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How do you adjust inventory?

The first adjusting entry clears the inventory account's beginning balance by debiting income summary and crediting inventory for an amount equal to the beginning inventory balance. The second adjusting entry debits inventory and credits income summary for the value of inventory at the end of the accounting period.

How do you adjust ending inventory?

Debit your inventory account by the amount of ending inventory in a new journal entry. This places the amount of ending inventory into your inventory account, which serves as your beginning inventory for the next accounting period. In this example, debit inventory by $8,000.

What account is inventory adjustment?

The Inventory Adjustment account is a special income statement account one of the accounts carried forward to the company's income statement from the general ledger that, when added to the Purchases account, reveals the company's cost of goods sold.

How do you adjust merchandise inventory?

0:14 6:08 Suggested clip Analyzing and recording a merchandise inventory adjustment on a YouTubeStart of suggested client of suggested clip Analyzing and recording a merchandise inventory adjustment on a

How does inventory adjustment work?

Inventory adjustments are increases or decreases made in inventory to account for theft, loss, breakages, and errors in the amount or number of items received. Inventory adjustments are increases and decreases made to inventory to match an item's actual on-hand quantity.

How is ending inventory determined?

Ending inventory, the value of goods available for sale at the end of the accounting period, plays an important role in reporting the financial status of a company and can best be figured out using the equation, Beginning Inventory + Net Purchases — Cost of Goods Sold (or COGS) = Ending Inventory.

What is an adjusting journal entry?

An adjusting journal entry is an entry in a company's general ledger that occurs at the end of an accounting period to record any unrecognized income or expenses for the period. Adjusting journal entries can also refer to financial reporting that corrects a mistake made previously in the accounting period.

What are the 4 types of adjusting entries?

Not every account will need an adjusting entry. There are four types of accounts that will need to be adjusted. They are accrued revenues, accrued expenses, deferred revenues and deferred expenses. Accrued revenues are money earned in one accounting period but not received until another.

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