Hello LB_Pgh
Thank you for posting on the Forum.
The biggest concern is with the Purchase and Direct Cost Applied setup currently. From a design perspective, these are typically expense accounts, possibly in the Cost of Goods Sold Section but a different account from COGS. These are offset accounts where the posting nets to zero through the Income statement.
For an example, in BC Posting flow, the following is a Purchase Invoice flow for an Inventory Purchase:
DR – Purchase
CR – Accounts Payable
DR – Inventory
CR – Direct Cost Applied
The Purchase and Direct Cost Applied are offsets. They will wash and can be set to the same account. The original design was that the Purchase/Direct Cost Applied offset posting flow allows for reporting on the Income Statement supporting schedule for the Cost of Goods Sold supplemental schedule, which has the basic structure below:
Beginning Inventory $ XXX.XX
Add: Purchases $ XXXX.XX
Other Capitalized cost $ XXX.XX (overhead applied etc.)
--------------
Total Goods Available $XXXXX.XX
Less Ending Inventory ($XXX.XX)
---------------
Cost of Goods Sold $XXXXXX.XX
The COGS supplemental Schedule then can be built by creating an Account Schedule and add the Purchase Debits for the purchase posting. This is why standard NAV does not post directly to Inventory on the Purchase Invoicing. It flows through Purchase and then offsetting Direct Cost Applied to the Inventory Balance Sheet (either with the Post Inventory Cost to G/L Batch process or through setting Automatic Cost Posting to TRUE in Inventory Setup) so the G/L Inventory Posting is automatically updated, to facilite this statement.
Note, if you had Indirect Cost % or Overhead Rate on an Item Card, the system would post the Purchase Invoice as follows:
DR – Purchase
CR – Accounts Payable
DR – Inventory
CR – Direct Cost Applied
CR – Indirect Cost Applied for OH Rate ($ Amount) or Indirect Cost % (Add % of Direct Cost as indirect overhead applied)
The Indirect Cost Applied allocates expensed cost and capitalizes the cost into Inventory. Other possible postings, which depend on Costing Method, can occur such as Purchase Price Variances in Standard Costing. The following is a complete listing of the postings for various inventory processes.
Design Details - Accounts in the General Ledger - Business Central | Microsoft Docs
The information will hopefully explain the setup more completely.
Best Regards,
Tom
