C.5.2c Opening Balance Equity - Inventory

While in the Opening Balance Equity register, you notice 4 items that refer to inventory. How did this happen?

Earlier we saw how creating new bank accounts with a starting balance creates an entry in OBE. Creating new inventory products with a starting *quantity* does the same thing. As with the bank account, the correct procedure is to start with a quantity of zero and then add transactions that adjust the amount. If you enter a starting quantity on hand instead, QBO will multiply that initial quantity on hand by the cost and create a starting inventory adjustment in the Inventory Asset account categorized as OBE.

This is what happened to Craig, as can be seen when looking at the Inventory Asset register.

These starting inventory transactions cannot be deleted or edited, so instead, you'll need to make some adjustments to get them out of OBE.

We'll start by running a report that shows us what we need to know.

The resulting report has everything you need to know to make the adjustments. Keep your report handy for the rest of this exercise and note that your dates will be different than the ones shown.

The first thing we will do is take out the initial balances. Since we can't delete or edit the starting balance transactions, we will have to add balancing ones. We'll do this using an Inventory Quantity Adjustment.

Next you will need to indicate which account to adjust. Usually for an Inventory Quantity Adjustment, you would indicate a shrinkage account, but in our case, the account we are reducing is Opening Balance Equity.