Hi anabonsecurity,

Thanks for chiming in on this thread in QuickBooks Community. The inventory module in QuickBooks Online will track all the inventory that goes in and out once it's been turned on. I can go through how the module works with you.

If you've adjusted the quantity, it'll create that entry into inventory shrinkage. There's no way to just void the entry and not change anything in the Profit and Loss Statement. If you delete the inventory shrinkage entry, it'll just put the items back into your inventory. To delete the inventory shrinkage entry:

1. Go to Reports from the left navigation menu.
2. Under the Sales and Customers report section, choose the Inventory Valuation Detail.
3. Find the Inventory Qty Adjust entry and click on it.
4. Click Delete at the bottom, confirm Yes.

This will remove the inventory shrinkage entry.

If you want to make the adjustment to the inventory without it creating the inventory shrinkage you'll want to change the starting value. If you started an inventory item with a wrong amount, sales price, or cost, the only way to correct this is to Modify the cost and initial quantity of an item. I can help you with this. 

To change the starting value of an inventory item, follow these steps:

1. Click on the Gear Icon in the upper-righthand corner.
2. Choose Products and Services from the Lists column.
3. Scroll down to the item you need to adjust. On the righthand column, click Adjust Starting Value. 
4. You'll get a warning, and you'll need to click Got it! to continue.
5. You can adjust the Initial Quantity on Hand or the Initial Cost. This will edit the original entry of the starting value, and the transactions will now use this new cost. There's no shrinkage recorded.
6. You can now Save and Close.

The article I shared covering modifying starting values also explains that QuickBooks Online uses the First In, First Out (FIFO) for inventory. This is how it calculates the Cost of Goods (COGS). The Cost of Goods is where the Inventory Shrinkage comes from. If you have inventory with a cost that's no longer there, that value needs to be recorded somewhere. This value becomes the Inventory shrinkage that affects your Profit and Loss statement.

I hope this helps. If you have any other questions, I'm here. Have a good night!