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VKniss - RDM
Level 1

Average Cost

How do you correct the average cost on an inventory item? For an example, our copper pipe usually cost anywhere from $3-$4 per foot. The average is roughly $3.50 per foot. Somehow our inventory item in QuickBooks got the average cost at -$819.00. Does anyone know how I can correct this?

16 Comments 16
Community Champion

Average Cost

The cost is based on your purchase history for the item, calculated from the beginning to date. It will  also include inventory adjustments if you use them.


It's weird to see it be negative/backwards if that is what you are seeing.  Not sure how you got there, but I'd focus on Credits and adjustment transactions to see if any of them look weird.


You might also Verify your company (File | Utilities | Verify) and if there are errors, review the results and see if any of them mention average cost for inventory items - specifically this one.  If so, Rebuilding your file (File | Utilities | Rebuild) will recalculate the average cost.

VKniss - RDM
Level 1

Average Cost

I tried the Verfiy Data and also Rebuild Data. It did not correct the problem. I also tried doing a manual item adjustment under Total Valve. It won't allow me to adjust the Global Cost. I don't understand how we got to the point with a positive quantity and a negative cost.


Average Cost

Thanks for getting back to us, @VKniss - RDM.


Negative Inventory is sometimes caused by entering sales transactions before entering the corresponding purchase transactions. For example, you sell inventory items that you do not have in stock.


There are few ways on how to fix this depending on these scenarios:


  • Your first transaction(s) for an item are sales.
  • You have sold inventory items without recording purchases.
  • You have entered purchases or adjustments before entering sales.


Before performing the solutions, please take note of the following:


  • Back up the QuickBooks company file without overwriting any previous backups. Keep these backups in a safe place.
  • Consult with your accounting professional to assure that these changes are legitimate. It is not sufficient to adjust the current QOH to a positive value. You must eliminate each occurrence of negative QOH.
  • If there is an extensive negative inventory that is not easily repaired, a better option may be to start a new data file.


For the detailed steps on how to fix this issue, consider checking out this article: Fix negative inventory issues in QuickBooks Desktop (QBDT). It also contains the ways on how to prevent this in the future.


To learn more about managing/tracking inventory in (QBDT), please refer to this article: Understand inventory assets and cost of goods sold tracking.


Reach out to me in the comment section below if you have any other issues or concerns. I'm more than willing to help. Have a good one!

VKniss - RDM
Level 1

Average Cost

That's the thing. I don't have a negative inventory. My inventory Quantity on hand has always been a positive number. Somehow the average cost to that inventory item became negative. For example, I have 82 feet of pipe currently in my inventory for an average cost of $4.15 per foot. QuickBooks has the 82 feet however the average cost in the system for pipe is -$819.00. I don't know how our average cost became negative or how to correct this when our inventory has a positive quantity on hand.

Tori B
QuickBooks Team

Average Cost

Hey there, @VKniss-RDM. 


Thanks for following up with us. I'm here to help sort your average cost out. 


From reviewing over your thread, our champion user, BigRedConsulting, is correct. The average cost is based on your purchase history for the item, calculated from the beginning to date. QuickBooks will compare the new average cost to the average cost used when selling and purchasing more of the item. Therefore, QuickBooks will make an adjustment entry to both the inventory asset and COGS accounts. 


However, it is strange that your average cost is so largely in the negative. With that being said, I recommend resorting the item list to clear any data damage that may be within it. I've included the steps below to do this. 


  1. Select List on the upper menu.
  2. Choose Item List.
  3. Click the Item drop-down arrow at the lower-left, then hit Re-sort List.
  4. Tap Ok.

You can see more details about resorting list in Resort list in QuickBooks Desktop.


If you're continuing to have issues with your average cost, I encourage you to contact our technical support team. They have the tools available to review your account in a secure environment and investigate the issue of its odd behavior.


Please let me know if you have further questions or concerns. You can reach out to the Community at any time. Take care and have a great day ahead! 

VKniss - RDM
Level 1

Average Cost



We don't sell our inventory. We use our inventory for Job Cost.

QuickBooks Team

Average Cost

Hello, @VKniss - RDM.


Let me share some information on how QuickBooks handles your inventory item's average costing.


Using the Average Costing method, the system takes the last purchase of on-hand stock, and any prior purchases, in order until all quantities are accounted for. The price will not be changed until a new purchase, at a different cost, is made. 


Since you're using QuickBooks Enterprise, let's consider how you set your Automatic Cost Updates preferences. This plays a very important part in updating your item cost when creating a transaction. Here's how:

  1. Go to the Edit menu.
  2. Choose Preferences.
  3. Select the Items & Inventory menu.
  4. From the Company Preferences tab, click the Automatic Cost & Price Updates button.
  5. To determine how QuickBooks will handle it if the item cost changes on a purchase:
    • Always update item cost
    • Never update item cost
    • Ask about updating the item costs. (Choosing Always or Ask, will cause QuickBooks to update the Cost filed in the item setup window.)
  6. To determine how QuickBooks will handle it if the item cost changes on a purchase:
    • Always update sales price
    • Never update the sales price.
    • Ask about updating the sales price.
  7. Click Ok. 3009.GIF

Also, you may have set QuickBooks to automatically update the Cost amount of the item if it changes on a purchase.



However, if you're still seeing a high cost posted, then it means that the item doesn't have an established average cost. Established average cost comes from purchases of the item, qty, and total cost of that qty. As a workaround, you can create an adjustment to these items. If you have entered these items without using them in a transaction you can delete and recreate the item and enter the correct amounts. 


Here's how:

  1. Go to the Lists menu.
  2. Choose Item List.
  3. Click Activities drop-down.
  4. Select Adjust Quantity/Value on Hand
  5. Input the correct details then check the Item Info After Adjustment at the bottom-left of the window.
  6. Click Save & Close.

Lastly, I've added these articles as additional references about ways to understand inventory costs:

You can always get back to us whenever you have other concerns or questions. I'm always here to help you anytime.

Level 1

Average Cost



We have 2 parts in our system that have been invoiced and paid already but still have an average cost attached to them. I would like to update the average cost of them to zero. How do I change an average cost of something from a few months ago?


Thanks, Brian


Average Cost

I'm glad you joined this thread, BrianCole.


I'll show you how to adjust the average cost of an item in QuickBooks Desktop.


To do that:


  1. Go to the List and select the Item List.
  2. Right-click anywhere on the list and select Adjust Quantity/Value On Hand.
  3. Change the Adjustment Type to Total Value.
  4. Enter the Date & Adjustment Account in the header.
  5. Enter the first Item you want to change.

Find out more about managing average cost in QuickBooks Desktop through the following articles:


Keep me posted for additional questions or other concerns. I'd be more than happy to help. Wishing you the best of luck.

Level 1

Average Cost

Thank you but this doesn't update the average cost of a past order that is complete though. At least not that I see. Here is the average cost showing up as a debit in our P&L and I need to get that to zero.Screenshot 2021-01-06 111450.jpg

Candice C
QuickBooks Team

Average Cost

Good afternoon, @BrianCole


Thanks for reaching back out to the Community. Let's work together and get this problem fixed. 


To zero out the debit in your Profit and Loss report, you'll need to create a journal entry. This will allow you to correct the information within the report since the average cost didn't update the historical transactions. Here's how: 


Note: I recommend consulting with your accountant before doing these steps. They'll be able to give you the best accounting advice for your business. If you don't have an accountant, don't worry. You can check out this link to find one near you. 


  1. Go to the Company menu. 
  2. Choose the Make General Journal Entries option. 
  3. Enter the required information. 
  4. Hit Save & New or Save & Close when you're done. 


It's that easy. You can cruise on over to this article about managing your journal entries for additional details.


Creating a journal entry will ensure the debit is a $0 amount. Let me know if you have any other questions or concerns. I'll always be around to help. Have an amazing day! 

Level 1

Average Cost

Thank you Candice

Level 1

Average Cost

check out, he use "Inventory adjustment" and select value adjustment

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Level 1

Average Cost

Hello Tori,

Thanks for this explanation.  Can you provide more detail as to the adjustments made to COGS and inventory as a result of price changes?

QuickBooks Team

Average Cost

Greetings, VinceR1. 


In addition to my colleague answer , your products total value is its average cost multiplied by its quantity in stock. I'd suggest you consult your accountant for advice on adjusting inventory value.


 I recommend you run the Inventory Valuation Summary report and look for the items you adjusted to make sure everything looks good. Here's how: 


  1. Select Reports, then click Inventory.
  2. Select the Inventory Valuation Summary, then set the dates to All.
  3. Double-click the item in question.

Check out this article for more details: Adjust your inventory quantity or value in QuickBooks Desktop.


For future reference, read through this article to learn more about inventory assets and COGS: Understanding inventory assets and cost of goods sold tracking.


I'll be around if you need more help with your inventories and QBDT account. Please don't hesitate to leave a response. I'm always here to back you up!

jeff Siegel
Level 2

Average Cost

Many times if you have adjusted the cost for a date before that invoice, then open the invoice, change anything on it and then save again.  It will recalculate at that point using the new average cost you adjusted to. 

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