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[Pedro Recalde]

We are currently working on Implementing Navision 2017, and are going over the posting setups.  Our Sales/AR posting setup is correct, however I think our Purchases is incorrect from the previous system, and I would like to make sure we have the right set up for Navision. 

This is the current posting set up

Debit                                      Credit
Inventory (Balance Sheet)
                                                Accrued Purchase Orders (Balance Sheet)
Accrued Purchase Orders (Balance Sheet)
                                                Inventory (Balance Sheet)                                                
Inventory (Balance Sheet)
                                                Payables (Balance Sheet)

This makes sense to me as in they with this transactions they are basically accrue for the PO until they received the invoice, however what I think it’s incorrect is that we are missing the Income Statement Side of the transaction.

Based on my knowledge I think the posting set up in Navision should be as follows

Debit                                      Credit
Inventory (Balance Sheet)
                                               Payables (Balance Sheet)
Purchases (Income Statement)
                                                Direct Cost (Income Statement)

This is where I differ with our accountant, because currently we do not have a Purchases and Direct Cost accounts.

Can anyone please assist or provide their feedback on the correct posting set up for Purchasing?

Thanks

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Pedro Recalde
Collins Brothers Corporation
Forest Park GA
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[David Wiser]

For purchasing transactions, NAV posts the following (assuming purchase of items):

Upon receipt of the item:
Debit – Inventory Account (Interim) from Inventory Posting Setup (using Inventory Posting Group assigned on the item card)
Credit – Invt. Accrual Acc. (Interim) from General Posting Setup (using the GBPG from the vendor card and the GPPG from the item card)

Upon invoicing of the item:
Reverse the above transaction, then…
Debit – Inventory Account from Inventory Posting Setup (using Inventory Posting Group assigned on the item card)
Credit – Direct Cost Applied Account from General Posting Setup (using the GBPG from the vendor card and the GPPG from the item card)
Debit – Purch. Account from General Posting Setup (using the GBPG from the vendor card and the GPPG from the item card)
Credit – Payables Account from Vendor Posting Groups (using Vendor Posting Group from the vendor card)

Must company will set the Inventory Account and the Inventory Account (Interim) as the same account.  All the above are generally balance sheet accounts except for the Direct Cost Applied and Purch. Accounts.  Many times these are also the same account and are coded to the COGS section on the income statement.  Since they usually net to zero, it should have an impact on profit.  There are other processes which use the Direct Cost Applied account (like production) so it’s best to have that in the income statement section.

Hope this helps.

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Dave Wiser
Controller
Beckwith & Kuffel
Seattle WA
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[Ian Ray]

Apologies in advance if this is too much information…
(And please anyone feel free to correct me if I am wrong about anything here)

The interim accounts are untouched if Expected Cost Posting to G/L is unchecked in Inventory Setup. Some people may want expected cost turned on to avoid having to run the Inventory to G/L Reconcile report to see what accruals they need to manually post. It should be noted that this expected cost is not the same as expected cost on the item ledger entries.

Design Details – Expected Cost

This may all seem a little odd. For a received purchase you may expect terminology like this 

Debit            Credit
Inventory
                      Uninvoiced Purchases

…or accrued purchase orders, uninvoiced payables, or something else like that.

Instead, with expected cost, NAV has Invt. Accrual Acc. (Interim) as the uninvoiced purchases as well as Inventory Account (Interim). I have not read anything about why these names were chosen, but that’s how it is. 

As well, if you do not have Automatic Cost Posting checked, these “interim” entries won’t appear until you run Post Inventory Cost to G/L report. Many NAV setups have this report run automatically at night via Job Queues/Task Scheduler. I would even recommend doing this if you want best performance. (I also have no idea why running this at a set interval isn’t just a inventory setup setting in NAV as opposed to setting up a “job.”)

Likewise, you may expect a purchase invoice transaction should be simple, i.e. debit inventory / credit payables. 

However, because NAV can split off posting inventory cost with the post inventory cost to g/l report, this is broken into two parts:

(Purchase invoice is posted)

Debit             Credit
Purchases
                      Payables

(Post Inventory to G/L report is run or automatic cost posting is turned on)

Debit           Credit 
Inventory
                     Direct Cost Applied

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Ian Ray
Cypress Grove
Arcata CA
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[Chad Stewart]

I realize this is an old Post, but I have the same questions.

We imported 2 years of data, and unfortunately when it all posted we had some crazy numbers.

Our Direct Cost Applied account went up every month totaling negative 11 million dollars.

Our Inventory Account also increased to “about” 11 million dollars more than average.

Our General Posting Setup was setup as follows
(Across all Gen Prod Posting Groups)

Purchase Account: was 13000 Inventory (Asset: Balance Sheet)
Direct Cost Applied Account: is  50500 Direct Cost Applied (COGS: Income Statement)

Obviously we are not configured correctly. 🙂

2 Questions.

1. Can I simply change our Purchase Account to 50500 Direct Cost Applied (COGS Account on Income Statement) to fix future transactions.

(in a sense the error we made was we accidentally set it to double post to Inventory by using the inventory account as a Purchase account when its going to post to that account as part of the Inventory posting setup, and left out accounting for removing from Direct Cost Applied)

2. Can I simply Credit Inventory, and Debit Direct Cost Applied to correct the posting errors for prior months? 

 

 

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Chad Stewart
G&S Nursery
Jacksonville Beach FL
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[Michael Carr]

Chad,

1. “Can I simply change our Purchase Account to 50500 Direct Cost Applied (COGS Account on Income Statement) to fix future transactions.”

As long as your inventory Posting Group setup has the debit for inventory going to 13000 —– I would say yes.

2. “Can I simply Credit Inventory, and Debit Direct Cost Applied to correct the posting errors for prior months?“

Asssuming no other complication — I would say yes to this as well. Now some folks would tell you to use a contra account for purchases so you can manage it and for your correcting entries I would suggest that as well

i.e 50500 Direct Cost Applied   ( contains orginal import) 
and 50510 Offset – Direct cost applied ( contains corrections from 13000) 

they two should zero out.

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Michael Carr
VP , Finance
Philadelphia Scientific LLC
Montgomeryville PA
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[Pedro Recalde]

I understand now.  Because the Income Statement portion balances out right away, that explains why we don’t have it set up in our  current ERP.

With NAV, i will set up the COGS to be the same for Purchases, and Direct Costs.

Thank you for your assistance.

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Pedro Recalde
Collins Brothers Corporation
Forest Park GA
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[Crystal Tollison]

?Pedro,
There are exceptions but generally speaking, General Posting Setup is for Income Statement Accounts and the others (Customer Posting Setup, Vendor Posting Setup, Inventory Posting Setup, Fixed Asset Posting Setup) are for Balance Sheet Accounts.

My favorite way to setup the Inventory (Interim) accounts is to add a ‘.1’ to your true Inventory account.  For example, Inventory Account 12345 will have a corresponding Inventory (Interim) Account of 12345.1. 

This setup gives you a way to tie back to your ‘Received Not Invoiced’ values from the Inventory to G/L Reconcile report and various other places this number is reported. These are Balance Sheet Accounts.  Auditors will love you.

I also like to have one Inventory Account per Inventory Posting Group if at all possible. This allows for a direct tie when running reports using a filter by Inventory Posting Group to your GL Account balances.  As someone who is often brought into Inventory/GL issues, this makes any inventory costing issue much easier to track down and fix.

Most often I setup the Purchases and Direct Cost Accounts to be the same account.  It should be an Income Statement Account.

I do not recommend making your COGS account or the COGS (Interim) account the same as any other account. This will make any account diagnostics a nightmare later on. I refer to this as ‘cross contamination’. Auditors will hate you.

The COGS (Interim) account is useful as a signal that you have not invoiced all shipments that occurred that month when closing the books. If this account holds a balance at the EOM, that should be a clue that you shipped an order but did not post the invoice in that same period which is the goal for most folks.

The posting setups are where your consultant can offer the most help as there are so many options and ways to use the setups to make your life easier later on when looking at your data. I would suggest you work closely with them to best utilize these setups.

Best of luck!

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Crystal Tollison
Consultant
ArcherPoint Inc.
Lawrenceville GA
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[Michael Carr]

Pedro,

Your accountant is acyually correct. The Nav conventions for Income Statement and Purchases do not fit most accounting presentation.

As best I can tell the Direct cost Clearing accounts Are set up to have purchases recorded as if Financial report for Cost of Goods sold was to be done in a tax accounting presentation as required for the Federal Form 1120.  Thus they generate a purchases account and off set it by breaking the transaction into 4 lines instead of 2.

Instead of

DR. Inventory
CR: Accounts Payable

you get

Dr Inventory
Cr Purchases*
dr Purchases (offset)*
Cr Accounts Payable
* referred to by Nav as “Direct Cost”

Now I don’t know what costing Method(s) you are using.How it will behave will depend on your costing setup.

Ian’s answer is correct for technical aspects , I am letting you know the account perspective.

But this is how it works. Purchases are offset by the Direct Cost Applied in either the Balance sheet or Income Statement and should equal zero. Since Nav is incapable of balancing entries precisely I suggest you position both account in the cost section of the P&L

For better review read Alex Chow’s writeup Confessions of a Dynamics NAV Consultant

Dynamicsnavconsultant		remove preview
Confessions of a Dynamics NAV Consultant The Postings When a purchase of inventory is made, 4 accounts are hit: Inventory A/P Purchases Direct Cost Applied When the items are sold, 4 accounts are hit: Inventory A/R Sales COGS In this case, the COGS is automatically calculated and posted to your COGS account. The COGS posted by NAV is ALWAYS correct. View this on Dynamicsnavconsultant >

Obviously I disagree with his assertions on how Accountants view the COGS setup and that NAV  always calculates COGS correctly. But his explanations on how it does work are very good!

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Michael Carr
VP , Finance
Philadelphia Scientific LLC
Montgomeryville PA
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[Ian Ray]

this could all make for a book: “Decoding NAV for Finance.”

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Ian Ray
Cypress Grove
Arcata CA
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[Michael Carr]

Fiction  or Non-fiction?

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Michael Carr
VP , Finance
Philadelphia Scientific LLC
Montgomeryville PA
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[Ian Ray]

Nonfiction horror.

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Ian Ray
Cypress Grove
Arcata CA
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