profit & loss report Using Quickbooks Desktop?

Hello there, @kmasta.

If you occasionally write off small amounts of damaged inventory, you do not have to make a separate disclosure on the income statement. The loss is included with the cost of goods sold amount. A separate account such as loss from the write-off of Inventory is included with the other inventory accounts.

We can do an inventory adjustment to lower the number of items. Here's how:

1. Go to the Lists menu and select the Item List.
2. On the Activities tab, click the drop-down arrow and select Adjust Quantity/Value on Hand.
3. Select the Adjustment Account by clicking the drop-down arrow. Please consult your accountant to ensure the account recorded is the right account for your business.
4. Select the item used and record the New Quantity and Qty Difference.
5. Once done, click Save & Close.

I've also added this link about inventory assets and the cost of goods sold tracking in QuickBooks Desktop (QBDT): Understand inventory assets and cost of goods sold tracking.

Let me know how it goes by dropping a comment below. I'm always here to help. Take care!

Hi thank you for your response but it didn't answer my question.

I want to clarify hopefully you can edit your response or someone else can see I still  need help.

Firstly, I am not adjusting inventory for personal use I'm adjusting for damages. 

Second, I was asking what account to use and why and your answer says to ask an accountant.  I don't have one because my business is too small.

Also, I am trying to find out how to reduce Cost of Goods Sold when I adjust my inventory for damages in QBD. 

Thank you I appreciate it.

Hey! Did you find solution? I cretaed an inventory adjustment account and  adjust my inventory, However, it effects all supplier's bill. How should I fix it?

Thanks for posting here, @azadehgar,

Can you please share some more details about the problem? Inventory adjustments should not affect created bills, so I will need some more information on what happened and how the adjustment is done.

Any clarification will help me provide the accurate resolution to you.

When you purchase or receive inventory, it debits the Inventory Asset account which is posted in the Balance Sheet report. If there are changes in the quantity because of damages, fire, theft, or breakage, and etc., that's when you use the adjustment option.

The steps and instructions are listed here: Adjust your inventory quantity or value in QuickBooks Desktop

This method affects both the Asset and the COGS account, but not necessarily show a loss in your books. This is because, we are only changing the quantity and asset value of the item, but the average cost of the item remains the same.

If you want to track the loss from damages in the P&L report, you will need to a different entry to account for the unrecoverable funds from damages. This is method is what we call writing off a bad debt. This article can explain the process and steps for you: Write off bad debt in QuickBooks Desktop

I'll be waiting for your response. Connect with me again by clicking the Reply button below. Have a great week ahead!

Hi , Thank you for reply.

I had some damaged items. so I followed the steps mentioned in:" Adjust your inventory", creted an account and added all those items in a list.

https://quickbooks.intuit.com/learn-support/en-us/quantity-on-hand-adjustment/adjust-your-inventory-...

My inventory quantity are correct now. But I noticed that the system created a bill for the suppliers, for those items.

Hello there again, azadehgar.

I appreciate your efforts in adjusting the inventory items and letting us know the result. We'll have to perform some basic troubleshooting steps to get your inventory information in order.

As mentioned by my peer, inventory adjustments should not affect created bills. Also, the system will not create a bill for the items.

Let’s run the Verify and Rebuild Data Utilities as your primary troubleshooting steps. These tools are used to fix integrity issues in the company file.

Before performing any steps, save a copy of the company file to keep a record of your transactions. When you’re ready, let’s go to the File menu to launch the utilities.

Here’s how:

1. Click the File menu at the top to choose Utilities and Rebuild Data.
2. Hit OK to create a backup of the company file.
3. Press Save to keep the copy.
4. Select OK once the Rebuild is completed.
5. Then, go back to the File menu to choose Utilities and Verify Data.
6. If it finds an issue, click Rebuild.

If it didn’t find any errors, open the report again to check the inventory adjustment. If you continue to get the same result, resort to the item list.

The process will help make your lists back to their default order. Here’s an article that will guide you through the process: Re-sort lists in QuickBooks Desktop.

For additional resources, the following articles will help you resolve any data and inventory issues in QuickBooks.

• Fix data damage on your QuickBooks Desktop company file
• Fix negative inventory issues

Let me know in the comment section below if you need help when working in QuickBooks. I’ll get back to make sure you’re taken care of. Have a good one.