How to Adjust an Inventory Journal Entry


Inventory accounting typically requires accountants to make various detailed journal entries. The entries required for the inventory accounting process depend on the inventory system a company uses. The perpetual system requires entries throughout the account period; a periodic system, however, only requires entry at month's end. Regardless of the method used, accountants may need to adjust inventory journal entries to correct general ledger accounts. Accountants can make corrections when they discover the error or during the month-end close process, whichever works best for their accounting system.

Review the original journal entry once the error becomes present. The journal entry should have documents to back up the entry posted into the general ledger.

Determine how to correct the error. This may involve reversing the entry to correct dollar-amount errors, moving an amount to the correct account or clearing out an account by moving inventory cost to the cost of goods sold.

Enter the correct journal entry. Make a copy of the original journal entry documents and keep it with the new entry.

Post the new journal entry into the general ledger. Enter a debit and a credit into the proper offsetting accounts.

Review the posted entry to ensure the accounts and dollar amounts are correct. Finish posting the entry and place the information for the entry with the monthly accounting documents.

Tips & Warnings

  • Adjusting a journal entry may require an authorization signature from a supervisor.
  • Proper documentation is necessary for inventory journal entries to prove the relevance and validity of entries to auditors.

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  • "Fundamental Financial Accounting Concepts"; Thomas P. Edmonds, et al.; 2011
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