Nobody's perfect, except yours truly, of course. Inventory errors are going to happen, and when they do, it's your job as a bookkeeper to deal with it smoothly. Like cream cheese on a very white, y'all buy everything bagel. But just like the number of calories in those bagels, inventory errors typically occur because something got miscalculated. Maybe a vendor doesn't send the correct amount of inventory, maybe the owner counted wrong or had the wrong value. Either way, this mistake will mean that the inventory amount won't add up. A little bookkeeping joke for you. Now, from a bookkeeping standpoint, when an error happens, it has a ripple effect that's going to mess with things like your net income and asset value, so your income statement and your balance sheet aren't going to be accurate. Don't take my word for it. Here is an expert to talk more about inventory errors. One thing is, if you look at a balance sheet as of a particular date, let's say, a month-end or quarter-end or a year-end, whatever day or even something in between, but as long as you're consistent when you're doing your report. Whatever date you're doing, a balance sheet and you see the inventory figure, and then you run a different report for the same date looking at inventory valuation summary. If the total on the inventory valuation summary does not match with the balance sheet, then you know, something is screwy. If you see a disconnect between those two figures as of the same date, and you'll want to make sure that you're running your balance sheet on the same date and it's on an accrual basis or whatever, just want to make sure that you're consistent in your comparison of your report. If you do see a disconnect, then you're going to have to look at what went into that inventory balance on the balance sheet. You'd zoom in on that figure and you'd look at, okay, well here we have all these purchases of inventory and here we have all these invoices or sales receipts selling the inventory. But if you see something like a general journal entry or a deposit or something like that, general journal entries and deposits have no field for product service items. If somebody made a general journal entry or a deposit and they actually affected the inventory account, they're doing it directly without using a product or service item. That will make the inventory balance not match with the inventory evaluation summary balance, which is made up of totally just a product service items. That's one thing you would look at. Another thing is, even if you don't have those telltale transaction types such as a journal entry or deposit affecting the inventory balance on the balance sheet. If you look at the other transaction types, such as mainly purchases. If you look at purchases and just look at the description. You may want to make sure that you've got the quantity. You may have to change the columns when you do the detail of what's gone into the inventory, you'll want to change it so you'll see the columns of quantity and you'll see maybe the rates and therefore the total. If you don't see a quantity, but you see in the description, that they bought eight lawn ornaments and then you realize that somebody, again that had used an allowable transaction type such as an expense or a bill or a check. Instead of using the item details grid where you put in your product service items, they used the category details grid where they entered manually the inventory account, and then they just put in the description of eight lawn ornaments and the total. Well, one thing I would tell them is to be very wary of clients who've been running QuickBooks without any advice especially when it comes to inventory. Because a lot of clients mess things up terribly because they don't realize that they're messing around with using QuickBooks in the wrong way. Let's just put it that way. If a client has more than one inventory account and that means that they've created an account on their chart of accounts for, let's say, raw materials inventory, another one for work in progress inventory, another one for finished goods inventory. They would all have to be other current asset types and the detailed type would be inventoried. The only way that those accounts can be linked to inventory items on the product service list. Make sure that transactions are using just the product service items, so on checks and bills and expenses, makes sure that the item details grid is being used. Make sure that on invoices and credit memos and sales receipts, the sales transaction, make sure that the inventory items are being used as opposed to, let's say, some shadowy mirror inventory item that isn't really an inventory item. It might be a service item or a non inventory item and somebody's used it by mistake. Look for that as well. Also make sure that nobody makes any entries affecting the inventory asset account or accounts using just chart of accounts or category accounts. Make sure they use the item details grid. That means if you see journal entries or deposits affecting inventory asset, as I said earlier, that means that they're affecting the inventory asset account directly without touching products or service items, which is what adds up to the proper inventory account balance.
