Account type: Stock Adjustment

Stock Adjustment is the expense account type that absorbs differences between what the books say and what the count finds, and the default contra account for Stock Entries that receive or issue goods without a purchase or sale. A Stock Reconciliation that finds two chairs missing credits Stock In Hand and debits Stock Adjustment - YFF; a surplus goes the other way. Revaluations, where you lower the rate of damaged goods, also land here. Because it is an expense under Cost of Sales, every shortage reduces profit on the Profit and Loss Statement, which is correct, but a large balance means theft, miscounting or unposted documents. Review it monthly before the VAT return.

Adjustment = (counted qty x valuation rate) - book value of the item in that warehouse

1. 01Go to Accounts Setup > Chart of Accounts, expand Expenses > Cost of Sales.
2. 02Open Stock Adjustment - YFF and confirm Account Type is Stock Adjustment.
3. 03Under Accounts Setup > Company, confirm it is the Stock Adjustment Account.
4. 04Submit a Stock Reconciliation showing 2 chairs short at Rs 4,000; the entry above posts.
5. 05Open General Ledger on this account to read every shortage, surplus and revaluation.
6. 06Investigate any month where the balance exceeds a few thousand rupees.

Set on Stock Adjustment - YFF; Stock Reconciliation posts here.

A shortage of 2 chairs at Rs 4,000 each debits Stock Adjustment Rs 8,000.