Write off inventory to record loss, damage, obsolescence, conversion to internal use, or other non-revenue reductions of inventory. When inventory items are written off, they are no longer available for sale or production, so they are no longer assets in the Inventory on hand account. Their value must be transferred to some expense account. This is done in the Inventory Write-offs tab.
ACME Distributing gives away samples of its products at trade shows. To keep inventory records accurate, it writes off the items, allocating the expense to a Trade show advertising account. The balance of Inventory on hand declines.
Click Customize below the left navigation pane, check the box to enable Inventory Write-offs, and click Update:
In the Inventory Write-offs tab, click New Write-Off:
Complete the form. Some fields appear only when relevant selections have been made in the Settings tab:
Datewill be today’s date by default. This may be edited.
Referencecan be used for any internal or external sequence. If the box within the field is checked, Manager will assign a number automatically. The program will find the highest existing number among all inventory write-offs and add 1. This field can be edited.
Descriptionis for a summary narration explaining the write-off.
Inventory location(if any are defined under Settings) lets you select where the write-off is occurring.
Inventory itemis where you select the item being written off. Both item codes and item names show in the dropdown box.
Qtyis the number of items being written off.
Add lineallows you to add inventory items to the transaction.
Allocationis where you select the account to be debited. Only expense accounts and certain balance sheet accounts can be chosen.
Tax Codeallows you to select a tax code if the disposition of the inventory item is subject to tax. Normally, this will only be the case under value-added tax schemes when tax paid to a supplier was claimed when the item was purchased and conversion for non-revenue usage is considered taxable by your tax authority. Consult a local accountant if you are unsure about this.
Projectis selected only when the write-off is specifically allocable to a defined project.
Divisionlets you choose an applicable profit center.
Click Create to write off the inventory item(s) and make all necessary accounting adjustments.