Hi Friends,
Since AX 2012, accounting framework has changed a lot. I will say from accounting perspective, AX 2012 is completely new. t’s not an enhancement to AX 2009.
Well, although AX 2012 is out in market for more than a year, i will try to explain the PO accounting in AX 2012.
The accounting impact of PO happens at two stages:
1. At PO product receipt(Or packing slip) posting.
2. On PO Invoice
PO Product Receipt
When receipt is posted, two sets of ledger entry is posted:
1.
Purchase expenditure, un-invoiced – Debit
Purchase, accrual – Credit
2.
Product receipt – Debit
Purchase expenditure, un-invoiced – Credit
Now, the important thing here to notice is the set of ledgers. The first set is liability booking for vendor while the second set represents open inventory. Here we notice that Purchase expenditure, un-invoiced is offsetting both accrual and receipt but they act differently. Things will be more clear after we discuss PO Invoice accounting
PO Invoice
At the time of invoice, the accrual and product receipts are reversed and main account are hit. Following are the set of entries:
1.
Purchase expenditure, un-invoiced – Credit
Purchase, accrual – Debit
Purchase expenditure for product – Debit
Vendor balance (Accounts payable) – Credit
2.
Product receipt – Credit
Purchase expenditure, un-invoiced – Debit
Purchase, product receipt – Debit
Purchase expenditure for product – Credit
So we see here that the one set of account is vendor and other is inventory. The very important to notice here is to look closely at purchase expenditure, un-invoiced account. Please note that it is not necessary that this account balance will always be 0 which it looks like. This ledger is running separately for vendor and inventory and in case of purchase return order where the inventory is issues at weighted average cost, there is a great chance that the vendor will hit by some amount and inventory will hit by some other amount unless you use marking feature.
Remember to discuss this point with client during discussion. The second point is always maintain separate account for Purchase expenditure, un-invoiced and Purchase, product receipt as i have seen many clients preferring same account for both.
I will discuss more points on AP accounting. Very soon i will be writing something on service items and its relation to item model group and of-course accounting impact of service items.
Please feel free to write me if you have any concern or issue.
Hope you had a great reading.
Many thanks,
Pranav
Let’s share knowledge….
Pranav's Blog 
Nice one Pranav…
Good Explanation of Accounting procedure for PO and Packing Slip
Thanks Bala.. Accounting framework is now new.I faced some questions from client when i started working on AX 2012. So i shared here so that it will be easy to explain the framework.
Thanks,
Pranav
Are these entries are due to sub ledger concepts……..?
Hi Jinesh. Yes we can say that.
Question: how can I process purchase returned… after I posted Purchase Invoiced..? Thanks in Advance.
Hi Willie,
Purchase returned can be processed either using credit note or purchase order type returned order. If you know which purchase invoice has to be returned then it’s better to use credit note feature else use purchase return order. When you use credit note, the inventory will be returned at exact cost of purchase other wise system will take weighted average price.
Pranav…
Hi Pranav..its very nice and helpful. Thanks for sharing this info.
Hey Hello can you please tell me that if we are working on moving average in AX 2012 R2 then when we create return order to vendor some amount is posted in Purchase Expenditure account due to moving average still if we are using marking option can you please guide me in this matter.
Pranav, Thanks for the nice explanation. could you explain what is the benefit to the end customer because of these new entries. Also, the “Purchase expenditure for product” account getting knocked off right, what could be the use of this too? Appreciate your early reply.
Hi Santosh;
I think, one of the reason for using multiple account is budget control. The other reason is the way inventory and AP part is segregated now. The Inventory account is not offsetting directly to AP account. Apart from that, since purchase expenditure account clear itself, i don’t see other benefits. May be MS is still changing the financial architecture and this is the point to begin with.
Thanks,
Pranav
Hey Pranav, Thanks for the reply. I’ve one more question. Lets say if we want to get the total purchases value of an item group. then, which account balance that we can pick up and say this is the total value of purchases
Hi Santosh, Purchase, inventory receipt account is basically inventory account. This account is debited when PO is invoiced. If you look at the ledger transactions, then ledger transactions which has transaction type as purchase order and Posting type as Purchase, inventory receipt are essentially created by PO Invoice. Please note that this a/c carries lot of other transactions also like SO Invoice, Inventory journals, inventory closing.
Thanks,
Pranav
Hi Pranav,
Appreciate your knowledge sharing. Thank you very much.
I have a Query.
What is difference between Product receipt & Purchase, product receipt. also difference between Purchase expenditure, un-invoiced & Purchase expenditure for product?
Hi Suhas,
Thanks for your feedback.
Product receipt account is hit at the time of product receipt. It’s basically inventory received not invoiced account and is a balance sheet account.
Purchase, inventory receipt is hit at the time of PO invoicing and this is your inventory account. Please note that when PO is invoiced, the amount in product receipt account is reversed as actual inventory is posted.
Purchase expenditure for expense account is used by Non stocked items. This account denotes the expense and in item posting, normally an expense account is used. This account doesn’t get impacted in case of stocked item posting.
Purchase expenditure uninvoiced is used as a clearing account in packing slip posting which i have explained in blog also.
Now with R3 release, purchase expenditure uninvoiced is not used for all the postings.
Pranav
Really thanx for your advicing….I want to know uses of all the item posting profiles …
Hi Shardendu,
Good question. Thought the answer is not simple.
Item posting profile defines the ledger account when a PO or SO is invoiced. Normally we do posting setup on item group level and all the setup is reflected in item posting profile. I will say it as a reposotry of item related posting setup.
The interesting fact here is the AR and AP parameter. In the parameter, you need to define how the posticng account will be picked, whether from Item or Customer/vendor.
Please let me know if you want to know more about it.
Pranav
Hi Pranav,
we are facing the problem of purchase account actually, i am not understanding that which types item posting profile is reflecting in Final purchase in main Account so that we can’t mention in profit & Loss account.
Regards
Shardendu Prakash Sharma
Hi Pranav,
Thanks for this post. I am getting the following error when attempting to perform a purchase order receipt/delivery note.
The transactions on voucher do not balance as per 11/09/2014. (accounting currency: 0.28 – reporting currency: 0.28)
I have debugged this down to the code; validateDebitCreditBalance method – the transaction isBalanced is true but then it switches to false and returns a checkfailed error.
Can you point me in the right direction to what might be wrong?
I think I have fixed this – in one company I was missing the supplier posting profile entry for Purchase accrual (I upgraded from AX4).
Entered the posting record and now all fine.
Thanks Kauto. I believe this will be helpful for others also.
Thanks,
Pranav
Hi Pranav
Very nicely explained, but i make the full setup and when i am posting the product receipt i am getting the two line voucher only, accrual part is missing. I Checked mark the accrual in the item model group, and check mark the post product receipt in ledger under AP parameters, can you suggest me which more area i have to check
Hi Imran,
Thanks for your feedback. The reason for 2 line entry is because of change in posting structure in R3. Rather than hitting purchase expenditure for Product, now system overlooks that if the voucher is balancing. Same happens with invoicing also, system posts 4 line entry. This change is good as it was not easy to explain 8 lines entries initially. Hope this helps. Thanks
Hi pranav
what is the default inventory valuation in item model group.
HI Pravan,
It’s a fabulous post with great exposure. Thanks for that.
We are facing an issue in PO Invoice accounting when the transaction is done in other than accounting currency. IN PO Invoice Voucher
Two additional lines of posting type Purchase expenditure for product is created.
It’s not happening if the transactions are done in the currency which is same as the accounting currency.
Is it the default behaviour in AX.
Could you please explain why it’s creating two additional lines in case of transactions done in other than accounting currency ?
Note: this thread is discussed in Ax community. you can check
https://community.dynamics.com/ax/f/33/t/182861
Thanks,
Hi Krishna;
What are the other 2 accounts getting hit, can you tell the posting type so that we can figure out its root cause. The posting is driven from item/vendor group depending on setup. The posting type will also give picture if it was related to foreign currency.
Thanks,
Pranav