A company's unadjusted balance in Inventory will usually not agree with the actual amount of inventory on hand at year-end.

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This is because the unadjusted balance in Inventory may not reflect any losses, damages or theft that occurred during the year, which would reduce the actual amount of inventory on hand. Additionally, the unadjusted balance may not reflect any additional purchases or returns that occurred after the balance sheet date. Thus, adjustments must be made to the Inventory account to reflect the actual physical count of inventory on hand at year-end.

A Company's Unadjusted Balance in Inventory Will Usually Not Agree