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Cost Accounting Transactions from Deliveries and Invoices

You can specify that Nominal Ledger Transactions for outgoing cost accounting postings (Cost of Sales postings) will be created from Deliveries, from Invoices or from Invoices with Accruals from Deliveries. You can also have outgoing cost accounting postings for spare parts can also be created from Work Sheets in the Service Orders module.

Cost of Sales Postings from Deliveries and Work Sheets

If you would like Cost of Sales postings to be created from Deliveries and Work Sheets, follow these steps:
  1. Select the Deliveries and Work Sheets options in the Sub Systems setting in the Nominal Ledger, and make sure the Invoices option in the same setting is selected as well.

  2. Select From Deliveries as the Cost of Sales Posting option in the Cost Accounting setting.

  3. It is recommended that you select the Invoices Update Stock option in the Account Usage S/L setting, just in case you sell a Stocked Item from an Invoice without a Sales Order (i.e. without a Delivery). If you will be using Work Sheets, you should also select the Work Sheet Update Stock option in the Account Usage Service Order setting in the Service Orders module.

  4. If you will be using Work Sheets, you can optionally specify dedicated Service Invoiceable Cost, Service Warranty Cost, Service Contract Cost and Service Goodwill Cost Account fields in your Item or Item Group records. When you remove an Item from stock using a Work Sheet, the choice of Service Cost Account will depend on the Item Type specified on flip B of the Work Sheet row. For example, if the Item Type is "Warranty", the Service Warranty Cost Account will be debited. If the Item Type is "Goodwill", the Service Goodwill Cost Account will be debited.

Cost of Sales Postings from Invoices

You can choose to have Cost of Sales postings created from Invoices. This may be because you are not using the Sales Orders module and therefore will not create Delivery records, and it may also be because you need sales transactions and related Cost of Sales postings to have the same dates (this is a requirement in the UK). Note that stock levels will still be adjusted from Deliveries. So, if you issue a Delivery with an earlier date than the Invoice, there will be a period where the valuation in the Stock List report will not match that in the Nominal Ledger. If you would like Cost of Sales postings to be created from Invoices, follow these steps:
  1. Ensure the Deliveries option in the Sub Systems setting in the Nominal Ledger is not selected, but select the Invoices and Work Sheets options in the same setting.

  2. Select From Invoices (no posting from Deliveries) as the Cost of Sales Posting option in the Cost Accounting setting.

  3. Select the Invoices Update Stock option in the Account Usage S/L setting. If you will be using Work Sheets, select the Work Sheet Update Stock option in the Account Usage Service Order setting in the Service Orders module as well.

  4. If you will be using Work Sheets, specify Service Invoiceable Cost, Service Warranty Cost, Service Contract Cost and Service Goodwill Cost Account fields in your Item or Item Group records.
Note that you should not choose to have Cost of Sales postings created from Invoices if you will be creating Invoices from Projects in the Job Costing module.

Cost of Sales Postings from Invoices with Accruals from Deliveries

A third option is to have Cost of Sales postings made from Invoices with Accruals from Deliveries. This option eliminates the disadvantages of the other two methods:
  • Each Delivery and Work Sheet will update stock levels and will also credit the Stock Account. This satisfies the requirement that the valuation in the Stock List report and the stock valuation in the Nominal Ledger are updated at the same time.

  • Each Invoice will debit the Cost of Sales Account. This satisfies the requirement that sales transactions and related Cost of Sales postings should be posted at the same time.
If you are using this option and you sell a Stocked Item from an Invoice without a Sales Order (i.e. without a Delivery), the Invoice will update stock levels, credit the Stock Account and debit the Cost of Sales Account.

If you would like Cost of Sales postings to be created from Invoices with Accruals from Deliveries, follow these steps:

  1. Ensure the Deliveries, Work Sheets and Invoices options in the Sub Systems setting in the Nominal Ledger are all selected.

  2. Select From Invoices with Accrual from Deliveries as the Cost of Sales Posting option in the Cost Accounting setting.

  3. Select the Invoices Update Stock option in the Account Usage S/L setting. If you will be using Work Sheets, select the Work Sheet Update Stock option in the Account Usage Service Order setting in the Service Orders module as well.

  4. Specify a Cost of Sales Accruals Account in the Account Usage Stock setting. This Account will be debited from Deliveries and Work Sheets (to balance the credit posting to the Stock Account), and credited from Invoices (to balance the debit posting to the Cost of Sales Account).

  5. If you will be using Work Sheets, specify Service Invoiceable Cost, Service Warranty Cost, Service Contract Cost and Service Goodwill Cost Account fields in your Item or Item Group records. It is particularly important that you specify Service Warranty Cost, Service Contract Cost and Service Goodwill Cost Accounts because otherwise costs from Work Sheets will be debited to the Cost of Sales Accruals Account. As Warranty, Contract and Goodwill Work Sheets will not be invoiced, there will be no Invoices to move the costs from the Accrual Account to the final Cost Account.
If you are creating Cost of Sales postings from Invoices or from Invoices with Accruals from Deliveries, you should not use the Invoices Before Delivery option in the Stock Settings setting, or at least you will not be able to take advantage of it. Please refer to the description of this option here for details.

Valuation Method (Cost Model)

The value of each Cost of Sales posting will be calculated using a Cost Model chosen as follows:
  1. The Cost Model will be taken from the 'Cost Model' card of the Item record.

  2. If the Cost Model in the Item is Default, if you are using the Use Item Groups for Cost Model option in the Cost Accounting setting in the Stock module and if the Item belongs to an Item Group, the Cost Model will be taken from the 'Cost Model' card of the Item Group.

  3. In all other cases (e.g. the Cost Model in the Item Group is Default, you are not using the Use Item Groups for Cost Model option in the Cost Accounting setting and/or the Item does not belong to an Item Group), the Primary Cost Model specified in the Cost Accounting setting will be used.
Please refer to the description of the Cost Accounting setting for full details about the different Cost Model options.

Stock Account

The Stock Account credited by such Transactions will be determined as follows:
  1. The Stock Account for the specified Location will be credited.

  2. If this is blank, or if you have not specified a Location, and if you are using the Use Item Groups for Cost Accounts option in the Cost Accounting setting, the Stock Account for the Item Group to which the Item belongs will be credited.

  3. If this is blank, the Item does not belong to an Item Group or you are not using the Use Item Groups for Cost Accounts option, the Stock Account in the Account Usage Stock setting will be credited.
Other outgoing stock transactions (i.e. Stock Movements, Stock Depreciations, Productions and Returned Goods to Supplier records) will also credit a Stock Account chosen largely as described above (the exception being that Productions will debit the Production Components Stock A/C in the Account Usage Stock setting in step 3 instead of the Stock Account). The values posted will be calculated using the appropriate Cost Model for the Items in question, again as described above.

Cost of Sales Account

The Cost of Sales Account debited by such Transactions will be determined as follows:
  1. In the special case where the Cost of Sales postings are being made from a Delivery or a Work Sheet and you have specified in the Cost Accounting setting that Cost of Sales postings will be made from Invoices with Accruals from Deliveries, the Cost of Sales Accruals Account specified in the Account Usage Stock setting will be debited. When you create the Invoice for the Delivery or Work Sheet, the Cost of Sales Accruals Account will be credited and a Cost of Sales Account chosen as described in the following points will be debited. In all other cases (i.e. when you have specified that Cost of Sales postings will be made from Deliveries or from Invoices, and when the Cost of Sales postings are being made from an Invoice that does not have a connected Order or Delivery), the Cost of Sales Account will also be chosen as described in the following points.

  2. If the Cost of Sales postings are being made from a Work Sheet and if you are using the Use Item Groups for Cost Accounts option in the Cost Accounting setting in the Stock module, one of the Service Cost Accounts for the Item Group to which the Item belongs will be debited. If that is blank or the Item does not belong to an Item Group, the equivalent Service Cost Account for the Item will be debited.

    However, if you are not using the Use Item Groups for Cost Accounts option, the relevant Service Cost Account for the Item will be debited. If that is blank, the relevant Service Cost Account for the Item Group to which the Item belongs will be debited.

  3. If the Cost of Sales postings are being made from a Delivery that is connected to a Project, a Project Materials Usage Account will be debited. This will be taken from the Item record, from the Item Group to which the Item belongs (if you are using the Use Item Groups for Cost Accounts option), or from the Account Usage Stock setting.

  4. If you have specified a Cost Account for the Location in the Location Accounts setting in the Stock module, that Cost Account will be used. The Location is the one specified in the relevant row (on flip B in an Invoice or Delivery) or, if blank, in the header (on the 'Del. Terms' card in an Invoice, the 'Terms' card in a Delivery or the 'Date' card in a Work Sheet).

  5. If you are using the Use Item Groups for Cost Accounts option in the Cost Accounting setting, the Cost Account for the Item Group to which the Item belongs will be debited. If that is blank or the Item does not belong to an Item Group, the Cost Account for the Item will be debited.

  6. However, if you are not using the Use Item Groups for Cost Accounts option, the Cost Account for the Item will be debited. If that is blank, the Cost Account for the Item Group to which the Item belongs will be debited.

  7. In all other cases, the Cost Account specified in the Account Usage Stock setting will be debited.
In all cases, the appropriate Cost Account for the Zone of the Customer will be used. In the case of a Delivery, the default Cost of Sales Account will be shown on flip E, where you can change it if necessary.

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If you find that Nominal Ledger Transactions for Cost of Sales are not being created despite this having been specified in the Sub Systems setting, the likely cause is that the default Cost Model has been set to None or you are have selected the incorrect Cost of Sales Posting option in the Cost Accounting setting.


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Cost Accounting in Standard ERP:

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