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Thursday, 29 November 2012

Procurement Accounting MS Dynamics AX 2012

New accounting framework introduced by MS Dynamics AX 2012 is not as same as available in DAX2009, my this post highlights accounting practice that is followed by Procurement Process in MS Dynamics AX 2012.


Accounts in Procurement Process

To setup accounts for procurement process, we need to setup Purchase Fast Tab within Item Group available at Inventory Management > Setup > Item Groups. Click the Posting Button, to define accounts based on Item Groups & Vendor Groups.





Accounts Type associated with Product Receipt,


  • Purchase Expenditure Un-Invoiced
  • Purchase, accrual
  • Product Receipt

Accounts Type associated with Invoicing,


  • Purchase Expenditure Un-Invoiced
  • Purchase, accrual
  • Purchase Expenditure for product
  • Vendor Balance
  • Product Receipt
  • Purchase, Inventory Receipt

All accounts are Balance Sheet Accounts, as if year-end close we would not like to transfer any account balance to Retained Earnings Account.

Logic,


At the time of receiving (Posting of Product Receipt), following entries are posted by MS Dynamics AX 2012.


Recording Accrual for a Vendor

  • Purchase Expenditure, Un-invoiced (Debit)
  • Purchase, accrual (Credit)


Recording of Inventory

  • Product Receipt (Debit)
  • Purchase Expenditure, Un-invoiced (Credit)


Overall effect of this entry should be,

  • Product Receipt (With Debit Balance)
  • Purchase, accrual (With Credit Balance)
  • Purchase Expenditure, Un-invoiced (ZERO EFFECT)


Overall effect of this entry on process should be the same as an entry.

At the time of Invoicing (Posting Vendor Invoice) following entries are posted by MS Dynamics AX 2012:

Reversal  of Accrual for a Vendor

  • Purchase Expenditure, Un-invoiced (Credit)
  • Purchase, accrual (Debit)


Recording of Actual Liability for a Vendor

  • Purchase Expenditure for Product (Debit)
  • Vendor Balance (Credit)


Reversal  of Inventory

  • Product Receipt (Credit)
  • Purchase Expenditure, Un-invoiced (Debit)


Recording of Inventory at the time invoicing

  • Purchase Inventory, Receipt (Debit)
  • Purchase Expenditure for Product (Credit)


Overall Effect of this entry should be,

  • Purchase Expenditure, Un-invoiced (Zero Effect)
  • Purchase Expenditure for Product (Zero Effect)
  • Purchase, accrual (with Debit Balance)
  • Vendor Balance (With Credit Balance)
  • Product Receipt (With Credit Balance)
  • Purchase Inventory, Receipt (With Debit Balance)


Overall effect of this entry on process should be,

Balances from Receiving Entry,

  • Product Receipt (With Debit Balance)
  • Purchase, accrual (With Credit Balance)


Balance from Invoicing Entry,

  • Purchase, accrual (with Debit Balance)
  • Vendor Balance (With Credit Balance)
  • Product Receipt (With Credit Balance)
  • Purchase Inventory, Receipt (With Debit Balance)


Overall Effect after invoicing,

  • Product Receipt (NO EFFECT)
  • Purchase, accrual (NO EFFECT)
  • Vendor Balance (With Credit Balance)
  • Purchasing Inventory , receipt (With Debit Balance)
I am still looking for answers why Microsoft has provided such accounting, when it was never required.

Let me know if you have any questions for this post.