Posting Purchase Cost to G/L

When we post a purchase inventory to G/L, Navision will post Cost Amount (Actual) in Item Ledger Entry and Value Entries to G/L Account based on the following condition:

"Item Ledger Entry".Type = Purchase ==> Debit Inventory Account "

"Values Entries".Type = Direct Cost ==> Credit Direct Cost Applied Account

"Values Entries".Type = Indirect Cost ==> Credit Overhead Applied Account

"Values Entries".Type = Variance ==> Credit Purchase Variance Account

* Inventory Account is defined in Inventory Setup
* Direct Cost Applied Account, Overhead Applied Account and Purchase Variance Account are defined in General Posting Setup.

Purchase Price different than Standard Cost

When standard cost is in used, the inventory value is based on the standard cost set up in the Item card. Any price difference than the standard cost will be posted as variance. Let's consider the following example:

1) Create a Purchase Order in Cronus database from Vendor 10000.
2) Select Type = Item and No. = 1110 in the Purchase Line. Navision will automatically filled the Direct Unit Cost Excl. SST field and Unit Cost (LCY) field with 1.05, which is pulled from Item Card's Standard Cost.
3) Change the Direct Unit Cost Excl. SST to 2.00.
4) Enter 20 into the Quantity field.
5) Post the Purchase Order as received and invoiced.


Now, Open Item Card and browse to Item 1110 - Rim. Click on Item --> Entries --> Ledger Entries. Notice that Navision has posted 21.00 to Cost Amount (Actual) field, which is (20 x 1.05) instead of 40.00 (20 x 2.00). Click on the 21.00 to drill-down to the Value entries.
The actual acquisition cost is 40.00 but the inventory is valued at 21.00. The difference of 19.00 is posted with the Value Entry Type of Variance.


When we post the Inventory to G/L, the following G/L Entries will be created:
-40.00 Direct Cost Applied Account (GENERAL POSTING SETUP)
+40.00 Inventory Account (INVENTORY POSTING SETUP)
-19.00 Inventory Account (INVENTORY POSTING SETUP)
+19.00 Purchase Variance (GENERAL POSTING SETUP)




Please note that the net effect are:
-40.00 Direct Cost Applied Account
+21.00 Inventory Account
+19.00 Purchase Variance Account


Another set of G/L Entries posted are:
+40.00 Purchase Account (GENERAL POSTING SETUP)
+04.00 Purchase SST Account (SST POSTING SETUP)
-44.00 Payable Account (VENDOR POSTING SETUP)


If we add additional cost to the purchase such as freight cost, the variance will also change accordingly.
1) Create a Purchase Order from Vendor 10000.
2) Add a purchase line of Charge (Item) for item P-FREIGHT.
3) Enter 10 in the Direct Unit Cost Excl. SST field.
4) Click on Line --> Item Charge Assignment.
5) Click on Functions --> Get Receipt Lines.
6) Select the line with 20 PCS of Items 1110 and then click on the OK button.
7) Enter 1 in the Qty. to Assign field.
8) Close the Item Charge Assignement (Purch) screen.
9) Post the Order as Received and Invoiced.


Now, open Item Card and browse to Item 1110 and then open the Item Ledger Entries. You can see that the Cost Amount (Actual) remain at 21.00. Drill down to the Value Entries, you will notice that Navision has created another Direct Cost entry with Cost Amount (Actual) = 10 and Cost per Unit = 0.50. At the same time, Navision also created a Variance entry with Cost Amount (Actual) = -10.00 and Cost per Unit = -0.50. So, the net off effect still 21.00.


On the G/L Entries side, we will get:
-10.00 Direct Cost Applied Account
+10.00 Inventory Account
-10.00 Inventory Account
+10.00 Purchase Variance Account


+10.00 Purchase Account
+01.00 Purchase SST Account
-11.00 Payable Account


After all the posting, the net effects are as follows:
-50.00 Direct Cost Applied Account
+21.00 Inventory Account
+29.00 Purchase Variance Account
+50.00 Purchase Account
+05.00 Purchase SST Account
-55.00 Payable Account


At the end, the Inventory Account still remain at 21.00, which is based on the standard cost.

Inventory Posting

Inventory Posting in Navision in done through posting of Item Journal Lines. Item Journal Lines can be posted directly from Item Journal or posted indirectly, for eg. from Purchase Line. Please note that when a Purchase Line is posted, the Purchase Line actually transferred to an Item Journal Line and the posted from there.

Posting Item Journal Line may causes the following entries to be created in Navision.
1) Item Ledger Entry
2) Value Entries
3) Item Application Entries
4) Capacity Ledger Entry

There are 2 types of postings involved in each Intentory transaction.
1) Quantity Posting (change of quantity in inventory), which will be recorded in Item Ledger Entries table.
2) Value Posting (change of inventory value) which will recorded in Value Entries table.

In other words, Item Ledger Entries table stored to the physical quantity changes while the Value Entries table stored the changes of value (or cost) of the inventory.

Item Ledger Entries can be applied against each other to track the linkage between inventory decrease and inventory increase. Item Application Entry table stores the application between Item Ledger Entries. For example, you can track the item that being sold (inventory decrease) was produced from which production order (inventory increase). The applications between Item Ledger Entries are stored in Item Application Entry table (Table 339).

Please takes note that:
1) One Item Ledger Entry can have one or more associated Values Entries.
2) One Item Ledger Entry can have one or more associated Item Application Entry.