Site icon Versa Cloud ERP Blog

How to correct inventory with negative cost or zero quantity but positive value in average inventory costing

How to correct inventory with negative cost or zero quantity but positive value in average inventory costing.

Negative cost or Zero Quantity but positive value in average inventory costing

How to correct inventory with negative cost or zero quantity but a positive value in Average inventory costing mode

Let Us Help You! (1)

Let Us Help You!

Transform your business and thrive with one of the best ERP systems for SAAS companies.

Signup for a personalized demo.

Get Your Free Product Tour!

In a business, users can come across instances where some inventoried products would have negative cost or zero quantity but a positive value in the average inventory costing method.

Negative costs are widely caused by adjustments and bill postings, or when the inventory transfer is done after the order is received. These values cannot be adjusted using the normal inventory adjustment method.

You can use this report called Non-Zero or Negative Inventory Value report. This report lists any product with zero quantity on hand but a non-zero value or 0 quantity with negative values.

Here we explain the flow of transactions in Negative cost or Zero Quantity but positive value in average inventory costing with a scenario

Consider this scenario:
You receive some inventory at the cost of 100 dollars. Inventory is recorded in the system with a value of 100, which is then added to the inventory asset account for the product.
Then you sell all of the inventory. The system deducts 100 from the inventory asset account. You now have 0 value in the inventory asset account.
You then receive a bill for the shipment receipt at a cost of 90 (discount offered by your supplier).
Upon posting, the system will reverse the 100 value received and put in 90. Since the entire inventory was sold at 100 value, this leaves -10 as the value of the inventory.
You can also go into negative if you transfer stock to another facility. And then correct the cost of the stock to a lower value.

Let Us Help You! (2)

Free

Let Us Help You!

Are you looking for the perfect solution for your business needs? Sign up for the Free personalized Product Tour to begin your journey today!

Get Free Product Tour Now

In Versa Cloud ERP, each inventoried product has a sub-account under the inventory account the product is using. An user can correct the inventory value of a product by posting it to this account.

To correct this, a user can do a manual GL entry by:

You would need to create a draft transaction that debits the inventory asset account for the inventory sub-account for the product and credit a balancing account in the case when you are increasing inventory value. When you are decreasing inventory value, you would need to credit the inventory asset account and debit a balancing account.

To find this sub-account, just type in the part number into the account search field when creating a new line for a GL transaction. The asset account you are looking for would have a name that looks like this Asset – Asset account name – P/N part number.

Check with your accountant to determine which account should be used for balancing an asset account.

Post this GL entry to correct your inventory balance.

Please note: This article is for the company that has chosen to track its inventory in the average inventory costing method. For companies using FIFO, please refer to this article.

Do Business on the Move! 

Make your businesses hassle-free and cut the heavyweights sign up for the Versa Cloud ERP today!!

Join our Versa Community and be Future-ready with us. 

See How Much $ Versa Can Save Me

How Much $ Versa Can Save Me?

Use our Instant Pricing Estimate Calculator to find out.

Fill out your business requirements and get your instant customized quote for free.

Get My Instant Quote Now!

Do Business on the Move! 

Make your businesses hassle-free and cut the heavyweights sign up for the Versa Cloud ERP today!!

Join our Versa Community and be Future-ready with us. 

Exit mobile version