AccountEdge Knowledge Base

Inventory Value Less Than $0

Situation:

• You attempt to reverse or delete a purchase order.
• The average cost at this point in time of an item on the purchase order is lower than when thepurchase was recorded.
• Reversing or deleting the purchase order will make the total inventory value of the item lessthan $0.00.

Message: This Will Value Your Inventory at Less Than 0

Note: When you reverse a purchase order, AccountEdge creates a new purchaseorder with opposite amounts, taking the original PO out as a negative quantity and value. If the newtotal inventory value of the item on the reversed purchase order is higher than its current totalinventory value, the total inventory value of the item is negative. You cannot bring an item's valueto less than zero by reversing or deleting a PO, even if you have the negative inventory preferenceturned on. If you have negative inventory preference turned on, only sales can bring an item's valueto less than zero.

Solution:

Follow this procedure to reverse or delete the purchase order after creating a backup of yourfile:

1. Use the Index to Reports window to display the Items List [Summary] report. In the Total Valuecolumn of the report, find the total inventory value of the item whose purchase order you want toreverse.
2. Display the purchase order you want to reverse in the Purchases window. To do this, open thePurchases Register window and click the Journal button. In the Transaction Journal window, enter adate range that includes the transaction you want to reverse in the Dated From and Dated To fields.In the scrolling list, locate the transaction you want to reverse and click its zoom arrow. Thetransaction appears in the Purchases window.
3. Determine the original amount of the purchase of the item. The purchase amount for a line itemappears in the Total field for that line item.
   
4. Calculate the difference between the item's original purchase amount (from step 3) and theitem's current total inventory value (from step 1).
5. Use the Adjust Inventory window to enter an adjustment transaction for the item to increase itstotal inventory value by the amount you calculated in step 4. Be sure to enter 0 in the Quantityfield. Enter the adjustment as a positive number in the Amount field. Use a cost of sales account inthe Account field. Click Record.
6. Display the purchases transaction you want to reverse in the Purchases window in the same manneras you used in step 2. If you marked the `Transactions CAN'T Be Changed; They must be Reversed'selection in the Setup > Preferences > Security window, choose Reverse Purchase from the Editmenu to prepare a reversing transaction; then click Record Reversal. If you did not mark the'Transactions CAN'T Be Changed; They must be Reversed' selection in the Preferences window, chooseDelete Purchase from the Edit menu to delete the transaction.
7. Display a new Items List [Summary] report. Be sure the quantity and total inventory value of theitem you adjusted are correct. If they aren't correct, you can record another inventory adjustmenttransaction to correct them. You might want to enter a new purchases transaction with correctinformation to replace the one you've reversed or deleted, especially if the purchase ordercontained several line items that didn't require inventory adjustments.