Balancing Purchases with Direct Cost Applied

Jeff_G

System Setup:
Expected Cost Posting=Off
Automatic Cost Posting = Off
Costing Method (All Items) = FIFO
Overhead Rate (All Items) = 0
Indirect Cost % (All Items) = 0

Before Inquiry:
Adjust Cost - Item Entries is run (2x)
Post Inventory Cost to G/L is run (2x, 2nd time produces no entries)

NO manual transactions have been posted to Purchases or DCA

Assumptions:
Invoicing a Purchase Order = Dr to Purchases, Cr to A/P
PIC to G/L = Dr to Inventory, Cr to Direct Cost Applied

The Debits to Purchases should be EXACTLY offset by the Credits to DCA

Problem:
This does not seem to be happening.
The Debits to Purchases are always more than the Credits to DCA.
This difference grows through time, and does NOT reverse.
This has been building over 16 months (since upgrade).

Question:
What causes this difference to occur?

Savatage

Jeff G wrote:

System Setup:
Expected Cost Posting=Off
Automatic Cost Posting = Off

We have them both checked, we used to NOT have Expected checked.

But curious to why you prefer not having either?

AdamRoue

Obvious questions but on the general posting setup
1. If you use 1 account for each is this correctly specified?
2. Is the Purchase Credit Account also the invoice account?
3. If you get any discounts where are these being posted - separately?

My money is on 3

ayhan06

this is usual situation when you post purchase credit. If you dont use "Exact Cost Reversing" feature or (even when you use "Extact Cost Reversing") use different direct unit cost (in purchase credit) than original purchase cost, difference between Direct cost applied account and purchase account can occur. ( direct costapplied account is fired from cost of items in item ledger, not from purchase invoice account.)

just an information about my situation: In turkish legislation, there is no purchase account or no direct cost applied account. pnly inventory account. (when ı purchase something, its cost goes to invontory account in balance sheet directly.) there exists lots of errors in my client's inventory accounts.

Alex_Chow

When you run the Post Inventory Cost to G/L, did you select Per Posting Group or Per Entry?

If you select Per Posting Group, you may not see the transactions when you navigate.

Jeff_G

Points of Clarification:
All General Posting Setup lines have the same account specified for Purchases and DCA.

We do not use Automatic or Expected cost posting because the client wants to cut down on spurious GL entries.

We Post by the Entry.

We are NOT using Exact cost reversing (I think that this may be the issue)

Anonymous

purchases and direct costs applied should match off on invoices, but there is an issue on credit notes. The cost posted to the "Purch. Credit Memo Account" will be the amount of the credit, but the cost posted to the direct Costs applied account will be the cost of the inbound Item Ledger entry to which the credit is applied.

We do not use Automatic or Expected cost posting because the client wants to cut down on spurious GL entries.

If you want to cut down on spurious entries, I would have thaught that posting per posting group is for you. If you are posting per entry you may as well turn on automatic cost posting unless you are worried about performance.

The good thing about posting per entry is that you can trace the G/L entries right back to the value entries, so you could do a great big reconciliation by document number to see where your differences are comeing form.

Good luck![/quote]

AdamRoue

I would recommend you find a day where there is a difference, and analyse the transactions made on this day, for one document number there will be a difference in the purchases and direct cost accounts, then look at the entries against each line, and find out where your missing value is being posted, or failing that why there is a difference. I would look for a purchase credit personnally as this has been the reason several instances where I have looked at this for a customer.

So no separation of the discounts in the GL or not using them?

ayhan06

to find difference, filter Item ledger entries for only purchase entries whose quantity is less than 0.
entries whose "purhase amount (actual)" and "Cost Amount (Actual)" values are different, will give you difference.