Value adjustments are used to change the value (cost) of your Items. Value is defined as Quantity multiplied by Cost. Therefore, if an item's value changes without changing its quantity, the cost is also changed. Value Adjustments might be used to reduce value of obsolete inventory or add costs for additional costs not included on the purchase order (e.g. freight). To add a value adjustment click Warehouse --> New Value Adjustment. You can also create a value adjustment directly from Receiving Doc and Transfer (see below). When working with Value Adjustments please keep the following points in mind:
Value adjustment are DATE specific. You should pick the Adj. Date BEFORE adding items. Once you start adding items you will not be able to change the Adj. Date.
The Account you use should NOT be an inventory asset account.
The Old Value is the All Order FIFO cost as of the Adj Date and not the QuickBooks average cost although when you Send to QB, All Orders will adjust the average cost appropriately.
The Quantity represent Quantity owned as of the Adj. Date. See understanding quantities in All Orders.
When created the warehouse menu the amount will adjust the cost of all the items but when created from a Receiving Doc or Transfer the amount will only be applied to the cost on those transactions.
To complete the value adjustment add items and edit either the Amount of New Value columns. Repeat for all the items you want to adjust then click 'Save'.
To see the effects of your value adjustment run the Inventory Valuation or Inventory Ledger reports.
As mentioned earlier one of the reasons to use the value adjustment is to add cost to items after the originating transaction has been completed.
Consider the following examples:
ABC, Inc. pays duty on imported products. It receives the product on January 11, 2009 and enters the Vendor Bill accordingly. On January 15, 2009, ABC receives a bill from the freight forwarder and wants to reflect the cost of duty in inventory.
The first is to receive the items as usual with the Receiving Doc as show in the following image.
Now click the 'Add Costs' button and the following dialog will appear:
On this dialog I enter the vendor and the amount of the duty bill. I then need to decide the allocation basis of the amount. You can select Cost, Volume,Weight or Quantity. When complete click OK a value adjustment is generated with the amount automatically allocated. Note also that the Quantity and Old Value come directly from the Receiving Doc. (Note if the Receiving Doc was in foreign currency then the Old Value will be converted to your home currency)