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How to set up purchase and COGS for retail customers in general posting

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Posted on by YuSh

I'm new to the system. How to set up retail items and shipping (as an item charge) to customers in the general posting setup? What should I put under the purchase account and COGS account? I'm confused.

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Dynamics 365 Business Central

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Hello,

The COGS should account should be the actual GL Account you want the Cost for selling the Item or Charge(Item) to post too. The Purchase Account and offsetting Direct Cost Applied Account are used during the first entry of Purchasing. For example:

Purchase Order of an Item:

1st Entry = Debit Purchase Account / Credit Accounts Payable

2nd Entry = Debit Inventory / Credit Direct Cost Applied

The Purchase and Direct Cost Applied account should wash to zero so they should be the same GL Account. Most users setup a Direct Cost Applied Account, in the COGS section of the Chart if Accounts, to post too.

Hope this helps.

Thanks,

Steve

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YuSh on at

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Thanks a lot, Steve. Why do we have to set up direct purchase account and direct cost applied account under COGS? Why don't we just use Debit Inventory / Credit AP? Inside our system, when I posted a purchase from our supplier, because of the general posting setup, the purchase and direct cost applied accounts would cancel out each other, but the inventory won't increase. How should I solve that problem? It seems to me all the purchased inventory now is under COGS. That doesn't make sense. Please help! Thank you so much!

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Hello,

Here is an example of my setup for my sandbox company. The location of the GL Account for Purchase and Direct Cost Applied normally falls for Accounting GAAP/IFRS rules, in the COGS Section of the Income Statement. If you are telling me the Inventory will not INCREASE after you Post the Purchase Invoice and the Purchase Line is an Item, what is the Inventory Posting Setup for the Item?

General-Posting-Setup-STEVE-2021_2D00_04_2D00_06T19_5F00_24_5F00_57.xlsx

Thanks,

Steve

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YuSh on at

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Hi Steve,

Thank you so much for sharing. I have found some accounts really confusing on the chart of accounts. For example, why do we need COGS interim when we don't use expected cost posting? How does it work? What are the purposes of those following accounts: inventory received not invoiced, inventory shipped not invoiced?

Also, when we sell an item, what are the entries that the system will create?

Thank you so much for your help!

Celeste

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Celeste,

If you do not have Expected Cost turn on, then the Interim Accounts are not required to be populated. The accounts you noted, inventory received not invoiced and inventory shipped not invoiced, in your Chart of Accounts, would be used if you have Expected Cost. If Expected Cost is turned on, then the following would occur:

When you sell an Item off a Sales document the entries are:

Hope this helps.

Thanks,

Steve

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YuSh on at

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Thanks, Steve! Just a clarification question. Are inventory received not invoiced and inventory shipped not invoiced both under the inventory category in the chart of accounts? Is inventory received not invoiced the same as inventory interim and is inventory shipped not invoiced the same as COGS interim?

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Hello,

Inventory Received not Invoice and Shipped not Invoiced normally appears in the Inventory Section of the Chart of Accounts.

Thanks,

Steve

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