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Inventory Adjustments Account for Income Statement II - The Sequel

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Posted on by john.ellis 3,480

Hi:

There is an Inventory Adjustments account in the cost section of the chart of accounts containing a large negative balance, because the beginning costs and quantities for the new inventory items were posted in the Item Journal earlier this month.

Since this results in a large figure in the cost section of the income statement and since this was the beginning of the posting of inventory costs and quantities for these new items, from an accounting standpoint is there a way to "write this off" so that these inflated figures do not appear on the balance sheet or income statement?

Thanks!

John

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  • john.ellis Profile Picture
    john.ellis 3,480 on at
    RE: Inventory Adjustments Account for Income Statement II - The Sequel

    Thanks, Kim!

    John

  • Suggested answer
    Dallefeld Profile Picture
    Dallefeld 11,423 User Group Leader on at
    RE: Inventory Adjustments Account for Income Statement II - The Sequel

    Basically, you should post a journal entry that reverses the accounting affect of the item journal load.

  • john.ellis Profile Picture
    john.ellis 3,480 on at
    RE: Inventory Adjustments Account for Income Statement II - The Sequel

    That is exactly what I did.  But, that's a pretty large amount showing now on both the balance sheet and income statement.

    Any ideas?

  • Suggested answer
    Dallefeld Profile Picture
    Dallefeld 11,423 User Group Leader on at
    RE: Inventory Adjustments Account for Income Statement II - The Sequel

    John, you should debit the Inventory Adjustment account and credit the Inventory Account on the balance sheet. Your Inventory account on the balance sheet will be populated when you enter your beginning general ledger balances.

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