Jun 28, 2015

Expected Cost Posting in Microsoft Dynamics NAV

Expected cost posting to GL is a beautiful functionality available in the Microsoft Dynamics NAV, But it seems many people have not understand this functionality well enough. 
Expected cost is an estimation that you would have before you get the final invoice from your vendor. This functionality allows you to have a interim accrual for the purchase before you get the actual invoice to your hand to update the G/L with the actual cost. 

How default functionality works without expected cost posting : 

Microsoft Dynamics NAV will only update the inventory at the time of receiving the purchase order and will NOT post any entries to G/L accounts. 
While updating the inventory, Dynamics NAV will post entries to Value Entry table. 

As an example if the item cost is USD 100 then value entry would like below :

Without expected cost posting - After Receiving Order (Value Entry)
Posting Date
Cost Amount (Expected)
Cost Amount (Actual)
Cost Posted to G/L
Expected Cost Posted to G/L
Cost per Unit
1/28/2016
100.00
0
0
0
100

If you navigate to the receipt document and check the related entries, you will find there are no G/L entries attached to the document. 

Once you post the Purchase Invoice with the actual cost (Cost changes to USD 120), Dynamics NAV will post entries to the G/L and Value Entry with the related cost.
Following are the entries posted to Value Entry: 
Without expected cost posting - After Invoicing (Value Entry)
Posting Date
Cost Amount (Expected)
Cost Amount (Actual)
Cost Posted to G/L
Expected Cost Posted to G/L
Cost per Unit
1/28/2016
-100.00
120.00
120.00
0
120.00

Following are the entries posted to G/L Entry:
Without expected cost posting - After Invoicing (G/L Entry)
Posting Date
G/L Account No.
Account Name
Amount
1/28/2016
2130
Inventory Account
120.00
1/28/2016
7291
Direct Cost Applied Account
-120.00

How Expected Cost Posting works

With the Expected Cost Posting set to Yes in the Inventory Setup, Microsoft Dynamics NAV will post entries to G/L at the time of receiving the order. Where earlier case it only update the inventory of the system.  
Following are the entries posted to Value Entry: (Expected cost is USD 100)
With expected cost posting - After Receiving Order (Value Entry)
Posting Date
Cost Amount (Expected)
Cost Amount (Actual)
Cost Posted to G/L
Expected Cost Posted to G/L
Cost per Unit
1/28/2016
100.00
0
0
100.00
100.00

Following are the entries posted to G/L Entry:
With expected cost posting - After Receiving Order (G/L Entry)
Posting Date
G/L Account No.
Account Name
Amount
1/28/2016
2131
Inventory Account (Interim)
100.00
1/28/2016
5530
Inventory Accrual Account (Interim)
-100.00

At the time of posting the purchase invoice, Microsoft Dynamics NAV will reverse the expected cost posted entries from the G/L and post the new entries to G/L with the actual cost. 

Following are the entries posted to Value Entry: (Cost changes to USD 120)
With expected cost posting - After Invoicing (Value Entry)
Posting Date
Cost Amount (Expected)
Cost Amount (Actual)
Cost Posted to G/L
Expected Cost Posted to G/L
Cost per Unit
1/28/2016
-100.00
120.00
120.00
-100.00
120.00


With expected cost posting - After Invoicing (G/L Entry)
Posting Date
G/L Account No.
Account Name
Amount
1/28/2016
2131
Inventory Account (Interim)
-100.00
1/28/2016
5530
Inventory Accrual Account (Interim)
100.00
1/28/2016
2130
Inventory Account
120.00
1/28/2016
7291
Direct Cost Applied Account
-120.00


To achieve above scenario you need to select the Automatic Cost Posting check box and the Expected Cost Posting to G/L check box in the Inventory Setup window.

Please provide your feedback with a comment. 
Thank you and Regards,
Tharanga Chandrasekar