Physical inventory reconciliation and need advice on how to record surplus stock

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1

Hi, I’m doing a physical inventory reconciliation and need advice on how to record surplus stock.

For example:

  • Book stock: 7 pcs
  • Physical stock: 23 pcs
  • Surplus: 16 pcs

I noticed that when I create an Inventory Write-off and enter -16 as the quantity, the inventory balance increases from 7 to 23.

Is using a negative quantity in Inventory Write-off the correct way to record surplus/discovered inventory? If not, what is the proper way in Manager.io to increase the inventory quantity by 16 pcs without creating an actual purchase transaction or supplier invoice?

I would also like to know the correct treatment in manager for the value of this surplus stock.

2

Hi,

For surplus/discovered inventory, I would not treat it as a normal inventory write-off. A write-off is normally used when stock is reduced due to loss, damage, internal use, etc.

In this case, since the physical stock is higher than the book stock, it should be treated as an inventory write-on / stock count adjustment.

For your example:

Book stock: 7 pcs
Physical stock: 23 pcs
Surplus: 16 pcs

The proper entry would be a Journal Entry:

Debit: Inventory on hand
Select the inventory item and enter quantity 16 pcs
Enter the value of the 16 pcs based on a reasonable unit cost.

Credit: Inventory Adjustment / Stock Count Gain / Miscellaneous Income
Use the same amount.

For the value, you can use one of the following, depending on the situation:

Average cost from the Inventory Items tab
Cost from the earlier write-off, if this surplus is reversing a previous write-off
Recent purchase cost or supplier price, if average cost is not suitable

Using negative quantity in Inventory Write-off may increase the quantity mechanically, but the cleaner and documented approach for surplus stock is to record it as a write-on through a Journal Entry, because you also need to recognise the value of the extra inventory properly.

Also, before posting the adjustment, it is better to confirm the reason for the surplus. If it is because a purchase invoice or receipt was missed, then the correct treatment would be to enter the missing purchase transaction instead of passing an adjustment.