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G/L Entries behind Items Transfer orders

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Posted on by 258

Dears, I did not work much with Inventory and while learning it, I discover in Cronus the transfer order hits this G/L account (Income Statement Accounts)

I see financially it's just a transfer between two locations, which should hit only a Balance sheet account.

Normally, when we ship items we debit a Current asset account ( Contra account) and once it's received in the other location it will be cleared

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I feel something may be missing in another setup area.

Thanks for your help

  • G/L Entries behind Items Transfer orders
    Dears, I have one question here !!
    For the transfer orders, if we have an in-transit location that has its inventory posting setup on a balance sheet GL account, why do the GL entries take the GL account from the general posting setup "Inventory adjustment account" ?
  • Suggested answer
    Dallefeld Profile Picture
    Dallefeld 11,415 UG Leader on at
    RE: G/L Entries behind Items Transfer orders

    Best practice says that only two columns in your General Posting Setup should be balance sheet accounts. These are COGS Interim and Inv Accrual Interim. Your Inventory Adjustment Account should not be balance sheet.

  • Hasith-Auwion Profile Picture
    Hasith-Auwion 20 on at
    RE: G/L Entries behind Items Transfer orders

    No. It will affect item journal and physical inventory journal postings. For example, if you post a negative adjustment in an item journal, entries are,

    DEBIT - Inventory adjustment account (mapped in general posting set up)

    CREDIT - Inventory account (mapped in inventory posting set up)

    In this entry, inventory adjustment account is picked based on gen. bus. group of item journal line and gen. pro. posting group of item. And usually when you post a negative adjustment, it should be debited to a P/L account as loss of inventory is an expense to company.

    Let's assume you map a balance sheet account as inventory adjustment account. If a user forget to update the gen. bus. posting group when posting an item journal, then system will debit the amount to the balance sheet account you mapped as adjustment account which is not correct.

    I hope you understand what I meant.

  • mahmoud_algindy Profile Picture
    mahmoud_algindy 258 on at
    RE: G/L Entries behind Items Transfer orders

    Thank you,

    I've seen that the system exactly created all entries you've mentioned.

    I noticed some words in this statement:

    Inventory adjustment account is mapped by empty General Business Posting Group (because in transfer order, there is no gen. bus. group field in header level) and items' gen. pro. posting group combinations in general posting set up.

    It means I can change it to another G/L accounts, let say a Balance Sheet Accounts, and it will work only for Transfers?

  • Suggested answer
    Hasith-Auwion Profile Picture
    Hasith-Auwion 20 on at
    RE: G/L Entries behind Items Transfer orders

    When you post a transfer order (Ship & Receive), 8 entries are posted in NAV/BC if it is an indirect transfer.

    1. When you ship

           Debit - Inventory adjustment account (mapped in general posting set up)

           Credit - Inventory account linked to 'from location' (mapped in inventory posting set up)

           Debit - Inventory account linked to in-transit location (mapped in inventory posting set up)

           Credit - Inventory adjustment account (mapped in general posting set up)

    2. When you receive

           Debit - Inventory account linked to 'to location' (mapped in inventory posting set up)

           Credit - Inventory adjustment account (mapped in general posting set up)

           Debit - Inventory adjustment account (mapped in general posting set up)

           Credit - Inventory account linked to 'in transit location' (mapped in inventory posting set up)

    Inventory adjustment account is mapped by empty General Business Posting Group (because in transfer order, there is no gen. bus. group field in header level) and items' gen. pro. posting group combinations in general posting set up.

    Inventory accounts are mapped by location code and items' inventory posting group combinations in inventory posting set up.

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