Adjusting Entry for Inventory

 
 
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Do you maintain an inventory of merchandise for sale to your customers? If so, you need to physically count the items that are in your inventory at the end of the accounting period. Your general ledger inventory account should show the total cost of your inventory items on hand at period end. Adjusting entries are required in your general journal so that your ending inventory is reflected on your books.

Example

On December 31, 2011, you physically count the inventory items you have on hand. Using your costs and the quantities of items on hand, you determine that the total cost of your inventory at December 31 is $18,500. Looking back at your general ledger, you see that you started the year with a December 31, 2011, inventory cost of $15,200. Make the following general journal entries to update inventory:


Debit Credit
Purchases 15,200
Inventory
15,200
To clear out beginning (1/1/2011) inventory

Debit Credit
Inventory 18,500
Purchases
18,500
To book ending inventory at 12/31/2011
 
 
 

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