During inventory audit, I noticed that there was a value in inventory asset account for an item that was expensed in previous year bringing value to zero. At the time, the company was not using "items" in Quickbooks. The prior bookkeeper added this item with a value therefore putting the amount back into inventory. Do not want to take a hit on taxes as this was done by mistake however, not sure how to fix the problem. Any ideas?
Thank you for taking the time to post here in the Community space, @H Cohn. I'm here to provide you some details that will help you resolve your concern.
Create a journal entry or delete the duplicate transaction to fix the dispute. You can create a journal entry if this item or value in your inventory asset has been done for a long time. You can also delete the duplicate item or value.
I would suggest speaking with your accountant. They can provide additional information and advice as they know what's best for your business.
Here's how to create a new Journal Entry:
You can refer to this article for more details: Create a journal entry in QuickBooks Desktop for Windows or Mac
If you would like to delete an item, here's how:
For additional information, you can check out this article: Add, edit, and delete items
I'm also adding this article that might help you in the future: Balance Sheet and Inventory/Stock Valuation reports show different amounts for Inventory Asset accou...
Please let me know if you have any other questions or need any other information about managing your inventory asset. I'll be available to help you. Keep yourself safe!
"The prior bookkeeper added this item with a value therefore putting the amount back into inventory."
Are you saying this amount was properly added to inventory and expensed (presumably to cost of goods sold) and then added to inventory a second time by mistake? If that is true, then how was it added to inventory the second time? The inventory asset account would have been debited, but what was the credit? You need to determine what the credit was and then reverse the entry.
Got it. It's my understanding that the credit entry to offset the total value entry is opening balance equity. Do you have a balance in opening balance equity on your balance sheet? To confirm, you should be able to locate the entry in the opening balance equity account. If you find it, then your opening balance equity is overstated by the same amount as inventory. To correct it, create a journal entry - debit opening balance equity and credit inventory asset.
This will reduce both opening balance equity and inventory on your balance sheet and have no effect on your P&L.