In the last post, we reviewed the procedures to adjust the quantity of inventory on hand. There are other ways to adjust inventory on hand dollars, other than just recording the shortage from a physical count.
Specific situations require other capabilities in the accounting software. Here are two that QuickBooks can handle.
The above screenshot shows an additional option QuickBooks allows for adjusting inventory. Besides Quantity, we can adjust the value of inventory without affecting the quantity on hand.
This is not an adjustment used very often. Some industries rely on it however. Car sellers will sometimes use this feature. As new model years come out, the inventory on their lot may age and become worth less than what they originally paid.
The sample company is a construction business, but we can show the same concept. For our example, we will assume Rock Castle Construction has a cabinet unit they have had in stock for a long time. They paid $1700 for it and that is the average cost shown in QuickBooks. Styles have changed, and it no longer has a $1700 value.
The above screenshot is adjusting the cabinet item only. When this transaction is saved, the quantity for this item will remain at one on hand. The average cost shown in the system and used in any subsequent sales transactions however, will be $1500.
Another less common reason to adjust inventory is a contractor that carries inventory for jobs.
When the job is invoiced at completion, the contractor may not want to show all the items used on the invoice. The job may have been bid for one contract price. Listing all the pieces of that job may not be practical.
But, if the inventory items are not listed on the invoice, the contractor faces a dilemma. How to reduce the inventory on hand in QuickBooks.
There are a number of ways to do this. Different QuickBooks users may use different methods. But this is one.
Note the three arrows in the above screenshot. The upper left arrow points to the account used for the adjustment. It is the account used for all job expenses in all transactions.
The arrow on the upper right points to the Customer:Job designation. In adjustments not involving a job, this field can be left blank.
The lower arrow shows the dollar amount of the adjustment being made.
Some job reports must be customized to show this type of transaction. But it is possible to have this expense included on job reports along with all others.
You can see the expense for the doors included on the above Job Profitability report.
As stated earlier, there is more than one way to account for inventory costs on a job. This may or may not be the best process for you. But it is one solution and serves to explain the inclusion of a Customer:Job field on the Adjust Quantity/Value On Hand transaction window.
Hector Garcia, CPA
Certified Advanced QuickBooks ProAdvisor
12401 Orange Drive #136
Davie, FL 33330