How it works
Expected freight costs are posted as separate Item Charge Value Entries against the Item Ledger Entry at the point of receipt.
When the freight invoice arrives, the expected charges are reversed and the actual cost is posted as a Charge Item Value Entry. Because this flows through Business Central's standard Value Entry mechanism, the actual freight becomes part of the Item's true inventory cost and propagates to COGS through cost adjustment. The accounts used for posting are derived from the standard Business Central Inventory and General Posting Setup.
Stage 1 - Purchase Receipt
Business Central posts the material cost only (no overhead rate) and then the expected Item Charge Value Entry for freight is also posted.
|
Account |
Debit |
Credit |
Source |
|
Inventory (Interim) |
100.00 |
BC - Expected Value Entry (material) |
|
|
Invt. Accrual Acc. (Interim) |
100.00 |
BC - Expected Value Entry |
|
|
Inventory (Interim) |
10.00 |
LC - Expected Item Charge Value Entry |
|
|
Landed Cost Invt. Accrual Acc. (Interim) |
10.00 |
LC - Expected Item Charge Value Entry |
Balances: Inventory (Interim) 110.00 Dr ~ Invt. Accrual (Interim) 100.00 Cr ~ Landed Cost Invt. Accrual (Interim) 10.00 Cr
Stage 2 - Material Invoice
Business Central reverses the expected cost and posts an actual cost for the material cost. The freight accrual remains in place until the freight invoice arrives.
|
Account |
Debit |
Credit |
Source |
|
Purch. Account |
100.00 |
BC - Purchase invoice line |
|
|
Payables Account |
|
100.00 |
BC - Vendor liability |
|
Inventory (Interim) |
|
100.00 |
BC - Reverse expected cost |
|
Invt. Accrual Acc. (Interim) |
100.00 |
|
BC - Reverse expected cost |
|
Inventory |
100.00 |
BC - Actual Direct Cost Value Entry |
|
|
Direct Cost Applied |
100.00 |
BC - Actual Direct Cost Value Entry |
Balances: Inventory (Interim) 10.00 Dr (freight) ~ Landed Cost Invt. Accrual Acc. (Interim) 10.00 Cr ~ Inventory 100.00 Dr ~ Payables 100.00 Cr
Stage 3 - Landed Cost Invoice
When you set the Landed Cost Type Code on the purchase line, the Type is set to G/L Account using the Purch. Account defined against the "Landed Cost Type" Charge Item No., using the General Posting Setup . Business Central posts the invoice against this account. The Landed Cost functionality then posts the reversal for the Expected Cost and replaces this with the actual cost, which is controlled through the assignment process triggered during invoicing.
|
Account |
Debit |
Credit |
Source |
|
Landed Cost Purch. Account |
15.00 |
BC - Purchase invoice line |
|
|
Payables Account |
|
15.00 |
BC - Vendor liability |
|
Inventory (Interim) |
10.00 |
LC - Reverse expected freight cost |
|
|
Landed Cost Invt. Accrual Acc. (Interim) |
10.00 |
|
LC - Reverse expected freight cost |
|
Inventory |
15.00 |
|
LC - Actual freight Item Charge Value Entry |
|
Landed Cost Direct Cost Applied |
15.00 |
LC - Actual freight Item Charge Value Entry |
After Invoicing, when the Adjust Cost - Item Entries batch job is triggered the updated costs will flow through to any usage of the Inventory.
Final Position
The Item's inventory cost is 115.00 which is true cost inclusive of raw material and freight charges. There is no variance account because the full cost is held in inventory. When the item is sold, Cost of Goods Sold (COGS) will also be 115.00 and if the goods were sold prior to the processing of the freight invoice, Business Central's cost adjustment routine will automatically update COGS to reflect changes in the inventory cost.
|
Account |
Balance |
Type |
|
Inventory |
115.00 |
Balance Sheet |
|
Payables (goods supplier) |
100.00 Cr |
Balance Sheet |
|
Payables (freight supplier) |
15.00 Cr |
Balance Sheet |
|
All interim and intermediate accounts |
0.00 |
Cleared |