Accounting for damaged materials

If you need to remove material from your stock due to damage/loss, the recommended approach is to set up an adjustment category for damaged goods and add an inventory adjustment for the missing amount. This will decrease your stock on hand correctly and attribute the material cost of the damaged stock to your inventory adjustments record. 

By categorizing adjustments, you can swiftly identify damaged items, ensuring efficient inventory management and precise financial reporting. This can be seen in your Materials adjustment summary report.

Your end of year inventory values will include this decrease and can thus be included in your cost of goods sold calculations.