Setup at Inventory Posting Setup will affect which account the system will post to when you do Warehouse Receipt, post orders, invoices, credit memos, etc, involving item.
1) Go to Financial Management --> Setup --> General --> Inventory
2) Add Inventory Posting Group in this screen
3) Select the Inventory Posting Group and then click on the Setup button to bring up the Inventory Posting Setup screen. Here, you can specify account on which you want to post to based on the Location Code and Inventory Posting Group.
4) The 2 important accounts here are:
a) Inventory Account Interim
--> Expected Item Cost.
--> Items received but not yet. invoiced.
b) Inventory Account
--> Actual Item Cost.
--> Item received and invoiced.
* My company only use the above 2 accounts
Other fields in the Setup includes:
c) WIP Account
--> WIP inventory
--> Used in Production
d) Material Variance Account
e) Capacity Variance Account
f) Subcontracted Variance Account
g) Cap. Overhead Variance Account
h) Mfg. Overhead Variance Account
When you do Warehouse Receipt, the received value will be debited into the Inventory Account Interim account. At the same time, it will credit an Inventory Accrual Account (Interim). The Inventory Accrual Account need to be set at General Posting Setup (Financial Management --> Setup --> Posting Groups --> General --> Posting Setup).
When you received an Invoice from the vendor and post Invoice,
1) Amount from the Inventory Account Interim will be credited and debited into Inventory Account.
2) Inventory Accrual Account will be debited and the same amount to be credited to a Purchase Account. The Purchase Account need to be setup at the General Posting Group.
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