DocuSend QuickBooks App Advertise here    

QuickBooks Forums      

Go Back   QuickBooks Forums > QuickBooks Software Support > QuickBooks FAQ

Reply
 
Thread Tools Rating: Thread Rating: 6 votes, 5.00 average. Display Modes
  #1  
Old 11-03-2007, 07:43 AM
RobJoy RobJoy is offline
Registered User
 
Join Date: Mar 2003
Location: UK
Posts: 3,858
Inventory Adjustments

There are several downsides to using the Inventory Adjustment (Adjust Quantity/Value on Hand):
  1. You can't do it in multi-user mode
  2. The screen is horrible, you have to wade through a list of all your items
  3. 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)
  4. You can't put proper memos against each line
  5. 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.
Attached Images
File Type: gif InventoryAdjByBill_qty.gif (18.5 KB, 1703 views)
File Type: gif InventoryAdjByBill_value.gif (19.3 KB, 1371 views)
__________________
Joyce Beck
joyce@pc-firstaid.com
------------------------------------------------------------------------------
Accounting and bookkeeping support, QuickBooks Pro Advisor
Home and small business computer services in Northampton, UK

Last edited by RobJoy; 11-03-2007 at 07:50 AM. Reason: typo
Reply With Quote
  #2  
Old 06-23-2012, 12:48 PM
sjordash sjordash is offline
Registered User
 
Join Date: Sep 2007
Location: Caribbean
Posts: 66
I cant seem to get this to work correctly. If I look at the vendor Inventory Adjustment it shows the Bill created. If I look in the Chart of Accounts Inventory Adjustments it shows nothing at all. If I adjust the bill to instead of showing zero and give an amount this doesn’t show up in the profit and loss so I think I have not quite got it. Can you think what mistake I have made please?
Thanks
SJ
Reply With Quote
  #3  
Old 06-23-2012, 12:58 PM
RobJoy RobJoy is offline
Registered User
 
Join Date: Mar 2003
Location: UK
Posts: 3,858
There are many factors involved, so let's investigate. Please open the bill and click on Journal (to show the postings QB has made from the bill), tell me what it shows.
__________________
Joyce Beck
joyce@pc-firstaid.com
------------------------------------------------------------------------------
Accounting and bookkeeping support, QuickBooks Pro Advisor
Home and small business computer services in Northampton, UK
Reply With Quote
  #4  
Old 06-23-2012, 07:33 PM
sjordash sjordash is offline
Registered User
 
Join Date: Sep 2007
Location: Caribbean
Posts: 66
Thanks for the quick reply caught me out.
It shows 3 Inventory Adjustment entries.
1 Accounts Payable Debit $0
1 Inventory Asset Credit $284.26
1 Inventory Asset Debit $284.26

ta
SJ
Reply With Quote
  #5  
Old 06-23-2012, 08:07 PM
RobJoy RobJoy is offline
Registered User
 
Join Date: Mar 2003
Location: UK
Posts: 3,858
Sorry, not thinking straight, need more information. Please tell us what exactly you trying to do - write something off as missing/damaged, move a quantity between items, adjust a value?
__________________
Joyce Beck
joyce@pc-firstaid.com
------------------------------------------------------------------------------
Accounting and bookkeeping support, QuickBooks Pro Advisor
Home and small business computer services in Northampton, UK
Reply With Quote
  #6  
Old 06-24-2012, 02:31 AM
Joe Williams Joe Williams is offline
Registered User
 
Join Date: Jan 2006
Location: Oklahoma
Posts: 9,372
When using the Inventory Adjustment, the adjusting account MUST NOT be Inventory Asset account. Use an expense account named "Inventory Adjustments".
The bills that have inventory items WILL NOT show in the P&L, but will show as an increase in the Balance Sheet report. When you sell an inventory item the average cost of that item will show in the COGS account on the P&L.
__________________
Joe Williams
joewilliams@wavelinx.net
Piedmont, Ok
Reply With Quote
  #7  
Old 06-24-2012, 09:10 AM
sjordash sjordash is offline
Registered User
 
Join Date: Sep 2007
Location: Caribbean
Posts: 66
I am buying batteries in a 12 pack as an inventory item but I sell them as 3 individual packs of 4 so just want to transfer the stock from one item to the other. Maybe I am doing it correctly now but need a way to check I am please?
Thanks
Reply With Quote
  #8  
Old 06-25-2012, 04:25 AM
Joe Williams Joe Williams is offline
Registered User
 
Join Date: Jan 2006
Location: Oklahoma
Posts: 9,372
I presume that you have separate items for the 12 pack and the 4 pack of batteries.
After you enter a bill for the purchase of the 12 pack of batteries, enter another bill to a vendor like "Inventory change" and then enter the item for the 12 pack with the received quantity and the amount as a negative. On the next line enter the item for the 4 pack with the converted quantity and the amount as a positive. This will enter a bill for a net of 0.00 and move the inventory from the 12 pack to the 4 pack inventory.
The original bill will still show s open until you pay it.
__________________
Joe Williams
joewilliams@wavelinx.net
Piedmont, Ok
Reply With Quote
  #9  
Old 06-25-2012, 04:56 PM
sjordash sjordash is offline
Registered User
 
Join Date: Sep 2007
Location: Caribbean
Posts: 66
Thanks that is what I am doing and seems ok, its just the paragraph from above "Now here's the tricky bit" from Joyce that I cant get now. If I enter a discrepancy into the bill it doesnt appear anywhere so not confident I am doing this correctly. No taxman here so no big deal as looks ok.
Thanks
SJ
Reply With Quote
  #10  
Old 06-25-2012, 05:31 PM
RobJoy RobJoy is offline
Registered User
 
Join Date: Mar 2003
Location: UK
Posts: 3,858
I wrote the blurb to be as generalised as possible, because people need inventory adjustments for all sorts of things. This may have resulted in it seeming more complicated and dangerous than it should.

It sounds as though you have done yours correctly, but I understand (and applaud!) your determination to be sure everything's correct. Look at these two things to convince yourself:

Inventory Valuation Detail report, filtered for just the affected items - the two battery packs in your case. You can obviously see if the quantities make sense, and most importantly, the average cost of the 12-pack should not change as a result of your adjustment. Possible source of trouble is if the balance quantity ever becomes negative - e.g. if you dated an adjustment to take 12-packs out before the receipt, so there were none available to take. That is something QB copes with correctly, but it can be somewhat weird and confusing. You can usually 'cheat' the dates easily without harm - make the receipt a day earlier or the adjustment a day later.

The transaction journal is always useful - amend it to show item codes, unit prices and quantities. You don't want to see anything posted to COGS, apart from the occasional cent.

P.S. No tax man? When can I emigrate?

P.P.S. Why not enter the original bill as 4-packs and save doing an adjustment at all?
__________________
Joyce Beck
joyce@pc-firstaid.com
------------------------------------------------------------------------------
Accounting and bookkeeping support, QuickBooks Pro Advisor
Home and small business computer services in Northampton, UK
Reply With Quote
  #11  
Old 06-27-2012, 09:05 PM
sjordash sjordash is offline
Registered User
 
Join Date: Sep 2007
Location: Caribbean
Posts: 66
Thanks Joyce it all looks good in those reports. Need the 12 Pack item to use as the item on the purchase order but will look into adjusting the bill when it next arrives.

You can emigrate whenever you like - I did!
Reply With Quote
  #12  
Old 09-14-2012, 11:48 AM
mikemalone mikemalone is offline
Registered User
 
Join Date: Jul 2012
Location: Canada
Posts: 4
Great information, never thought to try it like this.
Thanks
__________________
LedgerDocs - Online Document Management for Bookkeepers, Accountants, Businesses: www.ledgerdocs.com
Reply With Quote
  #13  
Old 03-01-2016, 10:26 AM
Twinoaks Twinoaks is offline
Registered User
 
Join Date: Feb 2016
Posts: 3
robJoy,

I know this is an older post but hopefully you can still help me out. I am using 2016 Quickbooks pro and love the idea of not having to shut all the other users down when doing inventory adjustments. Inventory adjustments have become a weekly task due to us using some of our currently inventory to manufacture a new product. We have started a service of fabricating pipe fittings. We take a piece of pipe from inventory then turn it into several different fitting (new item).

The problem that I have is that Quickbooks will not allow me to have a negative quantity in the purchase order to take out the pipe used to make a fittings.

Thank you in advanced for the help
Reply With Quote
  #14  
Old 03-03-2016, 06:53 AM
Joe Williams Joe Williams is offline
Registered User
 
Join Date: Jan 2006
Location: Oklahoma
Posts: 9,372
First you MUST know the current Ave Cost of the items used to create the new one. Then enter the following Bill to vendor Z-Manufacture.

Enter the items with the quantity and their cost (as a negative) amount.
If you are going to include the labor/overhead use an Other Charge item to that expense account also a negative amount.
Enter the inventory item you are creating with it's quantity then enter the amount that will zero the bill.

This will set the inventory value for the new manufactured item to equal the cost of the items used in creating it.
__________________
Joe Williams
joewilliams@wavelinx.net
Piedmont, Ok
Reply With Quote
  #15  
Old 03-03-2016, 08:14 AM
Twinoaks Twinoaks is offline
Registered User
 
Join Date: Feb 2016
Posts: 3
Joe,
I think that I understand the concept but dont I have to create a purchase order first before the program will create a bill? If this is the case, the purchase order will not allow me to receive a negative amount.

The current issue I am working on is we purchase semi trailers full of wheat straw, we than sell the bales individually. The trailer holds approximately 750 bales and we receive that amount at time when the trailer arrives. We never sell exactly that many bales due to damaged or miss count. This week we just emptied the trailer and the computer says we still have 20 bales in inventory when the trailer is empty. I like to match inventory with what we have on hand before we receive the next truck. We typically sell a truck of straw a week and it is very difficult to switch to single user mode because than our other computers will be down during that time. The wheat straw and the manufacturing of fittings need constant inventory adjustments.

I am trying to used the concept in this discussion to be able to "adjust" the inventory on multi user mode while using a bill to make the adjustment of -20 bales. Thus, when I receive the next truck our inventory will be correct.

I understand creating a vendor "inventory adjustment" and making sure average cost is correct. I just cannot figure out how to have an negative amount of wheat straw on the purchase order that then makes a negative on the bill. Quickbooks automatically turns the negative into a positive on the P.O.

Thank you so much for you assistance. If i can figure out how to make this work it will save a lot of frustration and time each week correcting inventory discrepancies.
Reply With Quote
Reply

Bookmarks
Bookmark and Share
Thread Tools
Display Modes Rate This Thread
Rate This Thread:

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off

Forum Jump


All times are GMT -5. The time now is 04:56 PM.


 

Powered by vBulletin® Version 3.8.4
Copyright ©2000 - 2017, Jelsoft Enterprises Ltd.
All contents copyright (c) by AccountingUsers Inc.
You Rated this Thread: