equity is total assets less total liabilities, so if there are more liabilities than assets, it would be normal to have negative equity in that case.
If you are not going to use the QB inventory system then you need to use periodic inventory
create an asset account for inventory, best not to use inventory asset in case you change your mind down the road, make an opening entry for the full cost the items on hand, and use OBE as the offsetting account
There are two ways to do periodic inventory, choose one and stick with it, you can not mix and match
1. (my preference) Create an asset account called purchases and post all purchases of item for resale to that account. Periodically, weekly, monthly, etc value the inventory on hand, subtract that value from the amount shown in the purchases account and do a journal entry for the answer to the subtraction
debit COGS for that value
credit purchases for that value
OR
2. Post all purchases to COGS. Periodically, but at least at the end of the year, you value the inventory on hand and do a journal entry.
debit the asset purchases account for that value
credit COGS for that value
Print the P&L
then reverse the journal entry
debit COGS for that same value
credit the asset purchases account for that value
This last journal entry, moves the value of what was on hand at the end of year back to COGS so the cost will be counted against the new year sales.
