What you need to know about inventory adjustments

Xero doesn't let you enter a transaction if it means your tracked inventory item's quantity or value falls below zero. You may need to make an adjustment in this situation. Additionally, you may need to adjust inventory following an inventory count.

We recommend you consult with your accountant or bookkeeper before making any inventory adjustments.

Important information about inventory adjustments

  • Inventory adjustments only apply to tracked inventory items.
  • You cannot adjust an inventory item so that its quantity or value falls below zero.
  • Xero updates inventory quantity on hand when you enter a transaction or adjustment. Xero does not backdate or forward date inventory quantity changes.
  • If you adjust an inventory item's quantity, the total value will be automatically adjusted.
  • If you need to decrease an inventory item's quantity and its value, do the 'decrease quantity' adjustment first, then the revaluation adjustment.
  • If you want to change something else about the tracked inventory item, for example its description or price, edit the item instead.
  • If you want to adjust for an incorrect transaction, and you haven't entered a payment for the transaction yet, you can simply edit the transaction rather than entering an inventory adjustment.

You may need to create an inventory adjustment account

When you make an inventory adjustment, Xero will require you to specify which account the adjustment should be recorded in. You might like to create an account in your chart of accounts for inventory adjustments.

Add an account to your chart of accounts

Talk to your accountant or bookkeeper if you're not sure whether to create an inventory adjustment account for your organization.