Negative Inventory is caused by entering sales transactions before entering the corresponding purchase transactions, i.e., you sell inventory items that you do not have in stock.
Negative Inventory can show up on your balance sheet, but primarily it shows on the Inventory Valuation Detail (IVD) report with negative numbers in the Quantity on Hand (QOH) column. The IVD is the ONLY report that you can use to evaluate the extent of your negative inventory.
When you sell items that have been entered into your company data file:
When you sell items that you have NOT entered into your company data file:
NOTE: The Inventory/COGS transaction report never appears on the the transaction, but you can see it by running the Transaction Journal report.
NOTE: Bills, checks and credit card charges with Inventory/COGS adjustments will appear on the Transaction Detail by Account and Account QuickReport for a Cost of Goods Sold (COGS) account.
Selling inventory that you do not have has driven your Quantity On Hand (QOH) negative and can cause incorrect Cost of Goods Sold (COGS) on your P&L report.
The Inventory/COGS transaction is normally on the invoice. Selling out-of-stock inventory causes your next bill to contain an adjusting Inventory/COGS transaction. These adjustments are associated with the vendor and appear on vendor reports. For example, you could see Bills and Checks on COGS detail reports.
If you sell assembly items when you have an insufficient quantity on hand, and when you later build assembly items with a cost different from the average cost, the build transaction will have an adjusting Inventory - COGS transaction that is normally included in the invoice. The build transaction does not enable you to enter either a customer:job name or a class so job costing and class reports cannot include the adjusting transactions.
To keep accurate inventory records, including COGS, it is important to prevent inventory quantities from falling into a negative status. Avoid selling assembly items when there is an insufficient quantity on hand. If a sale is made when the QuickBooks records have not yet been updated with build information, be sure to enter the build transaction before the sales transaction to help ensure correct reporting.
Before attempting these solutions:
If you can do so legitimately, adjust the transaction dates such that bills are dated before invoices:
If the inventory reports are incorrect because you have not established an average cost, you can cause them to display the correct values by assuring that the earliest dated transaction for an item is a bill, check, credit card charge or Adjust Qty/Value on Hand:
To prevent these issues from occurring: Do not sell inventory items until you have purchased them and entered the purchases into QuickBooks.
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