Question: The value of our inventory is different from the trial balance when you go into the report on value of inventory. How do we explain this? How do we change the trial balance figure to the lesser amount (the report value)?

Answer: If inventory items have been set up correctly, your inventory asset account balance should only ever fluctuate in accordance with the item sales and purchases you have put into MYOB, along with any inventory adjustments you have made. At any point in time your asset balance should agree to the inventory ledger balance.

It sounds like someone may have coded an entry (or a number of entries!) directly to your inventory asset account. If this is the case, the result will be a change in the general ledger balance, but not to the actual inventory values on hand.

At all times you must avoid coding any transaction direct to the inventory asset account. You can use the “Inventory Value Reconciliation Exception” report (under the Accounts, Exceptions reports) to identify any possible offending entries, otherwise you need to run the Inventory Value Reconciliation report dated back in time to see when you became out of balance then investigate the 1-xxxx Inventory account.

If you know for sure that your inventory ledger contains the correct item quantities, unit costs and total value, you can do a Journal Entry to correct the asset account balance. To reduce the asset balance record the journal like this:

Debit: 5-xxxxPurchases or Inventory Adjustment a/c $xxxxx
Credit: 1-xxxxInventory Asset a/c $xxxxx
(Note that this is the only time you will code a transaction direct to the asset a/c!)

Continue to review the “Inventory Value Reconciliation” report regularly to ensure that the asset balance continues to agree with your inventory ledger.

If all this seems too hard, engage an MYOB Certified Consultant!

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