Hi,
I am confused with some fields here in general posting set up.
Our consultant made this set-up in our system.
If i run a Purchase Order entry this is the entry made
INVTPCOST Merchandise Inventory 900.00
INVTPCOST Merchandise Inventory (900.00)
Invoice Merchandise Inventory 900.00
Invoice Input Tax - Imported 108.00
Invoice Accounts Payable - Trade (1,008.00)
I am confused with the first 2 entries in INVTPCOST. Can we eliminate this entry since they are just offsetting each other? What is the effect of this entry in our Inventory and GL?
In the inventory tab, can we just fill out COGS Account? what’s the use of the other fields in this tab?
Appreciate your reply. Thanks so much…
Hi
The posting for a Purchase Invoice for inventory is as follows
Dr Inventory Account - From Inv Posting Setup
Cr Direct Cost Applied Account - From Gen Posting Setup
Dr Purchases Account - From Gen Posting Setup
Cr Vendor Account
Obviously there may be a tax entry there aswell. Upon receipt only, there is a Dr posting to inventory account interim, a credit posting to inventory accrual interim. This is reversed upon the invoice being posted, and is only if expected cost is ticked.
Hope this helps
Andrew
Hi Katrine,
As per your Screenshot and entries, this seems you are using the same account for both Inventory account as well as Direct cost account so the two entries(one debit and one credit) for same account are generating.
You need to change either Inventory account or Direct cost account so that proper entries create while posting purchase transactions.
No, you can’t eliminate these entries(because Inventory and Direct cost must be posted) but need to change either Inventory account or Direct Cost Account. During purchase order, following entries must be created :
Inventory account: Debit
Direct Cost account: Credit
Account Payables account: Credit
Purchase account : Debit
COGS account is used during sales transactions only but Direct cost account is used during purchase transactions. If you are doing purchase transactions of item, you must fill Direct cost account otherwise error.
Interim accounts on Inventory Tab are used for expected cost posting and inventory adjustment account is used during positive and negative adjustments posting of inventory.
Hope this will help you.
Thanks Andrew, the entries are clear to me now.
What bothers me now is that expected cost in our system is not ticked.
Does this mean Inventory Interim is not reverse? how do i check?
Thanks so much for your help
Thanks Bheem.
Our company uses perpetual inventory system in recording inventory. Our Purchase Account is also Merchandise Inventory same with Inventory Account.
initially our consultant made this set up
Inventory account: Merchandise Inventory
Direct Cost account: Cost of goods Sold
Account Payables account: Accounts Payable
Purchase account : Merchandise Inventory
When we run our monthend report we discovered this was a wrong set-up. Our MI was very doubled and our COGS was very low.
The consultants recommended us to change the Direct Cost account to Merchandise Inventory.
That is why Inventory Account and Direct cost account are just offsetting each offsetting.
I wonder what effect this might cause in our data?
Thanks so much for your help