D365: Posting rules and GL transactions explanation. Part 1 – Purchase order posting

Posting is one of the tough piece in AX and I am going to go through different posting rules and GL transactions explanation:

Your inventory posting rules may vary due to different settings. Some of them are presented below:

– Whether your item stock, non-stock
– Whether you want to post physical inventory or no
– Whether charges are included into purchase
– Whether specific costing method is used
– Whether taxes are presented
– Whether it’s intercompany purchase
– Whether your cost matches vendor price
– Whether discounts are applied

In AX, the following configurations exist that is used for inventory posting along with purchase order update.

Product Receipt (with D365 it’s called Cost of purchased materials received)
Purchase expenditure un-invoiced
Purchase, inventory receipt (with D365 it’s called Cost of purchased materials invoiced)
Purchase expenditure for product
Purchase accrual

All listed setting you can find in the Item group form.

Item group

With AX R3 / D365 there are several changes in the purchase orders posting and we will review what was changed.

In this topic let’s review some Purchase account types that are used almost everywhere in daily life.

We will be using the simple case with the following settings:

  • Stocked item
  • FIFO inventory model with posting physical inventory for item
  • no taxes
  • no charges
  • no discounts
  • no price variances

When a purchase order is product receipt updated, accrued liability and cost resulting entries occur:

Dt Product Receipt (Cost of purchased materials received)

Cr Purchase accrual

DEBIT CREDIT
Product Receipt (Cost of purchased materials received):

Inventory value received not invoiced. (Inventory account)

Purchase Accrual:

Actual cost of inventory (Accrual account)

Product receipt

In AX R2 there were 2 additional accounting entries

Dt Purchase expenditure, un-invoiced

Cr Purchase expenditure, un-invoiced

DEBIT CREDIT
Purchase expenditure, un-invoiced

Actual cost of inventory received on PO.  (Inventory received not invoiced)

Purchase expenditure, un-invoiced

Actual cost of inventory received on PO.  (Inventory received not invoiced)

With AX R3 and next versions, these entries no longer transferred to the general ledger. As you can see these entries are not displayed on the Voucher transaction form, but you can find them in the Subledger journal form.

SubledgerInventory

Since Subledger journal form is displaying all generated subledger accounting entries, even those that are not transferred to the general ledger. Plus, as you can see, Purchase expenditure, un-invoiced accounting entries net to 0.

When a vendor invoice is recorded, the following resulting entries occur

Dt Purchase accrual

Cr Product Receipt (Cost of purchased materials received)

Dt Purchase, inventory receipt (Cost of purchased materials invoiced)

Cr Vendor balance

Purchase expenditure for product 0.00

First two accounting entries (transactions) are accounting entries on the product receipt for accrued liability and inventory cost that are reversed.

The next accounting entry is created to record the inventory on stock.

The next accounting entry is created to record vendor balance.

Purchase expenditure for product accounting entry is transferred to the general ledger in a single zero-amount entry. Initially (in previous versions), this accounting entry had displayed both lines for the credit and the debit entries that net to 0, now it’s only single line).

InventoryInvoice

Single zero-amount Purchase expenditure for product entry can be reviewed in Subledger journal form as both credit and debit entries. Purchase expenditure, un-invoiced accounting entries which are no longer transferred to GL, can be reviewed here as well.

InventoryInvoiceSubledger

In case of RMA order (with the same settings) the behavior will be the same, but with opposite transactions.

Transactions after Product receipt for Returned order are:

Cr Product Receipt (Cost of purchased materials received)

Dt Purchase accrual

Voucher form:

RMA Product receipt

Subledger form:

RMA Product receipt subledger

Transactions after Invoice for Returned order are:

Ct Purchase accrual

Dt Product Receipt (Cost of purchased materials received)

Cr Purchase, inventory receipt (Cost of purchased materials received)

Dt Vendor balance

Purchase expenditure for product 0.00

Voucher form:

RMA Invoice

Subledger form:

RMA Invoice subledger

Posting rules for Standard cost inventory model  with no price variances will be the same.

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4 thoughts on “D365: Posting rules and GL transactions explanation. Part 1 – Purchase order posting

  1. Hello Galyna,
    so I face the same problem you explained in this post in Dyn365 release 7.2: the purchase expenditure for product is 0 amount at invoice posting.
    How did you solve this? I need an amount different from zero in the account with posting type purchase expenditure for product, it is the cost account.
    Do you have an idea?
    Thank you
    Diana

    Like

    1. Hello Diana,
      In this post I have provided an explanation how it works right now. This change was made starting from AX 2012 R3. There is no setup to change this. If the amount for both the accounting currency and the reporting currency adds up to 0 (zero) per voucher, currency code, and ledger dimension, then accounting entries for Purchase expenditure, un-invoiced will not be not transferred to the general ledger.
      In my example while posting Product receipt there is no difference in amounts for accounting and reporting currency and as the result purchase expenditure un-invoiced is zero and it was not transferred to the general ledger.
      In my example while posting Invoice there is no difference in Main account and ledger dimensions, and as the result purchase expenditure for product is zero and it’s transferred in summary form (in my case it’s 0) to the general ledger.
      Why do you want to generate a transaction directly against the expense un-invoiced account from the PO line if these accounting entries net to 0?

      Like

  2. Hi Galyna,

    I saw in USMF demo company Purchase expenditure for product does not display in Invoice voucher. But in company i create it always display this posting type. My question is where i can setup to hide this posting type? or what kind of item i setup will not display ? Thanks

    Rabia

    Like

    1. Hi Rabia,
      In can be due to the item that you are selecting. For instance, if you selected unstocked item (inventory model group that is assigned to the item doesn’t have Stocked product flag selected). Is it the case?

      Like

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