I was recently asked what ledger account should be used when dealing with inventory adjustments. A good question indeed!
From my vantage point, if you are using the "Adjust Qty on Hand" screen within QuickBooks, you will want to have a special ledger account called "Inventory Adjustments" created.
As you know, you are not able to complete and save your entries in the "Adjust Qty on Hand" screen without choosing an adjustment account:
My recommendation is to go to your chart of accounts, create a new account with a type of "Cost of Goods Sold" and then name it "Inventory Adjustments". This is the account you should use each time you are in the "Adjust Qty" screen.
The reason? By using this special account, all of your adjustments (up or down) in quantity or value will be captured here for easy review and analysis. They won't end up buried with other transaction details in QuickBooks this way.
In addition, you may also want to consider creating another account in your chart of accounts with a type of "Cost of Goods Sold" and a name of "Scrap Adjustments". If you are using the "Adjust Qty" screen to record scrap transactions, use this account for them. As above, you are then easily able to see the impact of all the scrap transactions recorded by your business over any given date range.
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