Inventory Reconciliation Out of Balance

Problem:
The Inventory Value Reconciliation report shows an out of balance amount

Background:
Items that are kept in inventory have a Quantity on Hand value and a Current (monetary) Value, and are associated with an Inventory, Asset account. The value of the Inventory Asset account should equal the total of the Current Value of all the items associated with the Inventory Asset account. If the value of the Inventory Asset account does not equal the sum of item Current Value amounts, they are said to be Out of Balance.

Causes:

  • Incorrect Inventory Account Opening Balance
    When initialized, the opening balance of the Inventory Asset account was not set to match the sum of all item Current Value amounts.
  • Inventory Adjustments
    Adjust Inventory transaction(s) were recorded where the allocation account is the same as the item Inventory Asset account. This has the effect of adjusting the Item Current Value without adjusting the value of the Inventory Asset account.
  • Invoices referencing the Inventory Asset account directly
    If invoices, other than item invoices, are recorded with references to the item Inventory Asset account, the account will be adjusted without adjusting the Current Value of items.
  • Purchases referencing the Inventory Asset account directly
    If purchases, other than item purchases, are recorded with references to the item Inventory Asset account, the account will be adjusted without adjusting the Current Value of items.
  • Receive or Spend Money transactions referencing the Inventory Asset account
    If Receive or Spend Money transactions with references to the Inventory Asset account are recorded, the account will be adjusted without adjusting the item Current Value amounts.
  • Journal Entries
    If General Journal Entries are recorded that reference the item Inventory Asset account, the account will be adjusted without adjusting the Current Value of items.

Resolution:

  • Adjust Inventory Asset account and, or the Current Value of items so they are equal
    • Inventory on-hand quantities and values should be verified
    • Adjustments should (could) be made to the Inventory Asset account(s). (Account adjustments are customer-specific.)
  • Identify the transactions(s) that caused the out of balance situation and make corrections.
    Use Find Transactions to identify transactions referencing the Inventory Asset Account. Once identified, corrective actions, which are specific to each customer, should be taken.
    • Transactions recorded in other than the Purchase and Sales Journals (i.e., Src is PJ or SJ) should be examined. That is, General Journal (GJ), Inventory Journal (IJ), Cash Disbursements (CD) and Cash Receipts (CR) transactions should be examined.
    • PJ and SJ transactions should be examined to confirm they are Item transactions (and not Service, Misc, etc.). If they are non-item, they should be examined.

Reports Help:

  • Accounts > Accounts > Account Transactions (customize for Inventory Asset account(s))
  • Accounts > General Ledger Trial Balance > Trial Balance Detail (customize for Inventory Asset account(s))
  • Inventory > Items > Inventory Value Reconciliation (It may be possible to change the As Of date to a point where the Out of Balance condition does not exist. Therefore, you can identify the date when the condition was introduced.)