16 Nov Adjusting Inventory
QuickBooks Tips & Tricks – Adjusting Inventory
At this time of year the subject of inventory adjustments frequently comes up. The client has done the actual count and adjusted QuickBooks to reflect the results, the discussion between the client and tax accountant has determined that the general ledger balance needs to be adjusted, and/or the client uses a method other than average cost for valuing the inventory.
The problems begin when the accountant records a journal entry to adjust the inventory balance on the balance sheet because now the detail support schedule (inventory valuation summary) does not match the general ledger balance. The reason this will occur is because there is not any way to assign the transaction to a specific item on the journal entry. For this reason, for clients who are using the inventory features within QuickBooks, the accountant should not create journal entries for the adjustments. The only exception is for journal entries that will be reversed in the subsequent period (which will put the detail reports and general ledger “back in balance”).
How should the inventory balance be adjusted? The best alternative is to enter an inventory adjustment (Vendors > Inventory Activities > Adjust Qty/Value on Hand). If a specific item needs to be adjusted, for example an item is obsolete or the market is lower than cost, then the specific item should be adjusted. The ending quantity or ending value can be used, or both. If the adjustment is the result of a more broad issue, such as the change in valuation methods, or a discussion that results in the determination that the balance “in total” needs to be adjusted then a new item can be created for tracking the net effect of these changes.
List Limits Expanded
For most QuickBooks users, the list limit for the QuickBooks Pro and Premier products of 14,500 is sufficient. For some, however, that is not the case. We have been seeing increased list size for a variety of reasons. One of the most common is the increased number of customers as the result of web site sales. For version 6 and prior, the list limit was doubled for the Enterprise Solutions Product. New with version 7, the Enterprise Solutions limit has been removed.