Why No GL Entries Are Created When Posting Sales Order in Business Central

Why No GL Entries Are Created When Posting Sales Order in Business Central

In Microsoft Dynamics 365 Business Central, users often notice that when they post a sales shipment, no General Ledger (GL) entries are created. However, when they post a sales invoice, GL entries are generated. This difference is normal behavior and is based on how Business Central handles inventory and revenue recognition.

Key Differences Between Posting a Shipment and an Invoice:

1. Posting a Shipment: No GL Entries Created

   • When you post a sales shipment, you are recording the physical movement of goods from your inventory to the customer. This process updates the Item Ledger to show that items have been removed from inventory, but it does not create any GL entries.
   • The reason is that a shipment alone does not affect your financial accounts (such as sales revenue or cost of goods sold) because it is only concerned with the physical transfer of goods.

2. Posting an Invoice: GL Entries Created

   • When you post a sales invoice, you are recording the financial transaction of the sale. This action generates the necessary GL entries to recognize:
     • Revenue: The amount of money earned from the sale.
     • Cost of Goods Sold (COGS): The cost associated with the items that have been sold.
     • Inventory Reduction: The decrease in inventory value as items are sold.
   • Posting the invoice links the shipment details with the financial transaction, updating both the customer’s account and your company's financial accounts.

Why This Happens:

• Separation of Physical and Financial Events: Business Central separates the physical movement of goods (shipment) from the financial transaction (invoice). Only the invoice posting creates GL entries because it represents the actual sale and financial impact on your accounts.

• Control Over Financial Reporting: By keeping the shipment and invoice posting separate, you have greater control over when the revenue and costs are recognized in your financial statements.

In Summary:

• Shipment Posting: Updates inventory records but does not create GL entries.
• Invoice Posting: Creates GL entries for revenue, COGS, and inventory reduction, reflecting the financial impact of the sale.

By understanding this distinction, you can better manage your inventory and financial processes in Business Central.