Posting to General Ledger - Actual Costing

This topic describes in detail the posting of inventory transactions to the General Ledger (GL) module. All transactions processed in the Customer, Material, Vendor, and Production modules that affect the value of inventory are posted to the appropriate inventory distribution journal (CO Dist, IC Dist, PO Dist, and SF Dist, respectively) using account numbers that can be found in the Product Codes, Departments, Purchasing Parameters, and Distribution Accounts forms.

Because the costs and account numbers used for the journal posting are quite different if using standard costing or one of the four actual cost flow methods, the transactions generated are explained for both standard and actual. If the system should not automatically generate these transactions, clear the General Parameters form's Post to Journal check box.

Actual Costing - Post to Journals

The system uses the same GL account numbers when posting to the appropriate inventory distribution journal, no matter which of the four actual cost flow methods is in use (Average, LIFO, FIFO, Specific). For this reason, the transactions outlined below are for actual costing in general.

The phrase issue cost is used several times in this topic to refer to the cost at which an item is being issued from inventory. The issue cost value varies depending on the cost flow method in use.

General Ledger Account Numbers Used

Before processing any transactions in the manufacturing modules, the GL account numbers which are used for posting to the GL inventory distribution journals must be set up. The key accounts are stored at the Product Code level, so that different account numbers may be assigned to different classifications of items and also allow for the tracking of cost details of a unit cost.

Maintaining individual accounts for the various cost details allows visibility of these costs through work in process, inventory and cost of goods sold and more accurately determines the exposure relating to material, labor, fixed overhead, variable overhead and outside service costs. It is also possible to use one account number for all the cost detail components of an item if this cost detail visibility is not desired.

Example - Maintaining Individual Account Numbers for Each Cost Detail Component

A finished goods inventory account number and a raw materials inventory account number may be used rather than having all items posted to the same inventory account.

These accounts may be used rather than having all items posted to the same inventory account.

Example - Maintaining One Account Number for All Cost Detail Components of Finished Goods Inventory and Raw Materials Inventory

Accounts List

The following lists identify the accounts found in the Product Codes, Departments, Purchasing Parameters, Work Centers, and Distribution Accounts forms.

Product Codes

Inventory Adjustment

Material Fixed Overhead Applied

Material Variable Overhead Applied

NOTE: The Material Fixed Overhead Applied and the Material Variable Overhead Applied accounts are required only when basing overhead on job material issues.

Purchasing Parameters

Vouchers Payable Account

Department

Direct Labor Applied Account

Fixed Overhead Applied Account

Variable Overhead Applied Account

Although these rates default from this location, they are also maintainable on the Current Operations, Job Operations, and Estimate Operations forms.

Work Center - Costing

Fixed Machine Overhead Applied Account

Variable Machine Overhead Applied Account

Although these rates default from this location, they are also maintainable at the Current Operations, Job Operations, and Estimate Operation forms.

Distribution Accounts - Inventory

Inventory Material

Inventory Labor

Inventory Fixed Overhead

Inventory Variable Overhead

Inventory Outside

Distribution Accounts - Sales/Cost of Goods Sold

COGS Material

COGS Labor

COGS Fixed Overhead

COGS Variable Overhead

COGS Outside

Distribution Accounts - In-Transit

In-Transit Material

In-Transit Labor

In-Transit Fixed Overhead

In-Transit Variable Overhead

In-Transit Outside

NOTE: You can delete any distribution account record, including the default distribution account, with a blank warehouse and blank product code.

The inventory account numbers used for journal transactions do not come directly from the Product Codes form. Rather, the inventory accounts used come from the stock location being accessed when the transaction is performed. (When a stock location is added for an item in the Inventory module, inventory accounts are entered for the location, using the Item Stockroom Location form.) The default for this field is the inventory account numbers in the Distribution Account file to which the item belongs.

To locate the inventory account numbers:

1. The system searches for an exact match for both the warehouse and the product code.
2. If that fails, the system searches for a match for the product code and a blank warehouse.
3. If that fails, the system searches for a match for the warehouse and a blank product code.

If any of the account numbers the system is attempting to use have not been set up, the system does not post to the GL inventory distribution journals.

Transaction Posting to the Inventory Distribution Journals

The following subsections outline every transaction that is posted to the inventory distribution journals when some method of actual costing is being used.

Purchasing Transactions

The following transactions are posted to the inventory distribution journal named PO Dist.

• Purchase Order Receipt:

  Transaction	Debit	Credit
  Inventory Material	xxxx
  Vouchers Payable		xxxx

  Because this item is purchased, only one posting (Inventory Material Cost) is applicable. All accounts for each cost details component would have the same account number, therefore only one posting entry is made.

  The cost used is the quantity received multiplied by the purchase order line item unit cost. (This is the default cost. At the time of receipt, it is possible for you to update the receipt cost to anything.)

  CU = (RQ * POUC)

  where:

  CU = Cost Used

  RQ = Receipt Quantity

  POUC = PO Unit Cost

• Purchase Order Return:

  Transaction	Debit	Credit
  Vouchers Payable		xxxx
  Inventory		xxxx
  Inventory Adjustment	xxxx   or	xxxx

  The cost used is the quantity returned multiplied by the item's issue cost:

  CU = (QR * IIC)

  where:

  CU = Cost Used

  QR = Quantity Returned

  IIC = Item's Issue Cost

• Voucher Generation:

  Transaction

  a. If vouchered cost > receipt cost:

  Vouchers Payable

  Accounts Payable

  b. If vouchered cost < receipt cost:

  Vouchers Payable

  Inventory Adjustment

  Accounts Payable

  The previous transaction is created only if any line items were vouchered at a different cost than the cost at which they were received into inventory. (The cost at which the items were received into inventory is the line item unit cost field at the time of the receipt.)

  xxxx = (quantity received * (vouchered cost - receipt cost))

  xxxx = (cost of receipt - cost of voucher) - adjustment

  POVC = QR * (VC - RC)

  where:

  POVC = Purchase Order Variance Cost

  QR = Quantity Received

  VC = Voucher Cost

  RC = Receipt Cost

Production Transactions

The following transactions are posted to the inventory distribution journal named SF Dist.

• Job Material Issue:

  Transaction	Debit	Credit
  WIP Material Costs	xxxx
  WIP Labor Costs	xxxx
  WIP Fixed Overhead Costs	xxxx
  WIP Variable Overhead Costs	xxxx
  WIP Outside Costs	xxxx
  Inventory Material		xxxx
  Inventory Labor		xxxx
  Inventory Fixed Overhead		xxxx
  Inventory Variable Overhead		xxxx
  Inventory Outside		xxxx
  Fixed Material Overhead Applied		xxxx
  Variable Material Overhead Applied		xxxx

  The inventory accounts used are those of the item being issued to the job, not the item being manufactured. The inventory credit amount is the quantity issued from inventory multiplied by the issue cost of the item.

  ICA = QIFI * IC

  where:

  ICA = Inventory Credit Amount

  QIFI = Quantity Issued from Inventory

  IC = Issue Cost

  The credits to the overhead accounts are calculated by multiplying the actual material cost by the fixed and variable overhead rates in the Product Codes form.

  COA = MC * (FO + VOR)

  where:

  COA = Credits to the Overhead Account

  MC = Material Cost

  FO = Fixed Overhead

  VOR = Variable Overhead Rate

  The debit to WIP is the sum of the direct material, fixed overhead, and variable overhead amounts.

  DTWIP = DM + FO + VOA

  where:

  DTWIP = Debit to WIP

  DM = Direct Material

  FO = Fixed Overhead

  VOA = Variable Overhead Amounts

• Job Material Withdrawal:

  Transaction	Debit	Credit
  Inventory Material	xxxx
  Inventory Labor	xxxx
  Inventory Fixed Overhead	xxxx
  Inventory Variable Overhead	xxxx
  Inventory Outside	xxxx
  WIP Material Costs		xxxx
  WIP Labor Costs		xxxx
  WIP Fixed Overhead Costs		xxxx
  WIP Variable Overhead Costs		xxxx
  WIP Outside Costs		xxxx
  Fixed Material Overhead Applied	xxxx
  Variable Material Overhead Applied	xxxx

  The debit to inventory is the quantity of the item withdrawn from the job multiplied by a unit cost figure which varies depending on the costing method in use.

  DTI = QIWJ * VUCF

  where:

  DTI = Debit to Inventory

  QIWJ = Quantity of the Item Withdrawn from the Job

  UCF = Unit Cost Figure

  The debits to the overhead accounts are calculated by multiplying the average cost of all items issued. The job material total actual cost/job material quantity issued.

  DOA = MT / JI

  where:

  DOA = Debits to the Overhead Account

  MT = Job Material Total actual cost

  JI = Job material quantity issued

  The credit to WIP is the sum of direct material, fixed overhead, and variable overhead amounts.

  CTWIP = DM + FO + VOA

  where:

  CTWIP = Credit to WIP

  DM = Direct Material

  FO = Fixed Overhead

  VOA = Variable Overhead Amounts

• Post Job Transaction Labor:

  Transaction	Debit	Credit
  WIP Labor Costs	xxxx
  WIP Fixed Overhead Costs	xxxx
  WIP Variable Overhead Costs	xxxx
  Direct Labor Applied		xxxx
  Fixed Labor Overhead Applied		xxxx
  Variable Labor Overhead Applied		xxxx

  The credit to labor is the actual hours in the transaction multiplied by the specified manufacturing rate of the employee who reported the transaction.

  CTL = AH * SMR

  where:

  CTL = Credit To Labor

  AH = Actual Hours

  SMR = Specified Manufacturing Rate

  The credits to the overhead accounts are calculated by multiplying the actual labor hours by the fixed and variable overhead rates in the Departments form.

  COA = LH * (FO + VOR)

  where:

  COA = Credits to the Overhead Account

  LH = Labor Hours

  FO = Fixed Overhead

  VOR = Variable Overhead Rate

  The debit amount to WIP is the sum of direct labor, fixed overhead, and variable overhead amounts.

  • WIP Amount = (actual hours * employee manufacturing rate) + (actual hours * department fixed overhead rate) + (actual hours * department variable overhead rate)
  • Direct Labor =(actual hours * employee manufacturing rate)
  • Fixed Labor Overhead = (actual hours * department fixed overhead rate)
  • Variable Labor Overhead = (actual hours * department variable overhead rate)
  • Post Job Transactions: Machine transactions

  Machine costs apply machine overhead charges to a job operation for the hours a machine was run, along with the quantity of goods completed, scrapped, and moved to the next operation. If the work center for the operation is machine scheduled, the remaining scheduling time for the operation will be reduced by the total hours posted.

  The additional posting described below for the "Move" transaction is also performed for all "Run" transactions.

• Job Finish (Put to Stock):

  Transaction	Debit	Credit
  Inventory Material	xxxx
  Inventory Labor	xxxx
  Inventory Fixed Overhead	xxxx
  Inventory Variable Overhead	xxxx
  Inventory Outside	xxxx
  WIP Material Costs		xxxx
  WIP Labor Costs		xxxx
  WIP Fixed Overhead Costs		xxxx
  WIP Variable Overhead Costs		xxxx
  WIP Outside Costs		xxxx

  When inventory is received from a job, the receipt cost used is determined by:

  • The Shop Floor Control Parameter form's Costs Based on Complete field.
  • The status of the job.
  • The Complete flag on the job's operations.

  If the receipt is being performed using a labor transaction on the last operation, you have the option of closing the job order. If the job is closed when the transaction is entered, the receipt cost used is always the actual unit cost of the job. If the job is not closed and the Costs Based on Complete parameter is set to Jobs, the receipt cost used is the planned unit cost of the job.

  The planned unit cost is based on the setup, run-times, run rates, and labor overhead rates in the Job Operations form as well as the unit costs and the material overhead rates in the Job Materials form.

  If the job is not closed and the Costs Based on Complete parameter is set to Operations, the receipt cost used is determined by the Complete flag of the job's operations. Actual costs from complete operations are accumulated while planned costs from incomplete operations are accumulated to determine the final receipt cost.

• Job Closed Manually:

  Transaction	Debit	Credit
  a. If actual cost > planned cost:
  Inventory Adjustment	xxxx
  WIP Material Costs		xxxx
  WIP Labor Costs		xxxx
  WIP Fixed Overhead Costs		xxxx
  WIP Variable Overhead Costs		xxxx
  WIP Outside Costs		xxxx
  b. If actual cost < planned cost:
  WIP Material Costs	xxxx
  WIP Labor Costs	xxxx
  WIP Fixed Overhead Costs	xxxx
  WIP Variable Overhead Costs	xxxx
  WIP Outside Costs	xxxx
  Inventory Adjustment		xxxx

  If the job is being closed manually by changing the status from Released to Complete an adjustment needs to be made since the job's planned cost would have been used for the transaction that put the item to stock.

  The amount used is the difference between the total planned and actual cost of the job:

  AU = TPC - AC

  where:

  AU = Amount Used

  TPC = Total Planned Cost

  AC = Actual Cost

Customer Order Transactions

The following transactions are posted to the inventory distribution journal named CO Dist.

• Customer Order Shipment:

  Transaction	Debit	Credit
  COGS Material	xxxx
  COGS Labor	xxxx
  COGS Fixed Overhead	xxxx
  COGS Variable Overhead	xxxx
  COGS Outside	xxxx
  Inventory Material		xxxx
  Inventory Labor		xxxx
  Inventory Fixed Overhead		xxxx
  Inventory Variable Overhead		xxxx
  Inventory Outside		xxxx

  The amount used is the quantity shipped multiplied by the issue cost of the item.

  AU = QS * ICI

  where:

  AU = Amount Used

  QS = Quantity Shipped

  ICI = Issue Cost of the Item

• Customer Order Return:

  Transaction	Debit	Credit
  Inventory Material	xxxx
  Inventory Labor	xxxx
  Inventory Fixed Overhead	xxxx
  Inventory Variable Overhead	xxxx
  Inventory Outside	xxxx
  COGS Material		xxxx
  COGS Labor		xxxx
  COGS Fixed Overhead		xxxx
  COGS Variable Overhead		xxxx
  COGS Outside		xxxx

  The amount used is the average value of all shipments.

  AU = CST / IQS

  where:

  AU = Amount Used

  CST = Item's Cost of Goods Sold Total

  IQS = Item's Quantity Shipped

Inventory Control Transactions

The following transactions (unless otherwise specified) are posted to the inventory distribution journal named IC Dist.

• Inventory Adjustment:

  Transaction	Debit	Credit
  a. Increase quantity:
  Inventory Material	xxxx
  Inventory Labor	xxxx
  Inventory Fixed Overhead	xxxx
  Inventory Variable Overhead	xxxx
  Inventory Outside	xxxx
  Inventory Adjustment		xxxx
  b. Decrease quantity:
  Inventory Adjustment	xxxx
  Inventory Material		xxxx
  Inventory Labor		xxxx
  Inventory Fixed Overhead		xxxx
  Inventory Variable Overhead		xxxx
  Inventory Outside		xxxx

  The amount used for an inventory adjustment transaction varies depending on the cost flow method in use. If you are using:

  • Average costing, the system uses the Items form's unit cost.
  • Specific, the system uses the cost tied to the location that is being adjusted.
  • LIFO or FIFO and increasing the quantity, the cost used is the cost tied to the last item LIFO record on file for the item.
  • LIFO or FIFO and decreasing the quantity, the system consumes records from the item LIFO stack until the adjustment quantity is satisfied.

  Cycle counting and physical inventory posting create transactions like the ones described above. Either transaction a or b is created, depending on whether the count quantity is greater than or less than the original quantity.

• Inventory Move:

  Transaction	Debit	Credit
  Inventory Material	xxxx
  Inventory Labor	xxxx
  Inventory Fixed Overhead	xxxx
  Inventory Variable Overhead	xxxx
  Inventory Outside	xxxx
  Inventory Material		xxxx
  Inventory Labor		xxxx
  Inventory Fixed Overhead		xxxx
  Inventory Variable Overhead		xxxx
  Inventory Outside		xxxx
  Inventory Adjustment

  This transaction is posted only if the From and To locations have different inventory accounts tied to them or if specific costing is being used and the From and To locations have different unit costs tied to them.

  The inventory account debited is the account tied to the To location. The credited inventory account is the account tied to the From location. The inventory adjustment account is used only for specific costing when the From and To accounts have different costs assigned to them.

• Location Update:

  A transaction is created if you change the inventory account tied to the location:

  Transaction	Debit	Credit
  Inventory (New Accounts):
  Inventory Material Cost	xxxx
  Inventory Labor Cost	xxxx
  Inventory Fixed Overhead Cost	xxxx
  Inventory Variable Overhead Cost	xxxx
  Inventory Outside Cost	xxxx
  Inventory (Old Accounts):
  Inventory Material Cost		xxxx
  Inventory Labor Cost		xxxx
  Inventory Fixed Overhead Cost		xxxx
  Inventory Variable Overhead Cost		xxxx
  Inventory Outside Cost		xxxx

  A transaction is also created if specific costing is in use and you change the unit cost tied to the location.

  (This example assumes that all cost detail values are changed.)

  Transaction	Debit	Credit
  a. Increase cost:
  Inventory Material	xxxx
  Inventory Labor	xxxx
  Inventory Fixed Overhead	xxxx
  Inventory Variable Overhead	xxxx
  Inventory Outside	xxxx
  Inventory Adjustment		xxxx
  b. Decrease cost:
  Inventory Adjustment	xxxx
  Inventory Material		xxxx
  Inventory Labor		xxxx
  Inventory Fixed Overhead		xxxx
  Inventory Variable Overhead		xxxx
  Inventory Outside		xxxx

• Location Insertion:

  Transaction	Debit	Credit
  Inventory Material	xxxx
  Inventory Labor	xxxx
  Inventory Fixed Overhead	xxxx
  Inventory Variable Overhead	xxxx
  Inventory Outside	xxxx
  Inventory Adjustment		xxxx

  This transaction is only posted if a quantity is entered for the location at the same time it is added.

• Miscellaneous Receipt:

  Transaction	Debit	Credit
  Inventory Material	xxxx
  Inventory Labor	xxxx
  Inventory Fixed Overhead	xxxx
  Inventory Variable Overhead	xxxx
  Inventory Outside	xxxx
  Inventory Adjustment		xxxx

  The debit amount used is the quantity received extended by the unit cost you entered.

  DAU = QR * UCEBU

  where:

  DAU = Debit Amount Used

  QR = Quantity Received

  UCEBU = Unit Cost Entered by you

  The unit cost defaults to the value in the Items form's Unit Cost field at the time the transaction is entered.

  The credit account is the GL account number you entered. The account defaults to the item's Inventory Adjustment account.

• Miscellaneous Issue:

  Transaction	Debit	Credit
  Account Entered	xxxx
  Inventory Material		xxxx
  Inventory Labor		xxxx
  Inventory Fixed Overhead		xxxx
  Inventory Variable Overhead		xxxx
  Inventory Outside		xxxx

  The debit account is the GL account number you entered. The account defaults to the item's Inventory Adjustment account.

  The credit amount used is the quantity issued multiplied by the issue cost of the item:

  CA = QI * IC

  where:

  CA = Credit Amount

  QI = Quantity Issued

  IC = Issue Cost

• Job Material Issue:

  The following transactions are posted to the inventory distribution journal named SF Dist.

  Transaction	Debit	Credit
  WIP Material Costs	xxxx
  WIP Labor Costs	xxxx
  WIP Fixed Overhead Costs	xxxx
  WIP Variable Overhead Costs	xxxx
  WIP Outside Costs	xxxx
  Inventory Material		xxxx
  Inventory Labor		xxxx
  Inventory Fixed Overhead		xxxx
  Inventory Variable Overhead		xxxx
  Inventory Outside		xxxx
  Fixed Material Overhead Applied		xxxx
  Variable Material Overhead Applied		xxxx

• Job Receipt:

  The following transaction(s) are posted to the inventory distribution journal named SF Dist.

  Transaction	Debit	Credit
  Inventory Material	xxxx
  Inventory Labor	xxxx
  Inventory Fixed Overhead	xxxx
  Inventory Variable Overhead	xxxx
  Inventory Outside	xxxx
  Fixed Material Overhead Applied	xxxx
  Variable Material Overhead Applied	xxxx
  WIP Material Costs		xxxx
  WIP Labor Costs		xxxx
  WIP Fixed Overhead Costs		xxxx
  WIP Variable Overhead Costs		xxxx
  WIP Outside Costs		xxxx

Related Topics