Outside Processing: Generated Transactions
When you process production orders that include outside operations, you record payments for the subcontractor services (which may include material costs) by creating and processing purchase orders and the related documents and transactions. To track these expenses, the system generates the GL transactions described in the following section.
Transactions Generated for Non-Stock Items Used as Materials
Suppose that for a non-stock item that is used as a material for outside processing (that is, a subcontractor service), the Accrue Cost check box is selected on the Price/Cost tab of the Non-Stock Items (IN202000) form, and the Require Receipt check box is selected on the General tab of the same form. As a result, the system posts to the Expense Accrual account the costs of materials when the items are received to a warehouse of your organization and a production order is released. Transactions generated on release of the inventory receipt are listed in the following table.
| Account | Source of Account | Debit | Credit |
|---|---|---|---|
| Expense Accrual account | Item | Amount | 0.00 |
| PO Accrual account | Item | 0.00 | Amount |
On the Non-Stock Items form for a non-stock item used for outside services, Sales is selected in the Post Cost to Expenses On box on the Price/Cost tab and the Require Receipt check box is cleared on the General tab, then you create the AP bill with this non-stock item. When you release the AP bill, the transactions listed in the following table are generated.
| Account | Source of Account | Debit | Credit |
|---|---|---|---|
| Expense account | Item | Amount | 0.00 |
| AP account | Item | 0.00 | Amount |
When you issue or backflush the non-stock item that represents the subcontractor services, the transactions listed in the following table are generated for both the non-stock item and the materials shipped to the vendor.
| Account | Source of Account | Debit | Credit |
|---|---|---|---|
| Work in Process account | Item | Amount | 0.00 |
| Expense Accrual account | Item | 0.00 | Amount |
If the Accrue Cost check box is cleared on the Price/Cost tab of the Non-Stock Items form, the amounts are posted to the Expense account instead of the Expense Accrual account.