Which action is used to adjust inventory records when items are spoiled and cannot be sold?

Which action is used to adjust inventory records when items are spoiled and cannot be sold?

• A. Reorder
• B. Mark as used
• C. Reconcile with vendors
• D. Issue a credit memo

Answer: (D)

When spoilage occurs, you need to reflect the fact that those goods are no longer part of your inventory and may be recoverable through the supplier. Issuing a credit memo is the formal way to adjust the records because it documents the vendor’s recognition of the loss and reduces what you owe or increases the vendor credit for spoiled items. This aligns inventory value with what you actually have on hand and can impact accounts payable accordingly. Reorder would add more items, not correct the existing spoiled stock. Marking items as used implies they were used in production or service, which doesn’t accurately address the financial adjustment for spoilage. Reconciling with vendors is a broader process, whereas a credit memo specifically handles the credit/adjustment for spoiled goods.

When spoilage occurs, you need to reflect the fact that those goods are no longer part of your inventory and may be recoverable through the supplier. Issuing a credit memo is the formal way to adjust the records because it documents the vendor’s recognition of the loss and reduces what you owe or increases the vendor credit for spoiled items. This aligns inventory value with what you actually have on hand and can impact accounts payable accordingly.

Reorder would add more items, not correct the existing spoiled stock. Marking items as used implies they were used in production or service, which doesn’t accurately address the financial adjustment for spoilage. Reconciling with vendors is a broader process, whereas a credit memo specifically handles the credit/adjustment for spoiled goods.