QuickBooks Inventory Valuation Report and Balance Sheet Do Not Match?
A question for you…
Does your month-end closing process include the step where you check that the total of your inventory on the valuation report matches your balance sheet in QuickBooks?
If not, it should.
INVENTORY VALUATION SUMMARY REPORT VS. THE BALANCE SHEET
The reports I am referring to in this situation are the:
- Inventory Valuation Summary report (Reports > Inventory)
- Balance Sheet Standard report (Reports > Company and Financial)
The Inventory Valuation Summary report serves as a recap of both inventory parts and inventory assemblies as of a certain date. It provides you with a lot of details, but the primary focus would be on the quantity on hand, average cost and asset value columns. Here’s an example of a portion of the report:
From there, you’d want to verify that the total at the bottom of this report matches the total inventory showing up on your balance sheet.
If so, this is great news – it means that things are in good order and as we accountants like to say, “the details match the total”.
BUT WHAT IF THESE REPORTS DON’T MATCH?
Once businesses realize this is an important step in their processes, then the questions start as to why the totals might not match.
Here are some common reasons as to why they don’t:
- Transactions to the Inventory Asset account that do not have inventory items. The usual culprits:
- Journal entries that affected the inventory asset account without affecting any items
- Bills or checks that affected the inventory asset account without affecting any items
- Inventory adjustments that use the inventory asset account as the adjustment account
- Inactive items that have a non-zero value
- This means you have one or more items that you made inactive that still has a quantity on-hand
Here’s a quick way to try and isolate the differences:
- Run the balance sheet standard report
- Double-click on the Inventory Asset account
- Click the Customize button, and on the Display tab, change the “Total by” drop down from Total Only to Item Detail
- Set the report date to All
- Now scan the report to see if there are any entries with “No Item” on them. If so, that’s where your detective work should begin
This graphic should help visualize the settings:
Of course, if your on-hand counts in the valuation report are not correct, that’s an even bigger problem for another day!
NEED HELP FIGURING OUT INVENTORY IN QUICKBOOKS?
I’ve been helping businesses make the most out of the QuickBooks inventory system for over 20 years.
Contact me today so we can discuss your situation and potential solutions in more detail.