QuickBooks negative inventory basically caused because the sales transactions were entered before entering corresponding purchase transaction. Having negative inventory is not a good sign at all as it shows that the inventory you have is negative while selling an item. However, if the purchase transaction you entered prior to the sales transaction, you will still see a negative quantity on hand.
Negative Quantity on Hand will be displayed on your balance sheet, but it will still be displayed as negative under the Inventory Valuation Detail report in the Quantity on Hand (QOH) section.
Why Do Files Have Negative Inventory?
While entering an invoice transaction before providing a transaction for adding inventory such as a bill, item receipt, etc.
- Resolving negative inventory on hand is time taken process. Also, majority of business owners uses online/drop-ship services and it is usual to sell items before receiving them.
- Another reason can be that some Non-Inventory items are included in the Inventory items in QuickBooks. In such cases, you have to convert the inventory items to Non-inventory items again.
What are the effects of Negative Inventory?
Due to negative inventory, you can face one or more of the issues mentioned below. If you regularly use your QuickBooks files with negative inventory, it will reach to a point where the file becomes unusable.
- Inventory Items have Incorrect Cost
- A new inventory is created with an Item Cost but the initial QOH/VOH is not included.
- Due to this the item will be left without an average cost.
- The very first transaction for the was an invoice and not a bill, check, credit card charge or Adjust Qty/Value On Hand (IAD).
- The item was forced to negative inventory by the sale.
- An Item Cost is used from the Item List in the invoice that doesn’t have an average cost.
- The item you purchased for a cost is not matching up with the Item Cost.
- Incorrect Cost of Goods Sold (COGS). Cash-basis Balance Sheet out of balance
- A new inventory was created without an Item Cost.
- The item was sold without purchasing any inventory.
- You haven’t assigned an average cost for the inventory.
- Your COGS and inventory is damaged.
- Vendor reports have Errors.
- Generally, invoices that the Inventory/COGS transaction. If you sell negative inventory items, your next bill will contain an adjusting Inventory/COGS transaction. These adjustments are basically related to the vendors and shows up on each vendor report.
- Balance Sheet inventory amount is incorrect
- Including inventory transaction with items containing negative quantity on hand will make your cash or accrual basis balance sheet out of balance.
- Using the Rebuild Utility to will resolve the data damage on your company file, but it needs to be done whenever you enter an inventory transaction.
- If it is not done on a regular basis, you may not be able to repair your data files in coming days.
- Errors in A/P reports
- Bills for inventory purchases showing up on income and expense reports
- Inventory Assemblies show incorrect COGS on job costing reports
- Recurring data damage.
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