5 QuickBooks Inventory Adjustment Mistakes (And How to Avoid Them)

Inventory mistakes in QuickBooks are easy to make and can quietly cost you thousands. A single wrong adjustment can distort your financials, inflate your tax bill, and create hours of cleanup work every month.

These errors can also trigger audit risks, lost sales, and a cycle of manual fixes that never seem to end.

In this guide, you will learn the five most costly QuickBooks inventory adjustment mistakes, how to fix them, and how automation can help you avoid them for good.

Why QuickBooks inventory adjustment mistakes matter

A single inventory adjustment error can distort your financials and quietly erode profits. When you post an adjustment to the wrong account or select the incorrect adjustment type, the mistake cascades through your entire accounting system.

For example, suppose you discover $5,000 worth of damaged inventory and create an adjustment in QuickBooks. If you select the Inventory Asset account as both the source and offset, your inventory quantity updates correctly. The damaged goods disappear from your count.

However, your profit and loss statement never records the loss, your balance sheet still shows assets that no longer exist, and you end up paying taxes on inventory that is gone.

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Errors with major consequences

Financial misstatements

Overstated inventory inflates your assets and understates your cost of goods sold, making your business appear more profitable than it is. Understated inventory does the opposite, hiding actual profitability and potentially leading to unnecessary cost-cutting.

Audit and tax compliance risks

When physical counts do not match book values, auditors flag discrepancies.

The IRS may view persistent inventory variances as signs of unreported income or inflated deductions, increasing your risk of an audit.

Customer-facing failures

Inaccurate inventory leads to overselling, which damages customer trust, unnecessary stockouts that lose sales, and poor purchasing decisions that tie up cash in the wrong products.

These cascading errors all trace back to fundamental misunderstandings about QuickBooks adjustment types and offset accounts. When businesses automate with real-time inventory sync tools like Webgility, they eliminate up to 90% of manual reconciliation work.

Understanding QuickBooks inventory adjustment

Inventory adjustments correct stock and value, but the wrong move can cause lasting errors that cascade through your entire accounting system.

A QuickBooks inventory adjustment updates either the quantity of items, their value, or both when your records do not match reality. There are two main types:

• Quantity adjustments: Update only the number of units on hand without changing the inventory’s book value. Use these when correcting counting errors where the cost per unit is still accurate

For example, if you count 15 units but QuickBooks shows 20, a quantity adjustment brings the system in line with your physical count.

• Value adjustments: Update both the quantity and the total value of inventory, flowing the change through to your financial statements. Use these for shrinkage, damage, obsolescence, or any scenario where inventory value changes

For example, if $2,000 worth of goods are damaged, a value adjustment removes both the units and their value from your books.

Common scenarios requiring adjustments

• Shrinkage and damage: Products lost to theft, damage during shipping, or warehouse accidents
• Returns processing: Items returned but not properly restocked in the system
• Channel mismatches: Inventory sold on Amazon but still showing available in QuickBooks
• Receiving errors: Purchase orders marked received but products never arrived

Where to find adjustment features in QuickBooks

• QuickBooks Online

Go to + New > Inventory Qty Adjustment. The adjustment screen shows your current quantity on hand, lets you enter the new quantity, and requires you to select an adjustment account.

• QuickBooks Desktop

Go to Vendors > Inventory Activities > Adjust Quantity/Value on Hand. Desktop offers more detailed options, including the ability to adjust value without changing quantity.

Manual adjustments work for simple setups. However, as you add more channels, real-time inventory syncing prevents many errors before they start. Automation tools like Webgility eliminate the lag between channel updates and QuickBooks, keeping all systems aligned without manual intervention.

But as your business grows, manual adjustments become harder to manage and more error-prone.

Where manual adjustments go wrong at scale

Manual inventory adjustments multiply and compound when you sell across multiple channels. What works for a single Shopify store with 50 SKUs becomes a reconciliation nightmare when you add Amazon, a retail POS system, and a wholesale channel.

Consider this workflow: On Monday, a customer returns a product purchased through Shopify. Shopify updates its inventory, but the return is not yet reflected in QuickBooks. You manually create an inventory adjustment in QuickBooks to add the item back.

Meanwhile, a similar return happens on Amazon, but Amazon’s system does not sync with QuickBooks automatically. By the end of the week, your Shopify, Amazon, and QuickBooks records all show different inventory counts for the same SKU. When you try to reconcile at the month-end close, nothing matches.

This complexity grows with every new channel. Each platform operates on its own schedule, and manual adjustments require constant coordination. Errors multiply because each adjustment is based on previous numbers that may already be wrong.

Your cost of goods sold calculations become unreliable, margin analysis by channel loses meaning, and tax calculations can be off by thousands.

Now, let us break down the five most costly mistakes and how to avoid them.

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5 QuickBooks inventory adjustment mistakes to avoid

The most expensive inventory mistakes are technical and often invisible until they create major problems. Here are the five most common QuickBooks inventory adjustment mistakes, what they look like, and how to avoid them.

1. Using the wrong offset account

Posting inventory adjustments to the Inventory Asset account instead of a Cost of Goods Sold (COGS) or expense account. This error distorts both your balance sheet and your profit and loss statement, making your business appear more profitable than it is and hiding real losses.

Scenario: You discover $5,000 in damaged inventory and create an adjustment, selecting Inventory Asset as both the source and offset. Your inventory quantity updates, but the $5,000 loss never appears on your P&L. Your balance sheet still shows assets that do not exist.

Solution: Always create a dedicated Inventory Adjustments account in your Chart of Accounts, categorized under COGS or Expenses. When making adjustments, select this account as the offset.

2. Choosing the wrong adjustment type

Selecting a quantity adjustment when you need a value adjustment, or vice versa.

The two adjustment types have different impacts. Quantity adjustments only change the count; value adjustments change both count and value, affecting your financial statements.

Scenario: You receive 500 shirts at $8 each. A flood destroys all 500. You use a quantity adjustment to remove them, but the $4,000 value remains on your books. Your balance sheet is overstated, and your P&L never shows the loss.

Solution: Before adjusting, ask: Did the value change, or just the count? Use quantity adjustments for miscounts; use value adjustments for damage, loss, or obsolescence.

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3. Entering adjustments with incorrect dates

Posting inventory adjustments with the wrong date, often defaulting to today instead of the actual event date. Incorrect dates cause timing mismatches between your physical inventory and your financial statements, making reconciliation difficult.

Scenario: You discover a discrepancy during your March count but enter the adjustment in April. Your March reports are inaccurate, and your accountant cannot match inventory to sales or purchases for the correct period.

Solution: Always enter the actual date the inventory event occurred and the date you are making the adjustment.

4. Skipping memos and documentation

Failing to add clear memos or documentation to inventory adjustments.

Without documentation, it is impossible to trace why an adjustment was made, making audits and reconciliations much harder.

Scenario: Your team finds several adjustments with no explanation. You spend hours trying to reconstruct what happened, delaying your close and increasing the risk of errors.

Solution: Always fill out the memo field with a clear, specific reason for each adjustment (e.g., “Damaged during shipping, PO #12345”).

5. Overwriting inventory counts without a backup

Manually overwriting inventory counts in QuickBooks without saving a backup or audit trail. If you make a mistake, there is no way to recover the original data, and you may lose track of what was changed.

Scenario: During a year-end count, you overwrite all inventory numbers to match your physical count. Later, you discover a counting error, but there is no record of the original values.

Solution: Always export or back up your inventory list before making bulk changes. Use tools with built-in audit trails and automatic backups.

Channie's, a multi-channel seller, saved over 60 hours per month after automating inventory sync and eliminating manual adjustments.

If you have already made one of these mistakes, here is how to fix it.

How to fix inventory adjustment errors in QuickBooks

You can recover from most inventory mistakes with these steps.

Identify incorrect adjustments

In QuickBooks Online, go to Reports > Inventory Valuation Summary and Reports > Inventory Adjustment History. In QuickBooks Desktop, use Reports > Inventory > Inventory Valuation Detail.

Look for adjustments with unusual amounts, wrong accounts, or missing memos.

Reverse or correct entries

For each incorrect adjustment, create a reversing entry using the same date and details, but with opposite values. Then, enter a new adjustment with the correct type, date, and offset account.

Troubleshoot reconciliation mismatches

If your inventory valuation does not match your balance sheet, review all adjustments for the period. Check for negative inventory, mismatched totals, or missing documentation.

When to consult your accountant

If you find large or complex errors, or if adjustments span multiple periods, consult your accountant to ensure corrections are accurate and compliant.

Here are the best practices to keep inventory management accurate.

Best practices for accurate QuickBooks inventory adjustment

The best adjustment is one you never have to make. Consistent best practices and the right inventory management automation make lasting inventory accuracy achievable.

• Schedule regular physical counts and reconcile reports
• Review adjustment logs and restrict user permissions to limit who can make changes
• Use audit trails and backups to track every adjustment and recover from mistakes

Reducing QuickBooks inventory adjustments through automation

Real-time sync minimizes manual corrections by keeping all channels and QuickBooks aligned automatically. Automated alerts flag discrepancies before they snowball, and centralized dashboards give you a single source of truth.

Skinny Mixes doubled order volume and recovered 19% of abandoned carts after automating inventory and accounting workflows with Webgility, adding $3 million in revenue.

Webgility offers real-time inventory sync, audit trails, and automation rules that keep your books accurate across every channel. With Webgility, you can close your books 3x faster and track true margins down to the SKU.

Book a demo today.

Frequently asked questions (FAQs)

What is the difference between a quantity and a value adjustment in QuickBooks?

A quantity adjustment changes only the number of items in stock, while a value adjustment changes both the quantity and the total value, impacting your financial statements.

How can I prevent inventory adjustment mistakes in QuickBooks?

Use a dedicated Inventory Adjustments account, document every change with memos, enter the correct dates, and consider automation tools to reduce manual errors.

Do I need to back up my data before making inventory adjustments?

Yes, always back up your inventory list or use software with audit trails before making bulk changes. This ensures you can recover original data if needed.

Can automation really reduce manual inventory reconciliation work?

Yes, automation tools synchronize inventory across channels and QuickBooks in real time, minimizing manual adjustments and saving significant time each month.