How it works
The Standard Cost includes the expected freight (£110 = £100 material + £10 freight). At receipt, Business Central posts the full Standard Cost and no landed cost Item Charge Value Entry is posted, as this would double-count the freight that is already in the Standard Cost. Instead, the expected freight charge accrual is reclassified to a separate Landed Cost interim account.
When the freight invoice arrives, Item Charge Value Entry will be posted which Business Central initially adds to Inventory. The standard cost adjustment then immediately creates a variance entry to bring Inventory back to Standard Cost and a Landed Cost G/L correction will be made to route the variance to a specific Landed Cost Purchase Variance account
Stage 1 - Purchase Receipt
Business Central posts a single expected Value Entry at Standard Cost. The Landed Cost is then moved from the standard interim accrual to the Landed Cost specific interim accrual account.
|
Account |
Debit |
Credit |
Source |
|
Inventory (Interim) |
110.00 |
BC - Expected Value Entry |
|
|
Invt. Accrual Acc. (Interim) |
110.00 |
BC - Expected Value Entry |
|
|
Invt. Accrual Acc. (Interim) |
10.00 |
Landed Cost - reclassify accrual |
|
|
Invt. Accrual Acc. (Interim) (Landed Cost) |
10.00 |
Landed Cost - reclassify accrual |
Balances: Inventory (Interim) 110.00 Dr ~ Invt. Accrual (Interim) 100.00 Cr ~ Invt. Accrual (Interim) (Landed Cost) 10.00 Cr
Stage 2 - Material Invoice
Business Central reverses the full Standard Cost and posts actual. Because the invoice (£100) is less than Standard Cost (£110), BC creates a Purchase Variance of £10. However, this variance exists only because the LC portion (£10) was reclassified away from the standard accrual at receipt time - it does not represent a real material cost variance. A correction is then made by posting a G/L entry that offsets the variance and restores the Landed Cost accrual balance.
|
Account |
Debit |
Credit |
Source |
|
Purch. Account |
100.00 |
BC - Purchase invoice line |
|
|
Payables Account |
|
100.00 |
BC - Vendor liability |
|
Inventory (Interim) |
|
110.00 |
BC - Reverse expected cost |
|
Invt. Accrual Acc. (Interim) |
110.00 |
|
BC - Reverse expected cost |
|
Inventory |
100.00 |
BC - Actual Direct Cost Value Entry |
|
|
Direct Cost Applied |
100.00 |
BC - Actual Direct Cost Value Entry |
|
|
Inventory |
10.00 |
|
BC - Purchase Variance Value Entry |
|
Purchase Variance |
10.00 |
BC - Purchase Variance Value Entry |
|
|
Purchase Variance |
10.00 |
|
Landed Cost Variance Reclassification |
|
Invt. Accrual Acc. (Interim) |
10.00 |
Landed Cost Variance Reclassification |
Balances: Inventory 110.00 Dr ~ Invt. Accrual (Interim) (Material) 0.00 ~ Invt. Accrual (Interim) (Landed Cost) 10.00 Cr ~ Purchase Variance (Material) 0.00 ~ Payables 100.00 Cr
Stage 3 - Landed Cost Invoice
When you set the Landed Cost Type Code on the purchase invoice line, Clever automatically sets the line to Type = G/L Account with the account set to the Purch. Account from the Charge Item’s General Posting Setup.
This stage involves multiple coordinated postings where BC posts the vendor invoice and Clever Landed Cost functionality posts G/L corrections to reverse the receipt accrual and route variances to the correct accounts. An Item Charge Value Entry will be created which will be adjusted to bring Inventory back to Standard Cost.
|
Account |
Debit |
Credit |
Source |
|
Landed Cost Purch. Account |
15.00 |
BC - Purchase invoice line |
|
|
Payables Account |
|
15.00 |
BC - Vendor liability |
|
Inventory |
15.00 |
|
BC - Actual cost Item Charge Value Entry (landed cost) |
|
Landed Cost Direct Cost Applied |
15.00 |
BC - Actual cost Item Charge Value Entry (landed cost) |
|
|
Inventory |
15.00 |
BC - Purchase Variance Item Charge Value Entry |
|
|
Purchase Variance |
15.00 |
|
BC - Purchase Variance Item Charge Value Entry |
|
Landed Cost Invt. Accrual Acc. (Interim) |
10.00 |
|
Landed Cost Reversal |
|
Landed Cost Purchase Variance |
10.00 |
Landed Cost Reversal |
|
|
Landed Cost Purchase Variance |
15.00 |
|
Landed Cost Actual Invoice Value |
|
Purchase Variance |
15.00 |
Landed Cost Actual Invoice Value |
Final Position
The item’s inventory cost stays at Standard Cost which is 110. The net variance of 5 (actual freight compared to freight built into the Standard Cost) is posted to the Purchase Variance account via the Charge Item’s posting group. This is consistent with how Business Central handles all item charge variances against Standard Cost items. Cost of Goods Sold when inventory is sold will be 110.
|
Account |
Balance |
Type |
|
Inventory |
110.00 |
Balance Sheet |
|
Payables (goods supplier) |
100.00 Cr |
Balance Sheet |
|
Payables (freight supplier) |
15.00 Cr |
Balance Sheet |
|
Purchase Variance (landed costs) |
5.00 Dr |
Income Statement |
|
All interim and intermediate accounts |
0.00 |
Cleared |