How do I track damaged inventory loss or company use items?

This makes sense to me but I don't understand how sales and use tax is handled.  How do you handle the sales and use tax that would be due on an item that you use internally?  I thought the company would owe sales & use tax based on the company's cost for that item.  

OK sorry to say that I'm still confused. We shipped an order to a customer a few months ago and sent them an invoice. Since then, sales tax has been paid for that invoice. We have never received any payment from the customer and the entire shipment was lost in transit.

In Quickbooks Online, I need to bring the customer's owed balance to zero, somehow get the sales tax credited in a later period and write-off the inventory as damaged. If I simply do an inventory adjustment, it will appear as inventory shrinkage which doesn't seem right.

Can anyone give me step by step instructions to achieve all the things that need to be achieved?

Glad to have you back, @briton.

I've got you covered in recording the lost item that was sent to your customer in QuickBooks Online.

If an invoice is no longer collectible, you need to record it as a bad debt and write it off. This is to ensure your accounts receivable and net income are correct.

Before doing so, you'll need to review other invoices or receivables that should be considered as bad debt using the Accounts Receivable Ageing Detail report.

Once verified, let's now create a bad debt expense account.

Here's how:

1. Select the Gear ⚙ icon.
2. Under Your Company, select Chart of Accounts.
3. At the upper right, select New.
4. From the Account Type ▼ drop-down.
5. Select Expenses.
6. From the Detail Type ▼ drop-down, select Bad debts.
7. In the Name field, enter “Bad debts.”
8. Select Save and Close.

After that, we'll need to create a bad debt item and credit note, then apply it to the invoice. To give you the complete details of this process, please refer to these articles: 

• Write off bad debt.
• Writing Off Bad Debt in QBO.

In case the item will be returned, you can just make an inventory adjustment. To do that, you may check out this link: How to adjust inventory quantity on hand.

These resources should help you record your transactions correctly, briton.

I want to ensure that this gets taken care of for you, so please feel free to update me by posting a comment below. Have a wonderful week ahead!

I am a self owned company that does staging for real estate sales. I recently lost all of the furniture I used for staging in a warehouse fire. How do I properly record this loss in Quickbooks Online? Please understand that I'm still learning how to use Quickbooks so explain in a way that a rookie can understand. Thank you.

You've come to the right place, @Thibcli.

There are two ways on how to record the loss of your furniture in QuickBooks Online. I'd be delighted to walk you through the process.

The first process is to write off the bad debt, this refers to accounts receivables that will not be collected in QuickBooks.

To start, let's create a bad debts expense account:

1. From the Accounting menu, select Chart of Accounts.
2. Click the New button.
3. From the Account Type drop-down menu, select Expense or Other Expense.
4. From the Detail Type drop-down menu, select Bad Debts.
5. Enter Bad Debts in the Name field.
6. Select Save and close.

Then create a bad debt item:

1. Go to the Gear ⚙ in the upper right corner.
2. Under Lists select Products and services.
3. Click New, and then Non-inventory.
4. In the Name field, enter “Bad debts.”
5. From the Income account ▼ drop-down, select Bad debts.
6. Select Save and Close.

Once done, you can proceed to Step 4 and Step 5 in this article: Write off bad debt in QuickBooks Online.

The second process is to use the Adjust Inventory option in QBO to update the number of your stocks. 

1. Click the + New button.
2. Under Other, press Inventory Qty Adjustment.
3. Enter the Adjustment Date and complete the details of the transaction.
4. Hit Save or Save and Close.

Here's a great resource to guide you with the adjustment on inventory tracking: Adjust inventory quantity on hand in QuickBooks Online.

I'll be more than happy to share additional insights and assistance with QuickBooks whenever you need it. Have a good one!

I have completed the Inventory Adjustment Process as described above, but I do not see a report that would indicate the cost of the inventory that we lost due to shrinkage.  Please let me know if there is a report that will reflect the cost of each item of inventory that was lost.  Thank you

Hello there, @rwmout.

You're able to pull up reports in QuickBooks to find information about inventory value, stock status, pending builds, and losses due to shrinkage. There are two inventory reports (Inventory Valuation Summary and Inventory Valuation Detail) that are available for both QuickBooks Online (QBO) and QuickBooks Desktop (QBDT). 

Since you want to view the cost of the inventory that you lost due to shrinkage, I'd recommend pulling up the Inventory Valuation Detail report. For QBO, go to the Sales and customer section from the Reports menu's Standard tab. For QBDT, go to the Reports menu, then select the Inventory option.

After that, customize the Inventory Valuation Detail report to focus on the details that matter the most to you. For the step-by-step guide, select your QuickBooks product below:

• Customize reports in QuickBooks Online

• Customize reports in QuickBooks Desktop

Also, here's an article that'll further guide you on how QBDT generates reports: Understand reports. It also includes the complete list of available reports on said platform.

Let me know in the comments below if you have other concerns about pulling up inventory reports and managing product costs in QuickBooks. I'm just around to help. Take care always.

What if there is not an invoice you can do a credit with?  My client recently had some flooring and a saw stolen.  We do not do inventory.  Nor was the supplies invoiced to a client.  How do you record the loss in QBO?

I appreciate you for dropping your comment here in Community, @BottomLineBookkeeper.

I have some knowledge in recording a loss or damaged item in QBO.

You need to record a bad debt and write it off if an invoice is no longer recoverable. It will ensure that your receivables and net profits are accurate.

Let us make a debt expense account, here's how:

1. Select Chart of Accounts from the Accounting menu.
2. Select the New option.
3. Select Expense or Other Expense from the Account Type drop-down box.
4. Select Bad Debts from the Detail Type drop-down menu.
5. In the Name field, type Bad Debts.
6. Click Save and Exit.

After that, let us make a bad debt item:

1. Go to the upper right corner of the screen and select the Gear icon.
2. Select Products and services from the Lists menu.
3. Select Non-inventory from the New menu.
4. Type Bad debts in the Name field.
5. Select Bad debts from the Income account drop-down menu.
6. Click Save and Exit.

Now, you can move on to Steps 4 and 5 to write off bad debt in QuickBooks Online: see this article.

Secondly, the method is to adjust the number of stocks in QBO using the Adjust Inventory option. follow steps below:

1. Select + New from the drop-down menu.
2. Select Inventory Qty Adjustment from the Other menu.
3. Fill in the Adjustment Date and the rest of the transaction's data.
4. Press the Save or Save and Close button.

I added an article to guide you on adjusting inventory quantity on hand in QuickBooks Online.

I'd be delighted to provide you with extra QuickBooks information and assistance anytime you require it. Enjoy your day!

Hello! 
My case is similar, but not the same. FedEx lost the package on the way to the costumer. The payment was already received and now we have to send the item again (with no charge of course), so I am not sure how to properly record this loss. Beside this, we opened a dispute with FedEx, won, and they gave us a compensatory check (but not even close to the sale value). Could you please guide me on how to record all this movements? 

Thanks! 

Thanks for joining this thread, PauleyJK.

I see the duplicate post of your concern. My colleague already responded and shared some information on this issue.

Please check this link for your reference: https://quickbooks.intuit.com/learn-support/en-us/reports-and-accounting/fedex-lost-a-sales-package-...

The Community is always here to help you out. Don't hesitate to drop a reply below.

After doing all of this the bad debt shown on P&L is zero. If I don't add to the invoice the negative amount shows under accounts receivable. Am I doing something wrong? I want to show the product as inventory loss as it has now expired and we can no longer sell it. Also, I am not keeping track of the inventory so I did select non inventory when creating them. I am using QBDT if that helps.

Hello there, @oooh2beepink. Let me clarify thigs about writing bad debt in QBDT.

It seems like you have followed the steps in writing bad debt in QuickBooks Online. Please know that QBDT has different method to accomplish them. 

You'll only need two steps in writing off bad debt to offset your inventory in QBDT. We can just add an expense account to track the bad debt and close out the paid invoices. You may follow these steps below:

Add an expense account to track the bad debt

1. Go to the Lists menu and select Chart of Accounts.
2. Select the Account menu and then New.
3. Select Expense, then Continue.
4. Enter an Account Name, for example, Bad Debt.
5. Select Save and Close.

Close out the unpaid invoices

1. Go to the Customers menu and select Receive Payments.
2. Enter the name of the customer in the Received from field.
3. For Payment amount, enter $0.00.
4. Select Discounts and credits.
5. In the Amount of Discount field, enter the amount you'd like to write off.
6. For Discount Account, select the account you added in step 1, and select Done.
7. Select Save and Close.

That should do the trick!  Additionally, here's an article that you can use once you run a report: Customize reports in QuickBooks Desktop.

Please let me know if there's anything else I can do to be of assistance — cheers to a safe and productive week ahead.

Thank you for your help Daniela, I followed your steps and that still does not reflect an amount on the P&L under bad debts. 

You mention to close out unpaid invoices. We create one sales receipt at the end of the month to reflect the income for the month as we don't have inventory in QB. Do I have to create an invoice first? This amount then shows up under accounts receivable.

I simply want to reflect that on my P&L, should I use that invoice? I am fairly new to QB I appreciate your help.

Thanks for getting back to this thread, @oooh2beepink. Let me provide further details to help reflect the transactions on your Profit and Loss.

You're right. We can create first an invoice in your account. This way, the amount would show up in your accounts receivable.

Here's how:

1. From the Home screen or the Customers menu, select Create Invoices.
2. From the Customer: Job drop-down, select a customer or customer job. If the customer or job is not on the list yet, you can select Add New.
3. Fill in the relevant information at the top of the form like the Date Invoice #, Bill to/Sold to, and Terms.
4. In the detail area, select the item/s. 
5. (Optional) If you want to apply for a discount, you need to create a discount item.
   1. From the Home screen go to the Lists menu.
   2. Choose Item List.
   3. Right-click anywhere, then select New.
   4. Click the Type drop-down, then select Discount.
   5. Enter an Item Name/Number and a brief Description.
   6. In the Amount or % field, enter the discount amount or percentage. If your discount amounts vary, you may want to leave the Amount or % field blank and enter the amount directly on your sales forms.
   7. From the Account drop-down, choose the income account you want to use to track discounts you give to customers.
   8. Select an appropriate Tax Code for the item.
   9. Choose OK.
6. Select Save & Close.

You can also review this link for more information to help record an invoice in QuickBooks: Create an invoice in QuickBooks Desktop.

I'm also adding these links to help personalize and manage your reports in QuickBooks:

• Create, access and modify memorized reports
• Set up and modify Scheduled Reports

Feel free to get back in here if you have further concerns about reflecting the transaction in your P&L. I'm always around to help. Keep safe!