Negative Quantity on Hand (QOH) or Negative Inventory in a Quickbooks data file is caused by when you sell items you do not have in stock i.e. by entering sales transactions before entering purchase transactions. This results in the Quantity on Hand being negative when you sell the item. Even if the corresponding purchase transactions is entered after the sales transaction, the data file will still show a negative quantity on hand error.
Negative Quantity on Hand will show up on your balance sheet, but primarily it shows up on the Inventory Valuation Detail report with negative numbers in the Quantity on Hand (QOH) column.
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Issues due to Negative Quantity on Hand (QOH) :
You will see one or more of the issues below due to Negative Quantity on Hand (QOH) in your data file:
1. Inventory item has no average cost.
2. Incorrect Cost of Goods Sold (COGS).
Selling items with negative inventory will make the Quantity On Hand (QOH) negative and can cause incorrect Cost of Goods Sold (COGS) on your Profit & Loss report.
3. Vendor reports have Errors.
The Inventory/COGS transaction is normally on the invoice. Selling negative inventory items causes your next bill to contain an adjusting Inventory/COGS transaction. These adjustments are associated with the vendor and appear on all vendor reports.
4. Incorrect COGS in Inventory Assemblies on job costing reports.
If you sell assembly items with negative 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 QOH. 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 proper functioning of your data file.
5. Balance sheet out of balance Error.
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