FIFO & Charge Item Cost Treatment

How it works

For Charge Item treatment on transfers, the expected stevedore cost is posted as separate Item Charge Value Entries against the transfer receipt Item Ledger Entry, which adds the cost directly to the item's inventory value.

Clever Landed Cost then posts a G/L correction to create an accrual so that the cost can then be matched against the stevedore invoice when it arrives. 

When the stevedore invoice arrives, the accrual is reversed and an additional actual cost is posted as a Charge Item Value Entry for any variance between the expected and actual cost to value the inventory correctly. Because this flows through Business Central's standard Value Entry mechanism, the actual cost of stevedore charges 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 - Transfer Receipt

Business Central posts the standard transfer entries and then the expected value for stevedore is posted as an Actual Item Charge Value Entry due to the fact that Transfer Item Ledger Entries are always processed as Actual Costs in Business Central. The cost is then moved from the Direct Cost Applied to the Landed Cost Invt. Accrual Acc. (Interim) to represent the cost as an accrual rather than actual cost at this point.

Balances: Inventory 5.00 Dr ~ Landed Cost Invt. Accrual (Interim) 5.00 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 accrual (which moves expected cost back to Direct Cost Applied) and posts any variance as an actual Value Entry cost posting.

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 increased by 8.00 which is true cost of the stevedore 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 increased by 8.00 and if the goods were sold prior to the processing of the stevedore invoice, Business Central's cost adjustment routine will automatically update COGS to reflect changes in the inventory cost.