About landed costs for transfers

A new transfer order of the TR order type is created in the Sales orders (SO301000) window.
The transfer order lists the stock items to be moved with the following details: item ID, quantity, and destination and source warehouses.
For more details, see: Create a transfer order.

After creation of the transfer order, the related shipment is created and confirmed; on shipment confirmation, the system generates an inventory transfer and releases it if the Automatically release inventory documents check box is selected in the Inventory preferences (IN101000) window.

On release of this inventory transfer, the following general ledger transactions are created for each stock item:

• Inventory account: Cr, cost of goods sold (COGS) amount
• In-transit account: Dr, COGS amount

The inventory account for each item is determined by the posting class of this item; the rule for its selection is specified in the Use inventory/accrual account from field in the Posting classes (IN206000) window.
If the Subaccounts functionality is enabled in your system, the inventory subaccount used for the batch is defined by the rule specified in the Combine inventory/accrual sub. from field in the same window.
The in-transit account (and subaccount, if applicable) are specified in the Inventory preferences (IN101000) window.

As the result of the posting of this batch, the On hand qty. of the items in the source warehouse is decreased.

You create a receipt (of the Transfer receipt type) for the transfer order by using the Purchase receipts (PO302000) window.
On the Landed costs tab, you can add any landed costs by specifying a landed cost code for each transportation service provider involved in the transfer, as well as the amount, currency, and VAT category.

On release of this transfer receipt, the system generates the following documents:

• Inventory receipt
  The document is automatically released if the Automatically release inventory documents check box is selected in the Sales order preferences (SO101000) window.
  On release of this inventory receipt, the item's on-hand quantity in the destination warehouse is increased.

  The costs the transferred items will have in the destination warehouse depend on the valuation methods assigned to the items.
  For items with the FIFO valuation method, this receipt creates a new cost layer with the number and date of this receipt (not the original receipt that is selected by FIFO method from receipts in the source warehouse).
  For details, see the An example of cost updating for a FIFO Item section below.

  
  The following general ledger transactions are created:
  • In-transit account: Cr, COGS amount
  • Inventory account: Dr, COGS amount
• Inventory adjustment
  This document specifies the landed cost amounts to update the costs of each item.
  For details, see the Cost updating section below.
• Accounts payable invoice
  This document is created based on the invoice received from the landed cost supplier and includes the following general ledger transactions:
  • Landed cost accrual account: Dr, landed cost amount
  • Supplier ledger account: Cr, landed cost amount

The landed cost accrual account is associated with the landed cost code.
The supplier ledger account is associated with the location of the supplier that provided the transportation services (the landed cost supplier).

You create a receipt (of the Transfer receipt type) for the transfer order by using the Purchase receipts (PO302000)window.

On release of this transfer receipt, the system generates an inventory receipt.
On release of this inventory receipt, the following general ledger transactions are created:

• In-transit account: Cr, COGS amount
• Inventory account: Dr, COGS amount

As a result, the On hand qty. of the items in the destination warehouse is increased by the quantities of the received items.

The costs the transferred items will have in the destination warehouse depend on the valuation methods assigned to the items.
For items with the FIFO valuation method, the system creates a new cost layer with the number and date of this receipt (not the original receipt that is selected by the FIFO method from receipts in the source warehouse).
For details, see An example of cost updating for a FIFO Item section below.

You create an invoice for the landed costs by using the Purchase invoices (AP301000) window.
For the invoice, you can select the supplier that performed the transfer of the goods, and on the Landed costs tab, you add multiple transfer receipts and split the landed cost amount among the stock items selected from these receipts.

On release of the invoice with the landed costs, the following transactions are generated:

• Landed cost accrual account: Dr, landed cost amount
• Accounts payable account: Cr, landed cost amount

Release of the invoice does not affect the item's on hand quantity in the source warehouse or in the destination warehouse.

Also, the system automatically generates an inventory adjustment and splits the landed cost amount among the specified items according to the allocation method of this landed cost type and the valuation method of each item.

Upon release, an inventory adjustment updates the inventory costs of items differently depending on the valuation method of the item as follows:

• For items with the Standard cost valuation method, the landed cost amount is moved from the landed cost accrual account to the standard cost variance account.
  The following transactions are generated:
  • Standard cost accrual account: Cr, landed cost amount
  • COGS account: Dr, landed cost amount
• For items with the Average cost valuation method, the landed cost amount moved from the Landed cost accrual account to the inventory account (determined by the posting class of the item) updates the average cost of the unit.
  The following transactions are generated:
  • Landed cost accrual account: Cr, landed cost amount
  • Inventory account: Dr, landed cost amount

At the moment of the release of the inventory adjustment, if some of the units (listed on the transfer receipt) were sold, the landed cost amount updates both the COGS account and the inventory account of the item proportionally to the unsold and sold quantities (as specified on the original transfer receipt), respectively.

• For stock items with the FIFO or specific valuation method, the system creates a new cost layer based on the transfer receipt (this layer has the date and the quantity from the transfer receipt) and the amounts moved between accounts vary as follows, based on the quantity of the layer:
  • If the layer still has the original quantity, the cost of all items in the layer is updated, and the landed cost amount from the landed cost accrual account is transferred to the inventory account assigned to the item.
  • If the current quantity in the layer is less than the original quantity on the receipt, the landed cost amount is moved from the landed cost accrual account to update the COGS account and the inventory account in proportion to the sold and unsold quantities, respectively.