Posting Settings in the Inventory Module

An important part of the configuration of the Inventory module is to specify the posting settings—that is, the General Ledger accounts and subaccounts for inventory entities (such as stock items) and the rules determining how the system will select an account in specific transactions. In MYOB Advanced, you can create posting classes and reason codes that provide the default General Ledger accounts and subaccounts, or you can use warehouse- or item-specific accounts and subaccounts. In this topic, you will find information about the types of accounts used in the Inventory module, the system entities for which you can define accounts and subaccounts, and the posting settings.

Configuration of Posting Settings

Before you start configuring the Inventory module, you must create all necessary General Ledger accounts and subaccounts that the system will use for inventory transactions. For the description of the accounts and subaccounts used in inventory, see General Ledger Accounts in Inventory.

During the configuration of the Inventory module, you specify the following posting settings:

  • Reason codes: Reason codes are used with manually entered inventory transactions to track the reasons for these transactions. Reason codes provide offset accounts (with offset subaccounts if they are used in your system) to be used to post the transactions to General Ledger. For details, see Reason Codes.
  • Posting classes: Posting classes are used to provide default General Ledger accounts and subaccounts for inventory items. For details, see Posting Classes.
  • Integration settings between General Ledger and Inventory: The settings used to configure the level of integration between the Inventory and General Ledger modules. For details, see Inventory–General Ledger Integration Settings.

General Ledger Accounts Used by Inventory Entities

You can specify GL accounts in the settings of the following inventory entities: warehouses (if you use multiple warehouses in the system), posting classes (which can be specified for stock and non-stock items), stock items, and non-stock items. The specified GL accounts are used by the system to record inventory transactions that involve the respective entities. You specify the following GL accounts in the settings of inventory entities:

  • Inventory/Accrual account (specified in the settings of a stock item, warehouse, non-stock item, or posting class for non-stock items): An account that is one of the following:
    • If specified for a stock item or warehouse: An asset account to keep the inventory balance resulting from transactions with the stock item or transactions that involve the specific warehouse. The cost of the applicable items will be debited to the Inventory account when the items are received, and credited when the items are issued from inventory.
    • If specified for a non-stock item or a posting class to be used for non-stock items: A liability account to be used for non-stock items as the Accrual account. The cost of purchased non-stock items will be credited to this account, and when an AP bill is created for any of these purchased non-stock items, the cost will be debited to this account.
  • Sales account (specified for each warehouse, stock item, non-stock item, and posting class): The income account to record sales for the entity.
    Note: A sales account can also be specified in the Use Sales Account from box in the Posting Settings section of an order type on the Order Types (SO201000) form. In a sales order of a type with a sales account specified, this sales account has a higher priority than the setting specified in the item settings on the Stock Items (IN202500) form.
  • COGS/Expense account (specified for each warehouse, stock item, non-stock item, and posting class): An account that is one of the following:
    • If specified for a warehouse, stock item, or posting class for stock items: The expense account used as the Cost of Goods Sold (COGS) account. This account will accrue the cost of goods sold once an inventory issue that includes the applicable item or warehouse is released. The cost of items sold is debited to the account when items are issued for sale from inventory.
    • If specified for a non-stock item or for a posting class to be used for non-stock items or labor items: The Expense account used for transactions with these items.
  • Standard Cost Variance account (specified for each warehouse, stock item, and posting class for stock items): The expense account to be used to record any differences between the currently effective standard cost and the cost on a bill for the specified quantities of items.

    This account is used only for transactions associated with stock items to which the Standard valuation method is assigned.

  • Standard Cost Revaluation account (specified for each warehouse, stock item, and posting class for stock items): The expense account to be used to record the differences in inventory value estimated by using the pending standard cost and the currently effective standard cost for the quantities on hand of a stock item. Revaluation is performed at the moment when standard costs are updated—that is, when the currently effective standard cost becomes the last standard cost, and the pending cost becomes the effective standard cost.

    This account is used only for transactions associated with stock items to which the Standard valuation method is assigned.

  • PO Accrual account (specified for each warehouse, stock item, and posting class): The liability account to be used to accrue amounts on purchase orders related to the warehouse or stock item for which the account is specified. Whenever receipts linked to purchase orders are released, the system generates transactions between the PO Accrual account and the inventory account.
  • Purchase Price Variance account (specified for each warehouse, stock item, non-stock item, and posting class for stock or non-stock items): The expense account to be used to record any differences between the extended price on the purchase receipt and the extended price on the AP bill.

    This account is used for transactions that involve inventory items for which any of the valuation methods is assigned.

  • Landed Cost Variance account (specified for each warehouse, stock item, and posting class for stock items): The expense account to be used to record any differences in landed costs between the landed cost amounts specified on purchase receipts and the landed cost amounts on inventory receipts.
  • Deferral account (specified for each stock item, non-stock item, and posting class): The account to be used to hold the deferred amount until it is fully recognized. You select an account of one of the following types:
    • A liability account for a deferral code of the Revenue type
    • An asset account for a deferral code of the Expense type

Reason Codes

If inventory transactions are generated from the Purchase Orders or Sales Orders module, the system will use the PO Accrual account (for purchase receipts) or the COGS account (for sales orders). The offset account and subaccount for a receipt, issue, adjustment, or transfer are determined by the document's reason code, which is selected depending on the specific transaction being performed. For different types of inventory transactions, different types of offset accounts should be selected. Reason codes also can be used to gather statistics about specific inventory transactions.

You define reason codes on the Reason Codes (CS211000) form. Each reason code is associated with the type of inventory transaction for which it will be used. For each type of inventory transaction, you can create multiple reason codes, if necessary, to further categorize transactions within their types. By using the Inventory Preferences (IN101000) form, you can define the reason codes used most frequently with each type of transaction as the default reason code for this type of transactions.

For more information on using reason codes, see Reason Code Creation: General Information.

Posting Classes

In MYOB Advanced, you can use posting classes to provide the default accounts and subaccounts for items of the class; in this case, the accounts specified in the posting class are used for assigning the default General Ledger accounts for items. You create posting classes for stock and non-stock items by using the Posting Classes (IN206000) form.

On the Item Classes (IN201000) form, you can assign a posting class to an item class; the system will use this posting class as the default posting class for inventory items of this item class. If needed, you can assign a specific posting class (instead of the default one) to a particular stock item by using the Stock Items (IN202500) form, and to a particular non-stock item by using the Non-Stock Items (IN202000) form. For more information on managing item classes, see Item Classes for Stock Items: General Information.

A posting class defines the rules for selecting General Ledger accounts and subaccounts to be used for transactions with items assigned to the posting class. When a transaction with an inventory item is created, multiple similar accounts are involved. For example, when a stock item is received at a particular warehouse, its cost (a debit amount) can be recorded to either the inventory account associated with the warehouse or the inventory account associated with the inventory item. Subaccounts for various types of transactions can be combined from multiple involved subaccounts, depending on the policies established in your organization. You can select General Ledger accounts and subaccount segment values from the following sources:

  • Inventory item
  • Warehouse
  • Posting class

The posting class also provides the account and subaccount to be used if the source of General Ledger accounts for a transaction is a posting class itself.

For more details about using posting classes, see Posting Class Creation: General Information.

Inventory–General Ledger Integration Settings

The settings used to configure the integration between the Inventory and General Ledger modules are located on the General Settings tab of the Inventory Preferences (IN101000) form. The following check boxes are available:

  • Update GL: If this check box is selected, transactions originating in the Inventory module will update the General Ledger module. If this check box is cleared, inventory transactions do not update the General Ledger module, and the inventory can be maintained independently from the General Ledger module.
  • Post Summary on Updating GL: If this check box is selected, the system will include in the batch only summary information (for the account–subaccount pair). If this check box is cleared, the detailed information for each document line will be included in the batch generated for the document.
  • Automatically Post on Release: If this check box is cleared, inventory transactions will not be automatically posted to the General Ledger module on release of nventory documents; the inventory transactions should be posted through the General Ledger module. If this check box is selected, inventory transactions will be posted on the release of inventory documents.