How to properly account for inventory items that are used internally?

What is the best way to account for/be able to track items that are in inventory for sale, but are to be used internally?

For Example, I have a book in inventory that is available for sale, but an employee wants to requisition 5 of them for internal use by their department. what is the best way to account for these types of transactions that will adjust inventory accordingly and allow us to pull a history of these types of requisitions?


Hi Jason,

If the book is to be used to make another product then a BOM is the way to go, but if it is just to be used by the department and never “resold” then you could use an item journal and rename it, e.g. samples, or in house use, etc…

This will then appear on your ledger entries as a negative adjustment, with the journal name as the reason for the adjustment. Plus, if you always use the same name for this type of adjustment, you will be able to filter the ledger by this, and see everything ever used in this capacity.

Hope this makes sense



Hi Adam, thanks for the reply.

I have considered doing it all in the Item Journal under a batch called ‘Req’, but there are a couple of roadblocks I haven’t figured out yet.

Since, this type of transaction happens for multiple items, so I would need to also be able to pull all transactions entered under ‘Req’ in the item journal so that I can reconcile them with each department. Is there a way to do this that is not by pulling a report for each individual item?

Some clients also setup a dummy customer account and “sell” the items to them. That way all internal transactions are in a single place. Not saying it’s right, and I’m sure it’s not proper accounting practices, but it does work.

Just another approach:

Create a special Location, name it, for example, INTUSAGE and transfer Items to that location - this gives you:

  1. easy traceability which & how many items are “in use”
  2. when needed, you can later do neg.adjustment to write them off permanently, you may create a special PG for this case to use some special expenses account.

BTW - 2nd step can be used alone, if goods are supposed never to be “returned” to normal stock and thus sold.

Hi Jason,

I think the better solution is to create seperate location and transfer the inventory as suggested by Modris. by doing this way you can get a better tracking of your item…

On the item card, if you drop down on Inventory, select show all, then filter using “req” in document number, then every item, and posting date etc will be shown for that name. If you then need to investigate further, then one possibility would be to export to excel/access and report that way.

We do this for items to be sent to customers as samples. As we only send out a few items, not the whole case, the product is held in a sample area, so when an item is taken, we book it off stock by an item journal called “SAMPLES”. If we then need to find out what that department has taken, and when, then we do the above.

Hope this helps, if not then please see the other suggestions.