On Hand is less than Quantity fulfilled

Setup>Accounting>Accounting Preferences>Order Management tab:   
-Fulfill Based on Commitment = Limit to Committed       

An Item Fulfillment shows an On Hand quantity less than the Quantity Fulfilled 

This happens when a series of transactions (with their respective transaction dates) are created in the following order:           

1. Sales Order = 12/01          
2. Item Fulfillment = 12/05 
3. Inventory Transfer = 12/02         

To illustrate: 
- Item X has On Hand Quantity of 12 as at Dec. 1, 2012 available on Location A     
- a Sales Order dated Dec. 1, 2012 was created containing 10 pieces of Item X from Location A     
- this Sales Order was fulfilled on Dec. 5, 2012 for all the 10 pieces from Location A
- an Inventory Transfer was created later but back-dated Dec. 2, 2012 for 7 pieces of Item X being transferred to Location B       
- When the Item Fulfillment (Status: Shipped) dated Dec. 5, 2012 is viewed, the following numbers would appear:           

-On Hand = -5
-Quantity = 10