Understanding Inventory Adjustments
This document provides an overview of how Inventory Adjustments work in Zoho ERP. It explains the purpose of adjusting stock quantities, common scenarios where adjustments are required, and how they help maintain accurate inventory records. It also covers how adjustments impact inventory valuation and ensure consistency between physical and accounting stock.
When to use the Inventory Adjustments Module?
Inventory Adjustments are used to manually increase or decrease the quantity of items in inventory when there is a mismatch between the accounting stock and the actual physical stock. This helps businesses account for situations such as damaged goods, stock loss, excess stock, or quantity corrections, ensuring accurate inventory valuation and reporting.
Types of Adjustments
There are two types of inventory adjustments in Zoho ERP:
- Quantity Adjustment
- Value Adjustment
Quantity Adjustment
A Quantity Adjustment is recorded when the stock quantity in the system does not match the actual stock available in the warehouse due to reasons outside regular business activities, such as theft, damaged goods, data entry errors, write-offs, or donations. Zoho ERP allows you to record stock adjustments for basic inventory-tracked items, as well as serial-tracked and batch-tracked items.
Scenario: Patricia runs a furniture business that sells items such as wooden chairs, tables, and sofas. During a routine stock verification in her warehouse, she notices that the system shows 50 wooden chairs, but only 47 chairs are physically available due to damage during handling. To correct this mismatch, Patricia creates an Inventory Adjustment in Zoho ERP and reduces the quantity by 3 units, selecting the appropriate adjustment reason and account. This ensures that the system inventory accurately reflects the actual stock and maintains correct inventory valuation.
Value Adjustment
A Value Adjustment is recorded in Zoho ERP when the value of an item increases or decreases due to supply and demand. For example, if an item is slow-moving, it leads to a drop in the unit cost and the asset value.
Scenario: Bailey runs an electronics accessories business and regularly reviews inventory valuation. After a supplier price revision, Bailey realizes that the cost of wireless headphones in the system is lower than their actual purchase value. To correct this, Bailey creates an Inventory Value Adjustment in Zoho ERP and updates the item value without changing the stock quantity. This ensures accurate inventory valuation and proper financial reporting while keeping the physical stock unchanged.