Direct Cost Applied Account

Here you can enter the number of the G/L account to which the program must post the Direct Cost Applied Account (positive or negative) with this particular combination of business posting group and product posting group.

Vijay Gupta

The purchase account is an income statement (I/S) account. That means, that a purchase represents an expense at first, which has to be neutralized, because the item is moved into inventory (that is a Balance Sheet account (B/S)). That is one of the jobs of "Posting Cost to G/L" or "Automatic Cost Posting" in NAV.

Posting the purchase means (disregarding possible tax)
Debit: Purchase account (I/S)
Credit: Liabilities Account (B/S)

If the inventory cost is posted, this happens with the direct cost:
Debit : Inventory Account (B/S)
Credit : Direct Cost Applied Account (I/S)

This way the purchase balances out at zero in the Income Statement.

The debits & credits are reversed.

No, if you purchase something , the inventory value increases.

idiot wrote:

Is the nature of Inventory debit or credit?

If you sell the item, this happens:

Debit: Receivables a/c (B/S)
Credit: Revenue a/c (I/S)

and "Cost Posting to G/L" does this:

Debit: COGS a/c (I/S)
Credit: Inventory a/c (B/S)

Here the B/S Inventory account balances at 0 (if the item is sold out), but the I/S accounts should not balance at 0, because the unit price should be higher than the unit cost.
If the revenue was higher than the COGS, you are making money, otherwise you are losing it.

If "Expected Cost Posting" is turned on in the inventory setup and shipping and invoicing are posted separately, there are interim accounts involved too:
viewtopic.php?f=23&t=26874

<Edit>

kapil4dynamics wrote:

If you sell the item, this happens:

Credit: COGS a/c (I/S)
Debit: Inventory a/c (B/S)

:shock:. Pls check seems a big typo.

Sorry, I translated that wrongly. I've corrected it.

I know this doesn't directly answer the question. But it's explained somewhat in here:

http://mibuso.com/blogs/alexchow/2009/0 ... e-cpa-way/