When we receiving and invoicing a PO, we have 2 kind of scenario in Navision. And the related G/L posting are as fllowing. 1. Receiving first, then Invoicing Upon Posting of Receipt of goods (GRN) Dr. Inventory (interim) acc. (Inventory Setup) Cr. Inventory Accrual Interim acc. (General Posting Setup) Upon Posting Purchase Invoice Reversal of Interim Posting: Dr. Inventory Accrual Interim acc. (general posting setup) Cr. Inventory Interim Acc (Inventory Posting Setup) 2. Post Receiving and Invoicing at the same time. Dr. Inventory Account Cr. Direct Cost Applied Account Dr. Purchase Account Cr. Account Payables. I am quite confused about the posting of the second scenario. In demo company, Direct Cost Applied Account and Purchase Account are under Sales Cost category. So the net amount for the posting is 0 in Sales Cost. My question is why Navision just post one entry for Inventory and AP? Why we need this Purchase Account?
Hi In scenario 1 the net result after the posting of the invoice and the running of the adjust cost item entry routine is exactly the same as scenario 2. Look at the adjusted receipt entries, or ONLY transact on one day and filter on the results in the GL.
Hi Steven, Thanks for your reply! Yes, I understand scenario 1. Everything is fine. But my question is why we need “Purchase Account”? In scenario 2, I think 2 entries are enough. Dr. Inventory Cr. Account Payable I just try to understand Navision logic about purchase transaction.
Hi Its all to do with the different stages of processes and even though you are going through this in one stage does not mean you should bypass the interactions for consistency purposes. The system uses the same stage processes, and if you bypassed them the entries would not reflect correctly the entries into the accounts consistently. Ultimately the purchaes nets off to the payables and the direct cost applied to the inventory.
Hi wws, In ideal circumstances of a direct purchase transaction, there is no need for a Purchase Account and Direct Cost Account as it gets netted off. But Navision follows 2 sets of entries for all transactions involving purchase and sale of items, 1 set of entries for the costing and 1 set of entries for the accounting for the following reason : In the case of indirect expenses or item charges like frieght, insurance etc, the cost going to the Inventory will not be the same as what is going to the AP(vendor). In such scenarios the costing entries will take the Direct Cost Account and the Accounting entries will take the Purchase Account. Eventually the total of the purchases + indirect costs will be netted off against the Purchase Account. Hope that clarifies. Cheers,
Hi WWS, at first it does look a little odd, as though the purcahse accoutn is not needed. A little look at the history of Navision may offer some insight. Firstly be aware that interim posting is a new thing. So then your next question should be “why does NAvsion have the Purchase account at all?”. Basically the Purchase account in conjunction with the adjustment account allows you a lot of flexibility in setting up your accounts that you would not other wise have. It is a comon accounting practise to post the purcahse of inventory to a PL account, and then at the end of the month, simply do an adjustment to inventory to then get your actual cost of goods. By not running the adjustment routine, this works simply in Navision. It is a common process for companies that do not maintain a large inventory. THat’s the historic source of that Account. Another thing that you need to be aware of. The scenario you posted was a very simple one. Try a scenario with partials, i.e. part received, part invoiced, then part sold etc. you will see that in these cases without the adjustment and purchase accounts, the accounting is virtually impossible to audit. Once you try many differrent scenarios, it will start to make sense, but at first I agree, it does seem a bit odd. Oh and one very important note. The Inventory posting setup in Cronus is a complete load of garbage, it in no way reflects reality, so don’t get to concerned about all the odd postings made in the demo company. You really have to start with a clean database and set up the posting accounts for your requirements for it all to make sense.
Thank you very much, guys! It’s clearer to me now. I need to test more complex scenario to understand Navision more. 