Physical Inventory
How do you classify Physical Inventory Adjustment, is it Income or Expense?
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Mimbreno
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11/22/09 6:17pm PST
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An inventory adjustment should be made against the cost of goods sold (COGS). Create an COGS account named something like Inventory Adjustment Account. Create a journal entry - If the actualy inventory on hand per your physical count is lower than your book value then you would debit the Inventory Adjustment Account (COGS) for the difference and credit your Inventory (asset) account. If the physical count is a higher value then debit the (asset) Inventory account for the difference and credit the Inventory Adjustment Acount (COGS).
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