Hi Amy,

If 'Negative Inventory' is allowed  (Setup | Settings | Inventory & Services | Options)  newly created items can be sold, with no 'cost'.

It's also possible for total cost to be zero while using Average or for some items to be recorded at a cost of zero $$ in FIFO, so only the quantity is tracked.  Only FIFO, it's also possible to have a 'cost pool' of zero $$ items that are recorded as zero $$ cost as they work through the system.

And of course, if 'Inventory & Services' items are created as 'Services' then costs are not tracked or shown.

I hope that helps,

Randy

Hi Randy,

Thanks so much for replying.

However...the anomaly is that it was posting the cogs prior to May for all customers but is now posting the cogs for all but a few customers.  Some of the inventory items are new but when I check for later months the cogs are posting correctly.  Also, it's a mix of US customers and CDN customers.  So in one report it shows the cogs for all customers except one (a customer we've had for a very long time)...the US customer.

Now I did go to see what the settings are for Inventory and Services.  It's set up as "Average Cost" and does "allow inventory levels to go below zero".  So I guess this could be why the new inventory items are showing as zero cogs for these few customers.  

I just can't wrap my head around this.  I'm pretty sure this hasn't happened in previous years. But I do need to fix this.  I need those cogs to post.  Is there a fix for this?

Thanks again!

Amy

Hi Amy,

The problem is almost certainly related to the book cost of inventory at the time the sale is posted.  It might seem to be related to particular customers, but that is likely because certain customers are buying these items.

If you run an inventory item transaction report, in the default (Inventory ledger card) order, the cause of the problem should show up.  

i.e. something like this:

1/1/2014  Sold 100 widgets         -100     $0.00   $0.00

12/15/2014  Bought 100 widgets  100     $900.00  $900.00

12/15/2014  Variance                               $-900.00  $0.00

Posting inventory received after sales are posted will not recalculate Cost of Goods Sold for that customer, but should recalculate the average, and use a 'Variance' to book the unrecorded inventory COGS from the Purchases journal.  The end result, once inventory is adjusted to the corrected value, and all the invoices are posted for the year would be that the Financials are correct.

You will see these automatic purchasing adjustments reflected in the Income Statement, but not in any Sales report, since they are booked in the Purchases journal.

To expand on Randy analysis.... save the data as TEST then purchase some some of the items in question--- make sure the purchase brings the item well above zero. Just before posting check the JE for any variance calculations. If a variance is calculated then there is a costing problem for the items. Next step is to sell the item and then run the report.

it looks like, once the purchase invoice is created to establish the cost

if you open the original sales invoice, click  'adjust invoice', and post (without changing anything) Sage will correct the transaction to record inventory/COGs - though I'm not sure the cost is correct

new item, no inventory

sell 1

  db ar

  cr sales

purchase 3 @ 100$ each

  db inventory 200

  db variance 100

  cr ap 300

so my inventory unit cost is 100$, as expected, and the value of inventory is 200$

open s/o, adjust, and post

   correction JE

   db sales

   cr ar

   db  ar

   db  cogs 66.67

   cr   inventory 66.67

   cr   sales

would have expected 100/unit

but it looks like the correction put the original item into inventory at 0.00

making the unit cost 200/3 = 66.67

I am totally lost.  I tried running a report and did check that I wanted the variance....but alas, it still didn't show.  However, we have posted sales before receiving these items in the system.  Hmmm....that would definitely explain what happened here.  

Hi Roger L,

If you're using Average Cost, and post an adjustment, Sage 50 will:

- Reverse the original transaction exactly as it was entered, and record the transaction onto the inventory ledger.

      The total cost is still 200, but the quantity is now 3.   The 'Last Cost' is updated to 66.67

- Enter the new transaction, and look up the average cost.

To really correct it, you would have to:

 - Reverse the invoice

 - Adjust Inventory

 - Enter the invoice again.

In FIFO, I would have to test whether it creates a new cost pool for the reversal, and which cost pool it pulls it back out of.   I suspect it goes back into inventory and out again at the same value.  

The financial results when using negative inventory to sell 'zero cost' newly created items, are eventually the same over time.   The inventory reports and sales margin reports can be so messed up they are of little use.  

Hi Roger L, Randy, and GWG!

Thanks so much for all your ideas etc.  The problem definitely arose with posting sales invoices when the inventory was at zero and before receiving the new shipment therefore creating a negative inventory.  This is the reason it's only showing up for these few things.  I have spoken with my accountant and we will do an adjustment at year end seeing as how there are only a couple more months left before this.  As well, these items will not be going out the door again until most likely late spring.  I've learned a big lesson here and will no longer let sales invoices create negative inventory.

Thanks again!

Amy