Charges in Dynamics: Navigating D365 F&O's Financial Waters
Charges In D365 F&O
Hello, everyone! I trust you're all doing well.
I appreciate the fantastic feedback you've shared on my earlier blog posts.
Ever wonder what captivates a Functional Consultant? It's the art of resolving complex and challenging areas.
I've effectively addressed various challenging issues this year, but I'm genuinely surprised to receive emails on diverse scenarios related to charges. Trust me that every case is unique; similarly, each situation in different businesses is more complex than the previous one due to the nature of the business.
Let’s discuss the basic concepts related to the charges and how we can handle that in D365 F&O.
Types of Charges:
Following are the very common types of charges:
- ➢ Delivery charges or transport charges
- ➢ Service charges
- ➢ Packing charges
- ➢ Carries charges, Labor charges.
- ➢ Insurance charges
- ➢ Repair Charges
Treatment of charges: Based on the different business cases we can segregate the charges more in 2 categories:
Inventory charges (Added to the cost of inventory) ✓ Paid to vendor. ✓ Paid to the third party (very common case) Expenses (Not added to the cost of inventory) ✓ Paid to vendor. ✓ Paid to the third party (very common case)
Following will be the accounting treatment for the charges:
- ➢ Charges added to inventory (Paid to vendor)
The following will be the final entry during the invoice. Inventory Dr A/P (vendor account) Cr ✓ Let’s say you have a PO of 1000 USD and vendor says ok I will ship the goods & will charge 20 USD for the delivery charges. So, the entry will be, Material Acc 1000 + 20 = 1020 DR A/p (vendor Account) 1000+ 20 = 1020 Cr
- ➢ Charges added to inventory (Paid to third party)
This is the most common case and can become complex based on the clients’ requirements. ✓ Let’s say you are buying something from Ali baba and they send you the goods with the help of a third party, that is the shipment company. Ali baba says you will pay the shipment or delivery charges to the shipment company.
In that case:
Inventory Acc Dr 1020
Vendor Acc Cr 1000
Third party Cr 20
- ➢ Expenses (not added to the Inventory paid to the vendor)
- ✓ The vendor is shipping the goods, and some charges are added that are not value addition to the Inventory cost in that case you will not add those charges to the inventory cost.
Inventory Acc DR 1000
Expense Acc DR 20
Vendor Acc 1020
- ➢ Expenses (not added to the Inventory paid to the third Party)
- ✓ Let say vendor is shipping the Goods and some insurance charges are added by the shipper and that we need to pay to the Insurance company.
Inventory Acc DR 1000 Acc DR 20 Vendor Acc CR 1000 Insurance Expense Acc CR 20
Setup: • To set up this go to the AP> Charges setup> Charges Code. • To achieve all the above cases do the following configurations.
Charges added to inventory (Paid to vendor) ▪ Click on new. ▪ Add the Code name & Description. ▪ Select the “Item” on debit side. ▪ Select the “Vendor” on the credit side.
Charges added to inventory (Paid to third party) ▪ Click on new. ▪ Add the Code name & Description. ▪ Select the “Item” on debit side. ▪ Select the “Ledger, Posting type & Account” on the credit side.
Expenses (not added to the Inventory paid to the vendor) ▪ Click on new. ▪ Add the Code name & Description. ▪ Select the “ledger, Posting type& Account” on debit side. ▪ Select the “Vendor” on the credit side.
Expenses (not added to the Inventory paid to the third party) ▪ Click on new. ▪ Add the Code name & Description. ▪ Select the “ledger, Posting type& Account” on debit side. ▪ Select the “Vendor” on the credit side.
That’s the charges treatment in D365 F&O & you can handle that based on the different cases.
If you want to set-up the auto charges on header & line level you do setup based on the different combinations in auto charges setup
Happy learning……. :-P