Negative number on inventory assembly item; does the COGS get deducted?

You don't want to Ever have Negative. That doesn't reflect Written off; that reflects "go rid of something I never even had, by sales, adjustment, or both."

It's an Error condition. Slow moving items, such as Had 230 Widgets, "got rid of" takes them to Zero. Not Negative. Every time you see negative Quantity, that is an error for that date.

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@Kris3 wrote:

Does the cost of the widgets sold still come out of income as a Cost of Goods sold?

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Not sure about Desktop, but in QBO, the last cost is used, when selling negative inventory