It may sometimes be necessary to update the value of an inventory item to include shipping, handling or other charges. (The result will be the full replacement cost.) Whether or not this is necessary is a question that should be answered by your accounting professional. This note addresses how to implement the update.

To apply expenses (freight, handling, etc.) to the inventory item, follow the 2 steps below:

1. Adjust Inventory
   1. Open the Adjust Inventory window
   2. Enter the Item Number and Location (if used)
   3. Leave Quantity and Unit Cost blank
   4. Enter the amount of the Expense in the Amount field
   5. Enter the same Inventory Asset Account that is associated with the item (Inventory Asset Account field of the Item Profile)
   6. Enter a meaningful memo in the Memo field
   7. Record
2. Transfer the expense to the asset account
   1. Open the Record Journal Entry window
   2. Indicate the Expense Account in the Account field
   3. Indicate a Credit of the expense amount
   4. On the next line, indicate the Inventory Asset Account in the Account field
   5. Indicate the expense amount in the Debit field
   6. Enter a meaningful memo in the Memo field
   7. Record

The result will be an increase of inventory value and average cost of the item, and an increase in the Inventory Asset account by reducing the expense in the Expense account. The change will be reflected on both the Profit & Loss (by reducing the expense), and the Balance Sheet (by increasing the amount of the Inventory Asset Account).