Purchase Order Charges

PO charges

There are different kind of charges which are the part of goods purchase process like freight charges, insurance charges and installation charges. Some of the charges increase inventory value by adding charges cost to inventory cost. In this case, there are two scenarios which are illustrated below.

First scenario: The charges which are payable to same vendor to whom we are purchasing the other goods is very simple process in AX. We can create a PO, add charges over that and after GRN on invoice the whole liability gets created against a single vendor.

The main reason of writing this blog is the second scenario which is stated below.

Second scenario: The charges which are payable to another vendor but charges amount has to be added to inventory cost. for example if an organization is buying some goods from vendor A but he is not providing the transportation service to move the goods from his location to customer’s location, so a transporter is contacted to avail transportation services to load move and unload the goods from sender to receiver and organization wants to make these charges part of inventory value so how we do this in AX? Two separate orders can’t be generated as the charges amount need to be added with inventory cost, In AX a PO can have one vendor only and we have to generate the liability against two vendors for this purchase one for transporter for the freight charges and other for Vendor A for goods purchase.

In below steps I am going to provide a solution for this scenario.

Setup Charges

Navigate to Accounts payable > Charges setup > Charges code

1.     Click New. In the Charges code field, type a code for the charge.

2.     In the Description field, type a description of the charge.

3.     On the Posting Fast Tab, specify how the charge is automatically debited and credited. It is very important to setup for this scenario

·         Debit type = Item

·         Credit type = Ledger Account

·         Account (I  would recommend to open a clearing account for this scenario of expense nature)

Associate charges with purchase order

Navigate to Procurement & Sourcing > Purchase orders > All Purchase orders.

1.     Create a PO > Mention vendor of goods purchasing (1001)

2.     Create PO lines > in example below I have selected item M007 with qty 1.00and unit price 20.00

3.     To associate charges with the Purchase order, Financials tab > Maintain charges > below Maintain charges form will appear.

4.     Select charges code that we created above and mention charges value. Here I have provided charges value as 5.00.

5.     Click Save and proceed to PO confirmation.

Generate Goods Receiving Note

1.     After Confirm PO, go to Receive tab over purchase order form > Click On Product receipt.

2.     Enter receipt number > click ok.

Generate Invoice

1.     Go to Invoice tab over purchase order form > Generate > Invoice.

2.     Enter invoice number, date and post invoice

Now verify invoice voucher to see charges and PO amount has been credited separately.

Here, it is important to highlight that till yet we have parked charges amount in a separate account only not in the transporter’s vendor account.

Create & Post Invoice Journal for Transporter Liability

Now we will generate liability for the transporter account, to do this we will settle above clearing account with transporter’s account by creating invoice journal.

Entry will be

Clearing account (Expense) db

                                          Vendor cr

 (Let’s assume ‘Air cargo Carrier vendor’ as transporter)

Navigate to Accounts payable > Invoices > Invoice Journal

1.     Create invoice journal > On lines form > Set account = transporter vendor

2.     Enter charges amount as credit.

3.     Set offset account as above clearing account which is 600120 in our example (Which got credited on PO invoice)

4.     Click Post.

Check Vendor Balance for Transporter

Now we will verify that liability has been generated successfully for the transporter.

Navigate to Accounts payable> Vendors > All vendors (Select Air cargo Carrier vendor’) > Vendor > Transactions > Balance

Pay Transporter

Now we will pay the amount to transporter for the charges.

Navigate to Accounts Payable > Payments > Payment Journal

5.     Create new journal > On lines > enter vendor account > click on settle transactions

6.     On Settle transactions form > select the invoice that we have created for charges through invoice journal > Click OK

7.     Provide offset account and post payment journal.

RESULT:

After executing this whole scenario,

Freight charges has been paid to transporters, while goods purchasing amount has been paid to main vendor and inventory cost has charges amount included.

Verify Inventory Cost

Navigate to Inventory Management > Reports & Inquiries > On-hand list