The inventory GL account balance is the sum of the value of all inventory items that use this inventory account as the linked asset account. If they are not the same, you will need to do an adjustment. In case the GL account is correct but the sub-ledger is incorrect, you still need to make them equal to each other first. When the account is balanced to the sub-ledger, you can then use the Inventory Adjustments & Transfers journal to bring the individual inventory item back to its proper value, along with the account it is linked to.

If you have an accountant using the accountant edition of Sage 50, you can ask him/her to do the adjustment for you as this edition will be able to select the inventory GL account in a general journal entry and modify the value in one step.

For other edition of sage 50, instead of going to each inventory item and unlink the asset inventory account, which is very time consuming, you will do the adjustment by 3 entries.

Before you make any entry, please create an account called “ADJ Account” and an inventory item called “ADJ Item”.

If the Inventory GL account is too low, please do the following steps:

1. Go to the newly created ADJ Item record, Linked tab and use the Inventory account that needs adjustment as the linked asset account.
2. Use the Adjustment journal to adjust the ADJ Item up by 1 unit and by the dollar value required.   The amount is positive and it would be the difference between the inventory items and the GL account. The entry will increase the Quantity of the ADJ item by 1 unit, debit the Inventory account and credit the Adjustment Write-off account by the difference.
3. Go back to the ADJ Item record, Linked tab and change the linked asset account from the Inventory account that needs adjustment to ADJ Account.
4. Use the Adjustment journal to adjust the ADJ Item down by 1 unit and by the dollar value required. The dollar value is the same as in step 2, but the amount this time is negative. This entry will decrease the Quantity of the ADJ item by 1 unit, debit the Adjustment Write- off account and credit the ADJ Account by the difference.
5. Link the ADJ Item to another asset account, so you will be able to select the ADJ Account in general journal.
6. Make a general journal entry to bring the ADJ Account back to 0.       It is up to you to decide the account used on the other side. Usually, it will be an expense account. This entry will debit the ADJ Account and credit the expense account.
7. Re-link the ADJ Item to the ADJ Account.

In conclusion, the procedures above bring the inventory account up to the correct value (Step 2), bring the Adjustment Write-Off account and ADJ account back to 0 (Step 4 and 6), bring the quantity of the ADJ Item back to 0 (Step 4) and credit an expense account of your choice (Step 6).

Next week, I will go over the procedure if the Inventory GL account is too high. See you.