The company business cycle can be described in the following way:

Business cycle

What is the first step in this cycle? As you may know, the first step in business is finding a Customer and signing a contract. A lot of companies are launched after the Customer is found and the contract is signed. So, the first step in the business cycle is Sales, all other steps serve the Sales step.

The flow of the sales process is similar to the purchase flow:

1. Quotation
2. Confirmation
3. Picking and Shipment
4. Packing slip
5. Invoice

The sales process is described in the Trade and Logistics training, with the focus on the Picking and Shipment steps.

We assume that the Sales Manager finds the Customer who wants to buy 10 items of 1003 (Plasma Television Model 01) for the price of $ 1 600. Let’s go through the sales steps and analyze the results.

Quotation

First of all, the Sales Manager finds the Customer. There are a lot of techniques to do this: exhibition, e-mail spam, advertisements, etc. For this purposes Microsoft Dynamics AX provides a separate CRM module. CRM is an abbreviation for client relationship management. If you open the CRM module in Microsoft Dynamics AX, you can find the Sales quotation form. A Sales quotation is created when the Sales Manager makes a proposal to the business relation (a possible customer). The sales quotation can either be canceled or confirmed.

A Quotation is used to record the possible Sales order and the Customer. If the sales quotation is confirmed, the sales order is created on basis of the confirmed quotation and the customer record is created on basis of the business relation. The Quotation confirmation step is used to record in the system that the customer agrees to make an order.

The quotation step is optional. The Sales Manager can create the sales order without the quotation. The Quotation step does not generate any financial transaction.

To create a sales quotation, do the following:

1. Go to Accounts receivable > Common Forms > Sales Quotation Details. The Quotation form opens.
2. Create a new line. The Create quotation form opens. Select, for example, the “000125_139″ value in the Business account field. Click OK.
3. The quotation header is created.
4. Create a new line with the following values:
   • Item number = 1003
   • Configuration = HD
   • Size = 42
   • Color = 01
   • Quantity = 10
5. Save the line.

The Quotation form looks as follows:

Note that the Site, Warehouse, Unit, and Unit price fields are automatically filled in. The values for the Site, Warehouse, and Unit fields are filled in by analogy with the purchase line. In the purchase lesson you can find how the values are filled out.

The Unit price field contains the value of 1600. How does Microsoft Dynamics AX know the price? If we go to the Items form under Inventory management > Common Forms > Item details > find the 1003 item > Price/Discount tab > Base sales price field group, we see that the sales price is zero. If we go to the Item dimension combination form (the Items form > find 1003 item > Setup menu button > Item dimensions combination button > find the line with Configuration = HD, Size = 42, and Color = 01 > Price button), we see that only the cost price is set up. The sales price is taken from the trade agreement (the Items form > find the 1003 item > Trade agrmt. menu button > Sales price button). The Price (sales) form opens. We can see that the price for our configuration is $1600.

Confirm the sales quotation taking the following:

1. Now the Sales Manager prints the quotation and sends it to the possible customer. In the Quotation form, click the Update > Quotation button. The Send quotation form opens. Select the Print Quotation check box, click the Options button, and select the Screen option, click OK. Click OK in the Send quotation form. The quotation is printed and can be sent to the possible customer.
2. When the Sales Manager receives a positive answer, the business relation should turn to the customer and the quotation should turn to the sales order. In the Quotation form, click the Function > Convert to Customer button. The Convert to customer dialog box appears, click Yes. In the Customer account number form that opens, enter, for example, the 000500 number for the new customer. Fill in 000500 in the Customer account field, click OK.
3. The Customer form with the new 000500 (Corner restaurant) customer record opens. All customer information is transferred from the business relation. So, we make sure that the new customer record is created.
4. Now, the Sales Manager clicks the Updates > Confirmation button. The Confirmation quotation form opens. The confirmation document can be printed and then sent to the customer (select the Print confirmation check box and set the Screen option). Click OK. The Confirmation document is shown and the sales order is created. The “Field Mode of delivery must be filled in” message appears, we will fill the delivery mode in the sales order a bit later.

Go to Accounts receivable > Common forms > Sales Order Details. The Sales order form opens. We make sure that the sales order is created from the quotation:

In the Sales order form, go to the Delivery tab and fill in the Mode of delivery field with, for example, the “10″ value (Truck delivery). In this training lesson, you can get more information about the item delivery. The Update order lines box appears, select the Update Mode of delivery check box and click OK.

Let’s check the confirmation quotation posting results. In the Sales order form, click the Inquiries > Quotation confirmation button. Click the Inquiries > Quotation confirmation button again. The Confirmation journal form opens.

We can see that the new journal has been created with one line. This step has no influence on accounts, because from the financial point of view nothing has changed. No general ledger or sub-ledger transactions have been created. The Confirmation journal form doesn’t have the Voucher button. As you remember a voucher is used to group all transactions generated for one operation. Since the Confirmation journal form doesn’t have the Voucher button, the quotation confirmation operation never generates transactions.

Note that the quotation amount is $16 800. It is because sales taxes have been added. We will understand how sales taxes are set up and calculated later in this training.

Confirmation

The confirmation step is similar to the quotation confirmation step. It is optional and can be omitted. The confirmation step is used to record in the system that the customer receives the sales order document and confirms its details (quantity, configuration, price, delivery terms, payment terms, etc.).

The Sales Manager clicks the Posting > Confirmation button in the Sales order form. The Posting confirmation form opens. Select the Print confirmation check box. To print the confirmation to the screen, click the Printer setup > Confirmation button and select the Screen option, click OK. In the Posting confirmation form, click OK. The Confirmation document is printed. The Sales Manager sends this document to the customer. If the customer asks to change some details, this step can be repeated.

To view the posting results, click the Inquiries > Confirmation button in the Sales order form. The Confirmation journal form opens.

We can see that the journal has been created. The confirmation step has no influence on accounts, because from the financial point of view nothing has changed. The Confirmation journal form doesn’t have the Voucher button. The confirmation operation never generates transactions.

Picking and Shipment

Now, the items should go through the following process:

1. Picked from the warehouse location.
2. Transported from the warehouse location to the outbound location.
3. Loaded to the truck.
4. Shipped in the truck.

These steps are described in details in the Trade and Logistics training. From the financial point of view, nothing has changed because the items remain the company property, i.e. the Inventory account has not changed.

The flow of picking and shipment steps depend on the item setup. In our case, the flow is the following:

1. The Sales Manager prints the picking list and sends this document to the warehouse worker.
2. The Warehouse Worker picks the items and notifies the Sales Manager about this. The Sales Manager posts the picking list registration form.
3. The Warehouse Worker transport items from the warehouse location to the outbound location, loads the items to the truck, and the Driver ships the items. The truck steps are omitted.

Note that in our case, we have only the picking step.

The comprehensive flow (with transporting the items to the outbound location, loading them into the truck, and shipping them) depends of the following parameters:

• Item inventory model group has the Picking requirements check box selected.
• Item dimension group has the Location and Pallet dimensions active.

Let’s perform the picking step:

1. In the Sales order form, click the Posting > Picking list button. The Posting picking list form opens. To print the picking list to the screen, select the Print picking list check box, click the Printer setup > Picking list button, select the Screen option, and click OK. In the Posting picking list form, click OK. The picking list is printed. The Sales Manager sends the picking list to the Warehouse Worker.
2. When the Warehouse Worker picks all items, he or she notifies the Sales Manager. The Sales Manager registers the picking list. In the Sales order form, click the Posting > Picking list registration button. The Picking list registration form opens.
3. Click the Update > Update all button. The value of the Handling status field is changed from Activated to Completed.

Let’s check the picking list posting results. In the Sales order form, click the Inquiries > Picking list button. The Picking list form opens.

We can see that a new journal has been created. This step has no influence on the company accounts, because from the financial point of view, nothing has changed. The Picking list form doesn’t have the Voucher button. The Picking list operation never generates transactions. Note that neither the journal header nor the lines have information about the prices (the item price or the total order price). It is because this step is not related to the financial one. The company hides some info (the prices and the customer information) from the Warehouse Workers.

Packing Slip

This step is similar to the Packing slip step in the purchase process. A packing slip document is a guarantee that the customer receives the items. This step is used to record in the system that the item was delivered to the customer and the customer confirms all details (no items have been broken, the item quantity and configuration are the same, etc.). Note that in this step the customer does not confirm paying for delivered items.

The company can create a separate general ledger account for the items to be delivered to the customer, but for those that were not yet invoiced. In this case, the general ledger and the item transaction are generated. But this is an optional step.

The general ledger transactions are generated if the Post physical inventory check box is selected in the item’s inventory model.

Find the inventory model group for the 1003 item (Inventory management > Common Forms > Item Details > find 1003 item > General tab > Groups field group > Inventory model group field). The 1003 item has the “Std Cost” inventory model group.

Find the configuration of the “Std Cost” inventory model group under Inventory management > Setup > Inventory > Inventory model groups > find “Std Cost” > Setup tab > Ledger integration field group > Post physical inventory check box. We can see that for the 1003 item, the packing slip step generates general ledger transactions.

The transaction will look as follows:

Note that the amount used for this transaction is $12 300, not $16 800. The Inventory account contains the cost of items in stock. Since the items are delivered to the customer, the total cost of items in stock is decreased. From the purchase training lesson, we can find that the item cost is $12 300. On the other hand, the customer receives the item, so the cost of the item is recorded to the Account receivable account. This step is used to record that the item was delivered to the customer, so the item cost is used. When the customer agrees to pay for the delivered items, the item price is used (it is the Invoice step).

Account receivable is the company asset. Account receivable is increased, so the debit part is used. In other words, when the debit part is used, it is “good” for the company. Inventory is also the company asset. Inventory is decreased, so the credit part is used. In other words, when the credit part is used, it is “bad” for the company.

Let’s post the packing slip and check the results. In the Sales order form, click the Posting > Packing slip button. The Posting packing slip form opens. Note that you can print the packing slip document to the Screen by selecting the Print packing slip check box, clicking the Printer setup > Packing slip button, selecting Screen, and clicking OK. Click OK.

The packing slip document is printed to the screen. Note that this document doesn’t have the item price. It contains information about the item configuration and quantity.

Let’s check the posting results. In the Sales order form, click the Inquiries > Packing slip button. The Packing slip journal form opens. We can see that the journal has been created.

The Packing slip journal form has the Voucher button. So, this step can generate the general ledger transactions. The voucher is used to group all transactions that were generated.

Click the Voucher button. The Voucher transactions form opens. We can see that the transactions have been generated.

Find the information about these accounts. Go to General ledger > Common Forms > Chart of Account Details. The Chart of accounts form opens. Find the 142300 account. This account has the “Inventory Clearing – Shipped, un-invoiced” name and belongs to the Inventory accounts. Find the 130300 account. This account has the “Accounts Receivable – Clearing” name and belongs to the Accounts Receivable accounts.

In Microsoft Dynamics AX, negative amount is used to show that it is the credit part, and the positive amount is used to show that it is the debit part. So, we make sure that the generated transaction looks as follows:

Let’s check all transactions that were generated for all ledgers. In the Voucher transactions form, click the Origin button. The Transaction origin form opens.

We can see that except the ledger transactions, an inventory transaction has also been generated.

Why does Microsoft Dynamics AX use the 130300 account as Account receivable un-invoiced and the 142300 account as Inventory un-invoiced? Microsoft Dynamics AX takes accounts for different operations from the posting profiles.

Posting profiles are used to set up the controlling account (the general ledger account) for specific entities: customer, vendor, and item.

Since the packing slip operation relates to the item delivery, only an inventory transaction is generated (except the general ledger transactions). Controlling accounts for the customer un-invoiced and inventory un-invoiced are set up in the inventory posting profiles.

Let’s find out to what item group the 1003 item belongs. Open the Items form (Inventory management > Common Forms > Item details > find 1003 item > Item group field). The 1003 item belongs to the “Television” item group.

Open the items posting profiles form. Go to Inventory management > Setup > Posting > Posting. The Inventory posting form opens. The Sales order tab is shown by default. The Packing slip radio button is also selected by default. Find the settings for the “Television” item group.

This configuration is used for the Inventory un-invoiced accounts. We can see that for the 1003 item, the 142300 general ledger account is used as Inventory, un-invoiced.

Select the Packing slip offset radio button. Find the settings for the “Television” item group. The Inventory posting profile form looks as follows:

This setup is used for Account receivable, un-invoiced accounts. We can see that for the 1003 item, the 130300 general ledger account is used as Account receivable, un-invoiced.

Invoice

The Invoice is the last and the main step in the sales process. The company can set up the sales flow with only one Invoice step. In this case, all previous steps (Quotation, Confirmation, Picking, Packing slip) are optional and can be omitted. The Invoice step is used to record in the system that the customer receives the Invoice document and confirms to pay for delivered goods.

…

You are not authorized to see the full training lesson (67 pages are hidden).

Download the full PDF version of the Financial training for Dynamics AX 2009.

…

We can see that except the ledger transactions, the customer transaction is created. This is the open customer transaction that should be settled with the customer payment transaction. The customer payment transaction will be created when the customer pays the interest (the Account Manager will use a payment journal to post the customer payment). Note that if the customer does not pay the interest, the Account Manager can create the collection letter.

Summary

In the Sales training lesson, we have studied the following:

1. The main sales steps from the financial point of view are:
   1. Quotation
   2. Quotation confirmation
   3. Sales order confirmation
   4. Items picking
   5. Items shipment
   6. Packing slip
   7. Invoice
2. Sales taxes (Authority, Sales tax codes, Sales tax group, Sales tax posting)
3. Free text invoice
4. Customer payments (journal creation, payment settlement, payment generation, notification receipt, and journal posting)
5. Pay to authority (sales tax payment)
6. Bank reconciliation
7. Customer account statement, collection letter, and interest note

Technorati Tags: Bank Reconciliation, Collection Letter, free text invoice, Interest Notes, payments, Sales process, sales steps, sales tax payments, Sales taxes

The payment process generates the following transaction:

Remember in the first lesson, we have studied that if the Assets increase, the Debit part is used, and if they decrease, the Credit part is used. For the Liabilities is the vice versa. But always Debit is “good” and Credit is “bad” for the company. The Bank account is the Assets account that contains the amount of money that the company has in the bank. The money in the bank decrease, so the Credit part is used. In other words, when the money decrease, it is “bad” for the company. The Accounts payable is the Liabilities account that contains the amounts of money that the company owes to others. The Accounts payable amount decreases, so the Debit part is used. In other words, when debts decrease, it is “good” for the company.

The company can pay for the delivered goods or services in different ways: by checks, electronic payments, cash, promissory notes, etc. The payment method and other payment parameters are set up per vendor under Accounts payable > Common Forms > Vendor Details > Payment tab > Terms of payment, Method of payment, Cash discount, Bank account fields. These parameters are used as default ones when the Invoice is created, but can be changed.

The list of methods of payments is located under Accounts payable > Setup > Payment > Methods of payment.

Methods of payment form

The method of payment is set up for an Invoice, but can be changed when the company pays. In the previous training lesson, the “USAUSD_CHK” payment method was set up for the Invoice.

The Invoice also contains information about the terms of payment and the cash discount. The terms of payment is used to define the due date (the last date when the company should pay to the vendor). If the company doesn’t pay to the vendor before or on the due date, the vendor will send the collection letter. We will learn collection letters in the next training lesson when we sell items to the customer, and the customer will not pay. We have used the “N030” terms of payment in invoices. The terms of payment is set up under Accounts payable > Setup > Payment > Terms of payment. The “N030” terms of payment has the following setup – the due date is the current date + 30 days.

The Cash discount is used to encourage the company to pay the vendor as quickly as possible. We have used the 1%D15 cash discount in all invoices. The cash discount is set up under Accounts payable > Setup > Payment > Cash discounts. The 1%D15 cash discount has the following setup – the discount for 1% is applied if the company pays to the vendor during 15 days.

Payment Steps

The Payment Manager performs the following steps (the payment process):

1. Find what invoices should be paid on basis of due dates or cash discount dates.
2. Create payments in the payment journal.
3. Generate a payment document: a check, a file for electronic payment, a promissory note, etc.
4. Send the payment document to the vendor.
5. Receive an answer from the vendor.
6. Record in the system that the company has to pay to the vendor, i.e. to post the payment.

Let’s go through all these steps in Microsoft Dynamics AX.

1. Go to Accounts payable > Journals > Payments > Payment journal. The Journal form opens.
2. Create a new line and select “APPay” in the Name field. Save the line.
3. Click the Lines button. The Journal voucher form opens.
4. Microsoft Dynamics AX allows automatically creating payments on basis of unpaid invoices. Click the Payment proposal > Create payment proposal button in the Journal voucher form. The Vendor payment proposal form opens. Select “Due date & cash discount” in the Proposal type field. Click OK.
5. The Vendor payment proposal form opens.
   

   Vendor payment proposal form

   The Payment proposal pane contains the payments that are proposed to be paid by the company. The Open transactions pane contains the invoice for which the payment was proposed. If we select another payment in the Payment proposal pane, the information in the Open transactions pane changes. To view all invoices for which payments were proposed clear the Link check box.We can see that there are both invoices that were posted in the previous training lessons and a number of other ones. Select the “222”, “111”, and “485211188” invoices in the Open transactions pane and delete them from the grid (Alt+F9). The Open transactions pane will have only the following invoices:

   • “Invoice 1” (was generated with the help of the Purchase order form)
   • “Invoice journal 1” (was generated with the help of the Invoice journal)
   • “Invoice reg & appr 1” (was generated with the help of the Invoice registration and approval journals).

   We can see that Microsoft Dynamics AX proposes to pay these invoices later on the last day when the cash discount is valid.

   

   Vendor payment proposal form

   Let’s assume that the Company decides to pay today for the “Invoice journal 1”invoice. Delete the invoices “Invoice 1” and “Invoice reg & appr 1” from the Open transactions pane.

6. Click the Transfer button. The Transfer payment proposal box appears. Click OK.
7. The Journal voucherform will look as follows:
   

   Journal voucher form

   We can see that one payment line is created. The “1002” vendor account is debited (for the Liabilities, it means – decreased). The “USA OPER” bank account is credited (for the Assets, it means – decreased). As a result the following transactions will be generated:

   • One vendor transaction for the 1002 vendor
   • One bank transaction for the USA OPER bank account
   • Two general ledger transactions for the controlling accounts.

   The 1002 vendor has the 211100 general ledger controlling account (set up in the vendor posting profile). Note that for the bank account, the controlling account is set up under Bank > Common Forms > Bank Account Details > find the “USA OPER” bank account > Ledger account field. In our demo data, the controlling account for the bank account is 110110 (Bank account – USD). (This account belongs to the CASH&CASH EQUIVALENTS and Asset accounts). The Currency, Method of payments fields are filled in automatically from the invoice. The USA OPER bank account is taken from the method of payment under Accounts payable > Setup > Payment > Methods of payment > find UASUSD_CHK > General tab > Posting field group > Payment account field. We make sure that this field contains the USA OPER bank account. Note that the Transaction text field in the Journal voucher form contains the “Vendor payment Invoice journal 1” text that is also generated automatically on basis of the invoice name.

8. When the payment proposal is used, Microsoft Dynamics AX automatically settles payments and invoices. This is required because the company should know what exactly invoices were paid. To view settlement, click the Function > Settlement button. The Cancel settlement box appears, click NO. The Open transaction editing form appears. This form contains all “open” invoices (i.e. unpaid invoices). We can see that the “Invoice journal 1” invoice is marked, i.e. settled with the payment line. Note that we could manually change the settlement.
   

   Open transaction editing form

9. The Payment Manager checks all payment details. Since all information is correct, a payment check can be generated. In the Journal voucher form, click the Functions > Generate payments button. The Generate payments form opens. Select “USAUSD_CHK” in the Method of payment field, “USA OPER” in the Bank account field, and then select the Show format dialog check box. Click OK.
   

   Generate payments form

10. The Payment by checkform opens.
    

    Payment by check form

11. Print the check to the screen. By default, checks are printed but we will change this setup to Screen by clicking the Document button. The Printer setup form opens. Select Screen and click OK. In the Payment by check form, click OK.
12. The check will be shown.
    

    Check report

13. Return to the Journal voucher form. The value of the Payment status field is changed from None to Sent. It means that the payment is sent to the Vendor (checks, money, electronic transfer, etc.) but not yet received by the vendor.
14. For convenience, all sent payments are displayed in a separate journal under Accounts payable > Journals > Payments > Payment transfer. In this case, the Payment Manager can send all necessary payments during the day and then register the received status at the end of the day.
    

    Payment transfer form

    We assume that the Payment Manager calls the vendor to ensure that the check is received. If the electronic payment method is used, the return file is generated when the vendor receives the payment. In this case, the return file is loaded with the help of the Return file-Vendor button, validated, and the status is changed to Received automatically. In our case, we change the payment status from Sent to Received manually. Click the Payment status > Received button. The payment status is changed to Received. Note that this step is optional.

15. Close the Payment transfer form and return to the Journal voucher form (click F5 to refresh data). Make sure that the payment status is Received. Since the payment is received, the Payment Manager posts the payment. Click the Post > Post button. The voucher is posted successfully.

Posting Results

Let’s analyze the posting results. The general ledger, vendor, and bank transactions should be created. In the previous paragraph, we have found out that the 1101100 ledger account is the controlling account for the USA OPER bank account and the 211100 ledger account is the controlling account for the 1002 vendor account. We assume to find the following transactions:

General ledger:

Subledgers (the Vendor and the Bank ledgers):

In the Journal voucher form, click the Inquiries > Voucher button. The Voucher transactions form opens. This form contains the general ledger transactions.

Voucher transactions form

Click the Origin button to view all transactions for all ledgers. We can see that except ledger transactions one vendor and one bank transactions are generated.

Transaction origin form

Let’s analyze the general ledger transactions. Return to the Voucher transactions form. The 211100 account is the controlling account for the 1002 vendor. The 110110 account is the controlling account for the USA OPER bank account. We make sure that the general ledger transaction looks as follows:

What about $0.2? If you remember when we have performed a purchase, the sum of $20 was recorded to the Credit part of the 211100 account, but after the payment, only $19.80 was recorded to the Debit part. So the balance for the 211100 account is $0.2. It means that the company owes $0.2 to the vendor. But this is not true because the company receives the cash discount. The cash discount should generate the following transaction:

The Accounts payable account is decreased (since it is the Liabilities account, the Debit part is used). The Sales account is used because the company pays less for the purchased items. This item will be sold or used in production, as a result the company receives more profit, because the cost of item is less than it was assumed. The Sales account is increased, because company save money and their profit will increase. All the company’s profit should be returned to the Company Owners. The Sales account is like the Liabilities, so the Credit part is used.

This transaction was generated. In the Voucher transactions form, click the Related voucher button. The Related ledger transaction voucher form opens. Click the Voucher button. The Voucher form opens.

Voucher form

We can see the following transaction:

The 211100 account is one of the accounts payable accounts. If we go to the Chart of accounts form, we find that the 403160 account has the “Purchase cash discount” name and belongs to the Sales accounts.

You can ask why the 403160 account was used as the Sales account. The ledger account for this operation is set up in the Cash discounts form located under Accounts payable > Setup > Payment > Cash discounts > find “1%D15” cash discount > Setup tab > Account received field.

With the help of these two vouchers, the 211100 ledger account will contain the correct value. In other words, the company does not owe to the vendor $0.2 for the “Invoice journal 1” invoice.

Check the 211100 account transactions under General ledger > Common Forms > Chart of Account Details > find 211100 ledger > Transactions button. On the screenshot, only the last 3 transactions are available.

Account transactions form

So we make sure that the invoice for $20 will be paid with the cash discount ($19.8) and the accounts payable account contains the correct value.

Now, we will check the vendor transactions to make sure that the company doesn’t owe for the “Invoice journal 1” invoice in the Vendor ledger. Go to Accounts payable > Common Forms > Vendor Details. The Vendors form opens. Find the 1002 vendor and click the Transactions button. The Vendor transactions form opens.

Vendor transactions form

The first three transactions are generated from the purchase order, invoice journal, and invoice approval journal correspondingly. The transaction with the sum of $19.80 was generated when the payment journal was posted. The last transaction was generated for the cash discount. So we make sure that after the payment the vendor account was debited for $19.8+$0.2 = $20. In the Vendor transactions form, we can see that the “Invoice journal 1” transaction has the zero balance.

If we create the payment journal again and run the payment proposal, the “Invoice journal 1” invoice will not be shown. That is because this invoice was closed (i.e. paid). Microsoft Dynamics AX knows what invoice was paid based on the settlement.

If we click the Show open only check box in the Vendor transactions form, the “Invoice journal 1” and the payment with the discount lines disappear.

Settlement

The user can make the settlement manually. For example, the payment line can be created manually (without the payment proposal) and posted. In this case, the settlement is not created.

In the Vendors form, click the Function > Open transaction editing button. The Open transaction editing form opens. To settle the transactions, select the Mark check box. We can’t settle the invoice transactions because there have been no payments.

Open transaction editing form

Let’s assume that the Payment Manager made a mistake and the payment was made for the “Invoice reg & appr 1” invoice. Since the Payment Manager settled the payment against the “Invoice journal 1” invoice, he or she should reverse this settlement and make a new one between the payment and the “Invoice reg & appr1” invoice. Let’s do this.

In the Vendors form, click the Functions > Closed transaction editing button. The Closed transaction editing in several currencies form opens.

Closed transaction editing in several currencies form

Note that this form doesn’t contain the vendor transaction for $0.2 that was generated for the cash discount. Select the Mark check box for “Invoice journal 1”. The Mark check box for the payment will be selected automatically. Click the Reverse button. The settlement will be reversed and both transactions disappear from the form. Now, these transactions are open. Close the form.

As a result, the transactions appeared in the Open transaction editing form and a new voucher with the reversed cash discount transactions was generated. In the Vendors form, click the Transactions button to make sure. The Vendor transactions form looks as follows:

Vendor transactions form

It means that the system removes the cash discount, because Microsoft Dynamics AX doesn’t know for which invoice the payment is created. If the payment is created for the old invoice that was posted 1 month ago, then the cash discount is not applied. When we create a new settlement between the payment and the “Invoice reg & appr 1” invoice, the cash discount is applied again because the invoice and the payment date are in cash discount interval.

Make a new settlement. In the Vendors form, click the Function > Open transaction editing button. The Open transaction editing form opens. Make a new settlement – select the Mark check box in “Invoice reg & appr 1” and payment line.

Open transaction editing form

Note that Marked total amount is zero. Click the Update button. The new settlement will be created. As a result, the transactions disappear from the Open transaction editing form. Make sure that the transactions appear in the Closed transaction editing form. If we click the Transactions button in the Vendors form, the Vendor transaction form looks as follows:

Vendor transactions form

When the discount amount is applied or reversed, the vendor transactions are generated. Note that the general ledger transaction is also generated. To view this transaction, select the VPY-10007 voucher and click the Voucher button in the Vendor transactions form.

When the payment is created manually and posted, Microsoft Dynamics AX automatically settles it to some invoice. If the invoice amount is greater than the payment amount, the vendor invoice transaction is split to the two parts. One of these parts becomes settled, the other does not. It means that the invoice is partially paid.

Try it yourself. We have an invoice for the sum of $30 750. Create the payment for $2 000 and make sure that the vendor invoice transaction is split to $28 750 and $2 000. And the last one is closed.

The automatic settlement can be disabled under Accounts payable > Setup > Parameters > Settlement tab > Settlement field group > Automatic settlement field.

 Summary

In this training lesson, we have studied the following:

1. The payment process which includes the following:
   • Finding invoices.
   • Creating payments.
   • Sending the money or the money equivalent to the vendor.
   • Receiving the notification from the vendor.
   • Posting the payment.
2. Analyses of how the payment is posted in the system (i.e. the payment results).
3. The open and closed vendor transactions.

In the next training lesson, we will go through the sales process.

Technorati Tags: payment process, settlement

The same demo data will be used. Let’s assume that the company decides to purchase 10 items of 1003 (Plasma Television Model 01) from the 1002 (Wind Televisions) vendor.

Creating a Purchase Order

First of all, a purchase order should be created. Open the Purchase order form by navigating to Accounts payable > Common Forms > Purchase Order Details. The Purchase order form opens. (Click the Advanced button to have the advanced form layout.)

Purchase order form

Create a purchase order for the vendor 1002. In the Purchase order form, create a new line. The Create purchase order form opens. Select the vendor 1002 in the Vendor account field. The Transfer vendor information box opens, click Yes.

Create purchase order form

Click OK in the Create purchase order form. The new purchase order will be created.

Create a purchase order line in the purchase order for 10 items. In the Purchase order form in the Lines area, create a new line. Select the item 1003 in the Item number field. Select “HD” in the Configuration field, “42” in the Size field, and “01” (Black) in the Color field. Save the line (Ctrl+S).

The Site, Warehouse, Quantity, Unit, and Unit price fields will be filled in automatically. The default parameters are set up here:

• Site, Quantity, Unit: the Items form (Inventory management > Common Forms > Item details) > find item 1003 > Setup menu button > Default order settings button > Purchase order tab > Purchase Unit, Purchase site, and Min. order quantity fields.
• Warehouse: the Items form (Inventory management > Common Forms > Item details) > find item 1003 > Setup menu button > Site specific order settings button > find Site 2 > Purchase order tab > Purchase warehouse field.
• Price: Items form (Inventory management > Common Forms > Item details) > find item 1003 > Setup menu button > Item dimension combinations button > find HD + 42 + 01 combination > Price button > find 2 Site > Price field.

The Purchase order form will look as follows:

Purchase order form

The purchase process consists of the following steps:

• Confirmation
• Arrival
• Registration
• Packing slip
• Invoice

We will go through these steps with the attention to the financial results. To know more about the purchase process, read this training lesson.

Confirmation

The Purchase Manager agrees with the vendor all purchase details and confirms them. To record in the system that the purchase order is confirmed, the confirmation step is used. This step does not generate transactions, because it does not influence the company’s assets or liabilities.

The Purchase Manager opens the Purchase order form and clicks the Posting > Purchase order button. The Posting purchase order form opens. Click OK.

Posting purchase order form

In the Purchase order form, click Inquiries > Purchase order to review the posting results. The Purchase order journal form opens.

Purchase order journal form

The form contains the result of confirmation operation. We can see that the purchase journal “000167-1” is created with one line and is posted. This operation has no influence on accounts. The Purchase order journal form doesn’t have the Voucher button. A voucher is used to group all transactions generated for one operation. Since the Purchase order journal form doesn’t have the Voucher button, the confirmation operation never generates transactions.

Arrival and Registration

Arrival and registration steps are used when the Warehouse management is enabled for the item. This step is used to track items that arrived into the warehouse and the places where the items were stored in the warehouse. This process is described in more detail in the Item arrival and registration lesson from the Trade and Logistics training.

The Warehouse management consists of the item arrival and registration steps during purchase and the picking and shipping steps during sales. The  item 1003 doesn’t use the Warehouse management, because it doesn’t have the location and pallet dimensions (see the item Dimension group) and the Registration and Picking steps are not mandatory (see the item Inventory model group). Both groups are set up in the Items form.

This step is used to record that items arrived. Note that the item is not the company’s property yet. Since the item is not the company’s property, the operation does not influence the company’s assets or liabilities. Transactions are not generated.

To record that the items arrived and are registered, do the following (for the items that do not use the Warehouse management only). In the Purchase order form, click the Posting > Receipt list button. The Posting receipt list form opens. On the Lines tab, you can make sure that all items will be registered. Click OK.

Posting receipt list form

To review the posting results in the Purchase order form, click the Inquiries > Receipts list button. The Receipts list journal form opens.

Receipts list journal form

We can see that the receipt list journal is created. But the Receipts list journal form also doesn’t have the Voucher button, because this operation never generates transactions.

Packing Slip

The packing slip step is used to record that the items are delivered and become the company’s property. Since the items become the company’s property, the company assets and liabilities change, because the company’s inventory is increased. This operation generates transactions.

The inventory increases and the vendor liabilities also increase. Inventory is the company’s asset, so when the asset account is increased, the debit part is used (Debit is “good” for the company). The Vendor or Accounts payable are the company liabilities; when liabilities increase, the credit part is used (Credit is “bad” for the company). In the previous training lesson, we analyzed the same transaction when purchasing the pizza ingredients. The transaction will look as follows:

Let’s post the packing slip in Microsoft Dynamics AX and check the results. In the Purchase order form, click the Posting > Packing slip button. The Posting packing slip form opens. Enter any value in the Packing slip field, for example “Packing slip 1” and click OK.

Posting packing slip form

The “Period 2/11/2012 is not open” error message appears. It is because Microsoft Dynamics AX is trying to generate transactions but cannot find an open fiscal period for the current date. We must set up periods for the current year:

1. Go to General ledgers > Setup > Periods > Periods. The Periods form opens.
2. Click the Create fiscal year button. The Create new fiscal year form opens. Fill in 1 in the Desired length of period field and Month in the Unit field. Click OK.
   

   Create new fiscal year form

The Periods form will look as follows:

Periods form

Post the packing slip again. Don’t forget to select the “Packing slip 1” value in the Packing slip field. The packing slip is posted successfully.

Note that the purchase order status changed from Open order to Received. To review the posting results in the Purchase order form click the Inquiries > Packing slip button. The Packing slip journal form opens.

Packing slip journal form

We can see that the packing slip journal is generated. The Packing slip journal form contains the Voucher button. To view the transactions that are generated for this step click the Voucher button. The voucher contains all transactions that were generated for one posting. The Voucher transactions form opens.

Voucher transactions form (Packing slip)

The form contains two lines – one line for each account. The following accounts were used:

This transaction is similar to the one that we have assumed. Let’s find the information about these accounts.

All accounts are listed in the Chart of accounts. Go to General ledger > Common Forms > Chart of Account Details. The Chart of accounts form opens. Find the 142100 account.

Chart of accounts form

We can see that the account 142100 is called “Inventory Clearing – Received, un-invoiced”. The header account for this account is 140000 (INVENTORY). So, this account is one of the Inventory accounts that is used to store the money equivalent of items that were delivered but not invoiced.

Find the account 211250 in the Chart of accounts form. We can see that the account 211250 is called “Accounts Payable – Clearing”. The header account for this account is 211000 (ACCOUNTS PAYABLE). So, this account is one of the Accounts Payable accounts that is used to store the un-invoiced liability.

So, we make sure that Microsoft Dynamics AX generates the same transaction as we have assumed.

Invoice

The final and the main step in the purchase process is the Invoice. This step is used to record that the company agrees to pay for the delivered items. Until the invoice step is performed, the company could not pay for the delivered items. The vendor sends the Invoice document with the amount to pay. If the Company agrees to pay this amount for the delivered items, the Invoice is registered (in other words is posted) in the system.

This process changes the financial situation in the company, because the packing slip transaction should be reversed and a transaction with the inventory and accounts payable accounts must be generated.

The transactions will look as follows:

The first transaction reverses the amount on the accounts that were used in the packing slip step. After this the inventory uninvoiced total amount will be zero (Debit – Credit):

The Accounts payable – Clearing account will also have the zero amount. This means that the company doesn’t have the un-invoiced inventory and the accounts payable that are not yet approved.

Let’s post the invoice in Microsoft Dynamics AX and check the results. In the Purchase order form, click the Posting > Invoice button. The Posting Invoice form opens. Enter any value in the Invoice field, for example “Invoice 1”, and click OK.

Posting Invoice form

Note that the purchase order status changes from Received to Invoiced. To review the posting results in the Purchase order form, click the Inquiries > Invoice button. The Invoice journal form opens.

Invoice journal form

We can see that the invoice journal is generated. The Invoice journal form contains the Voucher button. To view the transactions that are generated for this step, click the Voucher button. The voucher contains all transactions that were generated for one posting. The Voucher transactions form opens.

Voucher transactions form

The form contains four lines – one line for each account. The following accounts were used:

The first transaction reverses the amount on the 142100 (Inventory clearing – received, un-invoiced) and 2110250 (Accounts Payable – Clearing) accounts.

Let’s find information about the accounts from the second transaction. Open the Chart of accounts form by navigating to General ledger > Common Forms > Chart of Accounts Details. Find the account 140820. The account is called “Television receipts”. The header account is 140000 (INVENTORY). So 140820 is one of the Inventory accounts. This account is used to store the money equivalent of the television items that the company has.

Find the account 211100 in the Chart of accounts form. The account is called “Accounts payable – US”. The header account is 211000 (ACCOUNTS PAYABLE). So, 211100 is one of the Accounts payable accounts. We make sure that Microsoft Dynamics AX generates the same transactions as we have assumed.

Let’s check what transactions are recorded to the 142100 (Inventory un-invoiced) account and the account balance.

Open the Chart of accounts form and find the 142100 account. Click the Transactions button, the Account transactions form opens.

Account transactions form

Our demo data already has a lot of transactions on this account. But, according to the date, only two transactions were generated for this account during the purchase process. Both transactions have different voucher numbers, so they were initiated from different operations. To view all transactions associated with the voucher number, click the Voucher button. The Voucher number form opens. On the General tab, in the Document field we can find the document number for which the transaction was generated. The first transaction was generated for the packing slip operation, and the second for the invoice operation.

The total amount (or the account balance) is the sum of all transaction amounts. To view the account balance, click the Balance > Balance button in the Chart of accounts form. The Balance form opens.

Balance form

We can see that the account has some balance. But, if we sum the transactions from the packing slip and the invoice operations, the sum will be zero.

Note that the account transactions could not be created for the Packing slip step, because it is an optional step. The company employees record the information to the accounts during the packing slip step if they want to track the un-invoiced items.

The Inventory model group is used to enable or disable the creation of account transactions during the packing slip step. Let’s check the inventory model group of the item 1003. Go to Inventory management > Common Forms > Item details > find 1003 item > General tab > Groups field group > Inventory model group field. The 1003 item uses the “Std Cost” inventory model group.

Item form, General tab

Let’s find out what setup this group has. Go to Inventory management > Setup > Inventory > Inventory model groups > find the “Std Cost” group > Setup tab.

Inventory model groups form

The Ledger integration field group contains the settings which will allow generating transactions during the packing slip step (the Post physical inventory check box), or even during the invoice step (the Post financial inventory check box).

We make sure that for the 1003 item, the transaction is generated during the packing slip step. But, during the invoice step this transaction is reversed and a new transaction for the correct accounts is created.

Posting Profiles

How does Microsoft Dynamics AX know what accounts should be used instead of the Inventory and Accounts Receivable accounts in different operations? For example, why does Microsoft Dynamics AX use the 211100 account as the Accounts Payable during the Invoice posting, and the 211250 account as the Accounts Payable un-invoiced during the Packing slip posting?

All information about accounts is stored in posting profiles. Microsoft Dynamics AX has a customer, vendor, and inventory posting profiles.

The vendor posting profile answers the question what account should be used for a specific vendor. Let’s find the vendor posting profile that is used in our demo data. Go to Accounts payable > Setup > Parameters. The Accounts payable parameters form opens. Go to the Ledger and sales tax tab, the Posting field group has the Posting profile field. In our case, the vendor posting profile is “GEN”.

Accounts payable parameters form

Let’s check what setup the “GEN” vendor posting profile has. We hope to find the 211100 and 211250 accounts because they are used in our transactions instead of the Accounts Payable accounts. Go to Accounts payable > Setup > Posting profiles. The Vendor posting profile form opens. Select the “GEN” posting profile and go to the Setup tab.

Vendor posting profile form

We can see that there are two kinds of setup – one for the vendor that belongs to the “90” (Intercompany vendors) vendor group and the other for all vendors. We should find out to what vendor group the 1002 vendor belongs. Go to Accounts payable > Common Forms > Vendor Details. The Vendors form opens.

Vendors form

We can see that the 1002 vendor belongs to the 10 (Video vendors) group. Since the “GEN” profile doesn’t have an individual setup for the “10” vendor group, the setup for all vendors is used.

Return to the Vendor posting profile form. On the Setup tab, we can see that for all vendors (except the intercompany vendors), the 211100 account should be used as Accounts Payable. We make sure that during the invoice posting, the 211100 account was used as Accounts Payable. We can see that the setup doesn’t have the 211250 account. This account is used in the Packing slip step as the Accounts Payable un-invoiced (in the Invoice step, it is only reversed, i.e. the account is taken from the Packing slip step). The Microsoft Dynamics AX architects decided to place the setup for the Accounts Payable un-invoiced in the inventory posting profile.

Let’s look at the inventory posting profile. We hope to find the 142100 and 140820 accounts because they are used as the Inventory un-invoiced and Inventory accounts. And, also the 211250 account because it is used as the Accounts payable un-invoiced account.

Go to Inventory management > Setup > Posting > Posting. The Inventory posting form opens, go to the Purchase order tab.

Inventory posting form

During the packing slip step, the accounts from the Packing slip and Packing slip offset setup are used. During the Invoice step, the accounts from the Receipt setup are used.

The Packing slip setup is used for the Inventory un-invoiced accounts. The Packing slip offset setup is used for the Accounts payable un-invoiced accounts. The Receipt setup is used for the Inventory accounts.

Select the Packing slip radio button. There are two setup lines – one for the “Ind Exp” (Indirect purchase expense) items, another for the rest of items. Let’s find out the item group that the 1003 item belongs to. Go to Inventory management > Common Forms > Item details. The Item form opens, find the 1003 item and go to the General tab. On the General tab, find the Item group field. The 1003 item belongs to the “Television” group.

Item form, General tab

Return to the Inventory posting form. Since there is no individual setup for the “Television” item group, the setup for all items will be used. Since the Packing slip option is used for inventory un-invoiced accounts, we make sure that for the 1003 item, the 142100 account is used as the Inventory un-invoiced account.

Select the Packing slip offset radio button. The grid contains the setup for the Accounts payable un-invoiced accounts. We can see that for the 1003 item, the 211250 account is used as the Accounts payable un-invoiced account.

Inventory posting form

Select the Receipt radio button. The setup for the Inventory accounts becomes available. Find the setup for the “Television” items. Make sure that for the 1003 item, the 140820 account is used as the Inventory account.

Besides the customer, vendor, and inventory posting profiles, Microsoft Dynamics AX has the setup for the system accounts and sales taxes:

• System accounts setup is available under General ledger > Setup > Posting > System accounts.
  

  System accounts form

• Accounts setup for sales tax posting is available under General ledger > Setup > Sales tax > Ledger posting groups.
  

  Ledger posting groups form

Accounting Equation

After we have purchased the 1003 item, the Assets and the Accounts payable increased. Let’s run the Balance sheet report and check the accounting equation: Asset = Liabilities + Owner’s Equity.

Go to General ledger > Reports > Transactions > Periodic > Financial statement. The Financial statement form opens. Select BS (Balance sheet) in the Financial statement field and click OK.

Balance sheet

Balance sheet

We can see that for the current year the total Asset is $30 750 and the total Liabilities is $30 750. So, the accounting equation is correct: $30 750 (Asset) = $30 750(Liabilities) + 0 (Owner’s equity).

We can also check whether the company is profitable, but we don’t sell any items. In this case, the company’s profit equals zero. To check whether the company is profitable, we will run the Income statement report. Profit is the difference between the Income and the Expenses.

Go to General ledger > Reports > Transactions > Periodic > Financial statement. The Financial statement form opens. Select IS (Income statement) in the Financial statement field and click OK.

Income statement

Income statement

We can see that the income and the expenses for the current period equal zero.

General Journal

Remember in the previous training lesson we have studied the Accounting cycle. The accounting cycle shows the steps of the accountant work. With the help of the purchase order and the posting profiles, some steps are performed automatically to simplify the accountant’s work.

But, all processes that influence the financial situation of the company can be recorded with the help of the General journal. The General journal is the most basic of journals. Since Microsoft Dynamics AX has the Purchase order, Sales order, Production order, and other forms, the general journal is almost not used. But, not all operations are handled with the help of special forms, among these are bad debts, sale of an asset, etc. To record these operations, the general journal is used.

Let’s record the purchase operation with the help of the general journal and go through the accounting cycle steps (open the accounting cycle paragraph from the first lesson to recall).

1. Some operation occurs. In our case the first step is when the Purchase Manager initiates purchasing the items and signs the Invoice document for $30 750.
2. Then the Purchase Manager brings the Invoice document to the accounting department.
3. The accounting personnel analyze the business papers. It is necessary to determine the following:
   • “What happened?” Answer – The company buys items.
   • “What accounts will change?” Answer – Inventory (Asset ) and Accounts payable (Liabilities). The accountant decides to use the 140820 account as the television receipts and the 211100 account as the accounts payable.
   • “How will they change?” – Answer – Inventory increases and the Accounts payable increase as well.
   • “Do they get a Debit or Credit?” – Answer – If the assets increase, the debit part is used, if the liabilities increase, the credit part is used. Debit is “good” for the company, Credit is “bad” for the company.
4. The Accountant writes the following transactions to the general journal:
   

   140820 (Inventory)		211100 (Accounts payable)
   Debit	Credit	Debit	Credit
   $30 750			$30 750

To create a new journal, take the following steps:

1. Go to General ledger > Journals > General journal. The Journal form opens. Create a new journal by clicking Ctrl +N.
2. Select “GenJrn” in the Name field.
   

   Journal form

3. Click the Lines button. The Journal voucher form opens.
4. Create a new line. Select the 140820 (Television receipts) account in the Accountfield. The “Ledger account 140820 is locked” message appears. Each account has the setup that enables or disables posting with the help of a general journal. Enable journal posting for both accounts:
   • Go to General ledger > Common Forms > Chart of Account Details > Find the 140820 account > Clear the Locked in journal check box. Perform the same steps for the 211100 account.
5. Return to the Journal voucher form. Select 140820 in the Account field.
6. Fill in $30 750 in the Debit field. Save the line.
7. Crete a new line. Select 211100 in the Account field.
8. Fill in $30 750 in the Creditfield. Save the line.
   

   Journal voucher form

9. Note that for each operation the Debit part should be equal to the Credit part.
10. Click the Validate > Validate button. The “Journal is Ok” message appears.
11. It is also possible to record the same transactions in one line with the help of the offset account. The amount will be recorded to the offset account in the differ part. For example, if the amount is recorded to the credit part for the account, then for the offset account, the amount will be recorded to the debit part. In other words, we can write the same transactions in the following way:
    

    Journal voucher form

    The journal is also valid.

12. Posting a journal is the act of transferring the journal information (i.e. the amount) to the appropriate accounts. To do this, click the Post > Post button. The “Number of vouchers posted to the journal: 1” message appears. It means that the journal is posted successfully.
13. The accountant checks the posting results with the help of the Trial balance. A Trial balance is process of checking the accounting equation: Assets = Liabilities + Owner’s Equity. For this purpose, the list of accounts and their balances is required. We can check all balances in the Chart of accounts form. Or, we can run the Balance sheet statement. In the previous paragraph, we have already checked the Trial balance with the help of the Balance sheet.

All the other steps are performed at the end of the period or the fiscal year and will be discussed later in this training.

General Ledger

You may ask why the General ledger name is given to the module in Microsoft Dynamics AX. The General ledger consists of the chart of accounts and account transactions. Let’s understand what the difference between the Chart of accounts, General journal, and General ledger is. How did the Accountant record operations in the past when there were no computers? According to the accounting cycle, the Accountant receives a document and then analyzes what account should be used for this operation from the Chart of accounts. Then, he records the transactions in the General journal. Then, the Accountant “posts” the transactions by adding the amounts to the debit or credit parts of the account in the General ledger. So, the Accountant uses four documents: an operation document, the Chart of Accounts, the General journal, and the General ledger. The chart of accounts is a list of accounts, the General journal is used to record transactions, the General ledger contains the results of posting.

The balance sheet and the income statement are built on basis of the general ledger. The general ledger is built up by posting transactions recorded in the general journal, purchase order, sales order, production order, etc. The general ledger should include the date, description, and the balance or the total amount for each account. It is usually divided into at least seven main categories. These categories generally include the assets, liabilities, owner’s equity, revenue, expenses, gains, and losses. The general ledger should always be in balance, thus maintaining the accounting equation: Assets = Liabilities + Owner’s Equity.

In Microsoft Dynamics AX, the General ledger is the Chart of accounts plus the Account transaction forms or, in other words, or the place where all information about the accounts and their transactions is stored.

Note that the account transactions are often called general ledger transactions, and the accounts are usually called general ledger accounts.

Sub Ledgers

We have purchased 50 items in whole. The fist purchase of 25 items was recorded with the help of the purchase order, the second purchase was recorded with the help of the general journal. What have we missed when recording the purchase with the help of the general journal? We haven’t entered the information about the vendor and the item.

If we look at the account and its transactions, we can’t answer the question what item and from whom was purchased. For example, we can only find that the account 211100 has $30 750 in the credit part, which means that the company owes $30 750 to some vendor. The ledger transactions don’t have the information about the vendor, so it is impossible to find out from who the items were purchased.

To record the information about the vendor, the special vendor ledger is used. Instead of accounts, this ledger contains the vendor accounts. The vendor ledger contains a separate account for each vendor and tracks vendor balances separately. When the company purchases items from the vendor, a vendor transaction is created. This transaction contains the vendor information and the amount to be paid. The vendor accounts can then be summed and compared with their controlling account to ensure the accuracy as part of the process of preparing a trial balance. In our case, all vendor accounts, except Intercompany vendors (see the vendor posting profile), have the 211100 controlling account.

The “chart of accounts” for the Vendor ledger is a list of vendors. Let’s find the 1002 vendor and check the transactions for it. The Vendor form is located under Accounts payable > Common Forms > Vendor details. Find the 1002 vendor and click the Transactions button. The Vendor transactions form opens.

Vendor transactions form

We can see that the vendor has only one vendor transaction. This transaction was generated when we purchases items with the help of the Purchase order form. The “Invoice 1” document number was used when we posted the Invoice with the help of the Purchase order form. To verify this, click the Original document > Show button > the Purchase order field.

When we click the Voucher button in the Vendor transactions form, we can see the general ledger transactions.

Voucher transactions form

When we click the Origin button in the Voucher transactions form, we can see all transactions for all ledgers that were generated during the invoice posting. Among them, we can find the general ledger, vendor, and item transactions. Note that all transactions are grouped in one voucher with the INV-100135 number.

Transaction origin form

By analogy with the Vendor ledger, the Inventory ledger is used to record the item transactions. This information is used to find out what items were purchased. The Inventory ledger contains a separate account for each item. When the company purchases items, an item transaction is created. This transaction contains the item name and the item cost. The item accounts can then be summed and compared with their controlling account to ensure the accuracy as part of the process of preparing a trial balance. The controlling account is set up in the Inventory posting form located under Inventory management > Setup > Posting > Posting. In our case, the 1003 item has the 140820 controlling account.

The “chart of accounts” for the Item ledger is a list of items located under Inventory management > Common Forms > Item details. Find the 1003 (Plasma Television Model 01) item and click the Transactions button.

Transactions on item form

We can see that only one purchase transaction for 25 items exists. If we click the Ledger > Financial voucher button, the Voucher transactions form opens. We can see all ledger transactions that were generated.

Voucher transactions form

Note that these are the same general ledger transactions that we have seen when opening the Voucher transactions form from the Vendor transactions form.

If we click the Origin button, the Transaction origin form opens.

Transaction origin form

This form contains the information about all transactions for all ledgers that were generated. Note that they have the same INV-100135 voucher number, so these are the same transactions, but opened from a different location.

Note that the Transaction origin form shows the transactions for all ledgers (general ledger, vendor ledger, inventory ledger). All ledgers, except general ledger, are called Sub-ledgers or subsidiary ledgers.

Remember we have studied that all company operations can be recorded with the help of the general journal. This is not totally true. In the previous paragraph, we have posted a purchase operation without two the transactions – vendor and item transactions. Let’s create a new general journal and try to post the following transaction:

1. Go to General ledger > Journals > General journal. The Journal form opens.
2. Crete a new line. Select “GenJrn” in the Name field.
3. Click the Lines button. The Journal voucher form opens.
4. In the Account type field, select “Inventory”. But, there is no Inventory type.
5. Fill in $30 750 in the Debit field.
6. In the Offset account type field, select “Vendor”. In the Account field, select 1002.

Journal voucher form

If we check the voucher (click the Validate > Validate button), the “Account number must be specified” message appears. So, it is impossible to record the Inventory transactions with the help of the general journal. What about the Vendor transaction? If we select Vendor in the Account type field and 1002 in the Account field, move the amount from the Debit to Credit field, remove the offset account and validate the journal. The “The transactions on voucher GEN00000008 do not balance” message appears. The voucher should be balanced, i.e. Debit part = Credit part. Since we can’t select the inventory account, we can’t post the vendor transaction.

I try to add the insufficient vendor and inventory transactions with the help of other journals – Invoice and Movement journals.

The Invoice journal is located under Accounts payable > Journals > Invoices > Invoice journal. This is the same general ledger journal, so it is impossible to select the Inventory account type.

The Movement journal is located under Inventory management > Journals > Item transaction > Movement. In this journal, we can select the item but can’t select the vendor account type (only the ledger account type).

So, to post all purchase transactions correctly to all ledgers in Microsoft Dynamics AX, the Purchase order form is used. With the help of the general ledger, you couldn’t post the item transaction.

Now, the following situation happens in the company. All Vendors balance (except the intercompany vendors) is $30 750, but the 211100 control account (Accounts payable) balance for the current year is $61 500. And, we can’t enter the vendor transaction to correct this situation. To prevent this situation, the Locked in journal check box is used for all controlling accounts (in the Chart of accounts form). Because of this, the 211100 and 140820 accounts were blocked to be used in the journal.

The purchase operation is posted with the help of the Purchase order form, the sales operation – with the Sales order form, the production operation – with the Production orders form. With the help of the General journal, we can post all operations that do not include the Item transactions: payments, bad debts, sale of an asset.

Invoice Journal

Imagine the following situation – the vendor sends us an Invoice for some service. We should record this information to the general and vendor ledgers. But, we don’t have the item number for this service. In this case, we can’t use the Purchase order form. You can answer that we can use the general journal, because this operation does not generate an inventory transaction. And, you will be right. The general journal can be used to post the Invoice from the vendor if an item transaction is not required. But, for convenience in Microsoft Dynamics AX, the Invoice journal is available. The Invoice journal is used for posting vendor invoices when the purchased items or services are not recorded to the Inventory ledger.

We assume that the vendor sends us an Invoice for $20 for some service. The Accountant analyzes the received Invoice and enters the following transaction for this operation:

Accounts payable is the Liabilities account, the amount on this account increases, so the Credit part is used (Credit is “bad” for the company). The Expense is also the Liabilities and the amount is also increased but the Debit part is used. It is because the increase of the Expense is “good” for the company. In this case, the net income decreases, as we know that the net income is the company’s liability and should be returned to the Owners.

We should record this information in the Invoice journal, post the Invoice, and analyze the results.

1. Open the Journal form by clicking Accounts payable > Journals > Invoices > Invoice journal. The Journal form opens.
2. Create a new line. Select “APInv” in the Name field.
3. Click the Lines button. The Journal voucher form opens.
4. In the Account field, select the 1002 vendor and fill in $20 in the Credit field.
5. Fill in the Invoice number that is printed on the document. For example, fill in the “Invoice journal 1” in the Invoice field.
6. The Accountant decides to use the 803200 (Extraordinary expense) account for the Sales Expense. Fill in 803200 in the Offset account field.

Journal voucher form

Pay attention to the following information:

• We have used different account types in one transaction (the Account type and Offset account type fields).
• The Terms of payment field defines the terms of payment, i.e. when the company should pay to the vendor. In our case, the term of payment is N030 (during 30 days). Microsoft Dynamics AX automatically defines the Due date.
• The Cash discount field defines the cash discount. In our case, the cash discount is 2%D10 (2% discount for 10 days). If the company pays during the first 10 days, it receives the 2% discount. In the next training lesson, we will pay this Invoice and check whether the cash discount is applied.

Since the transaction is balanced, i.e. Debit part = Credit part, we can validate and post the journal. Note that this transaction can be written in the following way.

1. In the Journal voucher form, click the Validate > Validate button. The “Journal is Ok” message appears.
2. Click the Post > Post button. The “Number of vouchers posted to the journal: 1” message appears. It means that the journal is posted.

Let’s check the general ledger transaction that was generated. In the Journal voucher form, click the Inquiries > Voucher button. The Voucher transactions form opens.

Voucher transactions form

We make sure that the 211100 account (Accounts Payable) was credited for $20 and the 803200 account (Services Expense) was debited. We can check the accounting equation with the help of the Balance sheet report (General ledger > Reports > Transactions > Periodic > Financial statement).

Let’s check whether the vendor transaction was generated. In the Voucher transaction form, click the Origin button to view all transactions for all ledgers. The Transaction origin form opens.

Transaction origin form

We can see that the Vendor transaction is created. Go to the Vendors form (Accounts payable > Common Forms > Vendor Details), find the 1002 vendor and click the Transactions button to make sure that the transaction exists.

Vendor transactions form

Usually the company doesn’t trust the employees who work in the purchase department, because the purchase agents can increase the price of the purchased items. For this purpose, the Invoice register and the Invoice approval journals are available. The Invoice register journal is used by all purchase managers. The Invoice approval journal is used by the senior purchase manager.

Let’s create and post one more Invoice for $20 for some vendor service:

1. Go to Accounts Payable > Journals > Invoices > Invoice register. The Journal form opens.
2. Create a new line. Select “APInvReg” in the Name field.
3. Click the Lines button. The Journal voucher form opens.
4. It is similar to the previous form. In the Account field, select the 1002 vendor.
5. Fill in the invoice number. For example “Invoice reg & appr 1”.
6. Fill in 20 in the Credit field.
7. There is no offset account. Click the Validate > Validate button. The “Employee to approve the line is not specified” message appears. Fill in the Approved byfield.
   

   Journal voucher form

8. Click the Validate > Validate button again. The journal is valid now.
9. Click the Post > Post button. The “Voucher is posted and transferred to the pool” message appears.

Check what general ledger transaction was created. In the Journal voucher form, click the Inquiries > Voucher button. The Voucher transactions form opens.

Voucher transactions form

The following accounts were used: 211320 was Debited and 211310 was Credited. 211310 is the “Invoice pending approval” account. This account belongs to Accounts payable. 211320 is the “Offset Invoice pending approval” account. This account belongs to the Accounts payable accounts. This is the trick when two accounts from one category are used. It helps post the intermediate values. From the accounting equation point of view nothing is changed, because the transaction has the following view:

Let’s check the other transactions from the other ledgers. In the Voucher transactions form, click the Origin button. The Transaction origin form opens.

Transaction origin form

We can see that the Vendor transaction was created.

The Senior Purchase Manager works with the Invoice approval journal:

1. Go to Accounts Payable > Journals > Invoices > Invoice approval journal. The Journal form opens.
2. Create a new line. Select “APInvApp” in the Name field.
3. Click the Lines button. The Journal voucher form opens.
4. Click the Fetch vouchers button. The Fetch vouchersform opens. The form contains the voucher that was posted in the Invoice registration journal.
   

   Fetch vouchers form

5. Click the Select button and then click OK.
6. The Journal voucher form will look as follows:
   

   Journal voucher form

   The 211320 and 211310 accounts were used in the invoice registration posting, we can see that these accounts will be reversed. So, after the posting, the total amount (Credit – Debit) will equal zero. The 211100 (Accounts payable) account will be credited for $20. The Senior Purchase Manager checks the amounts and specifies the offset account. We have specified 803200 (Extraordinary expense) as the offset account. Fill in 803200 in the Account field.

7. Click the Validate > Validate button. The “Journal is OK” message appears.
8. Click the Post > Post button. The journal will be posted.
9. Click the Inquiries > Voucher button to check the general ledger transaction that was generated.
   

   Voucher transactions form

   We can see that the same voucher number is used for the invoice registration journal and the invoice approval journal, because the general ledger transactions from both journals are available.

10. Click the Originbutton to see all transactions for all ledgers.
    

    Transaction origin form

As a result, one vendor transaction was generated, i.e. the vendor balance was changed. Balances of the 211100 and 803200 accounts are changed. Balances of the 211320 and 211310 accounts remain unchanged. The same result was when the Invoice was posted in one step with the help of the Invoice journal.

Only one question is left. Why were the 211310 (as Invoice pending approval), 211310 (as Invoice pending approval offset), and 211100 (as Accounts payable) accounts used?

All these accounts are set up in the vendor posting profile under Accounts payable > Setup > Posting profiles. We already define that “GEN” is used as a default. Go to the Setup tab:

Vendor posting profiles

For all vendors (except “90” – the intercompany vendors), the 211100 account is used as Accounts payable (or the summary), the 211310 account – as Invoice pending approval, and 211320 – as Offset Invoice pending approval.

In the next training lesson, we will pay for the delivered items and services, i.e. we will study the payment process.

Technorati Tags: Arrival and Registration, Creating a Purchase Order, General journal, General ledger, Invoicer journal, Posting profiles, Purchase, Purchase confirmation, Purchase invoice, Purchase packing slip, Sub ledger

Let’s assume that Taras goes into the pizza business – namely, cooking and selling pizza. The name of the new company is The Tastiest. Taras will start his business by putting some of his personal savings into it. In effect, he is buying shares of The Tastiest’s common stock. This is the first initial transaction – the company receives cash but at the same time the company has a debt. Try to illustrate this transaction.

First Transaction

Imagine a circle which represents the whole company, its left side is the Assets and its right side is the Liabilities. Assets are the things that the company owns and are sometimes referred to as the resources of the company. Liabilities are obligations of the company; they are amounts owed to others. What the company owes the outsiders call Liabilities and what it owes the owner calls Owner’s Equity. So, the right side is Liabilities and Owner’s Equity (the type of Liabilities).

At the beginning the circle looks like a dot, because the company doesn’t have any Assets and Liabilities. When Taras invests some of his personal money, the following occurs: the company gets cash (which is the Assets), but the company owes the money to Taras. Let’s assume that Taras invests 10 000$ into his business. The circle will look as follows:

Company balances after investment

The circle demonstrates the basic accounting equation: Assets = Liabilities + Owner’s Equity. The accounting equation should always be in balance. It guarantees that the money cannot appear from anywhere. In our case the company cash (Assets) was given by the owner (Liabilities).

The field of accounting—both the older manual systems and the today’s basic accounting software—is based on the 500-year-old accounting procedure known as double entry. Double entry is a simple yet powerful concept: each and every one of a company’s transactions will result in an amount recorded into at least two of the accounts in the accounting system. In our case, the first transaction records the amount to the “Cash” and “Owes the owner” accounts.

Owe the owner => $10 000 => Cash

The transaction could be recorded in the following manner:

Cash                      Owe the owner

10 000 $               10 000 $

The dual form of transaction is caused by natural law. Nothing is lost in the universe, it is only changed. You can transfer an apple from one hand to another and you can also observe it separately: for the 1^st hand –minus one apple, for the 2^nd hand – plus one apple.

The accounting equation is in balance: $10 000 (Cash) = $0 (Liabilities) + $10 000(Owner’s Equity).

Purchase Vehicle for Cash

The Company decides to purchase a used delivery car which costs 1200 $ by writing a check for $ 1 200. In this case, the new account which is called Vehicles (or Delivery equipment) is required. Vehicles is an Asset account.

The list of all company accounts is named the Chart of Accounts. The chart of accounts is a listing of the account names that a company has identified and made available for recording financial transactions. A company has the flexibility to tailor its chart of accounts to best suit its needs, including adding accounts as needed.

This transaction records the amount to the Cash and Vehicles accounts.

Cash => $ 1 200 => Vehicles

The transaction could be recorded in the following manner:

Cash                      Vehicles

$1 200                   $1 200

According to the Double entry procedure, one amount is used for the two accounts. Because the amount cannot be taken from anywhere. In our case it is $1 200.

But in this case, the accounting equation is not in balance: $10 000 (Cash) + $1 200 (Cash) + $1 200 (Vehicles) ≠ $0 (Liabilities) + $ 10 000 (Owner’s Equity).

It is logical that Cash is decreased, but according to the double entry procedure, it is impossible to create the following transactions:

Cash                      Vehicles

-$1 200                 $1 200

How was this problem solved by the middle ages accountants? They decided to divide all accounts into two parts. In one part, they recorded all amounts that increased the account amount, in the other part, they recorded all amounts that decreased the account amount. They called these parts as Debit and Credit. For example, if the Cash increases, the amount is recorded into the Debit part, if the Cash decreases, the amount is recorded into the Credit part. The total Cash amount is calculated in the following manner Debit – Credit.

In our case, the accounts will have the following view after the two transactions:

Note that if the amount is debited in one account, the same amount should be credited in another account, because the money cannot be taken from anywhere. So one account is Debited and the other account is Credited, and vice versa. It is impossible that in one transaction both accounts are Credited (or Debited). When we sum all Debit amounts from all accounts and sum all Credit amount, they will be the same, i.e. Debit = Credit.

Let’s check the accounting equation. In the accounting equation, the total account amount is used without debit or credit parts.

Total “Cash” amount is $10 000 (Debit) – $1 200 (Credit) = $8 800.

Total “Owe the owner” amount is $0 (Debit) – $ 10 000 (Credit) = – $10 000.

Total Vehicles amount is $1 200 (Debit) – $0 (Credit) = $1 200

$8 800 (Cash) + $1 200 (Vehicles) ≠ $0 (Liabilities) – $ 10 000 (Owner’s Equity).

Something is wrong again, the amount is correct but the sign is different. We have made one mistake, because we assumed that the Debit part contained the amount that increased the total account amount, the following formula was used Debit – Credit. But, for the Liabilities and Owner’s Equity accounts it is not true. Look at the first transaction, both accounts are increased! The “Owe the owner” account was increased by $10 000 with the help of Credit part. So, the total “Owe the owner” amount should be calculated in the following manner: $10 000 (Credit) – $0 (Debit) = $10 000. Remember the total account amount for Liabilities and Owner’s Equity accounts is calculated in the following manner: Credit – Debit.

Remember that any Debited account is “good” for a company, and any Credited account is “bad” for a company. For example, when the Cash account is debited it is good because the company’s cash is increased. When the Cash account is credited it is bad because the company’s cash is decreased. When the “Owes the owner” account is credited, it is bad because the company’s debt to the owner is increased. Note that in both cases the amount is entered in the Credit part, the cash is decreased, but the debt is increased and in both cases it is bad for the company.

Look at our circle after the second transaction. The circle has almost not changed. The money was moved from one asset account to another. Note that all accounts contain the total amount. For the asset accounts the total amount is Debit – Credit, for the Liabilities and Owner’s Equity accounts, it is Credit – Debit.

Company balances after purchase

Purchasing Pizza Ingredients

To prepare pizzas, the Company decides to purchase, for example, the following ingredients:

• 50 kg of cheese for $500
• 300 bases for pizza for $10
• 25 kg of salami for $300
• 5 kg of olives for $40

Taras contacts the supermarket administrator and agrees to pay for these ingredients within 30 days. When he brings all the ingredients to the company store, he decides to record a purchase transaction. First of all he creates the Cheese, Pizza bases, Salami, and Olives accounts to record the amounts spent for these ingredients and the Super Market account to record the liabilities for the Super Market vendor.

The purchase operation has the following transactions:

The Super Market total amount is increased. Since Super Market belongs to the Liabilities accounts, the amount is recorded in the Credit part (Account amount = Credit – Debit). The other explanation – since the liabilities are increased, it is bad for the company, so the amount is recorded to the Credit part. The Cheese and other ingredients accounts are also increased. Since they belong to the Assets accounts, the amount is recorded to the Debit part (Account amount = Debit – Credit). The other explanation – since the assets are increased, it is good for the company, so the amount is recorded to the Debit part.

The circle is increased and will look as follows:

Company balances after second purchase

Note that all accounts in the circle contain the total amount, for the assets it is Debit – Credit, for the liabilities and owner’s equity, it is Credit – Debit.

The circle is increased because someone has lent the money to our company. In this case, it is the Super Market. In the first transaction, the circle is increased, because Taras lends (invests) money to the company. Note that for the company doesn’t care who lends the money the Vendor or the Owner, this money is company liabilities.

Let’s check the accounting equation:

$8 800 (Cash) + $1 200 (Vehicles) + $500 (Cheese) + $10 (Pizza base) + $300 (Salami) + $40(Olives) = $850 (Liabilities) + $ 10 000 (Owner’s Equity).

When Taras pays for the ingredients, the circle will be decreased. The transaction will have the following view:

The company’s Cash is decreased, since the Cash amount is Debit – Credit, the Credit part should be increased. The other explanation – the company’s Cash is decreased, it is bad for the company, so the Credit part is used, the debt to the Super market is decreased, it is good for the company, so the Debit part is used.

The circle is decreased and will have the following view:

Company balances after payment

The circle shows the current snapshots of the accounts totals. The transaction information must be stored separately for each account, if we look, for example, at the Cash account, we can get the following information:

In this case, we can understand why our company has only $7 950 cash. You can note that it is not clear why the Cash was increased by $10 000 or decreased by $850 and you will be right. To understand what happened, we should look at all accounts that were involved in one transaction. For this purposes, a voucher is used. A voucher is an identification which is assigned to all amounts recorded in scope of one transaction. For example, the last transaction uses the “Voucher_4” identification. The transaction will look as follows:

When we look at the Cash account, we can get the following information:

So now, to answer the question why our cash account was decreased by $850, we should search through all the accounts and find where the Voucher_4 identification is available. In our case, it is the Super Market account. On the basis of the voucher identification, we restore the following transaction: Cash => $850 => Super Market. So, the cash account is decreased because the company paid to the Super Market vendor.

Selling Pizza

Let’s look how the company sells. Taras receives the first order for 1 pizza which costs $15. Let us assume that Taras has already purchased an electric oven for $1000. The updated circle will look as follows (the transaction is similar to the vehicle purchase):

Company balances after purchase

For one pizza, Taras uses 1 pizza base for $0.03 ($10*1/300), 0.3 kg of cheese for $3 ($500*0.3/50), 0.2 kg of salami for $2.4 ($300*0.2/25), and 0.15 kg of olives for $1.2 ($40*0.15/5). He notes that for making one pizza, the electric oven uses electric energy for $0.2. He has decided not to take into account the electric energy and personal labor. Taras also pays $1 for the express services. Let’s calculate the total cost of goods sold:  $0.03 + $3 + $2.4 + $1.2 = $6.63

The sales operation will have the following transactions:

Let’s analyze the Debit and Credit parts of accounts. Note that the new accounts were used. They are Customer, Sales, Cost of goods sold, and Delivery Expense.

In the first transaction, we use the Customer and Sales accounts. The Customer account is the company’s Asset, because this account contains the amount that the Customer must pay to the Company. Since this Asset is increased by $15 the Debit part is used. We already know that in one transaction, the Debit part should be equal to the Credit part. So, for the Sales account, the Credit part is used. At first sight, the Sales is the Asset account, because it contains the amount of money that the company earns. But, it is not the Asset. Because the company should give all profit to the owners. The Sales account contains the amount that must be returned to the company owners, in other words, Sales is similar to Liabilities.

In the second transaction, we use the Cost of goods sold account. The Cheese, Pizza basis, Salami, and Olives account are the Assets accounts. For the Assets account, the account amount is Debit – Credit. Since the account amount is decreased, the Credit part is used. In other words, the quantity of ingredients decreased in the stock – it is bad for the company, the Credit part is used. Since in one transaction, Debit = Credit, the Debit part is used for the Cost of goods sold account. Cost of goods sold is similar to the company Assets account.

The Sales and Cost of goods sold accounts answer the question whether the Company makes profit. If Sales plus Cost of goods sold are more than zero, the company is profitable. These accounts are named the Profit & Loss accounts. All Profit & Loss accounts are located on the right side of the circle. Because the Company makes profit, then this profit should be returned to the owner. In other words, the company’s profit is the liabilities.

Since the Profit&Loss accounts belong to the Liabilities, the total Profit & Loss amount is Credit – Debit (of all Profit&Loss accounts). Note that the Sales total amount is positive and the Cost of goods sold total amount is negative.

The circle will look as follows:

Company balances after sales

Note that the circle contains the total account amount, for the Assets, it is Debit – Credit, for the Liabilities and Owner’s Equity, it is Credit – Debit. For example, for the Sales account, it is $15(Credit) – $0 (Debit) = $15, for the Cost of goods sold account, it is $0 (Credit) – $6.63 (Debit) = -$6.63.

You may note that Delivery Expense is also the Profit&Loss account.

Let’s check the accounting equation: $6 949 (Cash) + $1 200 (Vehicle) + $1 000 (Electric oven) + $497 (Cheese) + $9.97 (Pizza Basis) + $297.6 (Salami) + $38.8 (Olives) + $15 (Customer) = $0 (Liabilities) + $10 000 (Owes the owner) + $15 (Sales) – $6.63 (Cost of goods sold) – $1 (Delivery expense).

10 007.37 = 10 007.37

The company’s profit equals the total Profit&Loss amount. Taras’s Company earns $7.37. Note that the company’s circle increased by $7.37. The total Assets amount is 10 007.37, the total Liabilities amount is 10 007.37. If the circle increased, then the company’s Assets and the company’s Liabilities are increased. In other words, the company’s cost or value increases. But, remember that the Liabilities divided to Owner’s Equity and other Liabilities. It is very good if the Owner’s Equity increases and it is not very good if other Liabilities increase. In the first case, the company owes the money to the owner, in the second case, the company owes the money to other(s).

In this example, the Customer hasn’t paid for the pizza yet. When the Customer pays for the pizza, the following transaction should be recorded:

The debit part for the Cash account is used, because the company’s cash is increased (it is “good” for the company). The credit part for the Customer account is used, because the Customer has decreased his debt to the company (it is “bad” for the company, because the Customer’s debt is decreased).

If we look at the Customer account, we can see the following:

We can see that the Customer amount is zero ($15 (Debit) – $15 (Credit)). In other words, the Customer pays for the items, and has no debt to our company.

In real life, we receive the money for the pizza the same time when we deliver it. In this case, the payment transaction is included in the sales operation. But, when the company sells items to other companies, the payment occurs during the payment period. It can be 2 weeks, 1 month, or even 3 months after the items are delivered, in other words, during any time period.

Remember that the revenues are recognized as soon as a product has been sold, regardless of when the money is actually received. It is the accrual basis of accounting the type of revenue recognition principle. Note that in our example, we calculate the revenue before the payment operation. It doesn’t matter when the payment occurs, because we assume that the money already belongs to us.

Chart of Accounts

You can ask how many accounts there can exist. Each company has its own set of accounts. An account contains information about the amount of money that is used. One company sells books and has the Books account, another company sells cars and has individual accounts for each car brand (Fiat, ZAZ, Daewoo, Mercedes, etc). For convenience, the smart accountants who lived several centuries ago classified all accounts by groups.

The main groups of accounts are:

1. Assets:
   • Current asset: Cash, Accounts receivable, Inventory
   • Property, Plant, and Equipment: Land, Buildings, Equipment, Vehicles
2. Liabilities:
   • Current liabilities: Accounts payable
3. Owner’s equity
4. Profit & Loss: Operating revenues (Sales), Cost of goods sold, Expenses

The accounts used in this training belong to the following groups:

Account groups

A chart of accounts is a listing of the account names that a company has identified. In Microsoft Dynamics AX, the chart of accounts can be opened under General ledger > Common Forms > Chart of Account Details.

Chart of accounts

I use the demo data which contains a good example of the chart of accounts.

There are the following accounts:

1. Assets are all accounts from 100500 till 199990
   • Cash and cash equivalents are from 110100 till 119000
   • Accounts receivable are from 130000 till 130900
   • Inventory accounts are from 140000 till 150990
2. Liabilities are all accounts from 200000 till 250990
   • Accounts payable are from 211000 till 212990
3. Owner’s Equity are all accounts from 300000 till 309900
4. Profit and Loss are all accounts from 400000 till 899990
   • Sales accounts are from 401000 till 401990
   • Cost of goods sold accounts are from 500000 till 519900
   • Expense accounts are from 600000 till 699900

Note that the header and total accounts are available in the Chart of accounts form. The Header accounts arejust a label and is used in reports and inquiries. The total account contains the sum of all accounts that are assigned to it. The header and total accounts are not used in a transaction and do not influence the accounting equation. They are used for convenience. For example the 119000 (TOTAL CASH & CASH EQUIVALENTS) account shows the total amount for the accounts from 110100 till 119000 (select the total account and click Setup > Totals button to verify this) – it is not necessary to manually sum all accounts to know how much cash the company has.

We will use some of these accounts when analyzing the purchase and sales transactions in Microsoft Dynamics AX.

Financial Statements – Balance Sheet, Income Statement, and Cash Flow Statement

When we purchase or sell, we use the circle to analyze the current financial situation in the company. The circle answers the questions how many assets or liabilities there are in the company for the current moment. In other word, the circle is a snapshot of the company’s financials. In accounting, instead of the circle the Balance sheet is used.

The accounting balance sheet is one of the major financial statements used by accountants and business owners. The balance sheet presents a company’s financial position at the end of a specified date. Because the balance sheet informs the reader of a company’s financial position as of one moment in time, it allows someone—like a creditor—to see what a company owns as well as what it owes to other parties as of the date indicated in the heading. This is valuable information to the banker who wants to determine whether or not a company qualifies for additional credit or loans. Others who would be interested in the balance sheet include current investors, potential investors, company management, suppliers, some customers, competitors, government agencies, and labor unions. Example of a Balance Sheet.

We already know how to answer the questions whether our company is profitable or not. To know this, it is required to sum the amounts of all profit and loss accounts. In our example, we have the Sales, Cost of goods sold, and Delivery expense profit and loss accounts. Accountants use the Income statement to see whether a company is profitable. The income statement is sometimes referred to as the profit and loss statement (P&L).

The income statement is important because it shows the profitability of a company during the time interval specified in its heading. The period of time that the statement covers is chosen by the business and will vary (for the month, quarter, year). Keep in mind that the income statement shows revenues, expenses, gains, and losses; it does not show cash receipts (money you receive) nor cash disbursements (money you pay out).

People pay attention to the profitability of a company for many reasons. For example, if a company was not able to operate profitably—the bottom line of the income statement indicates a net loss—a banker/lender/creditor may be hesitant to extend additional credit to the company. On the other hand, a company that has operated profitably—the bottom line of the income statement indicates a net income—demonstrated its ability to use borrowed and invested funds in a successful manner. A company’s ability to operate profitably is important to current lenders and investors, potential lenders and investors, company management, competitors, government agencies, labor unions, and others.

Profit and loss contains the following elements: Revenues and Gains, and Expenses and Losses. Example of Income statement.

Note that we prompt about the revenue when a product has been sold, regardless of when the money is actually received. But the Customer could not pay for our pizza for some reason. Similarly, the expenses reported on the income statement might not have been paid. You could review the balance sheet changes to determine the facts, but the Cash flow statement has already integrated all that information. As a result, savvy business people and investors utilize this important financial statement. We don’t analyze this statement.

The Balance sheet, Income statement, and Cash flow statement are the major financial statements used by accountants and business owners.

To know more about a Financial statement, I recommend you these articles: Balance sheet, Income statement, Cash flow statement.

In Microsoft Dynamics AX, all statements are set up manually. The user defines the rows, columns, ranges etc. Our demo data already contains the setup for Balance sheet, Income statement, and Cash flow statement.

To view the statement, do the following:

1. Click General ledger > Reports > Transactions > Periodic > Financial statement. The Financial statementform opens.
   

   Financial statement form

2. In the Financial statement field, select the BS (Balance sheet) option. Click OK.
3. In my company where some transactions are already available, the Balance sheet looks as follows:
   

   Balance sheet

In this example, the ASSETS, CURRENT ASSETS, CASH AND CASH EQUIVALENTS are the header accounts. The “Bank account – USD” is an account. The CASH AND CASH EQUIVALENTS is the Total account.

The total Asset amount is $19 (note that the report contains 2 pages, to view the next page click the Page Down button). Check the accounting equation: Assets = Liabilities + Shareholder’s equity.

Note that for a sole proprietorship company, the difference between the Assets and Liabilities is called Owner’s Equity, for a corporation – Shareholder’s equity.

On the second page, the total amount for Liabilities and Shareholder’s equity is -$19. According to the accounting equation, the Liabilities and Shareholder’s equity should be $19. In Microsoft Dynamics AX, the Balance sheet shows the total amount that is calculated as Debit – Credit for the Asset and Liabilities accounts! The accounting equation for the Balance sheet in Microsoft Dynamics AX looks as follows: Asset + Liabilities + Shareholder’s equity = 0.

Note that in Microsoft Dynamics AX, the amount that is placed in the Credit part is shown as negative amount, the amount in the Debit part is shown as positive amount for all accounts (Assets and Liabilities).

To view the Income statement, open the Financial statement form again, select IS (Income statement) in the Financial statement field, and click OK. The report looks as follows:

Income statement

In this example the OPERATING INCOME and SALES REVENUE are the header accounts. The “401110” and “402000” are the accounts. The OTHER INCOME is the header account. The Sales revenue is the Total account, etc.

We can see that the Sales revenue is 18 in the Credit part and Cost of goods sold is 9 in the Debit part. The company’s profit is the sum of all P&L account totals. In this case, the Sales revenue total is Credit – Debit = 18 – 0 = 19. The Cost of goods sold total is Credit – Debit = 0 – 9 = -9. The company’s profit is 18 + (-9) = 9.

We have already discussed that the company’s incoming are the liabilities because they should be returned to the company’s owners. The summarized P&L earning account contains 9 in the Credit part. In Microsoft Dynamics AX, the Credit part always shows negative values. If we look at the second page of the Income statement, we can find that the incoming equal -9.

Accounting Cycle

We already know that some company operations (purchase, sales) should be recorded as transactions (that move amounts from one accounts to others). In this paragraph, we will learn all the steps from the business operation till the financial statement. This flow is called the accounting cycle. This is what an accountant does.

The accounting cycle is the sequence of procedures used to keep track of what has happened in the business and to report the financial effect of those things. The following is a depiction of the steps in the accounting cycle and a brief description of each.

1. Some operation occurs. For example a purchase.
2. Business paper or computer record. Usually, the accounting department is not where the transaction takes place. It is necessary that a paper or a computer record be prepared at the point-of-sale so that the accounting department is aware that a transaction occurred (for different operations different transactions occurred).
3. Analyze. The personnel in accounting analyze the business papers. The goal is to write correct transactions. It is necessary to determine the following:
   • “What happened?” What kind of business took place? Did we charge our customer for something, get money for something, buy something, etc.?
   • “What accounts will change?” Asset, Liability, Owner’s Equity.
   • “How will they change?” Will the accounts increase or decrease?
   • “Do they get a Debit or Credit?” Debits and Credits were discussed in detail in the previous paragraph. Debit is “good” for the company, Credit is “bad” for the company.
4. Journalize. The main journal for an accountant is the General Journal. General Journal is used to write transactions to it. In this step, the accountant writes transactions to the General Journal.
5. Post. Post the journal (or posting) is the act of transferring the information in the journal to the appropriate accounts. In the previous step, the Accountant wrote the transactions in the journal, and in this step, the transactions are posted – amounts are transferred from one account to another.
6. Trial Balance. A trail balance is a list of all accounts and their balances. It is a written view of the financial circle. The accountant checks the accounting equation: Assets = Liabilities + Owner’s Equity.
7. Adjustments. Generally speaking, adjusting entries are made at the end of a period to ensure that Revenues are reported when earned and Expenses are reported when incurred. We will study this step in detail in the future lesson.
8. Adjusted Trail Balance. The accountant checks the accounting equation after adjustments.
9. Prepare Financial Statements. Financial Statements are used to report the financial position and results of operating a business. They are the Balance Sheet, Income Statement, and Cash Flow Statement.
10. Close. The accountant prepares closing entries for the temporary Owner’s Equity accounts such as the Revenue and Expense accounts. The closing entries are recorded after the financial statements for the accounting year are prepared. The reason for the closing entries is to ensure that each revenue and expense account will begin the next accounting year with a zero balance.
11. Post-closing Trial Balance. The accountant checks the accounting equitation after the close.

Summary

Let’s recall what have been studied in this training lesson:

• Accounting equation: Assets = Liabilities + Owner’s Equity
• Double entry system: Debit = Credit
• Purchase process analyses
• Sales process analyses. Accrual basis of accounting
• Chart of accounts
• Financial statements – Balance sheet, Income statement
• Accounting cycle

In the next training lessons, we will make a purchase in Microsoft Dynamics AX and analyze the results.

Technorati Tags: Accounting, Accounting Cycle, Accounting equation, Accrual basis of accounting, Assets, Balance Sheet, Chart of Accounts, Credit, Debit, Financial in Dynamics AX, Income Statement, Liabilities, Owner’s Equity, Profit&Loss accounts

//Reset application cashe - update end point adress
new InteropPermission(InteropKind::ClrInterop).assert();
appDomainCache = Microsoft.Dynamics.IntegrationFramework.WebService.AppDomainCache::get_Instance();
if (appDomainCache)
{
appDomainCache.Remove('LaserNet');
}
CodeAccessPermission::revertAssert();
}


{
//do something
//sumInventDim.InventLocationId,
//sumInventDim.wMSLocationId,
//sumInventDim.wMSPalletId,
//sumInventDim.InventBatchId,
//inventSumDelta.AvailPhysical,
}
}
}

Let’s assume that CustInvoiceJournal and CustConfirmJournal forms should have new menu button with menu item.

1. Create the static method:
   static void addMenuItems(formRun _caller)
   {
   FormFunctionButtonControl formFunctionButtonControl;
   FormButtonGroupControl formButtonGroupControl;
   FormMenuButtonControl formMenuButtonControl;
   ;

   switch (_caller.name())
   {

   case formstr(CustInvoiceJournal) :
   formButtonGroupControl = _caller.form().design().control(identifierstr(OverviewButtonGroup));
   break;

   case formstr(CustConfirmJournal) :
   formButtonGroupControl = _caller.form().design().control(identifierstr(ButtonGroupOverview));
   break;

   case formstr(CustPackingSlipJournal) :
   formButtonGroupControl = _caller.form().design().control(identifierstr(OverviewButtonGroup));
   break;

   }

   if (formButtonGroupControl)
   {
   // new menu button
   formMenuButtonControl = formButtonGroupControl.addControl(FormControlType::MenuButton, identifierstr(NameOf_MenuButton));
   formMenuButtonControl.text('New menu button');

   //new menu item
formFunctionButtonControl = FormMenuButtonControl.addControl(FormControlType::MenuFunctionButton, identifierstr(NameOf_MenuItem));
formFunctionButtonControl.menuItemType(MenuItemType::Display);
formFunctionButtonControl.menuItemName(MenuItemDisplayStr(CustTable));
}
}

2. Add the following code to the SysSetupFormRun.init method:
   public void init()
   {
   ;

   Class1::addMenuItems(this);//New code

   super();

   SysSecurityFormSetup::loadSecurity(this);
   this.dimensionFieldCtrls();
   this.inventStorageDimFieldCtrls();

   if (this.isWorkflowEnabled())
{
workflowControls = SysWorkflowFormControls::construct(this);
workflowControls.initControls();
}
}
   This is all.

Sometimes it is required to change form behavior without form modification. Let’s assume when User clicks the Preview/Print button on the CustInvoiceJournal form the info message shows.

1.  Add the following code the the SysSetupFormRun.init method:
   public void init()
   {
   ;
   super();

   SysSecurityFormSetup::loadSecurity(this);
   this.dimensionFieldCtrls();
   this.inventStorageDimFieldCtrls();

   if (this.isWorkflowEnabled())
   {
   workflowControls = SysWorkflowFormControls::construct(this);
   workflowControls.initControls();
   }

   if (Class1::overload(this)) // new code
{ // new code
this.controlMethodOverload(true); // new code
this.controlMethodOverloadObject(new Class1(this)); // new code
}
}

2. The Class1 class has the following methods:
   void new(FormRun _caller)
   {
   ;
   caller = _caller;
   }
   public static boolean overload(FormRun _caller)
   {
   ;
   switch (_caller.name())
   {
   case formstr(CustInvoiceJournal):
   return true;
   }

   return false;
}
   To override method behavior the class method should have the following name: ControlName_methodName(). In our case we override the clicked() method of the SalesInvoiceShow control:
   void SalesInvoiceShow_clicked()
{
CustInvoiceJour custInvoiceJour;
FormDataSource formDataSource;
FormButtonControl buttonControl;
;

   formDataSource = caller.dataSource();
   custInvoiceJour = caller.dataSource().cursor();

   if (custInvoiceJour.InvoiceId != "11111111")
{
info("You can't open invoice preview because we override button behaviour");
}
else//call super()
{
buttonControl = caller.controlCallingMethod();
buttonControl.clicked();
}
}
   That is all. If we open the CustInvoiceJournal and click the Preview/Print the info message will be shown. If Invoice id is 11111111 then button will have the standard behaviour (i.e. the Invoice will be shown)

All the best

Let’s develop this task.

Module is created very easy:

1. Go to the AOT > Menus and create new menu.  For example TestMenu.
2. Add menu item. For example CustTable menu item.
3. Then create new menu reference in the MainMenu menu:
   • On the MainMenu menu clicks the right mouse button and select New > Menu reference. The Select: Menus windows opens.
   • Drag and drop the TestMenu menu from Select:Menus window to the MainMenu.

New menu

This is all. The new module have been added. Reopen Dynamics AX application.

The new modules appears without image (to move module on the top position clicks the Microsoft Dynamics AX >View > Navigate Pane Options…):

New module without logo

Adding module logo is not so easy. Select the TestMenu menu in the AOT, click right mouse button and select Properties. There are two properties NoramlImage and NormalResource.

Menu properties

In the NormalImage property the file path to the logo could be specified. But if we create product for sell then we can not specify the exact file path because each Customer will have own path.

In the NormalResource property the image id could be specified. It is suitable for our requirements. Let’s add image in Dynamics AX:

1. Go to the AOT > Resources. Click right mouse button and select Create form file.
2. Specify the file path and click Open.

The new image resource will be created:

Image resource

But this resource doesn’t have the resource id or image id property. Even more in the NormalResource property only the resource id of standard image can be specified. Standard image could be review here AOT > Forms > SysImageResources.

Trick: we will use the NormalImage property and Logo_image_png resource.

Create the following static method:
static client void addImageToModule()
{
TreeNode treeNodeMenu;
;

treeNodeMenu = SysDictMenu::newMenuName(menustr(TestMenu)).parmTreeNode();
if (treeNodeMenu)
{
treeNodeMenu.AOTsetProperty(identifierstr(NormalImage), SysResource::getImagePath(resourcestr(Logo_image_png)));
treeNodeMenu.AOTsave();
}
}

Call this method in the \Classes\Application\startupPost method:

// No SYS code must exist in this method
// If you need the startup command, look in the class SysStartupCmd
void startupPost()
{
;
Class1::addImageToModule();
}

Reopen application.

Module with logo

All the best



Technorati Tags: image id, menu logo, module image, resource id

Hi! In this training lesson, we will learn the main production process steps and their realization in Microsoft Dynamics AX.

I have decided to create a new Universal Recorder BOM item that will consist of items from the standard demo data and with a simple route. We will learn the most complex flow of production process that will include the warehouse management (the item arrival and shipment flows) and the job management.

Prerequisite Setup

In this topic, we will create and check all data that is required to complete a production process. We will do the following:

• Create a new Universal Recorder BOM item.
• Create a new Universal Recorder BOM. BOM will consist of components 1601 and 1602. Check the warehouse management parameters.
• Create a simple Universal Recorder route. Check the job management parameters.
• Purchase BOM components (1601 and 1602) to make them on-hand in stock.

Creating a New BOM Item

We have already discussed what a BOM item is and how it can be created in this training lesson. Shortly, a BOM item is a regular item whose Item type field contains the BOM value.

Let’s create a new Universal Recorder BOM item:

1. Go to Inventory management > Common Forms > Item details. The Item form opens.
2. Create a new line with the following parameters:
   • Item number = 0000
   • Item name = Universal Recorder
   • Item group = Packaging
   • Item type = BOM
   • Inventory model group = FIFO
   • Dimension group = N-W

Item form

To understand what the Item group, Inventory model group, and Dimension group parameters are used for, read the “Item setup” training lessons from the Trade and Logistics training.

Creating a BOM

A BOM is a receipt of a BOM item (like a cake receipt containing a list of ingredients). In the Bills of Material training lesson, we have already discussed how a BOM is created and set up. In our example, the “receipt” of the Universal Recorder BOM item will include items 1601 and 1602. This is not logical as Universal Recorder contains a lot of different elements (a microchip, a decoder, a sound-recorder head, etc.). But to understand the production process, it does not matter whether a BOM contains all required components. We will assume that only items 1601 and 1602 are required to assembly the Universal Recorder. These items are taken from the standard demo data and already contain the Warehouse management setup.

Let’s create the new Universal Recorder BOM:

1. Go to Inventory management > Common Forms > Bills of Materials. The BOM form opens.
2. In the header area, create a new line with the following values:
   • Name = Universal Recorder BOM
   • Site = 2
3. Click the Lines button. The BOM line form opens.
4. Create a new line with the following values:
   • Item number = 1601
   • Warehouse = 22
   • Quantity = 1
5. Create another line with the following values:
   • Item number = 1602
   • Warehouse = 22
   • Quantity = 1
6. The BOM line form will have the following view:
   

   BOM line form

7. Close the BOM line form.
8. In the Versions area, create a new line with the following values (assign a BOM item):
• Item number = 0000 (Universal Recorder)
9. In the Versions area, click the Approve button. Select employee 7210, select the Approve Bill of materials check box in the Approve version form, and then click OK.
10. In the Versions area, click the Activation button.
11. The BOMform will have the following view:
    

    BOM form

Let’s analyze the BOM components: items 1601 and 1602. These items must have the setup that uses the Warehouse management features. Note that we will analyze only item 1601, because item 1602 has the same parameters.

First of all, item 1601 must have the Site, Warehouse, Location, and Pallet dimensions active:

1. Go to Inventory management > Common Forms > Item details. The Item form opens.
2. Find item 1601 and go to the General tab. The item uses the N-WLP dimension group.
3. Right-click the Dimension group field and select the Go to the Main Table Form option. The Inventory dimensions form opens. Make sure that the Site, Warehouse, Location, and Pallet Id dimensions are active.
   

   Inventory dimensions form

Item 1601 must be set up so that the registration and picking steps are mandatory. The Registration step ensures that a pallet with items is placed in a certain warehouse location. The Picking step ensures that the item is picked from the warehouse location. If, for example, the registration step is not mandatory, then the item can be received in a warehouse when an Invoice is posted without any previous steps.

1. Go to Inventory management > Common Forms > Item details. The Item form opens.
2. Find item 1601 and go to the General tab. The item uses the FRP_PICK inventory model group.
3. Right-click the Inventory model group field and select the Go to the Main Table Form option. The Inventory model groups form opens. Go to the Setup tab and make sure that the Registration requirements, Picking requirements, and Consolidated picking methodcheck boxes are selected.
   

   Inventory model groups form

    

The pallet type for item 1601 must be set up so that to receive, store, and issue items and the quantity of an item that can be loaded to the pallet must be specified:

1. Go to Inventory management > Common Forms > Item details. The Item form opens.
2. Find item 1601 and go to the Setup tab. Make sure that the Pallet type and Pallet quantity fields are populated.
   

   Item form, Setup tab

And, the last two settings that item 1601 must have are a Store zone and a Picking location. A store zone is used to define locations for storing items during the item arrival and registration process, a picking location is used during the shipment process.

1. Go to Inventory management > Common Forms > Item details. The Item form opens.
2. Find item 1601 and then click the Setup > Warehouse items menu button. The Warehouse items form opens. We will work with warehouse 22; so select the line with warehouse 22 and then go to the Locations tab. Make sure that the Store zone and Picking location fields are populated.
   

   Warehouse items form

We will go through all steps of Production process later in this training. In the Trade and Logistics training you can study in detail the Item arrival and registration and Shipment processes (how Store zone, Picking location, Pallet type etc. parameters are used).

Creating a Route

A route contains operations that must be executed in order to produce a finished good from components. In the previous training lesson, we have already discussed in detail how a route can be created and set up. In this training lesson, we will create a simple route with one operation. Let’s reuse operations from the standard demo data. Assume that only the “Enclosure Assembly” operation is required to build the Universal Recorder.

Create a simple route:

1. Go to Production > Common Forms > Route details. The Route form opens.
2. In the Header area, create a new line with the following value:
   • Name = Universal Recorder Route
3. Click the Route button. The Route form opens.
4. In the header area, create a new line with the following value (set up an operation):
   • Operation = Assem_Encl (Enclosure Assembly)
5. In the lines area, create a new line with the following values (set up a work center):
   • Item code = Table
   • Item relation = 0000 (Universal Recorder)
   • Site = 2
   • Work center = 011
6. The Route form will have the following view:
   

   Route (operations) form

7. Close the Route form.
8. In the Versions area, create a new line with the following values (assign a BOM item):
   • Item number = 0000 (Universal Recorder)
   • Site = 2
9. In the Versions area, click the Approve button. Select employee 7210, select the Approve route check box in the Approve version form, and then click OK.
10. Click the Activation button.
11. The Route form will have the following view:
    

    Route form

Let’s analyze the parameters that are required for the job management. In the Route training lesson, we have studied all route and operation parameters in detail.

Each operation can be divided into jobs. During job scheduling, the following jobs can be created for each operation: Queue before, Setup, Process, Transport, and Queue after. To create jobs, the corresponding job time must be specified. We will specify the time only for the Setup and Process job, so that only these jobs will be created.

1. In the Route form, click the Route button. The Route form opens.
2. In the lines area, click the Times tab. Specify the following values: Setup time = 2 hours, Run time = 3 hours. The Routeform will have the following view:
   

   Route form, Times tab

The Route group defines how the operation will be handled in Microsoft Dynamics AX. We can see that the Assem_Encl operation uses route group 10 (see the Figure “Route (operations) form”). Let’s analyze what parameters are set up for route group 10:

1. Go to the Production > Setup > Routes > Route groups. The Route group form opens.
2. Select route group 10 and then go to the General tab. We can see that all check boxes in the Automatic route consumption group box are selected. In this case, the route consumption step will be executed automatically. Since we are interested in going through all the production steps, this group is not acceptable.
   

   Route group form

3. Route group 20 has all mentioned check boxes cleared, so this group is acceptable (make sure yourself).

We need to change the route group from 10 to 20 in the Route form. Go to Production > Common Forms > Route details > Find the Universal Recorder Route > Click the Route button > Change Route group from 10 to 20.

Route form, Route group 20

One more parameter that is required for Warehouse management is work center production location. In the Work center training lesson we have set up the 01-00-0-0 production input location for the 011 work center (see the “Input location” paragraph and set up production location if you omit this step).

Purchasing BOM Components

We have already set up all parameters that are required for the production process lifecycle with the warehouse and job management. But, before starting the production of a BOM item, we must have all BOM components in the warehouse (i.e. on-hand). In this topic, we will purchase the BOM components – items 1601 and 1602.

…

You are not authorized to see the full training lesson (38 pages are hidden).

Download the full PDF version of the Production training for Dynamics AX 2009.

…

Summary

In this training lesson, we have gone through the Production lifecycle with the warehouse and job management.

The main steps of the production lifecycle are:

1. Creating a production order.
2. Estimation. The cost price is calculated.
3. Scheduling. The start and end date and time is scheduled.
4. Release the production order. Pick component items and deliver to a work center.
5. Start the production order. Post time and components quantity consumed during executing jobs: manually, automatically, in the Shop Floor Control module.
6. Report as finished. Produced items become available in the warehouse.
7. End the production order. Financial update. Transfer cost from Shop Floor Control.

Technorati Tags: Production end, Production report as finished, Production scheduling, Production start, Productione estimation

Hi there! In this training lesson, we will study how to work with a transfer order in Microsoft Dynamics AX.

The transfer order is used for registering in the system the items that must be moved from one warehouse to another and for managing this process. What is the difference between a transfer journal and a transfer order? With the help of the transfer journal, the Inventory Manager transfers the items from one dimension (warehouse, location, color, etc) to another one instantaneously .The Transfer order is used for managing the transfer process itself – that is all steps of transferring an item from one place to another. (Transfer journals are located under Inventory management > Journals > Item transaction > Transfer.)

Transfer orders are located under Inventory management > Periodic > Transfer orders.

We will study the most complex flow when items must be picked and registered in the system (i.e. we will use the Warehouse Management functionality). I will use this demo data.

Let’s assume that the Inventory Manager wants to move 5 Standard Digital Video Recorder Model 01 (1601) items from warehouse 22 to warehouse 23.

Prerequisite Step

We need to have the Standard Digital Video Recorder Model 01 (1601) items on-hand in the warehouse 22.

You can perform all required purchase steps to have it on-hand (i.e. create a purchase order, arrive items, register items , and post a packing slip and an invoice). For more information, you can read this training lesson.

Or, we can add item on-hand with the help of the counting journal:

1. Go to Inventory management > Journals > Item counting. The Inventory journal form opens.
2. Click the Create new button. The Inventory dimension form opens.
3. Select the Warehouse check box and then click OK. The Journal lines form opens.
4. Create a line with the following values:
   • Item number = 1601
   • Site = 2
   • Warehouse = 22
   • Location = 01-03-01-1 (any location)
   • Pallet = 00000125_114 (you can create a new pallet and use one)
   • Quantity = 50 (the new on-hand quantity)
     

     Counting journal lines

5. Click the Post button.

The counting journal has been posted. Let’s check the on-hand inventory for the 1601 item:

1. Go to Inventory management > Common Forms > Item details. The Item form opens.
2. Find and select the 1601 item and then click the On-hand button. The On-hand form opens.
   

   On-hand form

   Note: to view the warehouse, location, and pallet dimensions, click the Dimension display button and then select the corresponding check boxes.

We have added the on-hand for the 1601 item in the warehouse 22, so now we can transfer 5 items from the warehouse 22 to the warehouse 23.

Setup

Where is the item on-hand recorded when it is half way from the warehouse 22 to the warehouse 23? These warehouses don’t have the on-hand for the transported items.

In Microsoft Dynamics AX, the transit warehouse is available for these purposes. When items are half way from one warehouse to another one, they are recorded to the transit warehouse.

In our case, the warehouse 22 must have the transit warehouse. Let’s check:

1. Go to Inventory management > Setup > Inventory breakdown > Warehouses. The Warehouses form opens.
2. Find the warehouse 22 and then go to the General tab.
   

   Warehouses form

   We can see that the warehouse 22 uses the  warehouse 29 as transit warehouse.

Let’s create a transfer order and analyze generated inventory transactions.

Create Transfer Order

Now, the Inventory Manager will create the transfer order:

1. Go to Inventory management > Periodic > Transfer orders. The Transfer orders form opens.
2. The transfer order consists of the header and lines.
3. Create new line. Fill in the transfer order header with the following values:
   • From warehouse = 22
   • To warehouse = 23
   • Shipment date = today. The Available ship and receipt dates form opens.
     

     Available ship and receipt dates form

     This is because the transfer order, like a sales order uses the Delivery date control functionality. To get more information about it, read the Create Sales order article. In this training lesson, we will not use the Delivery date control functionality. Click the Disable dlv. date control button in the Available ship and receipt dates form.

   • Receipt date = today.
4. Create a transfer order line with the following values:
   • Item number = 1601
   • Transfer quantity = 5
5. The Transfer orders form will have the following view:
   

   Transfer orders form

The transfer order has been created. Let’s analyze what inventory transactions have been created. In the Transfer orders form, click Inventory > Transactions. The Transactions form opens.

Transactions form. The transfer order has been created.

We can see the following:

• 5 items are ordered in the warehouse 22 for issue, i.e. they will leave the warehouse 22. The issue status is On order.
• 5 items are ordered in the warehouse 29 for receipt, i.e. they will be delivered to the warehouse 29. The receipt status is Ordered.
• The same time, 5 items are reserved for issue in the warehouse 29. That is 5 ordered items will leave the warehouse 29 and they can’t be used for other purposes.
• 5 items are ordered in the warehouse 23 for receipt, i.e. the items will be delivered to the warehouse 23.

The following picture illustrates these inventory transactions:

Transfer order has been created

Pick Items to Transfer

The transfer order picking process is similar to the sales order picking process. For more information about picking and shipment processes, read this training lesson.

The Inventory Manager creates the output orders:

1. In the lines area of the Transfer order form, click Inventory > Output orders. The Create inventory order form with the item quantity opens. Click OK.
2. The Output order form with the created output order opens.
   

   Output order form

The Inventory Manager creates a shipment:

1. Go to Inventory management > Common Forms > Shipments. The Shipment form opens.
2. Create a new line. The Create shipment wizard appears.
3. Click Next on the Welcome page.
4. Select the 100_all shipment template and then click Next on the Identification page.
5. Click Next on the Configuration page.
6. Make sure that the inventory order is available on the Inventory order page. Click Next.
7. Click Finish on the Ready page.
8. The shipment is created:
   

   Shipment form, the shipment is created

The Inventory Manager creates the picking route (picking instruction):

1. In the Shipment form, click Functions > Activate.
2. The picking route is created. Make sure that the Pick field is set to Activated.

The Warehouse Worker picks the items and registers this information in the system:

1. Go to Inventory management > Common Forms > Picking routes. The Pick form opens.
2. In the Picking route field, select the last picking route number.
3. Click the Create picking pallet button. In the Create picking pallet form, click OK.
4. The Pick form will have the following view:
   

   Pick form

5. Click the Approve details button. The Approve line form opens.
   

   Approve line form

6. Click the Pick selected button. Since all picking route quantity is approved, the Deliver picked items form opens.
   

   Deliver picked items form

7. Click the Deliver items button.

The items are picked and transported to the outbound location.

If we return to the Shipment form, we can see the following results:

Shipment form. The items are transported to the outbound location

We can see that the Pick field is set to Completed and the shipment status is Staged.

The Warehouse Worker performs the last optional step he or she records in the system that the pallets are loaded into the truck.

1. In the Shipment form, click Shipment staging. The Shipment staging form opens.
2. Click Functions > Load. The Handling status is changed to Loaded. Note that no inventory transactions are created or updated. Close the form.
3. In the Shipment form, the Status field value is changed from the Staged to Loaded.

Let’s check the inventory transactions:

1. Go to Inventory management > Common Forms > Item details. The Item form opens.
2. Find the 1601 item and then click the Transactions button. The Transactions on item form opens.
   

   Transactions on item form. Transfer order items have been picked

Note that the Item form displays all inventory transactions for this item, among them we can see the inventory transactions generated from the counting journal. Don’t take this transaction into account.

We can see the following changes: 5 items are picked from the warehouse 22. The other transactions remain unchanged.

The following picture illustrates these inventory transactions:

Items have been picked

Ship Transfer Order

The Inventory Manager ships the transfer order. It means that the items have been taken from the warehouse 22 and are half way from the warehouse 22 to the warehouse 23.

Let’s ship the transfer order and analyze inventory transactions:

…

You are not authorized to see the full training lesson (8 pages are hidden).

Download the full PDF version of the Trade and Logistics training for Dynamics AX 2009.

…

The following picture illustrates these inventory transactions:

The items are transferred from one warehouse to another one

That is all, the items are transferred from one warehouse to another one.

Training Lesson Summary

In this training lesson, we have studied how to set up the transit warehouse and how to work with a transfer order. We also studied the main steps of the transfer flow.

Let’s recall the main steps of the transfer flow, they are as follows:

1. Creating a transfer order
2. Picking items for the transfer order
3. Shipping the transfer order
4. Items arrival and registration  in the destination warehouse
5. Receiving the transfer order

All the best

Technorati Tags: Receive transfer order, Ship transfer order, Transfer order