Hi Julia,
The functionality has been around since initial Navision version.
The Business Central Posting flow for Purchase is as follows:
DR – Purchase
CR – Accounts Payable
DR – Inventory
CR – Direct Cost Applied
The Purchase and Direct Cost Applied are offsets. The original design, as it was communicated to me many years back in my early Navision days, was that Denmark designed the Purchase/Direct Cost Applied offset posting flow to allow 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.)
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Total Goods Available $XXXXX.XX
Less Ending Inventory ($XXX.XX)
---------------
Cost of Goods Sold $XXXXXX.XX
The COGS supplemental Schedule then can be built by creating an Account Schedule and add the Purchase Debits for the AP posting. This is why standard NAV does not post directly to Inventory on the Purchase Invoicing. It flows through Purchase and then offsetting Direct Cost Applied to Inventory Balance Sheet with the Post Inventory Cost to G/L Batch process or through setting Automatic Cost Posting to TRUE in Inventory Setup so the G/L Inventory Posting is automatically updated.
Note, if you had Indirect Cost % or Overhead Rate on an Item Card, the system would post the Purchase Invoice as follows:
DR – Purchase
CR – Accounts Payable
DR – Inventory
CR – Direct Cost Applied
CR – Indirect Cost Applied for OH Rate ($ 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.
I hope this helps add some additional clarification.
Thanks
Tom
