Inventory Adjustments Overview

Making inventory adjustments
Counting inventory items
Adjusting item quantities and unit costs
Adjusting item total values and unit costs
Finding inventory adjustments
Changing inventory adjustments
Removing and reversing inventory adjustments

Most businesses probably won’t need to use MYOB Accounting Plus’s inventory adjustments feature very often. If you set up your items properly and you record item invoices and item purchase orders accurately and promptly, your Accounting Plus records should match your actual quantities and values.

Occasionally, however, situations will occur when you need to adjust your items’ quantities, unit costs and total values in Accounting Plus. When this is the case, it’s important that you make your adjustments carefully so your records remain accurate.

Making inventory adjustments

Step 1: Identify the inventory adjustment
Step 2: Enter the details of the inventory adjustment
Step 3: Choose what you want to do with the transaction

Determining the type of inventory adjustment you need

When making inventory adjustments, you should determine the type of inventory adjustment you need:

  • If an item’s actual inventory quantity is lower than your Accounting Plus records indicate due to unexplained loss or theft, you should enter a typical inventory adjustment. For instructions about this situation, start with Identify the inventory adjustment.
  • If an item’s actual inventory quantity is lower than your Accounting Plus records indicate because you’ve conducted sales without entering Accounting Plus item invoices, you should enter a typical inventory adjustment. For instructions about this situation, start with Identify the inventory adjustment.
  • If an item’s actual inventory quantity is higher than your Accounting Plus records indicate because you’ve made purchases without entering Accounting Plus item purchase orders, you should enter a typical inventory adjustment. For instructions about this situation, start with Identify the inventory adjustment.
  • If the actual inventory quantities of many of your items are different than your Accounting Plus records indicate, you can use the Count Inventory window, which will help you quickly update the quantities of many items at once. For instructions about using the Count Inventory window, see Counting inventory items.
  • If an item’s actual inventory quantity is different than your Accounting Plus records indicate, but the value of your main inventory asset account is correct in Accounting Plus, you should enter an inventory adjustment that changes the item’s quantity and unit cost in Accounting Plus. For instructions about this situation, see Adjusting item quantities and unit costs.
  • If an item’s actual inventory quantity matches your Accounting Plus records but the value of your main inventory asset account and the item’s total value are incorrect, you should enter an inventory adjustment that changes the balance of the inventory asset account, the item’s total value and unit cost. For instructions about this situation, see Adjusting item total values and unit costs.
  • If an item’s actual inventory quantity matches your Accounting Plus records and the value of your main inventory asset account is correct in Accounting Plus, but the unit cost of an item is incorrect, you should enter an inventory adjustment that changes the item’s total value and unit cost. For instructions about this situation, see Adjusting item total values and unit costs.
Entering information in the Inventory Adjustment window

Keep in mind that adjustments should be entered in the Quantity column field only; in other words, enter the quantity by which your inventory has changed, not the actual quantity of your inventory. For example, if your actual quantity is 100 items, but your Accounting Plus records show that your quantity is 125 items, enter a quantity of -25 in the Quantity column.

The entry you make in the Account field of the Inventory Adjustments window depends on the type of adjustment you’re making. Here are a few typical situations; choose the option that most closely matches your situation:

Warning: Be very careful choosing the account to enter in the Account column!If you choose Option A, B or C in the list below, keep in mind that the item’s inventory asset account’s value will change when you record this transaction. This is probably the most common entry to make in this type of inventory adjustment.

If you choose Option D, however, the inventory asset account’s value will not change. In most cases, you will want the value of the inventory asset account to change, so be very sure you want the account’s value to remain the same before you enter that account in the Account column.

Option A: If the items were lost or stolen

Enter the account you usually use to track loss. In this situation, most businesses use an expense account called “Shrinkage,” or a similar name, to track this type of loss.

Option B: If you didn’t record an item invoice when you sold the item

Enter the account you usually use to track the cost of sales for this item. If you’re not sure what this account is, display this item in the Item Information window, then check the Cost of Sales Account field; the entry in that field is the account you should enter in the Account column.

Option C: If you didn’t record an item purchase order when you purchased the item

If you used Accounting Plus to write a check for the purchase, use the same expense account that you used when you wrote the check to buy the item. See Finding, changing, removing and reversing Spend Money transactions to learn how to find a check you’ve written in Accounting Plus.

Option D: If you’re fixing an error you made when you entered your original item count when you set up Accounting Plus

If you made a mistake when you first entered your item information into Accounting Plus, use this item’s inventory asset account. If you’re not sure what this account is, display this item in the Item Information window, then check the Asset Account for Item Inventory field; the entry in that field is the account you should enter in the Account column.

Counting inventory items

Once in a while, you may experience discrepancies between the actual quantity of items you have in stock and your Accounting Plus records of those quantities. When such a situation exists for many items, it can take a great deal of time to enter individual inventory adjustments for each discrepancy.

Fortunately, however, the Count Inventory window will speed the process of updating the quantities of many items for you. By using this window, you can quickly create one inventory adjustment for all the items whose quantities you need to change.

Each inventory adjustment you make must be allocated to a specific account so your accounting records accurately reflect the reasons why your inventory needed adjusting. For example, many businesses use one account -- often called “Shrinkage” -- to track natural loss or theft of their items.

Warning: If you’re setting up an item or many items at this time If you’re setting up an item at this time, the procedure for recording your items’ initial quantities and values in Accounting Plus is slightly different than what is described in this procedure. See Enter the item’s opening quantity and value for more information.

Click below for the step-by-step procedure:

To count your inventory items

Adjusting item quantities and unit costs

If your Accounting Plus record of an item’s quantity is incorrect but the item’s total value is correct, you can enter a special type of inventory adjustment to change the item’s quantity and unit cost without changing the total value of the item.

If you want to reduce the inventory of the item, be sure to enter a negative number.

For example, if your Accounting Plus records show 10 units on hand, and you want to change it to 15, enter 5 in the Quantity column. Or, if your Accounting Plus records show 10 units on hand and you want to change it to 8, enter -2 in the Quantity column.

Warning: This transaction won’t affect the Inventory Journal Keep in mind that the transaction you create using these steps will not have a dollar amount assigned to it. As a result, no entry will be made in the Inventory Journal. In effect, you won’t be able to find this transaction again in the future.

Click below for the step-by-step procedures:

To adjust an item’s quantity and unit cost

Adjusting item total values and unit costs

If your Accounting Plus record of an item’s total value or unit cost is incorrect but the item’s quantity is correct, you can enter a special type of inventory adjustment to change the item’s total value and unit cost without changing the quantity of the item.

If you’re reducing the item’s unit cost and total value, be sure to enter the amount as a negative amount.

For example, say the total value of all your gadgets is $50 and you want to change that total value to $40. In the Amount column, you’d enter -$10.

Another example: Say you have 10 gadgets with a unit cost of $10 each. Your total item value is $100 (10 units multiplied by $10). Now, say you want to change the unit cost to $8 each. First, multiply the quantity of units (10) by the new unit cost (8). The eventual total item value you want is $80 (10 units multiplied by $8). To determine the amount of the adjustment, subtract the current total item value ($100) from the total item value you want to have ($80); this results in a -$20 adjustment amount. You’d then enter -$20 in the Amount column.

Click below for the step-by-step procedure:

To adjust an item’s total value and unit cost

Finding inventory adjustments

Inventory adjustments are a bit different than other types of Accounting Plus transactions, such as sales and checks, in that the transactions you create can be reviewed only in the Transaction Journal window.

Click below for the step-by-step procedure:

To find an inventory adjustment

Changing inventory adjustments

Unlike other types of transactions in Accounting Plus, once an inventory adjustment is recorded, you can’t change it.

If you’ve entered an inventory adjustment that you need to change, you can do one of two things:

  • Enter a new inventory adjustment that corrects the incorrect adjustment. For example, if you entered an adjustment of 20 gadgets but needed an adjustment of 200 gadgets instead, you could create a new inventory adjustment of 180 gadgets to make up the difference.
  • Enter a new inventory adjustment that completely cancels the effects of the incorrect adjustment, then enter another new inventory adjustment with the correct adjustment amounts. For example, if you entered an adjustment of 20 gadgets but needed an adjustment of 200 gadgets instead, you could first create a new inventory adjustment of -20 gadgets to cancel the incorrect adjustment, then you could create another new inventory adjustment of 200 gadgets to correctly record the adjustment.

Removing and reversing inventory adjustments

Unlike other types of transactions in Accounting Plus, once an inventory adjustment is recorded, you can’t remove or reverse it.

However, if you need to remove the effects of an inventory adjustment from your Accounting Plus records, you can enter a new inventory adjustment that completely cancels the incorrect adjustment. For example, if the adjustment you want to remove is for an increase of 20 gadgets, create a new inventory adjustment of -20 gadgets to cancel the incorrect adjustment.

Inventory Adjustments Overview