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casualheroescard
July 12, 2024
Question

Previous Period Inventory

  • July 12, 2024
  • 1 reply
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My 2019-2023 books have been closed and I need to journalize previous purchases to the inventory asset account. How do I do this? I was thinking that I would do some journal entry to a Prior Year Retained Earnings account. 

 

What I am trying to do is move 2019-2023 Purchases to Inventory Asset.

    1 reply

    Rainflurry
    Rainflurry
    July 12, 2024

    @casualheroescard 

     

    Did you account for this on your tax returns?  I'm sure you're aware of this but if you have a balance in Purchases at the end of a tax year, that should have been closed to Inventory and then adjusted to COGS based on your physical inventory count. Did that happen?  Are you confident that your inventory value and COGS were accurate on your tax returns for 2019-2023?  If you never closed Purchases to Inventory, your COGS could be understated, thereby causing your net income to be overstated and your tax liability to have been overpaid.  You can post it to R/E but if your COGS was reported incorrectly, consider amending tax returns.  

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