Remember last week we talk about how to do an adjustment if the Inventory GL account is too low. This week, we will go through the opposite, which is the Inventory GL account is too high.

For you information again, before you make any adjustment entry, please create an account called “ADJ Account” and an inventory item called “ADJ Item”.

If the Inventory GL account is too high, please do the following steps:

1. Go to the newly created ADJ Item record, Linked tab and use the ADJ Account as the linked asset account.
2. Use the Adjustment journal to adjust the ADJ Item up by 1 unit and by the dollar value required. The amount is positive and it would be the difference between the inventory items and the GL account. The entry will increase the Quantity of the ADJ item by 1 unit, debit the ADJ Account and credit the Adjustment Write-off account by the difference.
3. Go back to the ADJ Item record, Linked tab and change the linked asset account from the ADJ Account to the Inventory account that needs adjustment.
4. Use the Adjustment journal to adjust the ADJ Item down by 1 unit and by the dollar value required. The dollar value is the same as in step 2, but the amount this time is negative. This entry will decrease the Quantity of the ADJ item by 1 unit, debit the Adjustment Write- off account and credit the Inventory account by the difference.
5. Make a general journal entry to bring the ADJ Account back to 0. It is up to you to decide the account used on the other side. Usually, it will be an expense account. This entry will credit the ADJ Account and debit the expense account.
6. Re-link the ADJ Item to the ADJ Account.

In conclusion, the procedures above bring the inventory account down to the correct value (Step 4), bring the Adjustment Write-Off account and ADJ account back to 0 (Step 4 and 5), bring the quantity of the ADJ Item back to 0 (Step 4) and credit an expense account of your choice (Step 5).

This covers the adjustment towards Inventory GL account. Hope everyone enjoys the post this week and see you on next Wednesday.