I would like to find out what the accounting process is for an inventory adjustment being made in a Perpetual Inventory valuation system. What the accounting entries should look like and what reports would be affected by this.

Case: 

We're currently running a perpetual inventory system and recently carried out our quarterly inventory. However when the adjustments were validated, some erroneous entries were found in the valuation accounts tied to the categories for the inventoried items.

I've since gathered that you're supposed to configure the accounts that would be hit for the "inventory adjustment" virtual location but I'd like to know what to name these accounts and what type to classify them as e.g, Stock loss, Stock gain etc.

I would also like to know what to do to clear the wrong accounting entries.

So to summarize, I would like to find out what the ENTIRE process is for inventory adjustment for a company running Perpetual Inventory Valuation System i.e. from the inventory app to the accounting app to any other app that might need to be involved in the process.

Thank you all for your feedback