25.W32 - Adjusting Inventory

Scenario: Your client Craig noticed discrepancies in his stock levels and asked you to help him correct them. The situation, as noted down by Craig, is: Sprinkler heads: According to his QBO inventory: 25; In reality: 20 Sprinkler pipes According to his QBO inventory: 31; In reality: 35 What you need to do: - Enter the inventory quantity adjustment in batch to adjust the quantities based on Craig’s inventory count -Use Cost of Goods Sold (COGS) as the Inventory adjustment account

9 steps

QuickBooks

Quickbooks

We'll start by loading the Sample Company. [Click here to load the Sample Company.](https://qbo.intuit.com/redir/testdrive)

**IMPORTANT** 👩‍💻 Now that the Sample Company is open, if you are using Google Chrome, you can display this exercise and the Sample Company together on the same screen. [Click Here to Learn How](https://goakadian.com/success-guide#scribe-extension) ⚠️ If you have trouble with the Sample Company, click here for [Troubleshooting Tips](https://goakadian.com/success-guide#sample-company). ❌ Finally, if you come across any pop-ups during the exercise, just close them and move forward to the next step.

Now let's get started with the exercise.

**NOTE:**\ Need help using the Scribe Extension? Watch the quick [**how-to video**](https://goakadian.com/success-guide#scribe-extension).\ \ If you experience any glitches in the QBO Sample Company, please review our [**Troubleshooting Steps**](https://goakadian.com/success-guide#sample-company)**.**\ \ If you come across any popups during this exercise, close them and move forward to the next step

The Sample Company

To complete this exercise, you must be in the Sample company. To get into it, click on the Gear icon on the top right corner of the screen, then select Sample company.

Note that you will be logged out of your current account. If you are sure, click "Continue" to confirm.

Hands On Practice

As a reminder, here is the scenario: Your client Craig noticed discrepancies in his stock levels and asked you to help him correct them. **What you need to know:** The situation, as noted down by Craig, is: **Sprinkler heads:** According to his QuickBooks Online inventory: **25;** In reality: **20** **Sprinkler pipes:** According to his QuickBooks Online inventory: **31;** In reality: **35** **What you need to do:** - Enter the inventory quantity adjustment in batch to adjust the quantities based on Craig’s inventory count - Use Cost of Goods Sold (COGS) as the Inventory adjustment account

In this exercise, we will be using COGS for the adjustment, but you could also use a Shrinkage account. - If you use a **Shrinkage** expense account, you’re treating the shortage as a loss outside normal sales—like theft, spoilage, or damage—separate from your product margin. - If you use **COGS**, QBO assumes the missing stock was sold (or otherwise consumed in producing sales) and moves the cost out of inventory to cost of goods sold. For our purposes, we're just assuming the products were sold, but not accounted for.

From the left navigation bar, hover over Sales, then select "Products & services".

Click on the "checkbox" next to Sprinkler Heads and Sprinkler Pipes.

Notice the cost of these two products. This will become important later.

Click on "Batch Actions", then select "Adjust quantity".

On the Inventory adjustment account field, select "Cost of Goods Sold".

On the first line (Sprinkler Heads), in the New QTY field, type "20".

On the second line (Sprinkler Pipes), in New QTY field, type "35".

Notice that when you enter the new quantities, QBO will automatically do the math and enter the "Change in QTY." You can also enter the change, and QBO will calculate the new value.

Click the black "Save" button.

Let's see how this looks on the Transaction Journal.

Click "More", then select "Transaction journal".

The Transaction Journal shows how the adjustment was made. The cost of the Sprinkler Heads was $.75, and they *reduced* by 5, for a total of $3.75. Assets live on the *Debit* side, so when the Inventory Asset account **decreases**, it shows this on the *Credit* side. The cost of the Sprinkler Pipes was $2.50, and they *increased* by 4, for a total of $10.00. Assets live on the *Debit* side, so when the Inventory Asset account **increases**, it shows this on the *Debit* side. COGS is an Expense account, which also lives on the Debit side. It increases on the left and decreases on the right.

🏋️‍♀️ Get More Practice

This exercise was featured as an Exercise of the Week in the QBO Gym. Do more hands-on exercises just like this by joining our FREE, 5-day Bookkeeping Challenge. [Just click here.](https://www.fastandeasyqbo.com/gym5)

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