About Transfer Order Costing
You use transfer order header and line items to capture the information to drive the movement and costing of material. Once materials are transferred, it is important to create the supporting Accounting and Material transactions.
Required System Parameters for Account Setup
You must establish the following accounts at the time of system setup. If you do not want to collect data at such a detailed level, the same account number(s) could be established as the default.
| Parameter Name | Account Name |
|---|---|
| IntraDivision Clearing | Balance Sheet Account |
| InterDivision Payables | Balance Sheet Account |
| InterDivision Receivables | Balance Sheet Account |
| InterDivision Sales | Income Statement Account |
| InterDivision Cost of Sales - Matl | Income Statement Account |
| InterDivision Cost of Sales - Labor | Income Statement Account |
| InterDivision Cost of Sales - Fixed Ovhd | Income Statement Account |
| InterDivision Cost of Sales - Var Ovhd | Income Statement Account |
| InterDivision Cost of Sales - Outside Serv | Income Statement Account |
| InterDivision Profit on Sales | Income Statement Account |
| InterDivision Cost- Cost of Goods Sold | Income Statement or Balance on Sales Sheet Account |
| InterDivision In-Transit Inventory | Balance Sheet Account |
| InterDivision In-Transit Matl | Balance Sheet Account |
| InterDivision In-Transit Labor | Balance Sheet Account |
| InterDivision In-Transit Fixed Ovhd | Balance Sheet Account |
| InterDivision In-Transit Variable Ovhd | Balance Sheet Account |
| InterDivision In-Transit Outside Serv | Balance Sheet Account |
| InterDivision Valuation Variance | Income Statement Account |
Landed Cost Accounts
Entries for landed costs use these accounts:
Purchasing Parameters
- Freight Payable
- Duties Payable
- Brokerage Payable
- Insurance Payable
- Local Freight Payable
Accounts Payable Parameters
- Freight In Expense
- Duties Expense
- Brokerage Expense
Simple/Robust Transfer Orders and Costing
The type of transfer order used determines whether inventory moves through In-transit accounts or directly to the buyer's inventory accounts.
Simple transfer orders do not use the To and From In-Transit Accounts or journal entries. However, robust transfer orders cause In-Transit entries to occur. The act of shipping and receiving inventory moves inventory into and out of In-Transit accounts.
See these examples of transfer order costing methods: