Relevance of the Direct Cost Applied Account

Hi Forum,

Can someone explain in Accounting Terms the relevance of the Direct Cost Applied Account in Nav version 4 SP2.

My reason for asking is one of my clients who we are implementing Navision for had the Inventory Account and the Direct Cost Applied Account pointing to the same account code and when Automatic Cost Posting is tick they see the value of the item on a Purchase Order go in and out so in effect not actually hitting the Inventory Account. The FD has asked what the Direct Cost Applied Account actually does and is used for. Thanks

When purchasing items navision works as follows (based on account in General Ledger Setup)

Purchase value is debited “Purch. Account” and credited payables (and VAT if applicable).

Next automatic inventory movement credits “Direct Cost Applied Account” and Debits inventory.

So the sum of “Purch. Account” and “Direct Cost Applied Account” should always be zero (if Item Charges are setup with same accounts). But this enables the split to the in-direct method used in some P&L statements where you show:

Goods purchase for resale and Stock movement instead of CoGs.

Hi Kim, thanks for answering by question, I will pass this onto the person who asked the question in the first place…Paul

Hi Kim or anyone, is there away of bypassing the use of Direct Cost Applied Account regardless of whether Automatic Cost Posting is switched on or not. Paul [:D]

Hi Paul

You cannot bypass this account. Where you post it to of course is another question. However if the accountant sits down and step by step processes transactions through and sees the G/L transactions they will undertstand the postings and appreciate what it is doing.


Hi Steve, thank you for that. I have started to do just that with the FD and I think he is finally seeing the relevance. Good to hear from you and I havent forgotten about that beer. Have a good one…Paul [:D]