Dynamics Business Central (NAV)
Experts:
Direct Cost applied accounts in Manufacturing companies
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Direct Cost applied accounts in Manufacturing companies
I am having difficulty explaining the concept of Direct cost applied accounts to a client in a manufacturing company. Their thought process is that because they are offset/contra accounts, they should clear out in the chart of accounts.
For example, with labour consumption
Debit WIP
Credit DCA
When does the DCA account get cleared out or never? Is it a case that when the finished good is sold and COGS is then populated that it offsets the DCA for Labour?
Similar with materials – how does this clear down? Or does it clear down automatically by the below posting?
Debit WIP
Credit DCA
Debit DCA
Credit Raw materials
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1 Reply
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Hi Djon,
DCA accounts are NOT meant to zero out. They’re throughput accounts, not traditional contra accounts.
When you post labour or materials, BC routes the cost through DCA into WIP. The WIP account is what eventually clears when the finished good is sold and COGS gets hit. DCA just reflects cumulative direct costs that flowed through production.
At period end, your DCA balance should mirror what’s sitting in WIP/COGS on the other side. That’s your reconciliation check.
If your team wants a deeper walkthrough on the full cost flow from raw material to COGS in BC, we’re happy to help. Sometimes one focused session clears up months of confusion!
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