Quickbooks Negative Quantity on Hand (QOH) Repair

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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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Negative Inventory errors:

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.

  1. You created a new inventory item with an Item Cost, but without an initial QOH/VOH.
  2. This leaves the item without an average cost.
  3. The first transaction to use the item was an invoice instead of a bill, check, credit card charge or Adjust Qty/Value On Hand (IAD).
  4. The sale forced the item into negative inventory.
  5. The invoice, without an average cost with which to credit inventory and debit COGS, uses the Item Cost from the Item List.
  6. You purchase the item for a cost different than the Item Cost.
  7. The bill contains an adjustment to Inventory and COGS for the difference between the Item Cost and the actual purchase cost, thus causing it to show on the P&L report.

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.

  1. You create a new inventory item without an Item Cost.
  2. You sell that item without purchasing any inventory.
  3. QuickBooks has no information from which to calculate the average cost, so it must assign an average cost of $0.00.
  4. This distorts your COGS and your inventory.
  5. They are not corrected until you establish an average cost with a bill, check, credit card charge or Adjust Qty/Value On Hand.

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.

  1. Adding inventory transaction with items that have negative quantity on hand will put your cash or accrual basis balance sheet out of balance.
  2. Rebuilding the data file will fix the data damage, but it must be done every time an inventory transaction is entered.
  3. Eventually, the file will be unrepairable and you will have to start a new data file.

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