Actual Costing: Transactions Posting to Inventory Distribution Journals

The following subsections outline every transaction that is posted to the inventory distribution journals when some method of actual costing is being used.

Because the costs and account numbers used for the journal posting are quite different if using standard costing or one of the four actual cost flow methods, the transactions generated are explained for both standard and actual. If the system should not automatically generate these transactions, clear the General Parameters form's Post to Journal check box.

See Posting to General Ledger - Actual Costing for more information.

Purchasing Transactions

The following transactions are posted to the inventory distribution journal named PO Dist.

  • Purchase Order Receipt:
    Transaction Debit Credit
    Inventory Material xxxx  
    Vouchers Payable   xxxx

    Because this item is purchased, only one posting (Inventory Material Cost) is applicable. All accounts for each cost details component would have the same account number, therefore only one posting entry is made.

    The cost used is the quantity received multiplied by the purchase order line item unit cost. (This is the default cost. At the time of receipt, it is possible for you to update the receipt cost to anything.)

    CU = (RQ * POUC)

    where:

    • CU = Cost Used
    • RQ = Receipt Quantity
    • POUC = PO Unit Cost
  • Purchase Order Return:
    Transaction Debit Credit
    Vouchers Payable   xxxx
    Inventory   xxxx
    Inventory Adjustment xxxx   or xxxx

    The cost used is the quantity returned multiplied by the item's issue cost:

    CU = (QR * IIC)

    where:

    • CU = Cost Used
    • QR = Quantity Returned
    • IIC = Item's Issue Cost
  • Voucher Generation:

    Transaction

    a. If vouchered cost > receipt cost:

    Vouchers Payable

    Accounts Payable

    b. If vouchered cost < receipt cost:

    Vouchers Payable

    Inventory Adjustment

    Accounts Payable

    The previous transaction is created only if any line items were vouchered at a different cost than the cost at which they were received into inventory. (The cost at which the items were received into inventory is the line item unit cost field at the time of the receipt.)

    xxxx = (quantity received * (vouchered cost - receipt cost))

    xxxx = (cost of receipt - cost of voucher) - adjustment

    POVC = QR * (VC - RC)

    where:

    • POVC = Purchase Order Variance Cost
    • QR = Quantity Received
    • VC = Voucher Cost
    • RC = Receipt Cost

Production Transactions

The following transactions are posted to the inventory distribution journal named SF Dist.

  • Job Material Issue:
    Transaction Debit Credit
    WIP Material Costs xxxx  
    WIP Labor Costs xxxx  
    WIP Fixed Overhead Costs xxxx  
    WIP Variable Overhead Costs xxxx  
    WIP Outside Costs xxxx  
    Inventory Material   xxxx
    Inventory Labor   xxxx
    Inventory Fixed Overhead   xxxx
    Inventory Variable Overhead   xxxx
    Inventory Outside   xxxx
    Fixed Material Overhead Applied   xxxx
    Variable Material Overhead Applied   xxxx

    The inventory accounts used are those of the item being issued to the job, not the item being manufactured. The inventory credit amount is the quantity issued from inventory multiplied by the issue cost of the item.

    ICA = QIFI * IC

    where:'

    • ICA = Inventory Credit Amount
    • QIFI = Quantity Issued from Inventory
    • IC = Issue Cost

    The credits to the overhead accounts are calculated by multiplying the actual material cost by the fixed and variable overhead rates in the Product Codes form.

    COA = MC * (FO + VOR)

    where:

    • COA = Credits to the Overhead Account
    • MC = Material Cost
    • FO = Fixed Overhead
    • VOR = Variable Overhead Rate

    The debit to WIP is the sum of the direct material, fixed overhead, and variable overhead amounts.

    DTWIP = DM + FO + VOA

    where:

    • DTWIP = Debit to WIP
    • DM = Direct Material
    • FO = Fixed Overhead
    • VOA = Variable Overhead Amounts
  • Job Material Withdrawal:
    Transaction Debit Credit
    Inventory Material xxxx  
    Inventory Labor xxxx  
    Inventory Fixed Overhead xxxx  
    Inventory Variable Overhead xxxx  
    Inventory Outside xxxx  
    WIP Material Costs   xxxx
    WIP Labor Costs   xxxx
    WIP Fixed Overhead Costs   xxxx
    WIP Variable Overhead Costs   xxxx
    WIP Outside Costs   xxxx
    Fixed Material Overhead Applied xxxx  
    Variable Material Overhead Applied xxxx  

    The debit to inventory is the quantity of the item withdrawn from the job multiplied by a unit cost figure which varies depending on the costing method in use.

    DTI = QIWJ * VUCF

    where:

    • DTI = Debit to Inventory
    • QIWJ = Quantity of the Item Withdrawn from the Job
    • UCF = Unit Cost Figure

    The debits to the overhead accounts are calculated by multiplying the average cost of all items issued. The job material total actual cost/job material quantity issued.

    DOA = MT / JI

    where:

    • DOA = Debits to the Overhead Account
    • MT = Job Material Total actual cost
    • JI = Job material quantity issued

The credit to WIP is the sum of direct material, fixed overhead, and variable overhead amounts.

CTWIP = DM + FO + VOA

where:

  • CTWIP = Credit to WIP
  • DM = Direct Material
  • FO = Fixed Overhead
  • VOA = Variable Overhead Amounts
  • Post Job Transaction Labor:
    Transaction Debit Credit
    WIP Labor Costs xxxx  
    WIP Fixed Overhead Costs xxxx  
    WIP Variable Overhead Costs xxxx  
    Direct Labor Applied   xxxx
    Fixed Labor Overhead Applied   xxxx
    Variable Labor Overhead Applied   xxxx

    The credit to labor is the actual hours in the transaction multiplied by the specified manufacturing rate of the employee who reported the transaction.

    CTL = AH * SMR

    where:

    • CTL = Credit To Labor
    • AH = Actual Hours
    • SMR = Specified Manufacturing Rate

    The credits to the overhead accounts are calculated by multiplying the actual labor hours by the fixed and variable overhead rates in the Departments form.

    COA = LH * (FO + VOR)

    where:

    • COA = Credits to the Overhead Account
    • LH = Labor Hours
    • FO = Fixed Overhead
    • VOR = Variable Overhead Rate

    The debit amount to WIP is the sum of direct labor, fixed overhead, and variable overhead amounts.

    • WIP Amount = (actual hours * employee manufacturing rate) + (actual hours * department fixed overhead rate) + (actual hours * department variable overhead rate)
    • Direct Labor =(actual hours * employee manufacturing rate)
    • Fixed Labor Overhead = (actual hours * department fixed overhead rate)
    • Variable Labor Overhead = (actual hours * department variable overhead rate)
    • Post Job Transactions: Machine transactions

    Machine costs apply machine overhead charges to a job operation for the hours a machine was run, along with the quantity of goods completed, scrapped, and moved to the next operation. If the work center for the operation is machine scheduled, the remaining scheduling time for the operation will be reduced by the total hours posted.

    The additional posting described below for the "Move" transaction is also performed for all "Run" transactions.

  • Job Finish (Put to Stock):
    Transaction Debit Credit
    Inventory Material xxxx  
    Inventory Labor xxxx  
    Inventory Fixed Overhead xxxx  
    Inventory Variable Overhead xxxx  
    Inventory Outside xxxx  
    WIP Material Costs   xxxx
    WIP Labor Costs   xxxx
    WIP Fixed Overhead Costs   xxxx
    WIP Variable Overhead Costs   xxxx
    WIP Outside Costs   xxxx

    When inventory is received from a job, the receipt cost used is determined by:

    • The Shop Floor Control Parameters form's Costs Based on Complete field.
    • The status of the job.
    • The Complete flag on the job's operations.

    If the receipt is being performed using a labor transaction on the last operation, you have the option of closing the job order. If the job is closed when the transaction is entered, the receipt cost used is always the actual unit cost of the job. If the job is not closed and the Costs Based on Complete parameter is set to Jobs, the receipt cost used is the planned unit cost of the job.

    The planned unit cost is based on the setup, run-times, run rates, and labor overhead rates in the Job Operations form as well as the unit costs and the material overhead rates in the Job Materials form.

    If the job is not closed and the Costs Based on Complete parameter is set to Operations, the receipt cost used is determined by the Complete flag of the job's operations. Actual costs from complete operations are accumulated while planned costs from incomplete operations are accumulated to determine the final receipt cost.

  • Job Closed Manually:
    Transaction Debit Credit
    a. If actual cost > planned cost:    
    Inventory Adjustment xxxx  
    WIP Material Costs   xxxx
    WIP Labor Costs   xxxx
    WIP Fixed Overhead Costs   xxxx
    WIP Variable Overhead Costs   xxxx
    WIP Outside Costs   xxxx
    b. If actual cost < planned cost:    
    WIP Material Costs xxxx  
    WIP Labor Costs xxxx  
    WIP Fixed Overhead Costs xxxx  
    WIP Variable Overhead Costs xxxx  
    WIP Outside Costs xxxx  
    Inventory Adjustment   xxxx

    If the job is being closed manually by changing the status from Released to Complete an adjustment needs to be made since the job's planned cost would have been used for the transaction that put the item to stock.

    The amount used is the difference between the total planned and actual cost of the job:

    AU = TPC - AC

    where:

    • AU = Amount Used
    • TPC = Total Planned Cost
    • AC = Actual Cost

Customer Order Transactions

The following transactions are posted to the inventory distribution journal named CO Dist.

  • Customer Order Shipment:
    Transaction Debit Credit
    COGS Material xxxx  
    COGS Labor xxxx  
    COGS Fixed Overhead xxxx  
    COGS Variable Overhead xxxx  
    COGS Outside xxxx  
    Inventory Material   xxxx
    Inventory Labor   xxxx
    Inventory Fixed Overhead   xxxx
    Inventory Variable Overhead   xxxx
    Inventory Outside   xxxx

    The amount used is the quantity shipped multiplied by the issue cost of the item.

    AU = QS * ICI

    where:

    • AU = Amount Used
    • QS = Quantity Shipped
    • ICI = Issue Cost of the Item
  • Customer Order Return:
    Transaction Debit Credit
    Inventory Material xxxx  
    Inventory Labor xxxx  
    Inventory Fixed Overhead xxxx  
    Inventory Variable Overhead xxxx  
    Inventory Outside xxxx  
    COGS Material   xxxx
    COGS Labor   xxxx
    COGS Fixed Overhead   xxxx
    COGS Variable Overhead   xxxx
    COGS Outside   xxxx

    The amount used is the average value of all shipments.

    AU = CST / IQS

    where:

    AU = Amount Used

    CST = Item's Cost of Goods Sold Total

    IQS = Item's Quantity Shipped

Inventory Control Transactions

The following transactions (unless otherwise specified) are posted to the inventory distribution journal named IC Dist.

  • Inventory Adjustment:
    Transaction Debit Credit
    a. Increase quantity:    
    Inventory Material xxxx  
    Inventory Labor xxxx  
    Inventory Fixed Overhead xxxx  
    Inventory Variable Overhead xxxx  
    Inventory Outside xxxx  
    Inventory Adjustment   xxxx
    b. Decrease quantity:    
    Inventory Adjustment xxxx  
    Inventory Material   xxxx
    Inventory Labor   xxxx
    Inventory Fixed Overhead   xxxx
    Inventory Variable Overhead   xxxx
    Inventory Outside   xxxx

    The amount used for an inventory adjustment transaction varies depending on the cost flow method in use. If you are using:

    • Average costing, the system uses the Items form's unit cost.
    • Specific, the system uses the cost tied to the location that is being adjusted.
    • LIFO or FIFO and increasing the quantity, the cost used is the cost tied to the last item LIFO record on file for the item.
    • LIFO or FIFO and decreasing the quantity, the system consumes records from the item LIFO stack until the adjustment quantity is satisfied.

    Cycle counting and physical inventory posting create transactions like the ones described above. Either transaction a or b is created, depending on whether the count quantity is greater than or less than the original quantity.

  • Inventory Move:
    Transaction Debit Credit
    Inventory Material xxxx  
    Inventory Labor xxxx  
    Inventory Fixed Overhead xxxx  
    Inventory Variable Overhead xxxx  
    Inventory Outside xxxx  
    Inventory Material   xxxx
    Inventory Labor   xxxx
    Inventory Fixed Overhead   xxxx
    Inventory Variable Overhead   xxxx
    Inventory Outside   xxxx
    Inventory Adjustment    

    This transaction is posted only if the From and To locations have different inventory accounts tied to them or if specific costing is being used and the From and To locations have different unit costs tied to them.

    The inventory account debited is the account tied to the To location. The credited inventory account is the account tied to the From location. The inventory adjustment account is used only for specific costing when the From and To accounts have different costs assigned to them.

  • Location Update:

    A transaction is created if you change the inventory account tied to the location:

    Transaction Debit Credit
    Inventory (New Accounts):    
    Inventory Material Cost xxxx  
    Inventory Labor Cost xxxx  
    Inventory Fixed Overhead Cost xxxx  
    Inventory Variable Overhead Cost xxxx  
    Inventory Outside Cost xxxx  
    Inventory (Old Accounts):    
    Inventory Material Cost   xxxx
    Inventory Labor Cost   xxxx
    Inventory Fixed Overhead Cost   xxxx
    Inventory Variable Overhead Cost   xxxx
    Inventory Outside Cost   xxxx

    A transaction is also created if specific costing is in use and you change the unit cost tied to the location.

    (This example assumes that all cost detail values are changed.)

    Transaction Debit Credit
    a. Increase cost:    
    Inventory Material xxxx  
    Inventory Labor xxxx  
    Inventory Fixed Overhead xxxx  
    Inventory Variable Overhead xxxx  
    Inventory Outside xxxx  
    Inventory Adjustment   xxxx
    b. Decrease cost:    
    Inventory Adjustment xxxx  
    Inventory Material   xxxx
    Inventory Labor   xxxx
    Inventory Fixed Overhead   xxxx
    Inventory Variable Overhead   xxxx
    Inventory Outside   xxxx
  • Location Insertion:
    Transaction Debit Credit
    Inventory Material xxxx  
    Inventory Labor xxxx  
    Inventory Fixed Overhead xxxx  
    Inventory Variable Overhead xxxx  
    Inventory Outside xxxx  
    Inventory Adjustment   xxxx

    This transaction is only posted if a quantity is entered for the location at the same time it is added.

  • Miscellaneous Receipt:
    Transaction Debit Credit
    Inventory Material xxxx  
    Inventory Labor xxxx  
    Inventory Fixed Overhead xxxx  
    Inventory Variable Overhead xxxx  
    Inventory Outside xxxx  
    Inventory Adjustment   xxxx

    The debit amount used is the quantity received extended by the unit cost you entered.

    DAU = QR * UCEBU

    where:

    • DAU = Debit Amount Used
    • QR = Quantity Received
    • UCEBU = Unit Cost Entered by you

    The unit cost defaults to the value in the Items form's Unit Cost field at the time the transaction is entered.

    The credit account is the GL account number you entered. The account defaults to the item's Inventory Adjustment account.

  • Miscellaneous Issue:
    Transaction Debit Credit
    Account Entered xxxx  
    Inventory Material   xxxx
    Inventory Labor   xxxx
    Inventory Fixed Overhead   xxxx
    Inventory Variable Overhead   xxxx
    Inventory Outside   xxxx

    The debit account is the GL account number you entered. The account defaults to the item's Inventory Adjustment account.

    The credit amount used is the quantity issued multiplied by the issue cost of the item:

    CA = QI * IC

    where:

    • CA = Credit Amount
    • QI = Quantity Issued
    • IC = Issue Cost
  • Job Material Issue:

    The following transactions are posted to the inventory distribution journal named SF Dist.

    Transaction Debit Credit
    WIP Material Costs xxxx  
    WIP Labor Costs xxxx  
    WIP Fixed Overhead Costs xxxx  
    WIP Variable Overhead Costs xxxx  
    WIP Outside Costs xxxx  
    Inventory Material   xxxx
    Inventory Labor   xxxx
    Inventory Fixed Overhead   xxxx
    Inventory Variable Overhead   xxxx
    Inventory Outside   xxxx
    Fixed Material Overhead Applied   xxxx
    Variable Material Overhead Applied   xxxx
  • Job Receipt:

    The following transaction(s) are posted to the inventory distribution journal named SF Dist.

    Transaction Debit Credit
    Inventory Material xxxx  
    Inventory Labor xxxx  
    Inventory Fixed Overhead xxxx  
    Inventory Variable Overhead xxxx  
    Inventory Outside xxxx  
    Fixed Material Overhead Applied xxxx  
    Variable Material Overhead Applied xxxx  
    WIP Material Costs   xxxx
    WIP Labor Costs   xxxx
    WIP Fixed Overhead Costs   xxxx
    WIP Variable Overhead Costs   xxxx
    WIP Outside Costs   xxxx