• Like
Na2009 enus inc_04
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

Na2009 enus inc_04

  • 569 views
Published

 

Published in Technology , Business
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Be the first to comment
    Be the first to like this
No Downloads

Views

Total Views
569
On SlideShare
0
From Embeds
0
Number of Embeds
0

Actions

Shares
Downloads
26
Comments
0
Likes
0

Embeds 0

No embeds

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
    No notes for slide

Transcript

  • 1. Chapter 4: Inventory Valuation FunctionalityCHAPTER 4: INVENTORY VALUATIONFUNCTIONALITYObjectives The objectives are: Examine how inventory value is calculated in Microsoft Dynamics® NAV 2009. Post inventory value from value entries to the accounts in the general ledger. Examine how the program handles expected costs, both in normal posting flow and in posting to the general ledger. Revalue inventory items using the revaluation journal. Perform a physical inventory count.Introduction The value of inventory is one of the most important aspects of financial reporting for a company. Until now this course has examined how Microsoft Dynamics NAV 2009 records inventory cost information based on user input. The next step is to examine how Microsoft Dynamics NAV 2009 posts this cost information to the general ledger and reports on inventory value. This chapter also covers the tasks of inventory revaluation and physical inventory, both of which are periodic activities in which the user can make changes or corrections to the inventory value of one or more items.Inventory Valuation As defined earlier, inventory valuation is the determination of the cost assigned to an inventory item. Beginning + Net – Cost of = Ending Inventory Purchases Goods Sold Inventory (known) (known) (recorded) (solved for) This means determining the value of the inventory at the end of an accounting period (ending inventory). Apart from these purely accounting purposes, companies may also want to know the value of their inventory at a specific date. For example, to revalue the inventory, a company must know the current inventory value at a given date to make a decision concerning revaluation rates. The mechanism used by the program to calculate inventory value is explained as follows. Page 95
  • 2. Inventory Costing in Microsoft Dynamics NAV 2009 In Microsoft Dynamics NAV 2009, inventory valuation is based on the value entries. The calculation of inventory valuation uses the Cost Amount (Actual) field of the value entries for the item. The entries are classified according to the entry type that corresponds to the following cost component: Direct cost: For example, item cost, freight cost, cost adjustment. Indirect cost: For example, warehouse energy, wages and salaries. Variance: When the direct unit cost differs from the standard cost for an item using the standard costing method. Revaluation: When an item value has been changed due to appreciation or depreciation. Rounding: Rounding differences that occur in connection with valuation of inventory decreases. This course has already examined the situations where the program creates direct, indirect, rounding and variance types of value entries. The revaluation entries will be explained in the following sections. The Inventory Valuation report uses the value entries to calculate the value of inventory at a certain date or period, which the user can specify on the request page. By definition, the purpose of inventory valuation is to determine the value of all the items that are on stock on a given date. When the Inventory Valuation report is run, you have the option of including in the report those entries that have not yet been invoiced, which are known as expected costs. As explained earlier, entries are applied against each other, either by the fixed application, or according to the general cost-flow assumption defined by the costing method. One entry of inventory decrease can be applied to more than one increase entry with different posting dates and possibly different acquisition costs. Therefore, calculation of the inventory value for a given date is based on summing up positive and negative value entries. To calculate the inventory value in the Inventory Valuation report, the program begins by calculating the value of the quantity on hand at a given "starting date," and then adds the value of inventory increases and subtracts the cost of inventory decreases up to a given "ending date" for which the user wants to view the inventory value. The end result is the inventory value on the ending date. The program calculates these values by summing the values in the Cost Amount (Actual) field in the value entries, using the posting dates as filters. The principles of calculating the inventory value are illustrated in the abstract example entitled “Inventory valuation,” followed by a demonstration using the Microsoft Dynamics NAV 2009 demonstration database.Page 96
  • 3. Chapter 4: Inventory Valuation Functionality Example: Inventory Valuation The following entries represent a sequence of posted transactions for an item using the FIFO costing method: Posting Entry Type Invoiced Cost Amount (Actual) Date Quantity 1/1/2010 Pos. Adjmt. 4 80 1/5/2010 Pos. Adjmt. 3 75 1/10/2010 Neg. Adjmt. -3 -60 1/20/2010 Pos. Adjmt. 10 300 1/15/2010 Neg. Adjmt. -8 -215 Based on the above entries, the program calculates inventory value on a given date as follows: Date Quantity at Date Inventory Value at Date 1/3/2010 4 80 1/7/2010 7 80 + 75 = 155 1/13/2010 4 80 + 75 - 60 = 95 1/17/2010 0 (-4) 80 + 75 - 60 - 215 = 0 (-120) 1/22/2010 6 80 + 75 + - 60 - 215 + 300 = 180 Demonstration: Inventory Valuation To determine the value of all the items with the number starting with "COSTING..." on 3/1/2010, follow these steps: 1. Run the Adjust Cost-Item Entries batch job for items COSTING AVR through COSTING STD. 2. While still in the item list, click Inventory Valuation in the Action pane. 3. On the request page, enter 3/1/2010 as a starting date and as an ending date, and specify the same Item No. filter as for the Adjust Cost – Item Entries batch job. Click Preview to view the report.Posting Inventory Costs to the General Ledger As explained in the beginning of the course, the value entries making up the inventory costs is created as a result of inventory posting. If you have not set up the program to post automatically to the G/L (this option is explained later in this section), then you must reconcile the inventory costs with the records of the general ledger by using the Post Inventory Cost to G/L batch job. The batch job uses the type of the item ledger entry and value entry to determine which general ledger account to post to. Page 97
  • 4. Inventory Costing in Microsoft Dynamics NAV 2009 During reconciliation, inventory values are posted to the inventory account in the balance sheet. The same amount, but with the reverse sign, is posted to the relevant balancing account. The balancing account is, in most cases, an income statement account. However, when posting direct cost related to consumption or output, it is a balance sheet account. The type of the item ledger entry and value entry determines which G/L account to post to. Costs of the item ledger entries of the type Purchase are debited to the Inventory account in the balance sheet. The credit is posted to the following balancing accounts in the income statement: The Direct Cost Applied account for the value entries of the type Direct Costs. The Overhead Applied account for the value entries of the type Indirect costs. The Purchase Variance account for the value entries of the type Variance. Costs of the item ledger entries of the type Sale are credited to the Inventory account on the balance sheet and debited to the COGS account on the income statement. More specifically, as far as the costing of the purchased inventory is concerned, apart from purchase and sale, there are three more types of item ledger entries negative adjustment, positive adjustment and transfer. The related value entries are also divided into a number of different types, which must be posted to dedicated accounts in the income statement. The companies must ensure that all the relevant G/L accounts are set up in the program before undertaking inventory postings. The G/L accounts on the income statement must be set up in the General Posting Setup window, while the Inventory account must be set up in the Inventory Posting window. The following table provides an overview of all the G/L accounts required in connection with inventory cost management. G/L Accounts in the General Purpose Posting Setup COGS account To post the inventory decrease due to sales to the income statement. COGS account (Interim) To post the expected inventory decrease due to sales to the income statement. Only when using expected cost posting. Inventory Adjustment account To post inventory increases and decreases that occurred due to adjustments, revaluations and rounding to the income statement. Inventory Accrual account To post expected inventory increases andPage 98
  • 5. Chapter 4: Inventory Valuation FunctionalityG/L Accounts in the General PurposePosting Setup(Interim) decreases. Only when using expected cost posting.Direct Cost Applied account To post the direct costs to the income statement.Overhead Applied account To post the indirect costs to the income statement.Purchase Variance account To post the difference between the standard cost and the direct unit cost to the income statement.Inventory Account To post the inventory value to the balance sheet.Inventory Account (Interim) To post the expected inventory value to the balance sheet. Only when using expected cost posting.NOTE: Table "Controlling G/L Accounts Posted To," presented in Appendix B,provides a list of all possible combinations of different types of value entries andthe account and balancing account posted to in the general ledger.Post Inventory Cost to G/L Batch JobThe program performs reconciliation between inventory entries and the generalledger by means of the Post Inventory Cost to G/L batch job. This batch job postsinventory costs to the general ledger based on the values in the Cost Amount(Actual) and Cost Amount (Expected) fields on the value entries.When posting inventory costs to the general ledger, the program calculates theinventory value by summing up the actual cost amounts in the value entries thatare related to each item ledger entry. In this way, the program ensures that, forexample, additional costs posted as item charges and rounding residuals, areincluded in the inventory value.The batch job can post inventory value in the general ledger for each ledger entryor for each posting group. When posting inventory value for each ledger entry,you can see a detailed specification as to how a specific transaction hasinfluenced the general ledger. However, this also results in the program creatingnumerous G/L entries. When posting inventory value for each posting group, theprogram creates G/L entries for each combination of posting date, generalbusiness posting group, general product posting group, inventory posting group,and location code; the cost amounts for these entries are summarized on the sameposting date, for the same posting group, amount sign, and combination ofbalancing accounts.The program sets the posting dates of the G/L entries to the posting date of thecorresponding value entry, except when the value entry falls within a closedaccounting period. In this case, the program skips posting the value entry, and Page 99
  • 6. Inventory Costing in Microsoft Dynamics NAV 2009 you must change either the G/L setup or the user setup to allow posting within the date range. If one or more value entries have posting dates outside the allowed posting period, the batch job cannot be run. This guarantees that value entries with posting dates before Allow Posting From date are posted to G/L with their correct date. To complete the batch job, you need to enable the posting of those old value entries - typically by temporarily changing or removing the date in the Allow Posting To field to open the General Ledger for posting. The Post Inventory Cost to G/L batch job allows posting into an open accounting period of those adjustments that are recognized after closing the accounting period to be posted. This is an advantage, because it allows you to post these adjustments without reopening a closed accounting period. A disadvantage is that balances in the inventory ledger and general ledger are only guaranteed to be equal at the point in time when the reconciliation is done. Using fields from the Value Entry table, the program uses the following calculation to determine the actual costs to post to the general ledger: Actual Cost = Cost Amount (Actual) Cost Posted to G/L NOTE: The Post Inventory Cost to G/L batch job also posts expected costs. Expected cost handling is discussed in the "Posting Expected Inventory Value" section of this chapter. When posting to the general ledger, the program posts the entire amount in the Cost Amount (Actual) field on the value entry. After posting, the program updates the Cost Posted to G/L field on the value entry accordingly: Cost Posted to G/L = Cost Amount (Actual) A report created as a result of running the Post Inventory Cost to G/L batch job shows all the different postings made against inventory. When an items cost has been posted, a check mark is placed in the Cost is Posted to G/L field on the Invoicing FastTab of the item card. If the batch job encounters errors in setup or dimensions, the program skips processing these entries and lists the skipped entries in a section at the end of the report. If the batch job encounters any errors in the dimension setup, the program will override these errors and continue posting the entry to the general ledger, using the dimensions of the value entry. You can run a test version of the Post Inventory Cost to G/L batch job prior to actual G/L posting to find and resolve any posting errors that may occur during the run time of the batch job. The report is described in detail in the online Help.Page 100
  • 7. Chapter 4: Inventory Valuation FunctionalityDemonstration: Inventory Posting to G/LThis demonstration shows how the program posts to G/L the costs of specificitems. 1. In the navigation pane, click the Departments button, then click Financial Management > Inventory. 2. Under Reports and Analysis, click Post Inventory Cost To G/L. 3. On the request page, select Per Entry in the Posting Method field and select the Post check box. Specify the same Item No. filter as in step Error! Reference source not found. of the previous demonstration.NOTE: For more details about filling in the request page of the Post InventoryCost to G/L batch job, read the topic entitled "Post Inventory Cost to G/L BatchJob" in the online Help.FIGURE 4.1 POST INVENTORY COST TO G/L REQUEST PAGE 4. Click Preview.NOTE: To get a simple test preview of the Post Inventory Cost to G/L reportwithout undertaking the actual posting, make sure that the Post check box on therequest page for the batch job is cleared. The program generates the Post Inventory Cost to G/L report, specifying amounts posted to the relevant G/L accounts. Page 101
  • 8. Inventory Costing in Microsoft Dynamics NAV 2009 The program also updates the value entries for the individual items that were included in the batch job. 5. View the value entries for item COSTING AVR. FIGURE 4.2 VALUE ENTRIES FOR ITEM COSTING AVR Now the Cost Posted to G/L field contains the same values as the Cost Amount (Actual) field. This indicates that the general ledger has been updated with the corresponding amounts. View the respective G/L entries that were created as the result of posting the inventory cost amount. 6. Select the last value entry in the list (sales invoice with zero quantity) and click Related Information > Entry > General Ledger.Page 102
  • 9. Chapter 4: Inventory Valuation FunctionalityFIGURE 4.3 RESULTING GENERAL LEDGER ENTRIESPosting in Closed Accounting PeriodsAfter the inventory cost is posted to the general ledger, the accounting period inwhich these costs occurred is considered to be closed. However, there could besituations where due to, for example, additional costs posted after closing theaccounting period, the costs originally posted to the general ledger might change.To handle such situations, you must change either the G/L setup or the user setupto allow posting within the date range.The same principle applies when you run the Post Inventory Cost to G/L batchjob to post inventory costs for accounting periods that are already closed.Posting Expected Inventory ValueIn some cases, such as the partial shipment of an order, a purchase order may beposted as received but not invoiced. Similarly, a sales order may be shipped tothe customer and invoiced at a later time. In situations where only the quantitypart of an inventory increase or decrease has been posted, the actual costs of thevalue entries are not posted to G/L when the batch job is run. However, theprogram offers an option of posting the expected value of inventory increase ordecrease to the general ledger.Companies may want to post expected cost to interim accounts to get an estimateof the cost of the received items before receiving the actual invoice. In thismanner, they can more or less accurately estimate the value of their assets at agiven date. You can activate this option by placing a check mark in the ExpectedCost Posting field in the inventory setup. Page 103
  • 10. Inventory Costing in Microsoft Dynamics NAV 2009 With this option, when you run the Post Inventory Cost to G/L batch job, the program posts expected costs to interim accounts using the following formula with values from the Value Entry table: Expected Cost Posted to G/L Cost Amount (Expected) When you post the order as completely invoiced and run the Post Inventory Cost to G/L batch job, the program balances the interim accounts and posts the actual cost to the regular accounts. The program posts the expected inventory costs in the following manner: Orders An order is posted as... Expected costs are… Received Credited to the Inventory Accrual (Interim) account Debited to the Inventory (Interim) account Shipped Credited to the Inventory (Interim) account Debited to the COGS (Interim) account Receipts A receipt is posted as… The actual costs are… Invoiced Credited to the Direct Cost Applied account Debited to the Inventory account The posted expected costs are… Credited to the Inventory (Interim) account Debited to the Inventory Accrual (Interim) account Shipments A shipment is posted The costs are… as… Invoiced Credited to the Inventory account Debited to the COGS account Credited to the COGS (Interim) account Debited to the Inventory (Interim) account The following demonstration shows the functioning of the expected cost posting option. Demonstration: Expected Inventory Cost Posting For this demonstration, you need to enable expected cost posting. 1. In the navigation pane, click the Departments button. 2. Under Administration, click Application Setup. 3. Under Warehouse, click Inventory.Page 104
  • 11. Chapter 4: Inventory Valuation Functionality 4. Under Tasks, click Inventory Setup. 5. Select the Expected Cost Posting to G/L check box. 6. Confirm updating the Post Value Entry to G/L table. 7. Run the Post Inventory Cost to G/L batch job with the Per Entry posting type for all items. Now, perform the actual demonstration steps: 8. Create a purchase order for vendor 10000 for 10 units of item COSTING FIFO with a posting date of 02/01/2010 and the direct unit cost of 100 LCY. Post the order as received. 9. View the item ledger entry created for item COSTING FIFO as the result of posting (add the Cost Amount (Expected) field to your view).FIGURE 4.4 RESULTING ITEM LEDGER ENTRY The Cost Amount (Actual) field contains 0, while the Cost Amount (Expected) field contains the amount of 1,000 LCY. 10. Run the Adjust Cost Item Entries batch job and then the Post Inventory Cost to G/L batch job for the item. The last batch job will post the expected cost to the relevant interim G/L accounts. The program offers the possibility of including the amounts of expected costs into inventory valuation reports (this option is activated by selecting the Include Expected Cost check box on the request page of the valuation report). Create a valuation report for item COSTING FIFO: 11. In the item list, click Inventory Valuation in the Action pane. Page 105
  • 12. Inventory Costing in Microsoft Dynamics NAV 2009 12. On the request page, set up the filter for item number COSTING FIFO. Enter 01/28/10 as a starting date and 02/01/10 as the ending date. 13. Select the Include Expected Cost check box. FIGURE 4.5 INVENTORY VALUATION REQUEST PAGE 14. Click Preview to view the report. The valuation report now includes entries that have been posted with expected cost. 15. Post the purchase order created in step 8 as invoiced. 16. Run the Adjust Cost Item Entries batch job and then the Post Inventory Cost to G/L batch job for item COSTING FIFO. The last batch job will reverse posting of expected cost to the interim G/L accounts and post the costs to the regular G/L accounts. To view the accounts used for interim and final posting in the demonstration, do the following: 17. Browse to the last posted purchase invoice. 18. Click Navigate in the Action pane, and view the value entry created as the result of posting.Page 106
  • 13. Chapter 4: Inventory Valuation FunctionalityFIGURE 4.6 RESULTING VALUE ENTRY 19. Click Related Information > Entry > General Ledger.FIGURE 4.7 RELATED GENERAL LEDGER ENTRIESInventory – G/L Reconciliation ToolThe purpose of the tool is to provide quick insight into the status of reconciliationbetween the inventory subledger and G/L. To list its features in short, theInventory - G/L Reconciliation tool: Page 107
  • 14. Inventory Costing in Microsoft Dynamics NAV 2009 Exposes reconciliation differences by comparing what is recorded in G/L and what is recorded in the inventory ledger (value entries). Displays unreconciled cost amounts in the value entries in the inventory ledger as if they were mapped to corresponding inventory- related accounts in G/L and compares those to the totals actually recorded in the same accounts in G/L. Reflects the double entry structure of G/L by visually presenting data as such. For example, a COGS entry has a corresponding inventory entry. Lets you drill-down and view the entries that make up the cost amounts. Includes filters to narrow the analysis by date, item, and location. Explains reasons for reconciliation differences in informative messages. Layout of the window includes the following columns: The Name column on the left in the grid lists the various G/L account types that are associated with inventory. The Inventory, Inventory (Interim), and WIP Inventory columns show the invoiced, non-invoiced, and WIP totals of each G/L account type. These are calculated from value entries, that is, they are projected onto the G/L account types where they will end when they are eventually posted to G/L. The Total column shows the sum of the value entry amounts in the three inventory columns. The G/L Total column shows the amounts for each G/L account type that exists in G/L. These are calculated from G/L entries, that is, they represent inventory costs already posted to G/L. The Difference column represents the difference between G/L Total and Total. The Warning column contains a message title stating why there is a reconciliation difference. If you click the message title in the field, you will be presented the full message, according to the table below: Warning Title Warning Message Expected Cost Setup The program is not set up to use expected cost posting. Therefore, inventory interim G/L accounts are empty and this causes a difference between inventory and G/L totals. Post Cost to G/L Some of the cost amounts in the inventory ledger have not yet been posted to G/L. You must run the Post Cost to G/L batch job to reconcile the ledgers. Compression Some inventory and/or G/L entries have been date compressed. Posting Group You have possibly restructured your chart of accounts by reassigning inventory related accounts in the GeneralPage 108
  • 15. Chapter 4: Inventory Valuation Functionality and/or Inventory Posting Setup.Direct Posting Some inventory costs have been posted directly to a G/L account bypassing the inventory ledger.Posting Date There is a difference between the posting date of the value entry and the associated G/L entry within the reporting period. (This can only occur with old data. If the database started on the current version, dates cannot differ.)Closed Fiscal Year Some of the cost amounts are posted in a closed fiscal year. Therefore, the inventory related totals are different from their related G/L accounts in the income statement.Similar Accounts You have possibly defined one G/L account for different inventory transactions.Deleted Accounts You have possibly restructured your chart of accounts by deleting one or more inventory related G/L accounts.NOTE: In addition to reconciliation differences that the system will warn about,manual postings to the inventory account will also lead to a difference betweeninventory and G/L.The various amounts and totals displayed in the Inventory - G/L Reconciliationwindow are calculated in the Inventory Report Entry table. The table containstwo types of entries: Item: These entries are summaries of all the value entries of all the items that fall within the filters set in the Inventory - G/L Reconciliation window. G/L Account: These entries are summaries of all the general ledger entries for each account that is associated with inventory.NOTE: Because the amounts of the value entries in the inventory ledger areprojected onto the G/L accounts as based on the inventory posting setup,changing this setup will change the reconciliation status.Demonstration: View Inventory-G/L Reconciliation Status 1. Click the Departments button in the navigation pane, and then click Financial Management > Inventory. 2. Under Reports and Analysis, click Inventory – G/L Reconciliation. 3. Leave all filters blank, select the Show Warning check box, and click Show Matrix in the Action pane. Page 109
  • 16. Inventory Costing in Microsoft Dynamics NAV 2009 FIGURE 4.8 INVENTORY-G/L RECONCILIATION STATUS 4. Click the warning on the COGS (Interim) line. FIGURE 4.9 CLOSED FISCAL YEAR WARNING G/L – Item Ledger Relation When posting value entries to G/L, the program fills in the G/L – Item Ledger Relation table to provide detailed cost tracing. This table holds complete relations information for both methods of inventory posting to G/L: For each entry: one-to-one relation between G/L entry and value entry For each posting group: one-to-many relation between a G/L entry and value entries The information about relations of general and item ledgers can be viewed for a specific G/L register number by selecting the required register in the G/L Register window and clicking Related Information > Register > Item Ledger Relation.Page 110
  • 17. Chapter 4: Inventory Valuation FunctionalityMoreover, each general ledger entry can be traced to the source value entry fromthe General Ledger Entries window for a specific item. Similarly, a link isprovided in the Value Entries window to look up the resulting G/L entry of oneor more value entries.Demonstration: Trace the Origin of a G/L TotalWhen invoicing the purchase order for 88 pieces of the OSLO storage unit (itemno. 1952-W), a purchasing agent accidentally changes the quantity significantlybefore posting the order. Some time later, you review the Raw Materials accountin G/L and spot an unexpectedly high total that you want to analyze. 1. Browse to the existing purchase order 106010 for 88 pieces of item 1952-W. 2. Change the quantity from 88 to 888 (enter an extra 8). 3. Post the purchase order as received and invoiced. 4. Run the Post Inventory Cost to G/L batch job without filters and for each entry. Remember to select the Post check box. Now, when reviewing the inventory G/L accounts, you discover that the Finished Goods account is too high. 5. In the navigation pane, click the Departments button, then click Financial Management > General Ledger, and under Lists, click Chart of Accounts. 6. Select G/L account 2120 Finished Goods, and click Related Information > Account > Ledger Entries.FIGURE 4.10 EXCESSIVE AMOUNT ON THE G/L ACCOUNT Page 111
  • 18. Inventory Costing in Microsoft Dynamics NAV 2009 In this list of G/L entries, it is clear that the direct cost posting on 1/31/2010 is unusually high. 7. Click Related Information > Entry > Value Entries to view the origin of the G/L entry. FIGURE 4.11 SOURCE VALUE ENTRY Now, you can confirm that a purchase invoice with a high cost amount and quantity exists, probably caused by a data entry error.Inventory Revaluation The value of a companys inventory can change over time, for example, as a result of deterioration, age or changed market conditions. Therefore, to reflect the inventory value most accurately, companies may need to revalue the inventory. To decide on the new inventory value, they may use current value bases, such as a replacement cost and net realizable cost, or a lower-of-cost-or market basis. A company can implement the inventory revaluation at any date, allowing a high degree of flexibility, as the revaluation can be done back in time. To begin the process, a company must determine the quantity that is available for revaluation on a given date. This quantity is called a revaluable quantity, and it is calculated as the sum of quantity for item ledger entries of inventory decrease and increase with the posting date equal or earlier than the revaluation posting date. Only completely invoiced item ledger entries are included in the calculation. The program supports revaluation based on actual costs. However, for items using the Standard costing method, the program will also revalue based on expected costs. This means that for standard-cost items, inventory that is received but not invoiced can also be revalued.Page 112
  • 19. Chapter 4: Inventory Valuation FunctionalityNOTE: Therefore, all descriptions in the training material of revaluation alsoapply to the expected cost of items using the Standard costing method.Accordingly, such expected inventory costs are also included in the CalculateInventory Value batch job like any actual inventory costs. However, this is onlypossible if you select to calculate for each item, by location and by variant. Toinclude expected standard-cost item values in the Calculate Inventory batch job,you must therefore select the following on the Options tab:FIGURE 4.12 INVENTORY CALCULATION SETTINGSNote that by revaluing standard-cost items based on expected costs, the relatedinterim inventory accounts in G/L will be affected.After calculating a revaluation, it is possible that a user will post an inventoryincrease or decrease with a posting date preceding the revaluation. This newposted quantity is not affected by the revaluation. To make the inventory balance,it is important that only the original revaluable quantity is valued at the revaluedamount, regardless of the posting date of later inventory increases or decreases.For detailed information on revaluation of WIP inventory, refer to the"Manufacturing Costing" training material.The Revaluation JournalIn the program, you change the inventory value of an item or a specific itemledger entry in the revaluation journal.There are two ways you can fill in the revaluation journal with information aboutthe current (calculated) value of the specified item: Enter a journal line manually. Use the Calculate Inventory Value batch job.The option you choose depends on the extent of the revaluation.Creating a journal line manually is a feasible option when you need to revalue anitem within a specific item entry. In this case, you must apply the revaluationjournal line to the item ledger entry in question. Page 113
  • 20. Inventory Costing in Microsoft Dynamics NAV 2009 There is a defined set of rules for how the program determines whether an inventory decrease is affected by a revaluation. In essence, these rules represent certain combinations of two parameters, which are as follows: the number of an item ledger entry and the posting date of the entry. The rules are summarized in the following table. Affected by Entry No. Posting Date Revaluation Earlier than revaluation Earlier than revaluation No entry No. posting date Earlier than revaluation Equal to revaluation posting No entry No. date Earlier than revaluation Later than revaluation posting Yes entry No. date Later than revaluation entry Earlier than revaluation Yes No. posting date Later than revaluation entry Equal to revaluation posting Yes No. date Later than revaluation entry Later than revaluation posting Yes No. date When the user posts the revaluation to G/L, the program credits the actual cost amount in the value entries created as a result of the inventory revaluation to the Inventory account and debits them to the Inventory Adjustment account. When the scope of inventory revaluation is not limited to one or a few items, it is recommended to use the Calculate Inventory Value batch job. This batch job allows the user to specify exactly how the revaluation will change the inventory value of an item or item ledger entry. The revaluation is valid for entries relating to this item or item ledger entry, starting from the posting date of the revaluation journal. Demonstration: Revaluation of a Specific Entry Assume that you need to change the value of the recent purchase of item COSTING RND. 1. In the Navigation Pane, click the Departments button, then click Warehouse > Inventory, and under Tasks, click Revaluation Journals. 2. Enter a journal line for item COSTING RND. In the Applies-to Entry field, click the drop-down arrow and select the item ledger entry whose value you want to change (in the demonstration data, there is only one entry that you created earlier in the course). When you select the entry, the program automatically fills in the Unit Cost (Calculated) and Inventory Value (Calculated) fields.Page 114
  • 21. Chapter 4: Inventory Valuation FunctionalityFIGURE 4.13 AUTOMATICALLY CALCULATED REVALUATION LINE Notice that by default, the program also fills in the Inventory Value (Revalued) field with the current value. 3. In the Unit Cost (Revalued) field, enter “50” - the new cost. Post the journal line. As a result of this posting, the program creates a value entry of type Revaluation for the item in question. Page 115
  • 22. Inventory Costing in Microsoft Dynamics NAV 2009 FIGURE 4.14 CREATED REVALUATION ENTRY The new value entry changes the inventory value of all units of the original inbound entry, based on the new value. This revaluation will affect (after the Adjust Cost Item Entries batch job is run) the inventory value of the subsequent outbound entries that are applied to this item ledger entry, regardless of their posting date. Demonstration: Revaluation of a Set of Items Assume that you need to change the value of all the items with the Average costing method: 1. Run the Adjust Cost Item Entries batch job for all items . 2. Open the revaluation journal and click Calculate Inventory Value In the Action pane (confirm that you wish to continue with the revaluation). 3. On the request page, enter the posting date of 3/1/2010 and set the calculation to be performed for each item. 4. Set the costing method filter to Average.Page 116
  • 23. Chapter 4: Inventory Valuation FunctionalityFIGURE 4.15 CALCULATE INVENTORY VALUE REQUEST PAGE 5. Click OK to run the batch job. The program fills in the journal lines, but does not post the journal. Page 117
  • 24. Inventory Costing in Microsoft Dynamics NAV 2009 FIGURE 4.16 CALCULATED JOURNAL LINES Now you can enter the new unit cost or the total revalued inventory value in the corresponding fields for each journal line. NOTE: As established earlier, by definition, revaluable quantity is calculated as the sum of quantity for completely invoiced item ledger entries with a posting date equal to or earlier than the revaluation date. This means that when some items are received/shipped but not invoiced, the program cannot perform the inventory value calculation. The optional function of Calculate Inventory Value Test is available in the revaluation journal to allow the user to view (test) preconditions for the inventory value calculation. The test report will include all the items and corresponding documents that hinder calculation of the inventory value. Demonstration: Revaluation of an Inventory Decrease Now analyze the functioning of the program in terms of how an inventory revaluation affects an inventory decrease. 1. In the navigation pane, click the Departments button, and then click Warehouse > Inventory. 2. Under Tasks, click Item Journals. 3. Create three lines, each for a sale of one unit of item COSTING FIFO from location code BLUE. Enter different document numbers for each line, and set the respective posting dates of 2/10/2010, 2/15/2010 and 2/20/2010.Page 118
  • 25. Chapter 4: Inventory Valuation FunctionalityFIGURE 4.17 SALES LINES IN THE ITEM JOURNAL 4. Post the journal, then run the Adjust Cost Item Entries batch job for item COSTING FIFO. The program calculates the cost of the three sales transactions on the basis of unit cost of the applied purchase entry, which is 100 LCY. Now revalue the remaining quantity of the item using the unit cost of 80 LCY. 5. Open the revaluation journal. Use the function Calculate Inventory Value to automatically create journal lines for item COSTING FIFO only. On the request page, enter a posting date of 05/15/10 and set the calculation to be performed for each item ledger entry. Click OK to calculate the inventory value. 6. In the Unit Cost (Revalued) field for the journal line, enter “80”.FIGURE 4.18 REVALUED UNIT COST Page 119
  • 26. Inventory Costing in Microsoft Dynamics NAV 2009 7. Post the journal. 8. View the value entries for item COSTING FIFO. FIGURE 4.19 CREATED REVALUATION ENTRY The program creates a new value entry of the type Revaluation (associated with the just revalued purchase entry) with the cost amount equal to the difference between the old (8*100) and the new inventory value (8*80). 9. Repeat steps 1 - 4 of the demonstration. 10. Open the item ledger entries for item COSTING FIFO:Page 120
  • 27. Chapter 4: Inventory Valuation Functionality FIGURE 4.20 ITEM LEDGER ENTRIES AFFECTED BY REVALUATION The revaluation affected the following outbound entries: All outbound entries with entry numbers larger than the revaluation entry number. The outbound entry with an entry number smaller than the revaluation entry number but with a posting date later than the revaluation posting date. All entries with numbers smaller than the revaluation entry and with posting dates equal to or earlier than the revaluation posting date were unaffected.Physical Inventory During the course of their regular business operations, companies will unavoidably experience situations where the actual quantity of inventory on hand differs from the quantity on hand recorded in the program. With this in mind, it is therefore a common practice for the companies to undertake a physical inventory count to correct any discrepancies of this sort. The users enter the correct (actual) quantities into the program, and the program records the differences with negative or positive adjustments, as appropriate. Page 121
  • 28. Inventory Costing in Microsoft Dynamics NAV 2009 In Microsoft Dynamics NAV 2009, the physical inventory journal offers accountants a form where any differences in quantity can be registered, and a function that enables the automatic posting of corresponding adjustments. In the Navigation Pane, click the Warehouse button and click Inventory > Phys. Inventory Journals. In the journal, you can create lines for the items that require a physical count. You can do this in two ways: Manually Automatically by using the Calculate Inventory function. The choice of approach depends on the extent of the physical counting. To actually do a physical inventory, you can print the Physical Inventory List report that lists the items on inventory. The report can also include the quantity on hand for each item as calculated by the program. The following example illustrates the handling procedure when accounting for physical inventory discrepancies: Demonstration: Handling Physical Inventory Differences After performing a physical inventory count, a warehouse employee discovers that the quantity on hand of item 70000 differs from the quantity recorded in and calculated by the program. The loss must be registered, and the inventory availability and value updated. 1. In the navigation pane, click the Departments button, then click Warehouse > Inventory. 2. Under Tasks, click Phys. Inventory Journals. 3. Click Calculate Inventory in the Action pane. 4. On the Item tab of the request page, set the filter for item 70000. 5. Enter the following information on the Options tab (for details on how to set up filters for the Calculate Inventory batch job, read the corresponding topic in the online Help):Page 122
  • 29. Chapter 4: Inventory Valuation FunctionalityFIGURE 4.21 CALCULATE INVENTORY REQUEST PAGENOTE: By clicking the AssistButton in the By Dimensions field, the user canselect dimension codes by which the physical inventory journal lines will begrouped. For each combination of dimension values for the selected dimensions,the program will create a physical inventory journal line in the journal.However, when calculating inventory for a location that uses bins, it is notpossible to filter by dimensions. 6. Click OK to run the batch job. Page 123
  • 30. Inventory Costing in Microsoft Dynamics NAV 2009 FIGURE 4.22 CALCULATED PHYSICAL INVENTORY JOURNAL LINES Note that the values in the Qty. (Calculated) and Qty. (Phys. Inventory) fields are the same, calculated on the basis of the existing item ledger entries for the item in question. As a result, the Quantity field, which specifies the calculated difference between the above- mentioned fields, is equal to zero. 7. For the second journal line, in the Qty. (Phys. Inventory) field, enter “2,190” which is the correct (actual) quantity on hand. The program automatically calculates the inventory decrease of 12 in the Quantity field.Page 124
  • 31. Chapter 4: Inventory Valuation FunctionalityFIGURE 4.23 CORRECT ACTUAL QUANTITY 8. Post the journal. 9. View the item ledger entries for item 70000.FIGURE 4.24 CREATED ADJUSTMENT LINE The program created a negative adjustment for 12 units for item 70000. Page 125
  • 32. Inventory Costing in Microsoft Dynamics NAV 2009 NOTE: Generally, if the value of the Quantity field in the physical inventory journal is positive, the created item ledger entry will be of the Positive Adjustment type. If the value of the Quantity field is negative, the created item ledger entry will be of the type Negative Adjustment. Remember that posting the physical inventory journal does not result in any postings to the general ledger. Therefore, as in the case of other entries in the inventory ledger, the cost amounts must first be adjusted by means of running the Adjust Cost Item Entries batch job and then posted to the general ledger.Page 126
  • 33. Chapter 4: Inventory Valuation FunctionalityTest Your Knowledge 1. On which entries is inventory valuation based in Microsoft Dynamics NAV 2009? ( ) Item ledger entries ( ) General ledger entries ( ) Value entries ( ) Item tracking entries 2. Which report do you run to generate an inventory valuation of one or more items? 3. How do you ensure that expected costs are posted to the general ledger? ( ) Place a check mark in the Expected Cost Posting field in the inventory setup. ( ) Place a check mark in the Automatic Cost Posting field in the inventory setup. ( ) Place a check mark in the Include Expected Costs field in the Inventory Valuation report request page. 4. True or False: In Microsoft Dynamics NAV 2009, you can only revalue item entries that are completely invoiced. 5. In the physical inventory journal, when you post a change in quantity for an item, what are the two possible types of item ledger entries that the program will create, depending on whether you have posted a positive or negative change in the quantity? Page 127
  • 34. Inventory Costing in Microsoft Dynamics NAV 2009Quick Interaction: Lessons Learned Take a moment to write down three Key Points you have learned from this chapter: 1. 2. 3.Page 128
  • 35. Chapter 4: Inventory Valuation FunctionalitySolutions Test Your Knowledge 1. On which entries is inventory valuation based in Microsoft Dynamics NAV 2009? ( ) Item ledger entries ( ) General ledger entries (√) Value entries ( ) Item tracking entries 2. Which report do you run to generate an inventory valuation of one or more items? MODEL ANSWER: To determine the inventory value of one or more items, run the Inventory Valuation report. 3. How do you ensure that expected costs are posted to the general ledger? (√) Place a check mark in the Expected Cost Posting field in the inventory setup. ( ) Place a check mark in the Automatic Cost Posting field in the inventory setup. ( ) Place a check mark in the Include Expected Costs field in the Inventory Valuation report request page. 4. True or False: In Microsoft Dynamics NAV 2009, you can only revalue item entries that are completely invoiced. MODEL ANSWER: True. In Microsoft Dynamics NAV 2009, you can only revalue item ledger entries that are completely invoiced. 5. In the physical inventory journal, when you post a change in quantity for an item, what are the two possible types of item ledger entries that the program will create, depending on whether you have posted a positive or negative change in the quantity? MODEL ANSWER: When you post a change in quantity in the physical inventory journal, the program will create a Positive Adjustment item ledger entry, if the change was an increase, or it will create a Negative Adjustment item ledger entry, if the change was a decrease in quantity. Page 129