RobJoy
11-03-2007, 07:43 AM
There are several downsides to using the Inventory Adjustment (Adjust Quantity/Value on Hand):
You can't do it in multi-user mode
The screen is horrible, you have to wade through a list of all your items
It doesn't behave well with regard to classes (they don't get saved correctly when you first create them, you have to re-open and put them in again)
You can't put proper memos against each line
You can't enter a unit cost and have QuickBooks calculate the line total
But Shuff is a genius, and he figured out how to do it with a Bill!
Create an Other Charge item called InventoryAdjustment, or something similar. Set the account to be wherever you want the values of all adjustments to go - probably an Expense account called Inventory Adjustments, maybe you'd like more than one item to go in different accounts, to separate adjustments for different reasons - physical inventory checks, scrapping damaged goods, etc.
Create a Vendor called Inventory Adjustments. Maybe you'd like more than one again. And maybe you'd like to put an asterisk in front of the name so it comes at the start of your list.
Now, to create a bill to change your quantity:
First look up the average cost of the item. Look at the Edit Item screen, and take the Avg. Cost value at the bottom of the window. NOT the value you have entered as the cost, you need the actual average QB has calculated from the bills or item receipts.
Use your dummy Inventory Adjustment vendor.
It doesn't matter which A/P account, if you have more than one.
The first item line has the quantity change, at the average cost, the second is to your adjustment item. The second line needs to reverse the first, so the total is zero. You can put the quantity in the second line if you wish, it will enable you to report on the total quantity of adjustments across all items - this may be useful, or it may make no sense at all, depending on the nature of the goods. The screen shot InventoryAdjByBill_qty shows an example - it's done with QuickBooks Accountant 2006 UK, so please ignore any unfamiliar parts.
To create a bill to change the value, not the quantity:
A different reason to need an inventory adjustment is when you want to change the value of your balance of an item, but without changing the quantity. This is done only for specific reasons, you cannot just decide to make your inventory asset look more or less valuable! Perhaps you have some damaged goods which you can sell, but only at a price below that which you paid for them. So you could reduce their value, and post the reduction to an expense account called 'Flood damage'. Or perhaps you calculate landed costs, reducing the value of inward freight charges and import duty, and adding it to inventory items.
You need to put three lines on your bill in this case. The first takes off all the current quantity at the current cost (again, be careful to put in the right average cost), the second adds it back at the required cost, the third is to the adjustment item for the difference, again makes a total of zero value. There's an example in InventoryAdjByBill_value
Now here's the tricky bit: How do you check that you've done this correctly? The key thing is to make sure you used the right average costs. If you have awkward units of measure or foreign currencies to deal with, you may find that your average costs ought to be to 5 decimal places, but QB incongruously only stores them to 4, although you can enter 5 on your bills! If QB calculates an average cost just a tad different on your adjustment bills, it will end up with a penny/cent or two astray. It has to put it somewhere, and that will be in Cost of Goods Sold. So use Custom Transaction Detail Report, all dates, account Cost of Goods Sold, name Inventory Adjustments. The only transactions you should see are maybe for a penny/cent or two on items with average costs going to 4 decimal places. Anything else means you need to check the average cost on your adjustment bills - QB calculates it at something significantly different. The example in the screen shot resulted in a 0.01 posting to Cost of Goods Sold - I can live with that.
You can't do it in multi-user mode
The screen is horrible, you have to wade through a list of all your items
It doesn't behave well with regard to classes (they don't get saved correctly when you first create them, you have to re-open and put them in again)
You can't put proper memos against each line
You can't enter a unit cost and have QuickBooks calculate the line total
But Shuff is a genius, and he figured out how to do it with a Bill!
Create an Other Charge item called InventoryAdjustment, or something similar. Set the account to be wherever you want the values of all adjustments to go - probably an Expense account called Inventory Adjustments, maybe you'd like more than one item to go in different accounts, to separate adjustments for different reasons - physical inventory checks, scrapping damaged goods, etc.
Create a Vendor called Inventory Adjustments. Maybe you'd like more than one again. And maybe you'd like to put an asterisk in front of the name so it comes at the start of your list.
Now, to create a bill to change your quantity:
First look up the average cost of the item. Look at the Edit Item screen, and take the Avg. Cost value at the bottom of the window. NOT the value you have entered as the cost, you need the actual average QB has calculated from the bills or item receipts.
Use your dummy Inventory Adjustment vendor.
It doesn't matter which A/P account, if you have more than one.
The first item line has the quantity change, at the average cost, the second is to your adjustment item. The second line needs to reverse the first, so the total is zero. You can put the quantity in the second line if you wish, it will enable you to report on the total quantity of adjustments across all items - this may be useful, or it may make no sense at all, depending on the nature of the goods. The screen shot InventoryAdjByBill_qty shows an example - it's done with QuickBooks Accountant 2006 UK, so please ignore any unfamiliar parts.
To create a bill to change the value, not the quantity:
A different reason to need an inventory adjustment is when you want to change the value of your balance of an item, but without changing the quantity. This is done only for specific reasons, you cannot just decide to make your inventory asset look more or less valuable! Perhaps you have some damaged goods which you can sell, but only at a price below that which you paid for them. So you could reduce their value, and post the reduction to an expense account called 'Flood damage'. Or perhaps you calculate landed costs, reducing the value of inward freight charges and import duty, and adding it to inventory items.
You need to put three lines on your bill in this case. The first takes off all the current quantity at the current cost (again, be careful to put in the right average cost), the second adds it back at the required cost, the third is to the adjustment item for the difference, again makes a total of zero value. There's an example in InventoryAdjByBill_value
Now here's the tricky bit: How do you check that you've done this correctly? The key thing is to make sure you used the right average costs. If you have awkward units of measure or foreign currencies to deal with, you may find that your average costs ought to be to 5 decimal places, but QB incongruously only stores them to 4, although you can enter 5 on your bills! If QB calculates an average cost just a tad different on your adjustment bills, it will end up with a penny/cent or two astray. It has to put it somewhere, and that will be in Cost of Goods Sold. So use Custom Transaction Detail Report, all dates, account Cost of Goods Sold, name Inventory Adjustments. The only transactions you should see are maybe for a penny/cent or two on items with average costs going to 4 decimal places. Anything else means you need to check the average cost on your adjustment bills - QB calculates it at something significantly different. The example in the screen shot resulted in a 0.01 posting to Cost of Goods Sold - I can live with that.