Accounting Posting with FIFO Costing Method

Accounting Setups

Inventory Class

On the Item Card, if the Inventory Class is:

Finished Goods - Finished Goods inventory account defined on the Company Setup is used during posting.
Subassembly - Subassembly inventory account defined on the Company Setup is used during posting.
Raw Materials - Raw Materials inventory account defined on the Company Setup is used during posting.

Company Setup

The following GL Accounts are defined on the Company Setup:

Accounts Receivable
Accounts Payable
WIP
Inventory Adjustment

Account Posting Setups

The following GL Accounts are defined on Account Posting Setups. You can configure setups by Account Posting Group, Item Posting Group, or Item.

Sales/Sales Return
Cost of Goods Sold
Purchase/Purchase Return
Sales Discount

Item Journal Posting

Adjustment Journals

Average Cost (or the Last Invoiced Cost if Average Cost is 0) is used as the default Unit Cost on the Item Journal Line. Users can overwrite the Unit Cost.
The Inventory and Inventory Adjustment accounts are used during posting.
For negative adjustment Journal Entries, the Unit Cost on the Item Journal Line is updated during posting, based on the applied inbound inventory cost amount.

Transfer Journals

No general ledger entries are created during posting.

Cycle Count Journals

The posting is the same as the Adjustment Journals.

Production Journals/Kitting

Production Journal can be used as Kitting Journal without a Work Order.

Debit	Credit
Finished Goods	Raw Materials Purchase for the Service items

During the daily Adjust Cost routine, if the component cost is updated, GoldFinch will:

Debit	Credit
Inventory Adjustment Finished Goods	Raw Materials Inventory Adjustment

Warehouse Receipt Posting

The Expected Cost of the received inventory is recorded. No General Ledger Entries are created during posting.
The Expected Cost is based on the Purchase Cost on the Purchase Line. It is important to enter a Purchase Cost nearest to the Purchase Invoice Cost, especially for new items.

Purchase Invoice Posting

Debit	Credit
Inventory account using the Invoiced Cost amount, for Item. WIP account for Service items that are Work Order related. Purchase Account if Service items are not Work Order related.	Accounts Payable

Purchase Credit Memo Posting

Debit	Credit
Accounts Payable	Inventory account using the cost from the applied inbound inventory cost amount, for Item. The difference between the Credit Memo Cost and the Inventory Cost is posted to the Inventory Adjustment Account defined on the Company Setup. WIP Account for Service items that are Work Order related. Purchase Account if Service items are not Work Order related.

For service items, GoldFinch will create different GL Entries if the Description on the Purchase Invoice Line is different, even if the GL Account and GL Variables are the same.

Warehouse Shipment Posting

The Expected Cost of the shipped inventory is recorded. No General Ledger Entries are created during posting.
The Unit Cost on the Warehouse Shipment Line is updated during posting based on applied inbound inventory cost.

Sales Invoice Posting

Debit

Credit

Accounts Receivable
COGS

Sales

Sales Discount
Sales Tax Payable
Inventory Account for inventory items.
For Service Items, there is no general ledger entry created for the cost of the item during posting.

The Unit Cost on the Warehouse Shipment Line and the Sales Invoice Line is updated during posting based on the applied inbound inventory's cost amount.

GoldFinch will post Sales Discounts separately from Gross Sales Amount for inventory items. For service items, GoldFinch does not separate out Line Discounts from the Gross Sales Amount and only posts Net Sales Amount to the Sales GL Account.

Sales Credit Memo Posting

Debit	Credit
Sales Sales Tax Payable Inventory account for inventory items For Service Items, there are no general ledger entries created for the cost of the item during posting.	Accounts Receivable COGS

To post the cost of the returned inventory:

Enter the Applied From Sales Invoice Line on the Sales Line to use the original cost amount of the shipped inventory.
Manually update the Unit Cost on the Sales Line before creating the Warehouse Shipment.

For service items, GoldFinch will create different GL Entries if the Description on the Sales Invoice Line is different, even if the GL Account and GL Variable are the same.

Work Order Posting

Production Journal Posting

Output Item

The Expected Cost of the finished inventory is recorded, but no General Ledger Entries are created during posting.
The Expected Cost is calculated as the Last Invoiced Cost * Output Qty.
The Last Invoiced Cost is the previous Unit Cost of the output item on the Finished Work Orders.

Components

Debit	Credit
WIP	Raw Material Inventory Account

Direct Work Center Service

Debit	Credit
WIP	Capacity Expense Account (This is set up on Company Setup, and it should be a contra Payroll GL Account, or Labor Recovery account.)

Indirect Work Center Service

Debit	Credit
WIP	Indirect Capacity Expense Account ((This is set up on Company Setup)

Finish Work Order

Debit	Credit
Finished Good Inventory	WIP

You can update the work order status to Finished, and during this process, the Unit Cost on the Work Order is calculated as the Total Cost of the Work Order divided by the Quantity of items.

On executing the Adjust Cost Routine, the Invoiced Cost for the Output Item Ledger Entries is updated based on the latest WIP.

Additional Resources

Read Company Setup and Update Account Posting Setup for GL Account posting setup.

Read the Daily Adjust Cost Routine for information on adjusting the "timing difference" of costs,