When you are managing a company, it is critical to ensure that your accounting software is updated with accurate information regarding any damaged or missing inventory. Follow these steps to make the necessary adjustments for products that have been lost or damaged if you are using QuickBooks Online (QBO) but have not enabled inventory tracking.
Step 1: Create an Expense Account for Lost/Damaged Inventory
Create a new expense account that is applicable to the type of loss you experienced with your company's inventory type by navigating to your Chart of Accounts and clicking the +New button. Some examples of names would be Inventory Shrinkage, Damaged Inventory, etc.
Step 2: Create a New Entry under the Product or Services
Proceed to the Products and Services menu under the List menu in QBO
Create a new item with a name that is similar to the chart of account name and connect it to the account you made in Step 1.
Step 3: Select the Recording Technique You Will Use
Option 1: Creating a Journal Entry
To keep track of the loss, you can create a journal entry
Debit the Lost or Damaged Inventory account and Credit the account that was initially used for keeping track of the inventory.
Option 2 - Entry on the Customer Sales Invoice:
When you are recording daily sales, you can add a line entry on the invoice.
Enter a value for the lost or damaged inventory using the new product or service item that was created in Step 2, you will be able to reduce the sales for the day by the amount that was lost.
Following these steps will allow you to effectively record lost or damaged inventory in QuickBooks Online, which will ensure accurate financial reporting for your company.
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Disclaimer: The information provided in our accounting blog posts is intended for general informational purposes only and should not be considered as professional advice. Each company's structure and financial situation is unique, which may affect the applicability of the information presented. We strongly recommend consulting with your partnered CPA or financial advisor for personalized guidance on your specific accounting entries and financial management.
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