na2009 enus inc
TRANSCRIPT
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Microsoft Dynamics® NAV 2009
Inventory Costing
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Introduction
• Instructor’s name
• Training schedule
• Organizational moments– Facilities– Restrooms
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Course Description
• Audience– Microsoft Dynamics Certified Partners’ employees
selling, implementing, and supporting Microsoft Dynamics NAV 2009
• Training Goal:– Learn the basics and advanced features of
Inventory Costing
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Course Objectives
• To provide an overview on inventory valuation and accounting principles
• To instruct on managing, monitoring, analyzing, and tracing inventory costs in Microsoft Dynamics NAV 2009
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Course Outline
• Inventory Costing Overview• Inventory Costing Principles• Inventory Costing Functionality• Inventory Valuation Functionality• Inventory Costing Setup
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Course Objectives
What areyour objectives and
expectations?
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• Inventory costs• Inventory accounting
principles– Bases– Cost object– Cost flow assumptions
• Inventory posting flow• Inventory periods
• Unit cost calculation• Costing methods– FIFO, LIFO, Standard,
Specific– Average
• Inventory transfersand returns
• Inventory adjustment functionality
Session 1 Outline
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Microsoft Dynamics NAV 2009
Inventory Costing Overview
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Base Equation
Ending Inventory
Beginning Inventory
NetPurchases
Cost ofGoods Sold
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Cost Classification
Costs Included in the Balance Sheet and Income Statement
Capitalized Non-capitalized
Inventoriable Non-inventoriable
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Perpetual Inventory Method
Perpetual inventory method – a method that records and calculates the cost of withdrawals at the time the items are taken from inventory
Ending
Inventory (known)
Beginning
Inventory (known)
NetPurchases
(recorded)
Cost ofGoods
Sold(solved for)
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Bases of Inventory Valuation
• Acquisition cost – historical cost of items• Standard cost – an estimate of what inventory
items should cost• Net realizable cost – amount that a company
could realize as a willing seller with a willing buyer
• Replacement cost – amount the company would have to pay to acquire the item
• Lower-of-cost-or-market-basis – lesser of acquisition cost and market value
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Cost Object and Cost Assignment
Cost Object-anything for which a separate measurement of costs is desired
Direct Costs Indirect Costs
Trac
ing
Allocation
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Acquisition Cost Formula
Acquisition Cost
Purchase Cost
(- Discounts)
Additional Acquisition
Costs
Indirect Costs
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Accounting for Inventory
?Cost of Goods Sold
Net Purchases
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Cost Flow Assumptions
First-In, First-Out
Beginning Inventory
+
Net Purchases
Goods Available for
Sale
EndingInventory
+
Cost of GoodsSold
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Cost Flow Assumptions
Last-In, First-Out
Beginning Inventory
+
Net Purchases
Goods Available for
Sale
EndingInventory
+
Cost of GoodsSold
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Cost Flow Assumptions
Weighted Average
Beginning Inventory
+
Net Purchases
Goods Available for
Sale
EndingInventory
+
Cost of GoodsSold
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Microsoft Dynamics NAV 2009
Inventory Costing Principles
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Determining the Value of Inventory
Inventory TransactionValue Entries
Item Ledger Entries
General Ledger Entries
ReconciliationPosting
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Accounting for Inventory
0D.
Starting Date..........
Ending Date
Posting Date
Value of Quantity on Hand
Value of Inventory Increases
Value of Inventory Decreases
Inventory Value on Ending Date
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Inventory Posting Flow
Quantity Posting-records changes in quantity on inventory
Item Ledger Entries
Sales(incl. purchase
returns)
Transfers
Inventory Adjustments
Purchases(incl. sales returns)
Output
Consumption
Distributor
Manufacturer
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Inventory Posting Flow
Value Posting-records changes in inventory value
Value Entries
Direct Costs
Rounding
Revaluations
Indirect Costs
Variances
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Inventory
Inventory Posting Flow
General Ledger
Inventory DecreaseInventory Increase
Item Ledger Entry
Item Ledger Entry
Application Entry
G/L EntryG/L Entry
Value EntryValue Entry
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Inventory PeriodsAccounting Period
Inventory Period
Accounting Period
Inventory Period
Accounting Period
Inventory Period
Accounting Period
Inventory Period
Accounting Period
Inventory Period
Accounting Period
Inventory Period
Reopen
Late postings,cost adjustments,
additional costs, and so on.
Outbound entries closedCosts adjusted & posted to G/L
Accounting Period
Inventory Period
Accounting Period
Inventory Period
Accounting Period
Inventory Period
Close Close
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Microsoft Dynamics NAV 2009
Inventory Costing Functionality
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Unit Cost Calculation
Acquisition Cost
FIFO, LIFO, SpecificAverage
Last Direct Cost(+ Indirect Cost % + Overhead Rate)
Average Cost
ValuationBase
CostingMethod
Field
Standard Cost
Standard
Standard Cost
Unit Cost
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Unit Cost Posting
Inbound transaction
Value entries
Item ledger entries
• Purchased quantity
• Related item charge
• Entry with direct unit cost
• Entry with item charge as indirect cost
Entry with unit cost + item charge as Cost Amount (Actual)
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Inventory
Linking Inventory Increases and Decreases
Inc
reas
e D
ecrease
Link
Application Method
Costing Method
Fixed Application
User
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Costing Methods
Costing method – a combination of application methods and cost flow assumptions
+ +
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Costing Methods
First-In, First-Out
Posting Date Cost Amount (Actual) Entry No.
1/1/2010 10 1
1/1/2010 20 2
1/1/2010 30 3
1/2/2010 -10 4
1/3/2010 -20 5
1/4/2010 -30 6
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Costing Methods
Last-In, First-Out
Posting Date Cost Amount (Actual) Entry No.
1/1/2010 10 1
1/1/2010 20 2
1/1/2010 30 3
1/2/2010 -30 4
1/3/2010 -20 5
1/4/2010 -10 6
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Costing Methods
Average
Posting Date Cost Amount (Actual) Entry No.
1/1/2010 10 1
1/1/2010 20 2
1/1/2010 30 3
1/2/2010 -20 4
1/3/2010 -20 5
1/4/2010 -20 6
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Costing Methods
Specific*
Posting Date Cost Amount (Actual) Entry No.
1/1/2010 10 1
1/1/2010 20 2
1/1/2010 30 3
1/2/2010 -20 4
1/3/2010 -10 5
1/4/2010 -30 6
2
1
3
3
2
1
* - same principle as fixed application
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Costing Methods
Standard
Posting Date Cost Amount (Actual) Entry No.
1/1/2010 15 1
1/1/2010 15 2
1/1/2010 15 3
1/2/2010 -15 4
1/3/2010 -15 5
1/4/2010 -15 6
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Application of Entries
Application algorithm:
Is there a fixed application?
Are there Item Tracking Lines?
What is the costing method?
Item Application Entry
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Fixed Application
Fixed Application
Posting Date Cost Amount (Actual) Entry No. Applies-to
Entry No.
1/1/2010 10 1
1/1/2010 20 2
1/1/2010 30 3
1/2/2010 -20 4 2
1/3/2010 -10 5 1
1/4/2010 -30 6 3
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Average Cost Calculation TypeAverage Cost Period
Average Cost Calculation
Average Cost
• Day• Week• Month• Accounting
period
• For each item• For each item,
location, and variant
Valuation Date
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Average Cost Calculation
Average Cost Period
Item Cost
Sum of Receipts
Cost of Inbound
Transactions
Total Inventory
Qty.
Calculation formula:
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Non-inventoriable Costs
Non-Inventoriable Costs
Item Charge
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Cost Shares Breakdown
The Cost Shares Breakdown Report• Print Cost Share option:– Sale– Inventory– WIP Inventory
• Cost elements:– Purchase and material– Capacity and capacity overhead– Manufacturing overhead– Subcontracted cost– Other
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Inventory Transfers
Location A
Inventory Increase Inventory DecreaseTransfer
Inbound Entries Outbound Entries
Location B
Inbound Entries Outbound Entries
Application
Application
valued according to costing method
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Inventory Returns
Exact Cost Reversal• Cancels the effect of postings made to COGS accounts• Restores the items in inventory at the correct cost
Location A
Inbound Entries Outbound Entries
Fixed Application
PurchaseInbound Return
Outbound ReturnSale
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Inventory Adjustment
Item cost may need to be adjusted if:• The item is valued according to FIFO or LIFO
costing methods• Unit cost is changed due to additional direct
cost• The item is valued at average cost• Sales occur before purchase
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Inventory Adjustment
Ways of adjusting inventory costs:• Adjust Cost – Item Entries batch job
– For each item– For each item category– For all items
• Automatic adjustment– Daily– Weekly– Monthly– Yearly– Always (when posting occurs)
better performance
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Rounding
10/3 = 3.(3)
Average costing method
Other costing methodsSeparate rounding entry
Cumulative rounding entry
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Session 1 Summary• Costs are classified as:
– Capitalized, non-capitalized– Inventoriable, non-inventoriable
• Direct costs are traced to the cost object, indirect costs – allocated to the cost object
• Supported cost flow assumptions are FIFO, LIFO, Weighted Average
• Inventory posting is comprised of quantity and value posting• Posting flow includes creation of the following entries:
– Value entries– Item ledger entries– General ledger entries
• Inventory periods help with posting of inventory transactions
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Session 1 Summary
• Unit cost on purchase line is retrieved based on the item’s costing method
• Unit cost on sales line depends on how the link is established between the inventory increase and decrease
• Supported costing methods are FIFO, LIFO, Average, Specific, Standard
• Entry application can be of two types:– Based on the costing method– Fixed application
• Average cost depends on the valuation date• Non-inventoriable costs can be recorded as item charges
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Session 1 Summary
• Inventory transfers are valued using the transfer application• Inventory returns are valued using the fixed application• Inventory costs need to be adjusted automatically or using the
adjustment batch job• Rounding is facilitated by creating cumulative or standalone
rounding value entries
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Session 1 Summary
Questions?
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Session 1 Summary
Test Your Knowledge!
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Microsoft Dynamics NAV 2009
Inventory Costing
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Session 2 Outline
• Inventory valuation• Posting inventory costs to the General Ledger– Post Inventory Cost to G/L batch job– Posting expected inventory value– Tracing G/L entries
• Inventory revaluation• Physical inventory• Inventory costing setup
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Microsoft Dynamics NAV 2009
Inventory Valuation Functionality
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Inventory Valuation
Inventory Valuation
Value Entries
Direct Cost Indirect Cost Variance Revaluation
Rounding
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Inventory Valuation Report
Starting Date.......... ....
Ending Date
Posting Date
Value of Quantity on Hand
Value of Inventory Increases
Value of Inventory Decreases
Inventory Value on Ending Date
Expected Costs
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Posting Inventory Costs to G/L
Balance Sheet Income StatementAccount Name
Inventory
Account Name
Direct Cost Applied
Overhead Applied
Purchase Variance
COGS
PurchaseLedger Entries
SaleLedger Entries
DebitCredit
Credit
Debit
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The Post Inventory Cost to G/L Batch Job
Processing Algorithm:
1. Determine the posting method.2. Determine whether expected cost posting is enabled.3. Calculate the amounts to be posted:
Amount to be posted = Cost Amount (Actual) - Cost Posted to G/L4. Create general ledger entries for the calculated amounts.5. Update the Cost Posted to G/L field:
Cost Posted to G/L = Cost Amount (Actual)6. Update the Cost is Posted to G/L field on the item card.7. Display the report.
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Posting Expected Inventory Value
Amountto be posted
Expected Cost Posted
to G/L
Cost Amount
(Expected)
InterimG/L Accounts
RegularG/L Accounts
Amountto be posted
Post Inventory Cost to G/Lbatch job
Post Inventory Cost to G/Lbatch job
1 2
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Tracing G/L Entries
General ledger entries can be traced to underlying value and item ledger entries because of the following features:
• Inventory – G/L Reconciliation tool– Displays reconciliation differences between the inventory
ledger and G/L– Allows to drill-down to specific entries– Exposes the reasons for reconciliation differences
• Links between value and general ledger entries– One-to-one relation– One-to-many relation
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Inventory Revaluation
Revaluable quantity = Sum of quantities on invoiced item ledger entries for all inventory increases and decreases with posting dates equal or earlier than the revaluation date• For standard-valued items, expected costs can also be revalued (interim
inventory accounts in G/L will be affected)
Ways of performing revaluation in the revaluation journal:• Entering a line manually and applying it to the item ledger entry in
question• Running the Calculate Inventory Value batch job
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Physical Inventory
ActualQuantity on Hand
CalculatedQuantity on Hand
Physical Inventory CountAdjustments
Adjust Cost – Item Entries batch job
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Microsoft Dynamics NAV 2009
Inventory Costing Setup
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Inventory Costing Setup
The setup of Inventory Costing consists of:• Setup of inventory periods• General setup
– Automatic Cost Posting– Expected Cost Posting to G/L– Average Cost Calculation Type– Average Cost Period
• Individual item setup– Costing Method
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Session 2 Summary
• Inventory is valued based on value entries.• Inventory cost is posted to the income statement and balance
sheet accounts in the General Ledger based on the types of value and item ledger entries.
• The Post Inventory Cost to G/L batch job can post per entry or per posting group.
• Expected inventory value can be posted to interim inventory accounts.
• General ledger entries can be traced down to underlying value and item ledger entries.
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Session 2 Summary
• Revaluation is based on actual cost (or expected cost for standard-valued items).
• The Calculate Inventory Value batch job allows to perform inventory revaluation to a wider extent.
• Physical inventory counting helps resolve differences between the actual and calculated quantity of items on hand.
• Inventory costing setup reflects the way the company decides to control and account for its inventory value.
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Session 2 Summary
Questions?
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Session 2 Summary
Test Your Knowledge!
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Course Summary
The course highlighted the following points:
• Classification of inventory costs, definition of cost object• Bases of inventory valuation, cost flow assumptions• Costing methods and application of entries• Inventory posting flow, unit cost and average cost calculation• Cost flow of inventory transfers and returns• Cost adjustment and rounding• Reconciliation between inventory ledger and G/L• Inventory revaluation• Setup of the Inventory Costing functionality