D365: Posting rules and GL transactions explanation. Part 2 – Purchase order posting. Standard cost with price variances

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
• Standard cost inventory model with posting physical inventory for item
• no taxes
• no charges
• no discounts
• price variances

Standard cost of the item is $100 USD, Purchase price from the vendor is $112 USD. 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

Cr Purchase price variances

In AX R2 there were 2 additional accounting entries

Dt Purchase expenditure, un-invoiced

Cr Purchase expenditure, un-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.

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 – Total PO amount

Cr Product Receipt (Cost of purchased materials received) – Standard cost amount

Dt Purchase, inventory receipt (Cost of purchased materials invoiced) – Standard cost amount

Cr Vendor balance – Total PO amount

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).

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.