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  • Inventory Adjusting

    I'm new to the forum and I have some working knowledge of Quickbooks but not enough apparently. So here it goes. I received PRODUCTS in my INVENTORY COGS account. I had to return a huge portion of those products back to the manufacturer for defects. So in QB adjustments do I adjust both quantity and value? Because in my P&L it shows in COGs an increase of that same value amount that I adjusted. I've been reading on the net that I would need to do adjustment on an EXPENSE account. I need clarity please. HELP! Thanks and Happy Holidays to all.

  • #2
    If you are using inventory type items, you are not using QB correctly by receiving an order into cogs.

    see this, for how to receive inventory http://onsale-apparel.com/Rustler/tag/how2-rcv-inven

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    • #3
      I would caution on charging an inventory type item immediately off to cost of goods sold. I was hired by a retail/wholesale boot company some years back to do shipping of their boots as well as some of the bookkeeping. I discovered that the Income Statement for the prior year showed $254,000 in revenue and $341,000 in cost of goods sold on a cash basis. That's an $87,000 loss at the GROSS PROFIT LEVEL. I hope you understand what that means. It means, if those numbers were correct, that we were selling our boots for less than what we were buying them for. Obviously, the numbers were wrong.

      It took me about four months of investigation after work hours to discover what was going on and why. Each time the office manager paid for an inventory shipment she charged the payment to Cost of Goods Sold. The problem is that each time we sold a pair of boots from that inventory QB was charging the cost of the boots to Cost of Goods Sold again. So, each pair of boots that was sold was being charged to expense twice.

      That's the problem with charging a payment for inventory to Cost of Goods Sold. It needs to go against the vendor's accounts payable account. QB will charge the item to cost of goods sold when you prepare an invoice, assuming you have your Items set up correctly. If you don't understand how QB is handling the transactions there is a real risk of messing up the books very badly.

      As a result of this, I estimate the business underpaid its federal tax liability for the 2 prior years by at least $50,000.
      Last edited by Donatmontana; 01-06-2020, 03:52 PM.

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      • #4
        Or, as we learned back in the days of yore: Cost of Goods Sold in a combination of three factors -- Beginning Inventory plus Purchases less Ending Inventory. Cost of Goods Sold is not something that one can derive from just one entry.

        Neither is Gross Profit -- Sales less Cost of Goods Sold gives Gross Profit.

        Some CPAs have mistakenly claimed that QuickBooks is not a double entry system of bookkeeping, but it is. Even though one sometimes seems to make only one entry in QuickBooks, QuickBooks is amazing in how its subbookkeeping processes makes the second entry for you in the background by using data that is already entered.

        Does anyone remember Chuck from AIPB?
        Lorin Browning, Ph. D.
        Fellow -- National Tax Practice Institute
        [email]lorin@lorinbrowning.com[/email]

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