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 the purchase was recorded.
• Reversing or deleting the purchase order will make the total inventory value of the item less than $0.00.

Message: This Will Value Your Inventory at Less Than 0

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

Solution:

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

1. Use the Index to Reports window to display the Items List [Summary] report. In the Total Value column of the report, find the total inventory value of the item whose purchase order you want to reverse.
   
2. Display the purchase order you want to reverse in the Purchases window. To do this, open the Purchases Register window and click the Journal button. In the Transaction Journal window, enter a date 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. The transaction appears in the Purchases window.
   
3. Determine the original amount of the purchase of the item. The purchase amount for a line item appears in the Total field for that line item.
   
4. Calculate the difference between the item's original purchase amount (from step 3) and the item's current total inventory value (from step 1).
   
5. Use the Adjust Inventory window to enter an adjustment transaction for the item to increase its total inventory value by the amount you calculated in step 4. Be sure to enter 0 in the Quantity field. Enter the adjustment as a positive number in the Amount field. Use a cost of sales account in the Account field. Click Record.
   
6. Display the purchases transaction you want to reverse in the Purchases window in the same manner as 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 Edit menu 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, choose Delete 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 the item you adjusted are correct. If they aren't correct, you can record another inventory adjustment transaction to correct them. You might want to enter a new purchases transaction with correct information to replace the one you've reversed or deleted, especially if the purchase order contained several line items that didn't require inventory adjustments.