When closing out inventories, what occurs if the actual count is less than the on-hand balance?

When closing out inventories, if the actual count is less than the on-hand balance, an IAL (Inventory Adjustment Line) transaction is created to align the system's data with the actual physical inventory. This adjustment ensures that records reflect the reality of inventory levels, accounting for any discrepancies that resulted in a reduction of stock.

Creating an IAL transaction allows for the necessary corrections within the inventory management system. The IAL is a critical process to maintain accurate inventory records, facilitate accurate financial reporting, and ensure compliance with regulatory requirements. Making this adjustment helps prevent potential issues related to inventory discrepancies, such as overages or shortages that could disrupt supply chain operations and affect service delivery. It is a standard practice in inventory management to ensure integrity and accuracy of the inventory records and ultimately helps in maintaining effective stock levels for future management.