USA How to Adjust Understated Inventory

Aug 2, 2016
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United States

I'd like to hear your advice on how to adjust understated beginning inventory value.

In my company's accounting book, the original beginning inventory is about $180,000. However, the actual beginning inventory value is about $1,700,000. (Don't ask me why it's so different. It was already like this when I started working for this company)

In order to adjust the balance, I was going to do this

Inventory (Debit) $1,520,000
Retained Earning (Credit) $1,520,000
However, it is going to affect our balance sheet, especially the equity section, by huge amount. Our equity structure is very simple and the net profit (loss) is only about ($600,000), so the impact will be huge.

Do you think there's a better way to handle this problem in a more strategic, yet legitimate way? Please give me your advice.


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