does your inventory quantity change for reasons other than buying and selling well then you need
to know how to make special adjustments for changes in quantities in special situations
if you have any questions about this topic you can leave them in the comments section below and
i'll do my best to help you and of course if you feel the video helped you i hope you will click
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the quantity of inventory would only change for purchases sales and returns however sometimes
there are special situations that could change the quantity of your inventory items
without buying selling or returning the items when these special situations happen that change the
quantity you must make an inventory adjustment to correct the quantity of inventory in your records
examples of situations that you would have to adjust for are theft if somebody steals some
of your apples or bananas the quantity changed in your warehouse without buying selling or returning
and you have to adjust so that quickbooks knows the correct amount that you have after the theft
same thing with a casualty loss like flood earthquake fire tornado any kind
of thing that changes your inventory quantity you would have to adjust for
what about spoilage if you're dealing with food sometimes the food spoils before you get a chance
to sell it and sometimes your merchandise becomes obsolete if other products or services
come out in the market as a result you can't sell what you have on hand so you just get rid of it
your inventory also could increase if somebody actually gives you for free merchandise that
you can turn around and sell so these are things that you would have to adjust for
that would change the quantity of inventory without buying selling or returning the items
you must have an account in the chart of accounts for each reason that inventory is adjusted
the account that you adjust for or that you use to make the adjustment is not normal income or normal
expense you must put them as type other income or other expense these items appear at the bottom of
the profit and loss and they're not part of your normal operating income but of course they will
affect your overall net income and some examples of the accounts in the chart of accounts would be
loss on inventory theft loss on inventory spoilage and income from donated inventory that we received
let's take a moment and put these three accounts in our chart of accounts
we go to the left and we click accounting chart of accounts now that we're in the chart of accounts
we go to the top right and click new now the first one scroll all the way down to get other
expense and it doesn't really matter the sub uh the uh detail type but i guess you could
just basically choose um uh exchange gain or loss because that's really the closest one
but in this case the detail type won't really matter and we want to name it loss on inventory
theft
click save and new because we're going to do
two more the next one will be loss on inventory spoilage
so again this would be other expense not expense and probably the most appropriate detail type
would simply be other miscellaneous expense and you would name it loss on inventory spoilage
and you would click save and new now this next one would not be income it would be other income
because it's not part of your normal operations
income from invent donated inventory received choose other miscellaneous
income
you can name it anything you like as long as you know what it is now click save and
close and now we have the accounts on the list to be able to make the inventory adjustments
now let's do our example let's imagine on january 16th we opened the inventory warehouse and
observed that ten bananas have spoiled and cannot be sold well before you record this make sure you
click reports and open your inventory valuation detail so you can see right now how many bananas
do we have on hand on hand it says we have 180 bananas so it will decrease to 170 actually yes
it will decrease by 10. so in order to make the adjustment on january 16 we click new and then
go all the way to the right and go down to inventory quantity adjustment now the date
that we are adjusting for is january 16th because that's the day we observed it and the account that
will hold the money that we lost on the bananas that we spent would be the other expense account
loss on inventory spoilage now click under the word product and choose bananas now the
you have a choice when you put in the number if you want you could put the change in quantity as
negative 10 and push tab and it will automatically calculate the new quantity or you can change the
new quantity you know let's let's uh let's change that back let's put this back to zero
that means that your other choice is to simply type in the new quantity and push tab
and quickbooks will calculate the change so it's up to you which one you want to put in when you
put in one it will automatically calculate and change the other now when we click save and close
we can look at the bottom of bananas and you can see that on january 16th we adjusted inventory
we have 10 fewer bananas and that we lost two hundred dollars worth of bananas in that spoilage
and in order to prove that we would click reports and go down to the trial balance and you can see
loss on inventory spoilage would show up for the very first time as two hundred dollars
the next example would be january 17th we opened the inventory warehouse and observed
that five apples have been stolen well you would do the exact same thing you would click new
go to inventory quantity adjustment put the date as january 17th
make sure you choose the correct adjustment account and in this case loss on inventory theft
so that we know exactly how much money we lost for what we paid for the merchandise that was stolen
and in this case what was stolen was were five apples so we choose apples now we could put the
new quantity as 164 or you could just put minus five and push tab and quickbooks will calculate
164. it's the same thing so it is that easy to adjust click save and close and now you can see
for the very first time loss on inventory theft shows up for the first time as fifty dollars
and if you click reports and look at your inventory valuation detail you see on january
17th we lost five apples as a result of the theft and the quantity on hand decreased to 164.
lastly let's imagine on january 18th someone gave holden the owner i think the owner is wanda not
i don't know who's the owner but the crates of bananas 10 crates of bananas that he can resell
were given to him as a birthday gift well that counts as income it might not be taxable income
but from the point of view of the business it's donated income not part of the normal
income from operations so all you have to do is go to the top left and click new inventory adjust
put the date that you got and put into the warehouse the new bananas and this time it's the
other income account that you will choose income from inventory that was donated to the company
and in this case the product was bananas and the change in quantity is now a positive number
i believe they gave 10 yes they did so the quantity of bananas increases from 170
to 180. that might even be the guy that stole the ten bananas to turn around and give it back to him
uh i don't know save and close now we look at the bottom of bananas and we see
that the quantity on hand increased by ten for twenty dollars each because that's what
we would normally buy it for so he has income of two hundred and you can click reports and look at
the trial balance and see income from inventory donated can we make this column bigger maybe
and you can click reports profit and loss and notice these things are at the very bottom
in other words then here's the net income from normal operations from buying and selling look
here's the difference between your buying and selling and then here are your other operating
expenses so here's your net income from normal operations and then you would add income and
expenses that you had that were not from normal operations to get your ultimate net income you