Glossary
What is negative stock?
What negative stock means, why it shows up, what it does to cost, and how to stop or fix it.
Updated
In short
Negative stock means records show less than zero of a product, because more was issued than recorded as received. SimpleERP refuses negative stock by default; it can be allowed in settings.
Negative stock is when the records show less than zero of a product in a warehouse, because more was sold, transferred or consumed than was recorded as coming in. It nearly always means a purchase bill or receipt was entered late or not at all, or goods went out from the wrong godown. Negative stock makes cost of goods sold unreliable until the missing receipt is entered.
Negative stock: a worked example
Lakshmi Steel has 150 Cable tray 3 m in the Main godown at ₹1,020. A lorry from Tamil Nadu Steels is unloaded but its bill has not been entered, and an invoice for 160 trays goes out.
| Setting | Invoice for 160 trays | Main godown after |
|---|---|---|
| Negative stock off (default) | Refused: only 150 available in Main godown | 150, enter the bill first |
| Negative stock on | Posted, 160 costed at ₹1,020 | −10 |
| Then the bill for 100 at ₹1,060 posts | Average restarts at ₹1,060 | 90 |
FAQ
Questions, answered
Why does stock go negative?
Usually a purchase bill entered after the sale, goods invoiced from the wrong godown, a count never posted, or a work order completed without recording the raw material received. The stock really existed; the records were simply entered out of order.
Should I allow negative stock?
Most small businesses should not. It lets billing continue when paperwork is late, but cost of goods sold for those sales uses an old average, and errors hide. If you allow it, check the stock list daily for quantities below zero and clear them.
How do I fix negative stock?
Find the missing receipt in the movement ledger and enter it: the supplier bill, a transfer in, or a found-stock adjustment. If the shelf count truly differs, post a stock adjustment from a physical count so the record matches the godown.
Is negative stock possible in Tally?
Yes, Tally allows it by default and shows the quantity in red. Many businesses moving from Tally carry negative balances. Clear them before you bring opening stock into SimpleERP, which starts with negative stock refused.
Related
Keep reading
Stock adjustment
A document that corrects recorded stock to the shelf after a count, damage or loss, with a reason and a ledger entry.
Read moreWeighted average cost
A stock valuation method where every unit carries the same cost: stock value divided by quantity, re-blended on each receipt.
Read moreInventory
Stock on hand by warehouse at weighted average cost, with a movement ledger and a low-stock list.
Read more
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