This third and last post on GL journal imports with the help of Electronic Reporting focuses on the import of so-called split postings where one debit account and multiple credit accounts (or vice versa) are imported in MSDyn365FO GL journals.
This webcast shows you one can create and import GL journals in MSDyn365FO with the help of Electronic Reporting. A major advantage of those imports are that they run faster than the standard Excel GL journal import functionality. In addition, journal headers and journal lines can be created in a single run without having to create the journal headers before. Finally, users have more flexibility in the way how they create their Excel import templates and there is no limitation in the number of templates and ER import configurations that can be made.
This webcast demonstrates how one can create a stockholders equity statement in the standard MSDyn365FO application with the help of reason codes and the Management Reporter. A major focus is made on demonstrating how to setup the Management reporter stockholders equity report that necessitates the calculation of multiple beginning and ending balances for the different periods covered. The principle demonstrated in this webcast can be applied to other reporting scenarios such as cash flow reports or reports that detail accruals and changes in accrual balances.
In this post I will show you how you can inform people about newly setup ledger accounts in D365FO. Even though Alerts and MS Flow triggers are currently not available for D365FO, you can make use of the standard D365FO functionalities and MS Flow to send notifications to those who are for example responsible for setting up reports to ensure that they don’t miss newly setup ledger accounts.
Within this post I would like to share some of the experiences that I made with the import of transactions from Excel to D365 general ledger journals. The story began in the general journals form, which allows users opening, editing and re-importing accounting transactions in Excel.
The standard general journal line entry template that ships with D365 opens an Excel document similar to the one shown in the next screenprint that has (1) a link to the general ledger journal batch number and (2) a link to the main account(s) used.
Those linkages and functionalities are nice. However, I wanted to (a) enter main accounts and financial dimensions and (b) create new journals and not open already existing ones. Within the following, we will see how (a) and (b) can be achieved.
(a) Enter main accounts and financial dimensions
Fixing the first issue is easy and can be achieved by adding the account display value field via the workbook designer. The next screenprint exemplifies this.
A disadvantage of using the account display value field for recording main accounts and financial dimension combinations is that you cannot easily identify the sequence of the different financial dimensions used and thus do not know how to enter your transactions. That is because this sequence is defined in the following integration form in the general ledger module.
A second disadvantage of entering the main account-financial dimension combinations in a single field is that no tooltip or lookup is available that would help users entering their transactions. Luckily this disadvantage can easily be overcome by implementing a minor system modification that is described on the following website: https://docs.microsoft.com/en-us/dynamics365/unified-operations/dev-itpro/financial/dimensions-overview. The next screenprint that was taken for a different D365 environment that has this modification implemented illustrates that the system modification allows entering main accounts and financial dimensions in separate columns of the Excel template.
Even though the workbook designer and the optional system modification help to overcome my first issue, you will quickly notice that all Excel design changes that are made via the Office add-in designer are gone the next time you open the Excel template. To fix also this problem, one has to design its own template.
Creating and designing an own template might sound complicated. However, you do not have to design everything from scratch but can rather make use of the things that are already available. In other words, you can make use of the existing standard templates and easily modify them yourself as required. The only thing you need to do to realize that is opening the document templates form…
…identify the existing template and download it.
When downloading and saving the template, take care of the name that you give to this file because this name will be important later on when making the file available for usage.
Once the template is downloaded and saved, you can open it in Excel and start creating your own design.
After all design change are made, the new template can be made available by creating a new document template and importing the Excel document as illustrated in the next screenprint.
Please note that the template name defaults to the file name that has been uploaded. In my example, it ends with _L1. If you do not delete this suffix and make use of the original template name (‘LedgerJournalLineEntryTemplate’), the upload will succeed but you won’t be able to make use of the document template.
Provided that you managed creating your new template, it finally becomes available for selection in the general journals form…
… and can be used for recording accounting transactions.
(b) Create new journals
Using the general journal Excel add-in is nice. Yet, you might have noticed that all my Excel documents shown before had a link to an already existing general ledger journal. What I wanted to do though was creating new journals directly from Excel and not creating a journal in D365 that can be opened in Excel.
In the following, I will show you how creating new journals can be realized by making use of the Excel document template functionality. To make this exercise a bit more challenging, I decided to demonstrate the creation and posting of a new journal by ‘copying’ the lines from an already posted journal. For that reason, I selected one of the already posted journals and transferred all lines into my newly created template.
Once that export was done, I put my cursor into the header section and selected ‘New’ in the Office add-in data connector, which allowed me entering a new description and name that I could publish.
As a result a new batch number became visible (00459)…
… and a new journal was created in the D365 web client.
Happy about what I have achieved so far, I continued my exercise by changing the existing lines that I could still identify in the template. Trying to publish those modified lines to my newly generated general ledger journal went, however, terribly wrong and I got many error messages. After a while, I noticed that something might be wrong with the journal line association. To check this, I added the journal batch number field into my template and noticed that the existing lines still had a relationship to the old and posted journal no. 00001.
When I tried to overwrite those lines, I basically tried to tell D365 to delete already posted vouchers and replace them with some new ones. D365 did of course not allow me doing this and consequently generated the error messages. After becoming aware of this issue, I simply copied the existing lines from journal 00001 to the end of my template, entered the new journal batch number created (00459) and modified the posting date.
Those changes finally allowed me uploading and posting my journal.
I hope that this information and the experiences that I made are helpful for you and allow you circumventing those problems when using the document template in D365. Till next time.
As the other remaining production related standard cost variances are treated in a similar way as the previously analyzed lot size variance, they are analyzed together in this post. In order to get a price, quantity and substitution variance posted, the following modifications have been made to the standard production process for the item that has already been used in the prior post.
- Instead of consuming one raw material, two pieces of the raw material are consumed, which results in a quantity variance of $500.
- The standard cost price of the raw material has been increased from $500 to $515 prior to the start of the production order. This gave rise to a price variance of
2 pcs x ($515-$500) = $30
- The route card was posted with a different route version, which had a different (more expensive) cost category price setup ($600 instead of $490). This change resulted in a substitution variance of $110.
Other common sources of standard cost variances are described on the following website: https://technet.microsoft.com/en-us/library/gg213654.aspx
The next screen print illustrates the total production costs of $1640 and the different standard cost variances for the sample production order processed.
As before, the next accounting overview summarizes the generated ledger transactions.
For those readers who are not very familiar with ledger postings, the following financial statement overview has been prepared.
The financial statement overview presented above shows that the total inventory balance of the produced item ($1000) is too low from an actual costing perspective ($1640). For that reason, an allocation of the price, quantity and substitution variance similar to what has been shown in the previous post for the lot size variance is required.
Applied to the example shown above, the complete price, quantity and substitution variance amounts would have to be shifted to the company’s balance sheet by making use of an allocation rule. That is because only a single receipt transaction but not issue transaction has been recorded thus far. If also issue transactions would have been recorded, a separation and allocation of the different variance amounts would be required. The setup and application of this allocation rule is not shown here to conserve space and because it follows the same concept that has been explained in the prior posts.
This and the previous posts demonstrated that companies that make use of a standard cost inventory valuation can obtain a parallel inventory value that is based on actual costs by applying general ledger allocation rules for the different standard cost variances.
The next graph summarizes the different standard cost variances and illustrates how they need to be treated to arrive at a parallel inventory value.
The graph above differentiates between the different standard cost variances based on whether they arise internally (cost revaluation and cost change variance) or whether they have an external market relationship.
External market relationship in this context refers to the purchase market, which gives raise to the purchase price variance in case items are purchased and to the sales market, which relates to the produced items once they are sold.
As explained before, the ‘internal’ standard cost variances need to be eliminated, that is, shifted from the company’s income statement to its balance sheet because they relate to receipt transactions only and are eliminated automatically once the items are sold/consumed later on.
The ‘external’ standard cost variances require on the other hand side a separation based on whether they relate to receipt or issue transactions. This separation can be realized by making use of the ledger allocation rules and ensures that an actual cost inventory value can be obtained.
Overall it can be concluded that a parallel inventory valuation can be realized for companies that make use of standard costs by applying general ledger allocation rules. This post concludes this series on the alternative parallel inventory valuation approach. I hope that you found the one or the other useful information. Till next time.
After the purchase and internal standard cost variances have been analyzed, let’s now have a look at the production related standard cost variances and how to deal with them.
Within this fourth part we will have a look at the lot size variance (LSV) first, which arises for example if the good quantity from a production order differs from the calculation quantity that was used for the standard cost calculation of an item. The following graphic illustrates the composition of the finished item that will be used for the subsequent explanations of the production lot size variance.
The graphic above shows a finished good that is made of a raw material that has a standard cost price of $500 setup. In addition, another $500 route related costs – that consist of $490 assembly cost and $10 setup cost – are necessary to produce the item.
As the setup costs are independent from the quantity produced, the total production costs of an item decrease, as the production quantity increases. The next graphic illustrates this relationship for the sample item used.
To illustrate how the lot size variance arises and how to deal with this kind of variance, a production order for 10 pcs of the finished good is processed. The next screen print shows that a total of $9910 production costs arise for the production of the 10 items [$10 setup costs + 10 x ($500 material costs + $490 assembly costs)]. The illustrated lot size variance of $90 results from the fix cost degression effect shown in the previous graphic.
Similar to what has been shown in the previous post, the next accounting-like overview summarizes the production postings recorded (separated by the different production steps).
For those readers who are not very familiar with ledger postings, the following financial statement overview has been prepared.
The financial statement overview shows a total inventory value of $10000 for the finished product on ledger account 140670. To produce those finished goods, raw materials with a total value of $5000 and $4910 labor costs have been consumed. The remaining difference to the standard cost value of the finished goods is assigned to the lot size variance that is recorded on ledger account 540630.
Further above, a realized cost amount of $9910 has been identified. Against the background of this actual cost amount, it can be concluded that the inventory value of the finished goods is overstated by $90 from an actual costing perspective.
If one of the produced items is sold later on, the inventory value is decreased by $1000 – the standard costs of the item. The financial statements illustrated below exemplifies this situation.
From an actual costing perspective, the decrease in the inventory value from the sale of the produced item is comparatively too high. The same holds for the cost of sales, which are recorded on ledger account 640650.
In order to arrive at an actual cost valuation, the lot size variance (LSV) needs consequently be adjusted and split up in a similar way that has been shown for the purchase price variance before. The next graphic exemplifies the necessary separation of the total lot size variance if one out of the ten produced items is sold.
To conserve space, the setup of the necessary ledger allocation rule is left as an exercise for the reader. If the allocation rule is later on processed, the following financial statements result:
The financial statement overview shows a total inventory value that is $81 lower than before. This reduction takes care of the difference between the actual and the standard cost price [9 pcs x ($1000 – $991)]. As the allocated lot size variance amount is recorded on a separate ledger account, a parallel standard cost and actual cost inventory valuation can be achieved.
Please note that this also applies for the COGS amount of $1000 that has been adjusted through a corresponding adjustment on ledger account 640651 to arrive at an actual cost value of $991.
Within the next post we will take a look at the other production related standard cost variances and how to deal with them from a parallel valuation perspective. Till then.
The next standard cost variance type that has an influence on the parallel valuation approach concerns cost change variances, which can result from two different sources that will be explained in the following.
Source 1: Standard cost price differences between sites
Standard costs can be setup in a way that different standard cost prices are defined per site in order to incorporate cost price differences resulting for example from transportation costs, etc. The next screen print exemplifies an item that has different cost prices setup for site 1 and site 2.
In order to illustrate what influence these different cost prices have on the parallel inventory valuation approach, 100 pcs of the item have initially been acquired through an inventory adjustment journal for site 1. The resulting financial data can be identified in the following screen print.
After the items have been acquired, an inventory transfer from site 1 to site 2 for a single item is posted through an inventory transfer journal.
The outcome of this transfer is an adjustment voucher that results in a corresponding increase in the inventory value. The adjustment voucher and the resulting inventory value increase can be identified in the following figures.
What one can identify from the financial statement reports exemplified above is that the total inventory value increased by $25 because of the item transfer from site 1 to site 2.
Before analyzing how to deal with that variance for the parallel inventory valuation approach, let’s have a look at the second possible source of cost change variances.
Source 2: Customer item return after standard cost price change
A second possible source for cost change variances are situations where standard cost items are sold to customers and returned after a cost price adjustment has been completed.
The following example illustrates this scenario where initially 100 pcs of a standard cost item with a cost price of $100/pcs are acquired – for reasons of simplicity – through an inventory adjustment journal. The next screen print shows the resulting financial statements.
After the items have been acquired, 5 pcs are sold for a sales price of $200/pcs. With a standard cost price of $100/pcs, the company’s inventory value is consequently reduced by $500, which can be identified from the next financial statement illustration.
Shortly after the items have been sold, the standard cost price of the remaining inventory items is adjusted from $100 to $130. The resulting accounting voucher and financial statements are shown in the next screen prints.
The screen prints above illustrate that the change in the standard cost price resulted in a $2850 higher inventory value [95 pieces x ($130-$100)].
After the standard cost price has been increased from $100 to $130, the customer decided to return 3 out of the 5 pcs sold. Posting the return order packing slip and invoice results in a number of transaction vouchers that are summarized in the next accounting-like overview.
The transaction vouchers summarized above demonstrate that the item return resulted in a corresponding adjustment of the sales revenue and the receivables amount (3 pcs x $200 sales price / pcs = $600). At the same time, an adjustment of the COGS and inventory value was recorded. Yet, because of the cost price change, a $90 higher inventory value remains.
Expressed differently, selling and returning the 3 items resulted in a $90 higher inventory value, which can be identified in the following financial statement overview.
After having analyzed the sources of cost change variances, the question arises, how to deal with them in order to arrive at a parallel actual cost based inventory value?
As mentioned in the previous post, standard cost price changes resp. differences typically do not reflect actual (market) price differences but rather cost/transportation/handling cost differences.
Moreover, in an actual inventory costing environment, internal movements of goods between different sites do not affect the company’s profit. That is, a company does not get richer or poorer by the mere fact that an item has been shifted from one location to the other, as it might be the case for standard cost items.
The same holds for the second source of the identified cost price changes; i.e. in an actual costing environment, a company does not get richer or poorer by shipping and returning goods to and from a customer, as it might be the case in a standard cost environment.
For those reasons and because cost change variances affect receipt transactions only, it can be argued that the complete cost change variance amount needs to be shifted from the company’s income statement to it’s balance sheet in order to arrive at an approximate actual cost valuation. This shifting can once again be realized by making use on an allocation rule similar to the one that has been introduced in the prior posts.
The next posts will deal with the production related standard cost variances and how to incorporate them in the parallel inventory valuation approach. Till then.
After having analyzed how to deal with purchase price variances in order to arrive at a second (parallel) inventory value, let’s have a look at the second standard cost variance type – the inventory cost revaluation – and how to deal with those variances to obtain a second (parallel) inventory value for standard cost items.
At the end of a fiscal year, the standard costs of a first item are adjusted from $100 to $109. For a second standard cost item, the standard costs are adjusted from $100 to $95. As there are currently 100 pcs from each of the items on stock, a total inventory value of $20000 can be identified (before adjusting the standard cost prices) in the financial statements illustrated in the next figure.
The aforementioned revaluation of the standard cost item is realized by recording and activating the new standard cost prices in the standard cost costing version, as exemplified in the next screen print.
Once the new standard cost prices are activated, the financial statements show a $400 higher inventory value. This can be identified from the next figure.
The overall increase in the inventory value can be explained by the value increase of the first standard cost item [($109-$100) x 100 pcs] and the value decrease of the second standard cost item [($95-$100) x 100 pcs]. If the revalued items will be sold subsequently, the newly activated standard cost prices will be used for posting the issue transactions.
At this point the question arises whether the inventory cost revaluation amount can remain in the income statement as illustrated in the previous screen print or whether an adjustment similar to the one that has been shown in the first part for the purchase price variance (PPV) is required in order to get a second (parallel) inventory value?
This question can be answered by stating that no split and allocation of the cost revaluation is required, if the cost revaluation is done in a way to adjust the standard cost prices to an ‘actual’ market price. If this is the case, any previously recorded adjustment and allocation of the PPV needs to be reversed in order to avoid an over-adjustment of inventory values towards actual market prices/values.
In practice, most companies do not adjust their standard cost prices in a way to reflect ‘actual’ (market) cost prices. Otherwise, they would have chosen an alternative actual cost price valuation model right from the beginning. Against the background of this common adjustment behavior, it can be argued that an adjustment of the recorded standard cost revaluation amount is necessary in order to arrive at an approximated actual inventory cost price. The main question in this context is then how such an adjustment can be realized?
From the authors’ perspective, the complete cost revaluation amount needs to be shifted (allocated) from the income statement to the balance sheet in order to arrive at an actual cost valuation amount. That is because only those items that are currently on stock (or in process) – that is receipt transactions – are affected by the cost change variance. If those items are sold or consumed later on the adjusted higher/lower standard cost price will ensure that the cost revaluation amount that has been allocated to the balance sheet is successively eliminated. For that reason no split up and allocation of the cost revaluation amount is necessary.
The next part of this series continues with analyzing cost change variances and how they need to be incorporated into this parallel inventory valuation approach.