Direct cost applied account
“What is direct cost applied account?”
This is a popular question among new Business Central users. Normally in accounting, when a purchase receipt is invoiced, we would,
Debit – inventory account
Credit – Accounts payable account
Microsoft Business Central does not handle invoicing of purchase receipt in normal way. When a purchase receipt is invoiced, below accounts get updated,
Dr. Inventory Account (Inventory Posting Group)
Cr. Direct Cost Applied Account (General Posting Setup)
Dr. Purchase Account (General Posting Setup)
Cr. Vendor Account- AP (Vendor Posting Group)
*these accoutns are getting posted based on the business posting group and product posting group setups.
When we look at ‘General posting setup‘, we can see that there are columns for purchase account and direct cost applied account,
When we look at ‘General posting setup‘, we can see that there are columns for purchase account and direct cost applied account,
Purchase account and direct cost applied account should net to zero.
Reasons why does it work like this way in the system
- It is easy for some companies to budget for inventory purchases. Purchase account helps to compare actual to budget.
- It helps the system to run adjust cost-item entries batch job to make inventory adjustments.
