Internal Use: Inventory items put to internal use or consumed by the company instead of being sold to the customer. Write-offs: Inventory lost to other reasons. Breakage: Damaged inventory that cannot be legally sold as new. Waste: Expired or obsolete inventory (common in food and consumer goods). On the other hand, negative inventory quantity adjustments are often required to address: Positive inventory quantity adjustments are often due to the simplest: the addition of more inventory from production, or excess inventory that remains saleable, but did not sell. Inventory adjustment refers to adjustment entries made in periodic accounting to account for differences between recorded and actual inventory items.Īdjustment reasons vary. Sometimes, it’s necessary to modify inventory levels to reflect changes in your actual inventory count that might not be in your records. Inventory Adjustments: An OverviewĬhanges in inventory levels don’t always come from sales. 
The process itself is not terribly complicated, but ensuring it’s done properly can save you from needless frustration and costly delays in today’s data-driven business environment. And one of the most critical parts of any successful inventory system is the use of inventory adjustments. Effective inventory control is one of the most important ways your business can ensure the financial information you rely on for reporting, forecasting, and auditing purposes is complete, accurate, and up-to-date.
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