Inventory is complex and confusing, allowing negative inventory makes it much more complex.

Phoebe said:

I'm still setting up and need to check the 'do not allow below 0'

Yes, it's generally better to uncheck '[  ] Allow inventory levels to go below zero'.  for a number of reasons that I have gone into on other posts

But Sage 50 will not allow you to do that until you adjust out to zero or positive, all the negative quantities and dollar amounts, which is best done as soon as possible.

Also, to manage inventory you need to choose either 'Average' or 'FIFO'.  There is a difference in how the value of goods on hand is calculated. 

Phoebe said:

I just can't wrap my mind around how variance works.

That's understandable, given the only mention I can find in the online help is:

"Variance - Use this account to track the difference between the average cost and the actual cost of this inventory item when its inventory level drops below zero."  which is correct, but not that useful.

First, Inventory 'Variance' has nothing to do whatsoever with the 'cost variance' that is calculated when doing Cost Accounting.

In Sage 50, a variance is recorded after the inventory level drops below zero, when you next make a purchase, it will record as a variance the per-item cost difference between the per-item value it went below zero at, and the invoice per-item purchase cost.

Phoebe said:

How do I now get the correct balance of 60k??? After the correct purchase journal entry inc the variance it shows a balance of 3796.43, this s/b 60k, no variance

With all invoices entered for all inventory counted, from the Inventory Adjustment screen Record an inventory adjustment for the Quantity of items (Entering zero is allowed) and the Value of items currently on hand.  

(Override the G/L account to the account the difference SHOULD have been recorded to in sales transactions.)

Phoebe said:

it is posting and additional $70320.09 to variance and $130,320.09 to Inventory Asset

Without a copy of your inventory transaction report, showing quantities in and out, and the type of transactions, it's difficult to say exactly what happened, and why.

If you look at the inventory transaction report in default sort order, it should make sense.

(sorting by date or G/L entry runs the report in transaction order, then shuffles them into a sorted order, so the running totals make no sense - it's like running the report sideways through a strip-cut shredder and then reassembling it in a different order!)

What probably happened was that the quantity was below zero, and had gone below zero at a very different per-item value than it was replaced at, and when the negative quantity was 'refilled', the inventory ledger needed $130,320.09 to make it balance, which required the large 'variance' to allow for past transactions' total differences:

If you export the default order report to Excel and use a formula to find two numbers - the per-item cost of each transaction (In - out) / $ Amount and the per-item balance (Balance / On Hand) it's easier to follow. 

I hope that helps, please post back.

Thanks Randy.  I had heard you were THE MAN!

Not just THE MAN, THE OLD MAN.

Youth and Skill are no match for Old Age and Treachery.