To Check or Not to Check: Understanding Landed Cost's Invoice Match and Revalue Inventory Options in Microsoft Dynamics GP

Dynamics GP presents two selection options in the Landed Cost Maintenance screen: Invoice Match and Revalue Inventory. These two options have profound accounting effects in how inventory and purchases are tracked in GP. The following is provided as is and was posted by Marge Swanson, Senior Software Development Engineer at Microsoft in response to a user's question on the Dynamics GP community board, but I felt it was important to rescue as it contains valuable information not found in the manuals or elsewhere:

You should determine whether or not to mark the Invoice Match checkbox based on how you want your distributions to be tracked for the Landed Cost. If you do not mark Invoice Match, the distributions will be reversed from the accrued purchases account used on the Shipment – which defaults from the Landed Cost card. If you mark Invoice Match, the distributions will be created with the Purchase Price Variance account on the Landed Cost Maintenance window.

This helps you track the variances to a separate account if you want to. If you also mark Revalue IV when you mark Invoice Match, the distributions will assigned to the inventory account associated with the item the landed cost is applied to. The cost basis for the item will also be updated for any cost variance on the Landed Cost.

Example: Invoice matching and distributions for landed costs

Marking the Invoice Match option for a landed cost record will affect account distributions. For example, suppose that a shipment is recorded for 10 items at $1 each. The landed cost uses the Flat Amount cost calculation method, and the flat amount is $0.50.

The distributions for the shipment would look like this:

Inventory                                  $10.50
Accrued Purchases - Landed Cost            ($0.50)
Accrued Purchases – Inventory             ($10.00)

Suppose that when the invoice is received, the cost of the goods is unchanged, but the landed cost has increased to $0.75. If Invoice Match is not marked, the account distributions would be as follows.

Accrued Purchases - Landed Cost             $0.75
Accrued Purchases – Inventory              $10.00
Accounts Payable                          ($10.75)

If Invoice Match is marked and the Revalue Inventory option is marked for the cost variance, the account distributions would be as follows:

Accrued Purchases - Landed Cost             $0.50
Accrued Purchases - Inventory              $10.00
Inventory                                   $0.25
Accounts Payable                          ($10.75)

If Invoice Match is marked and Revalue Inventory option is not marked for the cost variance, the account distributions would be as follows:

Accrued Purchases - Landed Cost             $0.50
Accrued Purchases - Inventory              $10.00
Purchase Price Variance                     $0.25
Accounts Payable                          ($10.75)

Until next post!

MG.-
Mariano Gomez, MIS, MCP, PMP
Maximum Global Business, LLC
http://www.maximumglobalbusiness.com/