Inventory Cost setup

in D365 F & O
 Define how item groups used

Review the posting accounts on the Item groups

Create inventory dimension groups

Inventory Cost Describe how to track inventory physically and financially

setup
Setup Costs and Prices for products

Assign Item groups, Item Model Groups and Dimension groups to a

product.

Describe the various parameters to post source documents to the

Ledger.
About Item Groups
• Item groups are used to manage inventory by dividing inventory items
into groups based on item characteristics.
• You can configure the subledger to match the item group setup, by
specifying a different main account for each item group.
• The accounts are then used for automatic ledger transactions
generated in the connection with receipt and issue transactions in
inventory.
• To view item groups go to the Inventory Management → Setup →
Inventory → Item groups.
Item groups option in D365 F & O
After clicking the option
Item groups continued.
You can complete the following tasks for the items that are included in an item
group.
• Follow statistics for item sales, Item purchases, and projected inventory
transactions and balances.
• Setup a posting profile for a group of items that require a posting setup other
than the standard posting profile is set up for items in the posting form.
• In the posting profile, you can define the ledger postings by Table, Group or All.
• All can be considered the default posting profile.
• You can override All by setting a profile record by Group (with this you specify and Item
Group)
• By Table (with this you can specify an Item Number).
• To view the posting profiles open Inventory management → Setup → Posting →
Posting.
• A record in this form that is specified at the group level is the same information
that is viewed and setup in the Item group form.
Posting option in D365 F & O
After clicking the option.
Important
• It is recommended that you consider the structure of item groups carefully before
you complete the setup of item groups, and before you select the item groups for
product definitions.
• An item group that is associated with a product definition cannot be deleted.
Planning Item groups
• To manage how information is posted to main accounts, you can create a series of
different item groups that are associated with specific main accounts.
• For each posting type you can create a specific main account.
• By doing this, you can track each stage of the inventory transactions in different
main accounts.
Posting setup on Item Groups
• Each Fasttab in the Item groups form list a series of account types
that must be related to main accounts in the general ledger. Accounts
for sales, Purchase, inventory, and production can be setup in detail
according to your financial reporting requirements.
• The setup of main accounts is used to allocate the ledger transactions
for receipts and issues that are generated in the Inventory
Management.
Sales order Postings
• When you process sales orders, inventory information and related amounts are updated. Use the Posting form
or the Item group form to specify the sales order posting accounts.
• When you create an order line (On order status), an inventory transaction is generated with the quantity
specified, but without any costs.
• When you update the packing slip for the item (Deducted status), transactions that are based on the cost of
the items when the packing slip is updated are generated in the packing slip account. The packing slip offset
account is also updated with the packing slip update.
• When you invoice (Sold status) the sales order line, the two packing slip transactions for an item are reversed.
The cost of the item is credited to the account for inventory issues, and the account for item consumption is
debited.
• The sale of the item, excluding any taxes, such as sales tax, is credited to the revenue account.
• Tax is credited to the tax codes account.
• The sale, including any taxes such as sales tax, is debited to the customer summary account that is set up in
the customer's posting profile.
Sales order posting types
• Each account type on the Item group is used during a specific source
document update on sales order.
• Some posting types are used for multiple source document purpose.
• Depending on the parameter settings, the information will post to the
general ledger.
• When the voucher is posted to the general ledger, a posting type in
the voucher form is based on the account type in the Item group
form.
Sales order posting setup in AX 2012 R3
Sales order posting types Description in AX 2012r3
Posting type Account type Description D/C P/F Clearing
Account
Packing Slip Order, Packing slip The inventory clearing account for shipped sales– non invoiced items. C P Yes
The account in this field is credited with the running average or
standard cost of the item(s) when the sales order is packing slip posted.
The offset to this is the account in the Packing slip offset field
Packing Slip Sales, Packing slip The account in this field is debited with the value of the item when the D P Yes
offset offset sales order is packing slip posted. This is the offset to the account in the
Packing slip field.
Issue Sales order, Issue The inventory account for issues. This account is credited with the C F No
running average or standard cost of the item(s) when the sales order is
invoice posted. The offset to this is the account in the Consumption
field. The packing slip postings are reversed at the same time.
Consumption Sales order This account is debited with the value of the item when the sales order D F No
consumption is invoice updated. This is the offset to the account in the Issue field.
The running average or standard cost of inventory is debited to COGS
when goods are invoiced. The packing slip postings are reversed at the
same time.
Sales order posting types Description in AX 2012r3
Posting type Account type Description D/C P/F Clearing
Account
Revenue Sales Order, The revenue account. This account is credited with the sales value of C F No
Revenue the item when the sales order is invoice posted. The offset to this
account is the accounts receivable account (also referred to as the
summary account). Accounts receivable is debited with the item sales
value.
Discount Sales Discount The discounts granted account. This account is debited with the D F No
discount amount associated with the item when the sales order is
invoice posted.
The offset to this is the accounts receivable account (also referred to as
the summary account) from the posting profile associated with the
sales order.
If a discount ledger account is specified, the discount amount is
debited, and the summary account is debited with (Sales – discount).
If an account is not specified, then both the revenue and Accounts
receivable summary account post as (Sales – discount). Posting occurs
when goods are invoiced.
Sales order posting types Description in AX 2012r3
Posting type Account type Description D/C P/F Clearing
Account
Commission Sales, Commission The commission expense account. This account is debited with the D F No
commission amount when the sales order invoice is posted. The offset to
this is the account in the Commission offset field
Commission Sales, Commission The commission payable account. This account is credited with the C F No
Offset offset commission amount when the sales order invoice is posted. This is the
offset to the account of in the commission field.
Deferred Revenue Deferred Revenue The accrued revenue account. This account is credited with the sales C P Yes
on Delivery on Delivery value of the Item when the sales order packing slip is posted. The offset
to this is the account in the Deferred revenue offset on Delivery.
Deferred Revenue Deferred Revenue The accounts receivable clearing account. This account is debited with D P Yes
Offset on Delivery offset on Delivery the sales value of the item when the sales order is packing slip posted.
This is the offset to the account in the Deferred revenue on delivery field

Deferred sales tax Sales, Packing slip The sales tax payable clearing general ledger account. This account is C P No
on Delivery tax credited with the sales tax amount for the item when the sales order is
packing slip posted. The offset to this is the Deferred revenue on Delivery
field.
Sales order posting setup in D365 F & O
Sales order posting types Description in D365 F&O
Posting type Account type Description D/C P/F Clearing
Account
Cost of Units, Asset (Inventory) The inventory clearing account for shipped sales, meaning non-invoiced C P Yes
Delivered items. The account in this field is credited with the running average or
standard cost or moving average of the item when the sales order is
packing slip posted.
The offset to this is the account in the Cost of goods sold, delivered
field. This is typically an asset account that represents inventory.
Cost of Goods Revenue (COGS) The account in this field is debited with the value of the item when the D P Yes
Sold, Delivered sales order is packing slip posted. This is typically a revenue type
account.
Cost of Units, Asset (Inventory) The inventory account for issues. This account is credited with the C F No
Invoiced running average or standard cost of the item when the sales order is
invoice posted. It points to the inventory asset account.
The Cost of units, invoiced and Cost of units, delivered accounts are
typically the same main account.
Cost of Goods Revenue (COGS) This account is debited with the value of the item when the sales order D F No
Sold, Invoiced is invoice updated. This is the offset to the account in the Issue field.
The running average or standard cost of inventory is debited to COGS
when goods are invoiced. The packing slip postings are reversed at the
same time. The Cost of goods sold, delivered and the Cost of goods
sold, invoiced main accounts are typically the same.
Sales order posting types Description in D365 F&O
Posting type Account type Description D/C P/F Clearing
Account

Revenue Revenue The revenue account. This account is credited with the sales value of C F No
the item when the sales order is invoice posted. The offset to this
account is the accounts receivable account (also referred to as the
summary account). Accounts receivable is debited with the item sales
value. This should be a sales account with the type Revenue.

Discount Revenue The discounts granted account. This account is debited with the D F No
(Discounts) discount amount associated with the item when the sales order is
invoice posted.
The offset to this account is the Accounts Receivable account (also
referred to as the Summary account) from the posting profile
associated with the sales order.
If a discount ledger account is specified, the discount amount is
debited.
If this is left blank, both the revenue and Accounts receivable summary
account post as Sales – discount. Posting occurs when goods are
invoiced.
Sales order posting types Description in D365 F&O
Posting type Account type Description D/C P/F Clearing
Account
Commission Expense The commission account. This account is debited when the sales order D F No
(commission) invoice is posted. The offset to this is the account in the Commission
offset field.
Commission Liability(Payables) The commission offset account represents the commission expense C F No
Offset account. This account is credited with the commission amount when the
sales order invoice is posted. This is the offset to the account in the
Commission field.
Deferred Revenue(Deferred) The accrued revenue account. This account is credited with the sales C P Yes
Revenue on value of the item when the sales order is packing slip posted. The offset
Delivery to this is the account in the Deferred revenue offset on delivery field.
Deferred Asset (Deferred The offset to this is the account in the Deferred revenue offset on D P Yes
Revenue Offset Revenue) delivery field. The offset to this is the account in the Deferred revenue
on Delivery on delivery field.

Deferred sales Liability (Accrued The sales tax payable clearing general ledger account. This account is C P No
tax on Delivery Taxes) credited with the sales tax amount for the item when the sales order is
packing slip posted. The offset to this is the account in the Deferred
revenue offset on delivery field.
Purchase order Postings
• When you create a purchase order line (Ordered status), an inventory transaction is generated with the
quantity specified, but without any cost values.
• When the item is received (Received status), transactions that are based on the cost of the items that are
recorded in the purchase order line are generated in the Product receipt account.
• If an account for discounts is specified, the product receipt amount includes the whole line amount. The line
discount is not deducted from the product receipt amount. Instead, the line discount is credited in the separate
account for discounts.
• If you do not specify an account for the line discount, the product receipt amount is reduced by the line
discount amount, and the line discount amount is not recorded directly in a ledger account.
• To specify that a purchase is for the internal use of a fixed asset, select the Fixed asset receipt check box on
the Fixed assets tab on the Line details FastTab in the Purchase order form
Purchase order posting types in AX2012 R3
Open Inventory management→ Setup → Posting → Posting and then
click the Purchase order tab.
Purchase order posting types Description in AX 2012r3
Posting type Account type Description D/C P/F Clearing
Account
Product Receipt Product Receipt The Inventory Clearing account for received purchased and non- D P Yes
invoiced items. The account in this field is debited with the estimated
purchase price (from the purchase order line) or the Standard cost of
the item for purchase order.
The offset to this account in the Purchase Expenditure Un-invoiced
field.

Purchase Purchase The accounts payable clearing account fore received purchased and C P Yes
Expenditure Expenditure non-invoiced items. The account in this field is credited when the
Un-invoiced. Un-invoiced. purchase order is packing slip posted.
The offset to this is account in the Product receipt.
Purchase Purchase The Inventory account for receipts. This account is debited with the D F No
Inventory Receipt Inventory Receipt Actual purchase prices or Standard cost of the item when the invoice is
generated for the purchase order. The offset to this is the purchase
expenditure for product.
This account is debited with the invoiced cost of the Items when the
Invoice is posted.

Purchase Purchase This is the clearing account between accounts payable and inventory. C F No
Expenditure for Expenditure for Additionally, this account is used to book a difference in original cost
Product Product and the amount a vendor is allowing for the return when using a
costing method other than standard costing.
Purchase order posting types Description in AX 2012r3
Posting type Account type Description D/C P/F Clearing
Account
Discount Purchase Discount Purchase discounts account is credited when the invoice is posted. If C F No
an account is not specified in this field and a discount is granted, only
the net amount of the transaction will be booked to the account in the
Receipt field. A separate general ledger transaction will not be
generated for the discount.

Fixed receipt Purchase, The expense account used for fixed receipt gains. The account in this D F No
price profit fixed receipt field is debited when the purchase order is invoice posted if the
price profit purchase order cost is
greater than the fixed receipt (default) cost for the item. The offset to
this is the account in the Fixed receipt price offset field .
Fixed receipt Purchase, The expense account used for fixed receipt losses. The offset to this is C F No
price loss fixed receipt the account in the Fixed receipt price offset field. The account in this
price loss field is credited when the purchase order is invoice generated if the
purchase order price is less than the fixed receipt (default) cost
for the item.
Fixed Receipt Purchase Fixed The balance sheet account for posting the offset to fixed receipt price D/C F No
Price offset Receipt price gains and losses. The offset to this is the account in the Fixed receipt
offset profit and Fixed receipt loss fields.
Purchase order posting types Description in AX 2012r3
Posting type Account type Description D/C P/F Clearing
Account
Charge Charge European functionality: The account is debited when the invoice is D F No
posted.

Stock Variation Stock Variation European functionality: The account is credited when the invoice is D F No
posted.

Purchase Accrual Purchase Accrual This account is credited with the cost on the purchased items when the C P Yes
packing slip is posted only when the Accrue liability on product receipt
check box is checked on the inventory model Group. If the Stocked
product check box is selected, this check box is automatically selected
and cannot be removed.
Accrued Sales Tax Accrued Sales Tax This account is debited with the tax amount for the item when the D P No
on Receipt on receipt purchase order is packing slip posted. The offset to this is the account
in the Packing slip
offset field that a is credited for the tax amount.
Purchase price Physical purchase A purchase price variance is calculated at the time of purchase order D/C P/F No
variance price variane receipt and reflects the difference between an item's standard cost and
the purchase order price. A purchase price variance is also calculated
at the time of invoice entry and reflects the difference between the
purchase order price and the invoice price.
Purchase order posting types Description in AX 2012r3

Posting type Account type Description D/C P/F Clearing

Account
Fixed Asset Fixed Asset The expense account for the purchase of the fixed D F No
Receipt Receipt
asset. The purchase price of the item is debited to this
account.
Purchase Purchase This account is debited with the item costs when the D P Yes
Expenditure for Expenditure for
Expense Expense
invoice is posted. This is only used for products that are
not stocked, and will be expensed immediately, instead
of going into the company’s inventory. Example:
Supplies such as gloves, pallets, crates or cases.
Prepayment Prepayment The prepaid Expense account on the balance sheet. D F Yes
This account is debited with the amount of prepayment
at the time of generating the prepayment invoice.
Purchase order posting setup in D365 F & O
Purchase order posting types Description in D365 F&O
Posting type Account type Description D/C P/F Clearing
Account
Cost of Purchase Asset (Inventory) The inventory clearing account for received purchased and non- D P Yes
material invoiced items. The account in this field is debited with the estimated
Received purchase price (from the purchase order line) or the standard cost of
the item when a product receipt is generated for the purchase order.
The offset to this is the account in the Purchase expenditure, un-
invoiced field.

Purchase Liability (AP The accounts payable clearing account for received purchased and non- C P Yes
Expenditure Un- Clearing) invoiced items. The account in this field is credited when the purchase
invoiced. order is packing slip posted. The offset to this is the account in the
Product receipt field.
Cost of Purchase Asset (Inventory) The inventory account for receipts. This account is debited with the D F No
Materials actual purchase price or standard cost of the item when the invoice is
Invoiced generated for the purchase order. The offset to this is the Purchase
expenditure for product field. This account is debited with the invoiced
cost of the items when the invoice is posted.

Purchase Liability (AP This is the clearing account between accounts payable and inventory. C F No
Expenditure for Clearing) Additionally, this account is used to book a difference in original cost
Product and the amount a vendor is allowing for the return when using a
costing method other than standard costing.
Purchase order posting types Description in D365 F&O
Posting type Account type Description D/C P/F Clearing
Account
Purchase, This account is credited with the cost on the purchased items when the C P Yes
packing slip is posted only when the Accrue liability on product receipt
accrual check box is selected on the inventory model group. If the Stocked
product check box is selected, this check box is automatically selected
and cannot be removed.

Purchase This account is debited with the item costs when the invoice is posted. D F No
This is only used for products that are not stocked or purchase order
expenditure lines that are generated for a category without an item, and will be
for expense expensed immediately, instead of going into the company’s inventory.
Examples would include supplies such as gloves, pallets, crates, or
cases.
Discount Purchase discounts account is credited when the invoice is posted. If an C F No
account is not specified in this field and a discount is granted, only the
net amount of the transaction will be booked to the account in the
Receipt field. A separate general ledger transaction will not be
generated for the discount.
Purchase order posting types Description in D365 F&O
There are several options here that are enabled if the Fixed receipt price option is selected on the item model
group. This indicates that the standard cost or default cost for an item should be used at the time of the invoice
posting. This is like standard costing, except there is no retroactive updating of on-hand inventory.

Posting type Account type Description D/C P/F Clearing

Account
Fixed receipt Expense(Inventory The expense account used for fixed receipt gains. The account in this D P Yes
Gains) field is debited when the purchase order is invoice posted if the
price profit purchase order cost is greater than the fixed receipt (default) cost for
the item. The offset to this is the account in the Fixed receipt price
offset field. This is posted to an expense account.
Fixed receipt Expense(Inventory The expense account used for fixed receipt losses. The offset to this is C F No
loss) the account in the Fixed receipt price offset field. The account in this
price loss field is credited when the purchase order is invoice generated if the
purchase order price is less than the fixed receipt (default) cost for
the item.
Fixed receipt Asset (Inventory The balance sheet account for posting the offset to fixed receipt price D/C F No
Gain and Losses) gains and losses. The offset to this is the account in the Fixed receipt
price offset price profit and Fixed receipt price loss fields. This is an asset
account.
 Purchase order posting types Description in D365 F&O
There are also other posting types
Posting type Account type Description D/C P/F Clearing
Account
Charges This account is obsolete and is now replaced with the functionality included D P Yes
in Purchase expenditure, un-invoiced and the Purchase expenditure for
product accounts. When upgrading from an older software release, this
functionality will remain active, though the recommendation is to update
the usage.
Stock Expense(Charges) This account represents the additional charges that are added to items for C P No
indirect costs through the costing sheet or through the charges feature for
Variation purchase orders when the charge code is configured to debit the item and
credit the customer or vendor. This optional features in enabled via a
parameter in the Accounts payable parameters form. When this selected,
the account that is specified for the posting type should represent an
expense account for charges.
Accrued sales Liability (Accrued This account is debited with the tax amount for the item when the purchase D/C P No
Taxes) order is packing slip posted. The offset to this is the account in the Packing
tax on slip offset field that is credited for the tax amount.
receipt
Fixed asset Expense (Fixed The expense account for the purchase of the fixed asset. The purchase price D F No
Assets) of the item is debited to this account.
receipt
Prepayment Liability(Prepaid) The prepaid expense account on the balance sheet. This account is debited D F No
with the amount of the prepayment at the time of generating the
prepayment invoice.
Inventory posting types in D365 F & O
Production order postings
Production posting activities follow the production process.
• As items are consumed during production, they are recorded in the production order. This process generates
issue transactions to make up for the missing raw materials.
• As the materials are consumed, they are posted to both the Picking list issue account and the Picking list
offset account.
• When the production is reported as finished, a receipt transaction is posted to the finished item.
• The cost calculated for the finished item is then posted to both the Report as finished receipt account and the
Reported as finished offset account.
• when production is complete, all accounts are updated with the final calculations.
• The raw materials that are actually consumed are credited to the account tracking inventory issues and
debited from the account tracking item consumption.
• The overall cost of the finished item is debited from the inventory Receipt account and credited to the
inventory Issues account.
Production order posting types in Ax2012r3
• Open Inventory and Warehouse management → Setup → Posting →
Posting and then click the production order tab.
 Production order posting types details in Ax 2012r3
Posting Account Description D/C P/F Clearing
Type Type Account
Picking List Production The purpose of this account is to remove the value of the items from the raw C P Yes
materials inventory. This account is credited with the physical value of the item
Issue Picking list when the production order picking list journal is posted. The offset to this is
the account in the Picking list offset account field. Enter the inventory clearing
account for production issues.
Picking list Production The purpose of this account is to add the value of the items to the work-in- D P Yes
process inventory. This account is debited with the physical value of the item
issue offset picking list when the production order picking list journal is posted. The offset to this is
Account offset the account in the Picking list issue field. Enter the work-in-process (WIP)
clearing account for production issues.
Report as Production The purpose of this account is to represent the physical value of the finished D P Yes
items going into inventory. This account is debited with the value of the
Finished report as finished items coming out of WIP and going into finished goods inventory
Receipt finished when the report as finished journal is posted. The offset to this is the account
in the Report as finished offset account field. Enter the inventory clearing
account for production receipts.
Report as Production The purpose of this account is to remove the physical value of the items from C P Yes
WIP inventory. This account is credited with the value of the finished items
Finished report as coming out of WIP and going into finished goods inventory when the report as
offset finished finished journal is posted. The offset to this is the account in the Report as
account offset finished field. Enter the work-in-process clearing account for items coming out
of WIP.
 Production order posting types details in Ax 2012 r3
Posting Account Description D/C P/F Clearing
Type Type Account
Issue Production This is the inventory issue account for the item and is used for component C F No
items coming out of inventory and going into WIP. This account is credited
Issue with the financial value of the item issued to a production order when the
production order is ended. At this time, the production order picking list
account general ledger entries are reversed. The offset to this is the account in
the Issue offset account field.
Issue Offset Production This is the work-in-process account. This account is debited with the financial D F No
value of the item issued to a production order when the production order is
Account Issue Offset ended. The offset to this is the account in the Issue field.
Receipt Production This is the inventory receipt account for the item and is used for finished items D P Yes
coming out of WIP and going into inventory. This account is debited with the
Receipt financial value of the item received into inventory from a production order
when the production order is ended. At this time, the production order report
as finished account general ledger entries are reversed. The offset to this is
the account in the Receipt offset account field.
Receipt Production This is the WIP account. This account is credited with the financial value of the C P Yes
item received into inventory from a production order when the production
offset Receipt order is ended. The offset to this is the account in the Receipt field.
Account offset
Production order posting setup in D365 F & O
Production order posting details in D365 F&O
This screenshot shows the Production tab of the Posting form. You will notice that there are several additional
radio buttons that are specific to this tab.
The two radio buttons for lean service WIP are used specifically with lean manufacturing. These accounts are
like accounts used for the Estimated cost of materials, consumed, but they are related to lean service transactions
specifically.
• The other eight posting types are broken into two categories. The first four are all related to physical updates,
while the last four are related to financial updates.
• The system will automatically reverse the posting shown when you end the production order.
• There are two types of transactions for every production order: Input (raw materials or semi-finished goods)
and Output (finished goods).
• The estimated cost of materials is related to the cost of materials that are being picked or input into the order.
• The estimated manufacture costs are related to the semi-finished or finished goods.
• This is also true for the cost of materials.
 Production order posting types details in D365 F & O
Posting Type Account Description D/C P/F Clearing
Type Account
Estimated Asset The purpose of this account is to remove the value of the items from the raw C P No
materials inventory. This account is credited with the physical value of the item
cost of (Inventory) when the production order picking list journal is posted. The offset to this is the
materials account in the Picking list offset account field. Enter the inventory clearing
consumed. account for production issues.

Estimated Asset (WIP) The purpose of this account is to add the value of the items to the work-in- D P No
process inventory. This account is debited with the physical value of the item
cost of when the production order picking list journal is posted. The offset to this is the
materials account in the Picking list issue field. Enter the work-in-process (WIP) clearing
consumed, account for production issues.
WIP
Estimated Asset The purpose of this account is to represent the physical value of the finished D P Yes
items going into inventory. This account is debited with the value of the
Manufactured (Inventory) finished items coming out of WIP and going into finished goods inventory when
Cost the report as finished journal is posted. The offset to this is the account in the
Report as finished offset account field. Enter the inventory clearing account for
production receipts.
Estimated Asset (WIP) The purpose of this account is to remove the physical value of the items from C P Yes
WIP inventory. This account is credited with the value of the finished items
Manufactured coming out of WIP and going into finished goods inventory when the report as
Cost, WIP finished journal is posted. The offset to this is the account in the Report as
finished field. Enter the work-in-process clearing account for items coming out
of WIP.
Production order posting types details in D365 F & O
Posting Account Type Description D/C P/F Clearing
Type Account
Cost of Asset(Inventory) This is the inventory issue account for the item and is used for component C F No
items coming out of inventory and going into WIP. This account is credited with
materials the financial value of the item issued to a production order when the
consumed production order is ended. At this time, the production order picking list
account general ledger entries are reversed. The offset to this is the account in
the Estimated cost of materials consumed, WIP field.
Cost of Asset(WIP) This is the work-in-process account. This account is debited with the financial D F No
value of the item issued to a production order when the production order is
materials ended. The offset to this is the account in the Estimated cost of materials
consumed consumed field.
(WIP)
Manufact Asset(Inventory) This is the inventory receipt account for the item and is used for finished items D F No
coming out of WIP and going into inventory. This account is debited with the
ured cost financial value of the item received into inventory from a production order
when the production order is ended. At this time, the production order report
as finished account general ledger entries are reversed. The offset to this is the
account in the Manufactured cost, WIP field.
Manufact Asset(WIP) This is the WIP account. This account is credited with the financial value of the C F No
item received into inventory from a production order when the production
ured cost, order is ended. The offset to this is the account in the Manufactured cost field.
WIP
Inventory Postings
• You can generate transactions for inventory profits and losses when you record transactions in the inventory,
for example, in a movement journal.
• For receipts into inventory, the Inventory, receipts account is debited, and the account for Inventory, profit is
credited.
• For inventory issues, the Inventory issues account is credited and the account for Inventory, loss is debited.
• The following list describes many of the transactions that use the inventory posting accounts.
• Movement, Inventory adjustment, and Bill of materials journals: A line for a positive quantity causes
a receipt transaction, and a line for a negative quantity causes an issue.
• Transfer journal, and Transfer orders: Each line in the journal or lines of the order causes a receipt
and an issue transaction. In many cases these two transactions cancel each other out, but it is possible
that there will be a difference in cost. For example, when you transfer an item from one site to another
and you have a different cost at each site.
• Quarantine orders: Each quarantine order creates a minimum of three inventory transactions. When a
quantity is scrapped from a quarantine order, an additional inventory loss transaction is created.
• Inventory closing and adjustment: When the inventory close makes an adjustment to the inventory
transactions.
Ledger integration
• It is recommended that all main accounts that are specified in the Item group or the Posting forms are
configured to not allow manual entry. This is because the accounts are used for making entries into the
subledger and the ledger and these entries should always match.
• When manual entries are made into these accounts, it can be difficult or not possible to reconcile the
subledger transactions to the general ledger.
• If adjustments are required, they should be made through the subledger (directly on the purchase order, sales
order, production order, inventory journal, or other inventory transaction) or into an alternative main account.
• the system will allow you to modify the accounts that are specified for an item group or in the Posting form.
• It is recommended that you carefully consider the affect of modifying this information after transactions exist
for items within that group. Modifying this information mid-transaction can make it difficult or not possible to
reconcile the subledger transactions to the general ledger.
• To prevent manual entries in a main account, follow these steps.
• Open General Ledger → Chart of Accounts → Accounts → Main Accounts
• Select the account to prevent manual entries for and then click Edit option from the action pane.
• On the General Fasttab in the Administration Group, select the Do not Allow manual entry check box.
Chart of Account option in D365 F & O
After clicking the option. Click the option Do
not allow manual entry check box as ticked.
Inventory Dimensions
• Inventory dimensions are assigned to products. Before you can assign inventory dimensions, you must set up
inventory dimension groups. There are three types of dimension groups in Microsoft Dynamics AX 2012, and
each group controls different inventory dimensions.
• Product dimension group
o Configuration
o Color
o Size
o Style
• Storage dimension group
o Site
o Warehouse
o Location
o Pallet ID

• Tracking dimension group

o Batch number
o Serial Number

o Storage dimension groups and tracking dimension groups are set up in a similar manner. However, product
dimension groups are configured and used differently.
About product dimension groups
• A product dimension group is used as the basis for variants that are created for a product master. Products of
the Product master subtype must be associated with a product dimension group.
• After you have created a product master and associated it with a product dimension group, you can create
product dimensions for the product master.
• The dimensions control the product variants that are created for the product master.
• The number of product variants equals the number of possible combinations of product dimensions.
To create a new product dimension group
• Open Product information management > Setup > Dimension groups > Product
dimension groups.
• Click New option from the action pane.
• Type SZCOL in the name field.
• Type by price by size with Colors in the description field.
• Select the active check box for size.
• On the row for size select the for purchase prices and for Sales price check box.
• Select the active check box for color
• On the row for color, make sure that for purchase prices and sales prices check
boxes are cleared.
Dimension groups option in D365 F & O
After clicking the option.
About Storage and Tracking Dimension Groups

• The storage dimension group and the tracking dimension group do not have to be associated with a product
until after the product is created.
• A shared product definition that does not have a storage dimension group or a tracking dimension group can
also be released to a company.
Physical Tracking
• You can select whether each dimension in a dimension group will track the inventory physically.
• Physical contributions to inventory are derived from transfers between two inventory dimensions that are
physically tracked.
• No cost is added by the transfer. This is what is referred to as a non-financial transfer.
• Transactions that are generated to track physical transfers are also included in cost calculations unless the
Activate closing of non-financial transfers check box in the Inventory and warehouse management
parameters form is selected.
• All transactions that are associated with non-financial transfers are disregarded in the cost calculation when
inventory is closed or recalculated.
• If items are tracked physically, a limitation for negative inventory can be observed. By using the Physical
negative inventory check box in the Item model groups form, you can make negative inventory available
for items that are associated with the item model group.
• If negative inventory is not made available, and an item with this dimension is tracked physically, the item
must be available physically to process transactions on the item.
Financial Tracking
• Each inventory item is assigned an inventory dimension group.
• The running average cost price for an item is therefore calculated based on the selection of inventory
dimensions that are being tracked financially.
• Product dimensions are always tracked financially.
• You decide the storage and tracking dimensions that will be tracked financially.
Storage and Tracking Dimension Groups
To create a storage dimension group that tracks the warehouse value physically and financially, follow these
steps.
• Open Product Information Management → Setup → Dimensions Groups → Storage Dimension Groups
• Click New from the Action pane.
• Type SITEWH in the Name field.
• Type Site, Warehouse in the Description Field.
• Select the Mandatory check box to make the warehouse dimension Mandatory.
• On the Warehouse row in the grid, Select the Physical and Financial Inventory check boxes.
Storage dimension groups in D365 F & O
After clicking the option
Tracking Dimension Groups in D365 F & O
After clicking the option
Product Setup
• Products are the primary control point for defining what a product costs.
• You can define a default purchase price, inventory cost, and sales price for each product in each legal entity.
• you can set up costs for a product that is date effective.
• The costs that are defined here are not used unless you have negative physical inventory.
• when you activate a costing version, the system will automatically update the values in these fields.
• The cost of a product is used to determine the cost of goods sold (this is referred to as Consumption in
Microsoft Dynamics AX 2012) and the inventory value.
• The difference between the cost and the sales price of items is used to determine the revenue.
Changing Dimension Groups
• The setup of the product dimension group for a product master can be changed if the product master is not released,
and if no dimensions are created. The following rules may be applied
• If a product master is shared, the setup of the product dimension group cannot be changed. This rule applies
both to the shared instance of the product master and to any company-specific instances.
• If a product master is created as a released product master, the product dimension group cannot be changed.
• If dimensions are created for a product master, the product dimension group cannot be changed.
• However, if the dimension setup of a new product dimension group is identical to the dimension setup of the
original product dimension group, the new product dimension group can be changed.
• If a product has transactions, the storage dimension group and the tracking dimension group cannot be changed.
However, if the product is not used in any transactions, the following rules apply.
• For a shared product, the storage dimension group and the tracking dimension group can be changed if the
product is not yet released.
• For a released product, you must follow these steps to change the storage dimension group and the tracking
dimension group.
• Delete the setup of the storage dimension group and the tracking dimension group for the shared instance of the
product.
• Delete the setup of the storage dimension group and the tracking dimension group for the released instance or
instances of the product.
• Select a new storage dimension group and a new tracking dimension group for the shared instance of the
product.
• The new storage dimension group and the new tracking dimension group are replicated in the released instance
or instances of the product.
Setup a Default Purchase price
To define a default purchase price for a product, follow these steps
• Open product information management → products→ Released Products
• Select Item from the list
• Click Edit from the Action pane.
• Click the purchase Fasttab.
• Select ea in the Unit field
• Select the Latest purchase price check box to indicate that the default purchase price should automatically
when a purchase order is invoiced.
• In the date of price field, select a today’s date.
• In the price field enter the purchase price
• In the price unit field type 1,to indicate that the price is for each item purchased.
• When a new purchase order is created for this item, the price will default to 67.89 USD for each product
purchased.
• You can override the price on the purchase order line or during the product receipt process or when the
invoice is generated.
• If you override the price, then the new price from the purchase order will be automatically updated to the
released product.
Purchase price in the Released products
Setup default inventory price
To setup a default Inventory price, follow these steps
• From the released product details form, click the Manage Costs Fasttab.
• Select the Latest cost price check box to have the system automatically
update the cost price when inventory journals or posting negative reported
as finished quantities.
• Enter the Today’s date in the Date of price field.
• Type the amount in the Price field.
• When a new inventory journal is created, this price will default into the journal line if no other price is specified for
the product.
• If you override the price in the inventory journal, then the new price will be updated on the released product.
• If a product has variants such as size, color, or configuration, you can specify the cost price by product variants.
• To do this, you must select the Use cost price by variant check box on the Manage costs FastTab. Then to define
the price for each variant, click Released product variants in the Product master group of the Action Pane. Then
for each variant, click Related information > Price.
Setup of Inventory price in D365 F & O
Setup a default Sales price
• To define the default sales price for a product, follow these steps
• From the Released product details, click the Sell Fasttab
• In the sales price model field, select Contribution Ratio.
• In the Base price select purchase price (67.89)
• In the contribution ratio field type (60)
• In the date of price field, enter the date
• Notice that the sales price is calculated as per the data entered.
• The formula used for calculating this is (100 * Purchase Price) / (100 - Contribution Ratio). In this example
the calculation is (100 * 67.89) / (100 - 60) = 169.73.
Setup of Sales price in D365 F & O
Posting Parameters
• Each source document such as production picking lists, production reported as finished, sales order packing slips,
and purchase order product receipts can be configured to post to the general ledger.
• When these source documents are posted to the general ledger, you can track the work-in-process for productions
and accruals for the received not invoiced amounts on purchase orders or shipped not invoiced amounts on sales
orders.
• There are three basic scenarios or combinations of posting parameters that can be selected.
• If the item is configured as a Standard cost item, the Post physical inventory and Post financial inventory
check boxes are automatically selected on the Item model group form. The system will always post standard
cost item transactions to the General ledger regardless of the setting in Accounts payable or Accounts
receivable.
• If the item is configured as an actual cost item (the inventory model is set to anything except Standard cost) there are
two possibilities.
• If the Item model group posting check boxes are selected and the Accounts receivable and /or Accounts
payable posting options are selected, the transactions for the items linked to the item group will post to the
general ledger.
• If the Item model group posting check boxes are not selected and the Accounts receivable and /or Accounts
payable posting options are selected, the transactions for the items linked to the item group will not post to the
general ledger.
• NOTE: Selecting the posting check boxes on the Item model group form has no affect unless you also select
the Accounts receivable and /or Accounts payable parameters.
Post sales order packing slips to the General
ledger.
• To configure the system to post the sales order packing slips to
general ledger follow these steps.
• Open Accounts Receivable → Setup → Accounts Receivable
parameters.
• Click the updates Tab
• Verify that Post packing slip in Ledger check box is selected.
Accounts Receivable Parameters screen
• When a sales order packing slip is generated, the stock value of physical inventory
transactions is posted to the general ledger. To specify the offset ledger account
that the update will post to, follow these steps
• Open Inventory Management → Setup → Posting → Posting
• On the Sales order tab, select the packing slip radio button.
• In the grid, select the record for the Item code All.
• In the main account field, select an account. The account specified will be debited
when the packing slip is posted.
• On the sales order tab, select packing slip offset radio button
• In the grid select the record for the Item code All.
• In the Main account field, select an account. The account specified will be
credited when the packing slip is posted.
• Both the accounts are temporary accounts that are reversed when you invoice
the physical inventory transactions. If this check box is selected, the balance of
physical inventory value accounts, plus the balance of the financial inventory
value accounts equals the total inventory of the item in the stock.
• IMPORTANT: If you post packing slips in ledger accounts, you must also select the Post physical inventory check box on the
Setup FastTab of the Item model groups form.
Post purchase Order product receipts to the General Ledger
To configure the system to post purchase order product receipts to the general ledger, follow these steps.
• Open Accounts Payable → Setup → Accounts payable parameters
• Click the updates Tab.
• Verify that the post product receipt in ledger checkbox is selected.
When a purchase order product receipt is generated, the stock value of physical inventory transactions is posted to
the general ledger. To specify the ledger account that the update will post to, follow these steps.
• Open Inventory Management → Setup → Posting → Posting
• Click the purchase order Tab, then select the product receipt button.
• In the grid, select record for Item Code all.
• In the Main account field, select the account for posting the product receipt. The account specified will be
credited to when the product receipt is posted.
• On the purchase order tab, select the purchase expenditure un-invoiced radio button.
• In the grid, select the record for Item Code All.
• In the Main account field, select the account for the product receipt offset. The account specified will be
debited when the product receipt is generated.
• Both accounts are temporary accounts that are reversed when you invoice the physical inventory
transactions.
• If the Post product receipts in ledger check box is selected, the balance of physical inventory value
accounts, plus the balance of financial inventory value accounts, equals the total inventory value of
items in stock.
• If you post product receipts in ledger accounts, you must also select the Post physical
inventory check box on the Setup FastTab of the Item model groups form.
Accounts Payable Parameters