Even though QuickBooks tracks COGS very accurately, taking a year-end physical inventory allows you to compare what QuickBooks says with what is actually the truth as of the end of the year. These numbers rarely agree perfectly, but hopefully they are not too far different. Make adjustments in the inventory adjustments screen of QuickBooks, using a COGS account.
I like to set up a COGS account specifically for these
adjustments. If you think the difference is due to theft, set up a COGS
account called Shrinkage.
I found a good PowerPoint presentation that has good advice & tips. I was unable to link directly to it, but it's from this site: www.atloaug.org here's the url:
There's a lot of good information there. You can save the file and get the PowerPoint Viewer to watch it if you need to.
It's very important to take an inventory count at the end of the tax year, if not more regularly. Regular inventory counts provide an accurate base line, so that COGS can be accurately calculated.