How-ToFinance & Operations

How to Perform Inventory Adjustments in Business Central

Correct inventory quantities and values in Business Central using item journals, physical inventory counts, and cost adjustment.

Stein Sæstad
6 min read

Inventory adjustments in Business Central fall into two main categories: correcting a known quantity discrepancy through an item journal, and reconciling quantities after a physical count. Both methods post item ledger entries that update stock levels and the related G/L accounts.

Quantity Adjustment Using the Item Journal

Use this method when you know the exact quantity to add or remove.

  1. Search for Item Journals using Alt + Q.
  2. Open a journal batch with the Item Journal template.
  3. Enter a line with Entry Type set to:
    • Positive Adjmt. to increase quantity (e.g., found items, opening balance correction)
    • Negative Adjmt. to reduce quantity (e.g., damaged goods, shrinkage write-off)
  4. Set the Item No., Location Code, and Quantity.
  5. For positive adjustments, enter the Unit Cost to capture the value correctly.
  6. Set the Posting Date.
  7. Select Post.

When to use an adjustment vs a return order: Use an item journal for internal corrections, stock discrepancies, damage write-offs, or opening entries. If a customer is returning goods for credit, use a sales return order instead. If you are returning goods to a vendor, use a purchase return order. Those documents also create the necessary financial transactions (credit memos) that an item journal does not.

Physical Inventory Count

Use the Physical Inventory Journal when you are doing a full or cycle count and want BC to calculate the difference between book quantity and counted quantity.

Step 1: Calculate Inventory

  1. Search for Physical Inventory Journals using Alt + Q.
  2. Select Calculate Inventory from the action bar.
  3. In the request page, set options:
    • Posting Date, the date the count is effective.
    • Item No., leave blank to include all items, or filter to a subset.
    • Location Filter, limit to a specific location if counting in stages.
  4. Select OK.

BC fills the journal with one line per item per location, showing the Qty. (Calculated) from the system.

Step 2: Enter Counted Quantities

  1. For each line, enter the physically counted quantity in Qty. (Phys. Inventory).
  2. BC calculates the Quantity (Adjustment), the difference between system and counted.
  3. Lines with zero difference can be left as-is or deleted; they will not post anything.

Step 3: Post

  1. Review the lines. Lines with a positive adjustment will add stock; negative adjustments will reduce it.
  2. Select Post.
  3. BC creates item ledger entries for each adjusted line.

Adjust Cost, Item Entries

After posting receipts and adjustments, the actual cost of inventory can differ from the value recorded on the item ledger entries. This happens particularly with Average and FIFO costing when costs are settled later.

Run Adjust Cost - Item Entries periodically to bring item costs up to date:

  1. Search for Adjust Cost - Item Entries using Alt + Q.
  2. Optionally filter by Item No. or leave blank to process all items.
  3. Select OK to run the batch job.

This job creates value entries that correct the cost on existing item ledger entries and posts the cost difference to the G/L inventory accounts. It should be run before closing a period.

Most implementations schedule this job to run automatically overnight.

For adjustments that change lot numbers, bin codes, or serial numbers without changing quantities, see How to Use Item Journals in Business Central.