Periodic Manual Inventory Adjustment

I’d like to know the proper way to record a periodic (e.g., monthly, quarterly) manual adjustment of inventory quantity in Manager.

Each of my sales transactions are bulk loaded into a Cash Account using the ‘Import bank statement’ function. Although I could edit each imported sales receipt and add the relevant inventory items consumed, that would be a very tedious task.

An inventory write-off didn’t seem correct since the inventory items (raw materials) were consumed in the product manufactured and sold. In looking at older posts, I saw a mention of using a Journal entry, but couldn’t figure out how that would be done. If I manually adjusted the Quantity on Hand, I would’t have an audit record of the manual adjustment.

This seems like a simple, but common issue and any advice would be appreciated.

Inventory is adjusted when the Sales Invoice is created, not when the payment is received.

Thanks - I’m aware of that, but I don’t use Sales Invoices. Most customers buy my products online and pay with PayPal. At the end of the week, I do an Import Bank Statement into my PayPal cash account in Manager. I could go into each of the 50 or so imported transactions and add the inventory (raw material) used to make each specific item sold (custom silver jewelry). That works, but is very tedious and time consuming.

I was just wondering how businesses that do periodic, “manual” inventories would adjust their quantities in software such as Manager.

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Ok, then there is an alternative system but that doesn’t involve having Inventory Items.
So do you need to know or have your accounting system know detailed Inventory stock levels/values.

If no. then you can run the opening/closing stock system - read this topic the juicy bits start half way down

A question to ask yourself, @devan, is whether you need to be concerned with inventory at all. The answer may well depend on local tax laws, so check with an accountant. But you might be able to run the business simply expensing materials. Typically, when supplies and materials are not held for extended periods, but are consumed within a normal accounting cycle, they are not accounted for as inventory.

For example, a custom furniture maker might buy special wood for a custom project. The wood is used up in the process of building the furniture. There is no need to create inventory for the wood. Nor would she count bottles of glue or screws remaining from a box of fasteners.

In your case, you might buy rolls of silver wire or beads. But you don’t sell wire and beads; you sell finished jewelry. So if you hold finished items for sale, it can be appropriate to treat them as inventory. But not the raw materials.

On the other hand, if you had a large and expensive stock of gem stones, some of which might sit around for months or years waiting for the right piece to use them in, it could be appropriate to treat individual stones as inventory.

Thanks. That thread has some good info with examples. I’m going to create a test business in Manger (a very helpful feature) and work on a couple scenarios.

When the business first started and things were simple, it could have been done either way as you said – expensing my materials or keep an inventory. However, I now have a significant investment in core components (silver sheet, silver wire, gemstones, etc.) whose cost can’t be deducted until they are sold.

I currently use a sole trader, cash-basis method of accounting, but with an inventory. The IRS allows a modified cash-basis accounting system such as this (vs, straight cash or accrual) if the gross receipts are under $1 million.

Therefore you can run a duel system - Inventory for the core components and expensed for the non-core components.

So getting back to your initial question of “periodic manual inventory adjustment”. Accepting that it would be vary tedious task (even though proper) to adjust each sale invoice for the cost of goods componentry. Therefore, there is an alternate approach.

For the core components, do a monthly stocktake and calculate the difference between the Manager Inventory Item quantities and the stocktake quantities (which should always be lower).

Then create a zero value Sales Invoice - Invoice total is 0.00. List the Inventory items and enter the calculated quantities (usage) as if they were being sold (so positive numbers) but with zero values. Once the invoice is created, the inventory item quantity and value would be adjusted and a Cost of Sales value would be added to the P&L

So a monthly stocktake and an adjusting Sales Invoice in place of 50 sales invoices, also much better then using Inventory write off or a Journal

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Thanks - I like that.