how to repair an inventory adjustment made in error?

[Karen]

Hell all,

Help!

I made an inventory adjustment a few months ago which is now showing up
at the end of the year as a $24k "income" amount on the P&L statement.
After setting the amounts to "0" and clicking "save & close" I get the
message "You cannot record a blank transaction. Fill in the appropriate
fields and try again". I am using QB Pro 2004 on Win XP Pro.

I really need to eliminate that $24k worth of "income" as it's not
really "income". When the inventory was adjusted it was put into an
"income" account only because I received a warning "pop-up" telling me
that it had to be either income or expense. imo It is neither, but now
am faced with this problem.

Thanks,

Karen
(please reply to NG as that is a munged email addy)

 

[Tee]

Hell all,

Help!

I made an inventory adjustment a few months ago which is now showing up at
the end of the year as a $24k "income" amount on the P&L statement. After
setting the amounts to "0" and clicking "save & close" I get the message
"You cannot record a blank transaction. Fill in the appropriate fields and
try again". I am using QB Pro 2004 on Win XP Pro.

I really need to eliminate that $24k worth of "income" as it's not really
"income". When the inventory was adjusted it was put into an "income"
account only because I received a warning "pop-up" telling me that it had
to be either income or expense. imo It is neither, but now am faced with
this problem.

What was the actual adjustment for? In order to move it out of income it
has to go somewhere and people would need to know what the inventory was,
where it came from, what it was for, etc before being able to offer
suggestions.

 

[!]

You can't adjust the value of inventory without posting an entry to
SOMETHING else. QB does not say it MUST be an income or expense
account, only that it is USUALLY.

Most accountants will agree - an inventory adjustment must usually be
posted to income or expense (or Cost of Goods Sold, which is
effectively an expense account). But if you have a good enough
imagination to choose another account, and persuasive powers to
convince your accountant and the tax authorities that it is
appropriate, go right ahead - change the adjusting entry to the
account of your choice.

 

[Karen]

You can't adjust the value of inventory without posting an entry to
SOMETHING else. QB does not say it MUST be an income or expense
account, only that it is USUALLY.

OK. Sorry I didn't mention that. By error I'd posted the adjustment to
an "income" account and not one that I'd previously created for
inventory adj's which is an "asset" account. I just modified the
adjustment to remove it from "income" to that of the "asset" and the
sales balance reflects the invoices.

We do use a COGS account but when the inventory item was set up it was
assigned to an "asset" account.

Most accountants will agree - an inventory adjustment must usually be
posted to income or expense (or Cost of Goods Sold, which is
effectively an expense account). But if you have a good enough
imagination to choose another account, and persuasive powers to
convince your accountant and the tax authorities that it is
appropriate, go right ahead - change the adjusting entry to the
account of your choice.

I'm not into "imaginative" accounting practices and do want to correct
this in the most accurate way possible.

Karen

 

[!]

How did the inventory become over- or under-valued in the first place?
That may lead you to the appropriate account for the adjustment. Also
think about the adjustment - how is it an "asset"?

 

[forked tongue]

Karen:

Well, one thing you could do is edit the inventory adjustment transaction
to point it to a more appropriate account. You should be able to find the
transaction in a report. Just keep double clicking and you should get
presented with the original transaction. Change the adjustment account and
save. Quickbooks may give you a warning message about the adjustment
acount but if you dismiss the warning it will save.

Gary

 

[Karen]

How did the inventory become over- or under-valued in the first place?
That may lead you to the appropriate account for the adjustment. Also
think about the adjustment - how is it an "asset"?

The inventory became over valued by my attribution to an "income"
account rather than an "asset". I'm considering it an asset because it
is unsold stock. As this is the way that it was originally set up by my
predecessor who I assume received this setup from an accountant, I'm
leaving it alone.

To the best of my knowledge an "asset" is a physical thing, e.g. on-hand
stock whereas "income" would be produced from the sale of that stock,
and also deplete the "asset" stock.

Karen

 

[Karen]

Karen:

Well, one thing you could do is edit the inventory adjustment transaction
to point it to a more appropriate account. You should be able to find the
transaction in a report. Just keep double clicking and you should get
presented with the original transaction. Change the adjustment account and
save. Quickbooks may give you a warning message about the adjustment
acount but if you dismiss the warning it will save.

Gary

Gary,

That's precisely what I did. The error it seems was due to my trying to
reduce an "income" account (incorrectly posted) when an "asset" account
had been already assigned to it when the inv. item was set up. A
preliminary report for sales for that particular item seem to match
though a bit more checking will be necessary to insure correctness.

Thanks for all the feedback/help.

Karen

 

[!]

An asset isn't necessarily physical, but I agree with your distinction
in this case.

But I'm confused. Your inventory is an asset. If it's incorrectly
valued, the error is not a different asset.

Have I misunderstood your question? If so, try not to let me lead you
further astray.