The customer sales detail report will show deleted or adjusted transactions, and probably doesn't show and 'variance' amounts.   Those show only on the inventory report.

To really 'fix' this you have to:

1. Reverse the sales invoice

2. Record the purchase, or inventory adjustment

3. Enter the invoice again.

The only complete 'fix' is to do the adjustment in between the reversal and the new invoice, which is impossible on an automatic adjustment.

It should be possible to establish a cost for a newly created item without making a journal entry, so that the sale cost is correct:

Add one, then remove it, in the same adjustment transaction.

I would like to also point out that:

- As a whole, the accounting is correct, once the negative inventory purchase is recorded.

- Sales of services such as labour show a meaningless 100% profit in the customer sales report.  (no matter what you do elsewhere in the program, such as using timesheets, projects, etc.)

 - Sage development has been asked more than a few times for a 'show correction' filter on the Customer Sales report, and on the Inventory Transaction report.  It will probably never be a high priority, since relatively few Sage 50 users will ever use Inventory, and fewer still will make much use of the reports.

The customer sales detail report will show deleted or adjusted transactions, and probably doesn't show and 'variance' amounts.   Those show only on the inventory report.

To really 'fix' this you have to:

1. Reverse the sales invoice

2. Record the purchase, or inventory adjustment

3. Enter the invoice again.

The only complete 'fix' is to do the adjustment in between the reversal and the new invoice, which is impossible on an automatic adjustment.

It should be possible to establish a cost for a newly created item without making a journal entry, so that the sale cost is correct:

Add one, then remove it, in the same adjustment transaction.

I would like to also point out that:

- As a whole, the accounting is correct, once the negative inventory purchase is recorded.

- Sales of services such as labour show a meaningless 100% profit in the customer sales report.  (no matter what you do elsewhere in the program, such as using timesheets, projects, etc.)

 - Sage development has been asked more than a few times for a 'show correction' filter on the Customer Sales report, and on the Inventory Transaction report.  It will probably never be a high priority, since relatively few Sage 50 users will ever use Inventory, and fewer still will make much use of the reports.

I added a suggestion to allow an initial cost to be defined when setting up a new inventory item, removes the need for your in/out inventory adjustment - if I know the cost for the adjustment, I know when setting up the item

and I added a suggestion to update the COGs when updating a sales invoice, per your "complete fix" comment

...cost to be defined when setting up a new inventory item...

I strongly second that, especially when creating an item from a Sales invoice.  Then the first negative quantity transaction would also generate a negative value on hand, and record COGS. 

Even better if it could be integrated into the History setup so that item cost would calculate total cost.

QuickBooks has a setting for a 'standard' cost, although they don't call it that, only "Cost:.  I'm not sure if it's used for costing before any purchases have occurred. 

...suggestion to update the COGs when updating a sales invoice...

The way it currently works, is that the line item amounts and quantities are 'thrown back in the pool'  (the cost pool) when the invoice is reversed, and then pulled from the pool by the other half of the transaction.  

If Negative Inventory is an absolute necessity, FIFO costing is preferable to Average  - with separate cost pools, a 'floater' is easier to fish out, and only 'contaminates' one pool.

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Allowing negative inventory is an acceptable way of getting Sage 50 up and running quickly.  It should only be done with a clear understanding of the implications of checking off that box. 

Every client's situation is different, but usually there will be a huge cleanup effort required by year end.  Combining negative inventory with few restrictions on creating new items will be a massive mess.

There's always a 'day of reckoning'.