Hi Susan,

If you adjust the quantity only, then there is no adjustment to the cost. You are either increasing (if you reduce the quantity) or decreasing (if you increase the quantity) of the value of each component in inventory.

Say, for example, the inventory worksheet says you have 4 items worth $200 total in inventory ($50 ea average cost). If you then adjust the quantity down to 2, then each item cost you $100. If you had imported the cost as well, then there would have been an adjustment to the average cost of the items down to $100 (keeping each item valued at $50) and an entry of $100 to the inventory write-off account.