Accounting Posting with FIFO Costing Method
Accounting Setups
Inventory Class
The Inventory Class on the Item Card determines which inventory account is used during posting:
Finished Goods: The Finished Goods inventory account, as defined in the Company Setup, is used.
Subassembly: The Subassembly inventory account, as defined in the Company Setup, is used.
Raw Materials: The Raw Materials inventory account, as defined in the Company Setup, is used.
Company Setup
The following General Ledger (GL) Accounts are defined in the Company Setup:
Accounts Receivable
Accounts Payable
WIP (Work In Progress)
Inventory Adjustment
Account Posting Setups
You can configure GL Accounts in Account Posting Setups by Account Posting Group, Item Posting Group, or Item. The following accounts are commonly used:
Sales/Sales Return
Cost of Goods Sold (COGS)
Purchase/Purchase Return
Sales Discount
Accounting Posting
Item Journal Posting
For Item Journal Posting, the Average Cost (or the last invoiced cost, if the average cost is zero) is used as the default Unit Cost on the Item Journal Line, although users can overwrite this value. The Inventory and Inventory Adjustment accounts are used during posting. For negative adjustments, the Unit Cost is updated based on the applied inbound inventory cost.
Transfer Journals
No general ledger entries are created during Transfer Journal Posting.
Cycle Count Journals
The posting for Cycle Count Journals follows the same logic as Adjustment Journals.
Production Journals/Kitting
The Production Journal can be used for kitting without a Work Order. Upon posting, the following general ledger transactions are created:
Debit | Credit |
---|---|
Finished Goods | Raw Materials |
If the component cost is updated during the Daily Adjust Cost Routine, the following adjustments are made:
Debit | Credit |
---|---|
Inventory Adjustment | Raw Materials |
Warehouse Receipt Posting
When posting a Warehouse Receipt, the Expected Cost of the received inventory is recorded, but no general ledger entries are created. The expected cost is based on the Purchase Cost entered on the Purchase Line.
Purchase Invoice Posting
When posting a Purchase Invoice, the following general ledger entries are created:
Debit | Credit |
---|---|
Inventory account (for items) WIP account (for Work Order related service items) Purchase Account (for non Work Order related service items) | Accounts Payable |
Purchase Credit Memo Posting
When posting a Purchase Credit Memo, the following entries are created:
Debit | Credit |
---|---|
Accounts Payable |
|
Warehouse Shipment Posting
For Warehouse Shipments, the expected cost of shipped inventory is recorded, but no GL entries are created. The Unit Cost is updated during posting, based on the applied inbound inventory cost.
Sales Invoice Posting
For Sales Invoice Posting, the following general ledger entries are created:
Debit | Credit |
---|---|
Accounts Receivable |
|
Sales Credit Memo Posting
When posting a Sales Credit Memo, the following entries are created:
Debit | Credit |
---|---|
| Accounts Receivable |
More Information:
Work Order Posting
For Work Orders, when posting the Production Journal, the following entries are made:
Components:
Debit | Credit |
---|---|
WIP | Raw Material Inventory Account |
Direct Work Center Service:
Debit | Credit |
---|---|
WIP | Capacity Expense Account (setup as contra Payroll or Labor Recovery account on the Company Setup) |
Indirect Work Center Service:
Debit | Credit |
---|---|
WIP | Indirect Capacity Expense Account |
When the Work Order is finished, the following entries are made:
Debit | Credit |
---|---|
Finished Good Inventory | WIP |
The Unit Cost is calculated based on the total cost of the Work Order divided by the quantity of finished items. During the Adjust Cost Routine, the invoiced cost for the output item is updated based on the latest WIP costs.