sometimes the quantity of inventory changes but not just for buying and selling we have to
make special adjustments to inventory whenever the quantity of inventory changes for any other reason
besides buying selling or returning merchandise now you may ask why would the inventory quantity
change if you did not buy and sell or if nobody returned to us or we did not return any
merchandise to the vendor what could be the reason the quantity of inventory changed well number one
theft it doesn't happen very often it's not a normal part of business but it is something that
causes the quantity of inventory to change that is not buying selling or returning a catastrophe
such as a fire a flood or tornado earthquake or some kind of damage where the building collapses
that would be an event that's rare that's not part of normal business operation but it would
cause inventory to change in quantity spoilage if we are in the apple and banana business nothing
spoils faster than apples and bananas sometimes we don't sell the apples and bananas fast enough
and whatever spoils before we have a chance to sell is a loss to us that changes the quantity
of inventory without any event actually happening and of course sometimes we can actually donate
inventory to a charity and these would be four of several reasons why inventory quantity would
change without buying selling or returning so if those are the reasons that inventory
changed what we need in our accounting records is an expense account in the chart of accounts
for each of the different reasons why inventory quantity changed without buying or selling let's
make three of them now let's a t-account in the chart of accounts for loss on theft inventory
loss on catastrophe and inventory lost on loss on spoilage just like we've done many times before
list chart of accounts account knew these accounts are expensed type of accounts click continue make
sure your cap locks is on so we know that we added this account and not QuickBooks loss on
theft now we can click Save and new an expense type of account will still be selected loss on
casualty that means fire theft flood or some kind of impact that destroyed the inventory save
and new loss on spoilage and those will be the only three we add for now save and close and we
now have three accounts that will accumulate the total money we lost from our merchandise without
chain without buying and selling the merchandise and the total amounts will accumulate in these
accounts let us now imagine that on June 13 we open the inventory warehouse and observed that
10 apples had been stolen the cost of those 10 apples is the amount of the loss on the theft
let's take a look at how we enter it we click vendors inventory activities adjust quantity
value on hand that's where you click to adjust the inventory quantity for something other than
a purchase sale or return now the date that we observed that was June 13 so we go forward
to June 13 now the adjustment account is the account that we accumulate the loss for the
reason we lost it in this case its loss on theft now we have to select the item we lost apples now
the quantity difference is the amount of apples that we put that the inventory changed if it is
a decrease we put negative 10 and push tab notice the cold quantity on hand was 283 once you put the
quantity difference especially as negative the new quantity will be the decreased amount when
we click Save and close we can open our trial balance and we notice for the first time we
have loss on theft showing up for the cost of that inventory $100 and of course the account inventory
asset has decreased by that hundred dollars if we double click we can come down and see inventory
adjustment is the type of transaction 2 and 13th apples $100 decreasing the inventory account
notice this very same inventory adjustment showed up here in the inventory valuation detail making a
minus 2 the quantity of apples if we need to see what we put we can double click and go back to
the very window that we recorded it what about this event June 14 the inventory warehouse and
observed that 20 bananas had been spoiled the cost of those bananas is the amount of loss on spoilage
so we do what we did before we click vendors inventory activities adjust quantity value the
date that we noticed that was June 14 but this time it's not a loss on theft this time it's a
loss on spoilage we have to know the difference between the money amount of inventory we're losing
on theft compared to the money amount of inventory that we're losing on spoilage the item was bananas
and of course the quantity difference in this case was 20 so if we lost 20 bananas we put minus 20 as
the quantity difference when we push tab we notice QuickBooks calculates the new quantity of bananas
on hand when we click Save and close we can see in the trial balance for the very first time loss on
spoilage showed up in the trial balance as $400 because $400 is what we paid for the 20 bananas
that were spoiled we can also see this on the inventory valuation detail inventory adjustment
on June 14th minus 22 the quantity of bananas making the quantity of bananas go down to 503