Purchase Order Accounting

Purchase order posting is a very common process in a business and is done on a daily basis.

The financial impacts of the postings, therefore, form a very important aspect for a business.

Postings happen only once the Receipts are posted. Confirmations and registrations do not have any physical or financial impacts in the system.

Product Receipt: A receipt is what confirms that the Items (stocked, tangible items) have been received into the inventory/ stock. Once the Items are in, only then there are impacts to the Ledgers. 

When a product receipt is recorded for a stocked item, two accounting processes take place:

One accounting process creates an accounting entry for the accrued liability. The accounting entry amount is for the received quantity of the stocked item, multiplied by the currency amount per unit for the purchase order. In the following example, ### denotes the currency amount of the accounting entry.

Debit Purchase expenditure, un-invoiced ###

Credit Purchase, accrual ###

Another accounting process accounts for the cost in inventory for the received quantity of the stocked item by crediting the expenditure ledger account and capitalizing the cost in an inventory asset ledger account.

Debit Product receipt ###

Credit Purchase expenditure, un-invoiced ###

Purchase Invoice: When an Invoice is posted, it indicates that the Vendor has issued a bill for the goods that have been transferred. A Vendor Invoice is what creates the liability towards the Vendor.

When a vendor invoice is recorded for a stocked item and accounting entries are created, two accounting processes take place:

First, the accounting entries on the product receipt for accrued liability are reversed. The amount that is reversed is based on the quantity of stocked item on the vendor invoice that is matched to the product receipt. Then, the accounting entry is created to record the liability for the vendor invoice. .

Credit Purchase expenditure, un-invoiced ###

Debit Purchase, accrual ###

Debit Purchase expenditure for product ###

Credit Vendor balance (Accounts payable) ###

Second, the accounting entry on the product receipt that records the inventory cost is reversed. The amount that is reversed is based on the quantity of the stocked item on the vendor invoice that is matched to the product receipt.

Additional account entries are created to record the inventory cost under a new inventory ledger account classification.

Credit Product receipt ###

Debit Purchase expenditure, un-invoiced ###

Debit Purchase, product receipt ###

Credit Purchase expenditure for product ###

Notes:
Where the Inventory runs on Weighted Average costing, there is a chance that the Vendor accounts and the Inventory accounts are posted with different amounts. These differences are in tandem with the Calculations that the system does for arriving at the Weighted Average cost of the Item.

Budgeting in AX 2009 - Overview

Budget Allocations

AX has the ability to use predefined allocation rules to perform generated allocations. Generated allocation is the distribution of posted or fixed amounts to combinations of destination accounts and dimensions at any time, for which system generates new Journal entries distributing the amount based on an allocation formula.

Allocation can be set by various methods in Ax, which includes:

- Basis

- Fixed percentage

- Fixed weight

- Spread even

The Allocation process in the system is divided into 3 segments.

• §  Ledger allocation rules definition
• §  Process Allocation request
• §  Allocation Journal.

Ledger Allocation Rules definition: - The first step in allocation is to define the allocation rules.

Creation of allocation rules requires the allocation code, allocation validity as Start Date & End Date. Then, select one of the allocation methods as fixed percentage, Basis, Fixed Weight, Spread even.

After selecting the allocation method, define the Rules for the Source Ledger account. Source Ledger accounts and dimensions can be selected where the expenses has been incurred.

Define the destination account & dimensions where the amount needs to be allocated. Also define the actual percentage or Basis based on which source amount should be allocated to destination. Once destination is defined the Ledger allocation rules are completed.

Process Allocation: -Once the Ledger Allocation rules are defined, the unique rule code will be generated. Refer the rule code in process allocation request to process the allocation entries (based on the allocation rules the system will reallocate the cost to the respective department.)

After selecting the rule code, provide start date and end date of rules and reason codes with remarks. Process the Allocation request and this generates the financial entries in allocation journal.

The allocation process collects one or more values from a source data record and distributes the totals of the values to one or more accounts or account and dimension combinations according to an allocation rule that is defined using the Ledger allocation rule form.

Allocation Journal: -Allocation journal shall show the entries passed by Process Allocation step. System would generate the entries on running the Allocation request. System shall reverse the Source Ledger a/c and book the entries against destination ledger accounts as per the allocation rule.

Budgets

Budgets are defined for each Chart of Accounts dimension wise, where dimension can be a Category/cost center/department/projects/sub department which are identified as Dimensions.

AX supports budgets to be created at the General ledger level. The budgets are maintained at the chart of account level with relevant dimension and the variance analysis will be made at the chart of account level.

Sales and Purchase Budgets:

The budgeting for sales and purchases is carried out in the Accounts Receivable & Accounts Payable module and the same will be transferred to GL. However the accounts that are affected during the transfer are only the Sales revenue accounts and the purchase inventory accounts.

The sales and purchase forecast can be entered by quantity and amount and the allocation keys will be defined to split the amount over a period of time when the forecast are transferred to GL budgets.

Budget Revisions:

There can be scenarios where the budgets are prepared and approved for the complete year, however the budgets can be revised as per the requirement. The existing budgets can be modified or a new budget created with the revised figures. 

Year End Closing - AX 2009

Year End Closing is an inevitable process for all businesses. Yet, many of us are not completely aware of the details of the task in AX.

Following are the details of the process in AX 2009:

Prerequisites to Fiscal Year-End Close

• Related General Ledger Parameters for Fiscal Year Close:
• Set the Periods status to ‘STOPPED’: 
• Periods form – Module status tab 

Make any adjusting entries by using the general journal

Transfer Opening Balances

Prerequisites to Fiscal Year-End Close:

1. Run the Inventory Close process through the end of the fiscal year. 

Path: Inventory Management >> Periodic >> Closing and Adjustment

The Inventory Close process will take into account the Inventory Valuation selection you have selected on the Inventory Model Group from the Weighted Average Method that is used during the month.

2. Create a new Fiscal Year 

Path: General Ledger >> Setup >> Periods >> Periods 

Create the next Fiscal Year that you will be creating transactions for. This step may have been done previously if the Fiscal Year is not closed right at Year End. 

3. Set the appropriate Periods to Stopped in the current Fiscal Year. Also Open the Closing Period to allow posting of the Closing Entries. 

Path: General Ledger >> Setup >> Periods >> Periods

Change the status of any period that should not have further transactions posted to it to Stopped. In case the period is set to Stopped, it can be reopened. Change the status to Closed only if there is no possibility of any transactions being posted to this period.

Note: A Closed Period may can not be reopened.

4. Backup Data. 

Backup the Ax data. 

5. Make Adjusting Entries. 

Make adjusting entries by passing Journals where necessary

6. Print final Financial Statements. 

Path: General Ledger >> Reports >> Periodic >> Financial Statement

Print the Final Financial Statements. This would include the Cash Flow Statement, Statement of Stockholder's Equity, Profit and Loss Statement (Income Statement), and Balance Sheet. 

7. Print 1099s for any Vendor that requires a 1099 statement. 

Path: General Ledger >> Periodic >> Tax 1099 >> Report 1099 

For any Vendor that requires a 1099 statement, please be sure to set up the 1099 forms as well as the Vendor. Please note that 1099 reports can be reprinted. 

8. Transfer Opening Balances into the new Fiscal Year. 

Path: General Ledger >> Periodic >> Fiscal Year Close >> Opening Transactions

Use this job to move the Balance\Asset Account Balances forward into the New Fiscal Year. This job will also move the balances of your Profit & Loss\Cost\Revenue accounts to the Year-end Result account which is set up in the System Accounts (General Ledger >> Setup >> Posting >> System Accounts).

Related General Ledger Parameters for Fiscal Year Close:

Path: General Ledger >> Setup >> Parameters >> Ledger Tab

• Delete close-of-year transactions during transfer:

If this check box is selected, opening transactions and system-generated closing transactions that exist for the year to be closed are deleted when the transfer is processed again (process is repeated), in the Opening Transactions form. So with this selection, we can process the transfer multiple times, if needed, while Opening entry will be only one.

• Create closing transactions during transfer:

If this check box is selected, the system creates closing transactions when running the Opening Transactions job. In that case, the system posts closing transactions to all profit and loss accounts and all balance accounts, although Opening Transactions are posted on balance accounts only.

• Set period status to year closed:

If this check box is selected, the system displays a status of Year closed for all fiscal periods for the year that is being closed (when you run the ‘Opening Transactions’ job).

NOTE: Care should be taken while selecting this check box, as we may have to run Opening Transactions job several times.

• Voucher number must be filled in:

If this check box is selected, a voucher number must be entered when opening transactions are created for a new fiscal year.

Set the Periods status to ‘STOPPED’:

When we create a new fiscal year, we may have to control or stop transactions from updating to the ledger accounts during the closing process. To stop transactions set the period(s) to Stopped status.

Periods form – Module status tab

Close all the modules, except for the General Ledger during the closing process. Often only allow for specific user groups to enter transactions and leave the period open.

To set up module status for every module, go to the Module status tab on the Periods form and select the User group in the Module user group filed area who can update the respective module.

Note: Open the year-end closing period in the fiscal year being closed to enable posting of any necessary closing entries.

Make any adjusting entries by using the general journal:

Print the trial balance in order to look for any variations and make adjustments before closing the period.

Transfer Opening Balances:

Transfer opening balances into the new fiscal year.

• In the opening transactions process, System creates a line for the opening transaction which makes up the opening balance for the New Year.
• The system also creates a transaction for each currency and dimension. It is necessary to maintain this to keep statistics and financial reporting. You can transfer balances as frequently as needed during the year-end close process.

I Path: General Ledger >> Periodic >> Fiscal year close >> Opening transactions

II Enter the End date of the fiscal year

III Profit and loss accounts are always reset by the system. You must specify the transfer method for the balance sheet accounts. In the balance accounts fields, you should specify one of the following two options:

• Reset: Reset the balance accounts and enters the opening balances for the balance sheet accounts manually.
• Closing > Opening: continues with the balance sheet accounts, and has the opening transactions created automatically by the system.

IV Enter the ‘Account for transfer of year-end result’ in the system account.

V Enter the Voucher number for the opening transactions that are created automatically.

Click OK when all the fields are entered. This process may take several minutes, depending on the amount of data.

When the process is complete, check the account balances or print the Trial balance. You can run the year-end job as many times as needed. The opening balances will update correctly.

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