QuickBooks Inventory Adjustment: Quantity vs Value on Hand
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Short answer: QuickBooks treats an inventory quantity adjustment and an inventory value adjustment as two different transactions, and only QuickBooks Desktop can do both. Desktop uses Vendors, then Inventory Activities, then Adjust Quantity/Value on Hand. QuickBooks Online adjusts quantity only, through + New and Inventory qty adjustment, and posts the difference to an expense account it calls Inventory Shrinkage.
Last updated August 2026.
Inventory is the account that most often quietly breaks a set of books, because nothing warns you. Payroll errors surface at filing time and bank errors surface at reconciliation, but an inventory count that drifted eight months ago just sits in the balance sheet looking plausible. The fix is a physical count followed by a deliberate adjustment, and the adjustment has to be the right kind or you will move the quantity and leave the value wrong.
Quantity adjustment and value adjustment are two different transactions
A quantity adjustment changes how many units QuickBooks thinks you have and lets the software recalculate the dollar value at its own costing method. A value adjustment changes the dollar value while leaving the unit count alone. They solve different problems, and picking the wrong one is why a second count still does not agree.
You need a quantity adjustment when the shelf disagrees with the report: breakage, theft, samples, miscounted receipts. You need a value adjustment when the units are right but the cost carried against them is not, typically after obsolete stock is written down or an item was set up with the wrong cost.
| What you need to change | QuickBooks Desktop | QuickBooks Online |
|---|---|---|
| Quantity on hand | Yes, Adjust Quantity/Value on Hand | Yes, Inventory qty adjustment |
| Value on hand, quantity unchanged | Yes, tick the Value Adjustment box | No direct adjustment available |
| Costing method used | Weighted average cost (FIFO only in Enterprise with Advanced Inventory) | FIFO, with no option to change it |
| Edition required | Any edition that tracks inventory | Plus or Advanced only |
| Default offset account | The expense account you name in the Adjustment Account field | Inventory Shrinkage, created automatically |
How do you adjust inventory quantity in QuickBooks Online?
Open + New, choose Inventory qty adjustment, set the adjustment date, pick an account in the Inventory adjustment account dropdown, then enter either a new quantity or a change in quantity for each item. QuickBooks Online posts the difference to Inventory Asset and to cost of goods sold automatically when you save.
- Open the adjustment. Select + New, then Inventory qty adjustment under Other.
- Date it to the count, not to today. The adjustment date drives which period absorbs the write-off, so use the date you actually counted.
- Choose the adjustment account. This is where the discrepancy lands. Leave it as Inventory Shrinkage or point it at your own shrinkage expense account.
- Enter the counted figure. Put the physical count in the New Quantity column and let QuickBooks calculate the change, rather than doing the subtraction yourself.
- Write a real memo. Record what the count was, who did it, and why the difference exists. This is the field that saves you in an audit or a handoff.
QuickBooks Online will create the Inventory Shrinkage account the first time you save an adjustment, whether or not you wanted it. If your chart of accounts already has a shrinkage or spoilage account, select it here so the expense lands where the rest of your reporting expects it, and make the auto-created account inactive afterwards from the chart of accounts.
How do you adjust inventory quantity or value in QuickBooks Desktop?
Go to Vendors, then Inventory Activities, then Adjust Quantity/Value on Hand. Name an expense account in the Adjustment Account field, then enter either the new quantity for each item or the difference in the Qty Difference column, using a minus sign to reduce. To change value as well, tick the Value Adjustment checkbox and edit the amounts.
The Qty Difference column is the one to use when you are correcting a known event rather than a full count. If twenty-five units were damaged, type -25 and leave the rest alone. If you are posting a full physical count, use the New Quantity column instead so a stale on-hand figure cannot survive the adjustment.
Ticking Value Adjustment opens the value columns and stops QuickBooks recalculating at average cost. That is exactly what you want for a write-down and exactly what you do not want for a routine count, because a hand-typed value silently overrides the cost history the software has been maintaining.
What account should an inventory adjustment go to?
Use an expense account that describes the cause, most often a cost of goods sold account named Inventory Shrinkage, Spoilage, or Inventory Adjustments. Shrinkage from theft, breakage and miscounts belongs in cost of goods sold because it is a cost of the goods you intended to sell. Do not post it to a generic Other Expense account, and do not post it to Opening Balance Equity.
Opening Balance Equity comes up here because it is where a great many inventory setup errors end up, and the two get conflated. Entering quantity on hand and value on an item during setup does post to Opening Balance Equity, but an adjustment after setup should not. If yours is landing there, the account mapping is wrong. The Opening Balance Equity cleanup guide covers how to clear what has already accumulated.
Can you adjust inventory with a journal entry?
No, and this is the single most expensive mistake in inventory cleanup. QuickBooks journal entries cannot carry inventory items, so a journal entry can move the dollars in the Inventory Asset account but cannot touch a single unit count or per-item cost. The balance sheet then agrees with what you intended while every inventory report disagrees with it.
This is how the classic split appears: the balance sheet says one inventory figure, the Inventory Valuation Summary says another, and nobody can find the difference. It usually traces back to a well-meant journal entry. There is a further wrinkle worth knowing, which is that the balance sheet includes both active and inactive items while the Inventory Valuation Summary only lists active ones, so an inactivated item with value still on it produces the same symptom. The inventory valuation versus balance sheet guide works through both causes.
Why can you not adjust inventory value in QuickBooks Online?
Because QuickBooks Online costs inventory strictly on FIFO and does not expose the cost layers for editing. Desktop maintains a weighted average cost it will let you overwrite; Online calculates cost from the actual purchase history, so there is no single value field to change. The supported route is to correct the underlying data rather than the total.
In practice that means one of three things. If the item was set up with the wrong cost, open Settings, then Products and services, edit the item and use Starting Value to fix the original date and cost. If a purchase was entered at the wrong price, correct that bill or expense so the cost layers rebuild from real numbers. If neither applies and you genuinely need a write-down, a journal entry against Inventory Asset and a shrinkage expense will move the balance sheet, but understand that your item-level reports will no longer agree with it and document why.
How do you delete an inventory adjustment in QuickBooks?
In QuickBooks Online, use the search icon, then Advanced search, set the transaction type to Inventory Quantity Adjustment, run the search, open the adjustment and delete it. In Desktop, open the adjustment from the item history or the Adjust Quantity/Value on Hand register and delete it there. Deleting the transaction reverses its effect but does not remove the Inventory Shrinkage account.
Think twice before deleting one dated inside a filed period. The adjustment moved cost of goods sold, which moved net income, which was on a return. Correcting a closed year through a current-dated adjustment with a clear memo is usually the right answer, and it is the answer your tax preparer will expect. A closing date password will block the back-dated edit anyway.
Run the physical count before you adjust, not after
An adjustment is only as good as the count behind it. In QuickBooks Desktop, run Reports, then Inventory, then Physical Inventory Worksheet, which prints every item with its on-hand figure and a blank Physical Count column to write in. QuickBooks Online has a built-in inventory count that works the same way, recording counted figures in a New Quantity column and generating the adjustment for you when you finalize it.
Count with the report hidden if you can. Handing a counter a sheet that already shows the expected quantity invites them to confirm it rather than count it, which is how a variance survives three consecutive counts. Count first, then compare. If the same items drift every quarter, the problem is not the adjustment and no amount of month-end correction will fix it; that is the point where tracking stock levels and reorder points in dedicated inventory software starts paying for itself against the bookkeeping time you are spending.
What the adjustment does to your numbers
A downward quantity adjustment credits Inventory Asset on the balance sheet and debits your shrinkage expense, which lowers gross profit in the period you dated it. An upward adjustment does the reverse and increases income, which is why an adjustment made purely to make a report look right is a genuine misstatement rather than a formatting choice.
Watch the size of it. A shrinkage figure over a percent or two of cost of goods sold is telling you something about receiving, counting, or theft that the accounting cannot solve. It also often exposes negative inventory, where items were sold before they were received and QuickBooks has been guessing at cost ever since; the negative inventory and cost of goods sold cleanup should be run before you trust any adjustment you make on top of it.
Where this fits in the close
Inventory belongs late in the month-end sequence, after the bank and card accounts are reconciled, because a missing purchase looks exactly like a missing unit until the payables side is complete. If your transactions are not fully in QuickBooks yet, export the account activity and run it through the CSV to QBO converter to build a Web Connect file, which imports through the bank feed rather than posting blind. Bookkeepers comparing tools for that step can read the CSV to QBO converter comparison.
Then work the rest of the close in order. The month-end close checklist sets the sequence, and if you have inherited this file from someone else, the new client cleanup checklist covers what to inspect before you start adjusting anything at all.