The reason codes are used for assigning the various components of a G/L transaction (ie. COGS, freight, duty etc.) to their respective General Ledger Accounts. They are defined by warehouse location and can be thought of as a General Ledger distribution as they are assigned to a product group, which in turn is assigned products. ALL General Leger postings are based upon these Product, Product Group and Reason Code combinations.
When defining the Reason Code some of the accounts are mandatory entry however under certain simply accounting installations, not all of the accounts may be utilized or required. It is suggested that for these mandatory entries where the account will not be used a ‘dummy’ General Ledger Account be created and used for entry purposes only. Further to this and to the complexity of DYNAMIC3i’s G/L posting abilities it is suggested that individual ‘dummy’ accounts be created for each unused account entry. Ie. 1.1.1, 1.1.2, 1.1.3 etc. If for some reason now, an obscure posting transaction appears it can easily be traced.
Transfer Variances / Exchange Variances
Used to track all Cost of Goods Sold. When an item is sold (OE2100) this account is increased with the cost of the item (not the sale price). The offset is the Inventory control account.
If the inventory auto G/L posting flag in system flags (GB2800) is set to ‘detail’ and ‘Standard Costing’ is being used, then the COGS account will be split out into three distinct accounts as follows:
COGS Material
COGS Labour
COGS Overhead
This allows for the detailed tracking of the above values as to their values on the stock file for the given product
All order entry (OE2100) sales for product are tracked against this account.
E.g. Sell Product 148, Product group A, Reason code AN that costs $125 for $150
Inventory for reason AN gets credit by $125.00
COGS for AN gets debited for $125.00
Sales for AN credited by $150
A/R for currency of Customer gets debit for $150
This account is used if the freight charges want to be tracked at the customer’ warehouse level instead of the std. company currency level. A reason code can be attached to a customer in customer master maintenance(GB0900). If the freight by reason code flag in system flags (GB2800) has been set then the customer’s reason code and the warehouse that the order is coming from are used to get OE freight account. In most cases freight charges would be tracked at the global company level. In this case the freight account on the currency file is used.
E.g. Using Currency Freight Account:
Product 148 Group A, Reason code AN, cost $60
Product 158 Group B, Reason code BY, cost $40
Both products sell for $80.00
Order for product 148 and 158
Order Freight is $10
Inv. Account for AN decrease by $60
Inv. Account for BY decrease by $40
COGS for reason code AN debit $60
COGS for reason code BY debit $40
Sales for reason AN credit $80
Sales for reason BY credit $80
AR for customer debit by $170 (80 + 80 + 10 Freight)
Currency Freight Account increase by $10
E.g. Using Reason Code OE Freight:
Product 148 Group A, Reason code AN, cost $60
Product 158 Group B, Reason code BY, cost $40
Both products sell for $80.00
Customer master reason code is CT
Order for product 148 and 158
Order Freight is $10
Inv. Account for AN credit by $60
Inv. Account for BY credit by $40
COGS for reason AN debit by $60
COGS for reason BY debit by $40
Sales for reason AN credit $80
Sales for reason BY credit $80
AR for customer debit by $170 (80 + 80 + 10 Freight)
OE Freight for reason code from Customer table (CT ) credit $10
Deferred Income and Deferred Expense accounts are used only for sales of Service Contracts - Product Type 16
Where a service contract is billed in order processing, a pro-rated portion of the service contract and a pro-rated portion of the cost of the service contract (if purchased) will generate a GL Transaction (through the (OE4100) Invoice Update to deferred income and deferred expense respectively.
Only the portion for the current period will generate a Transaction to sales and cost of goods, and the balance to the deferred GL accounts.
This will also generate a Repetitive Journal in GL for the pro-rated amounts to be taken into income and expense from deferred income and expense for each GL period using the (GL3120) Repetitive Journal Entry Update
Used with Order Entry and customer to track volume rebates based upon orders. On the customer master table (GB0900) there is a volume rebate accrual percentage. At order entry this percentage is taken from the ship to customer, if blank then the bill to customer is checked and if blank then the statement to customer is checked if all is blank then no rebate is taken. If there is a rebate allowed, the percentage (i.e. 5%) is stored on the order header. At invoice update the percentage of the total order value for each product on the individual order detail line (after discount and before taxes) is taken and posted to this account. The offset is the Volume Rebate Accrual Payable account for the currency of the customer used.
E.g. Customer 125, Volume rebate percentage 5%
Customer Currency US (US Dollar)
Branch currency CD (Canadian Dollar), Exchange Rate 1.2
Product 148 cost $10 price $15.00 US
Product 150 cost $10 price $20.00 US
Order: 200 of product 148, product group A reason code AN
200 of product 150, product group B reason code BY
Inv. Account for AN credit by $2000
Inv. Account for BY credit by $2000
COGS for reason code AN debit by $2000
COGS for reason code BY debit by $2000
Sales for reason code AN credit by $3420 (US)
(200 * 15 * 1.2 (Exch.) – 5%)
Sales for reason code BY credit by $4560 (US)
(200 * 20 * 1.2 (Exch.) – 5%)
A/R for customer 125 debit by $6650 (CD)
A/R Regular Exchange debit by $1330 (CD)
Volume Rebate for reason code AN debit $171 (US)
(5% of $3420 US)
Volume Rebate for reason code BY debit $228 (US)
(5% of $4560 US)
Volume Rebate
Accrual Account credit by $332.50
Volume Rebate
Accrual Exchange credit by $66.50
Used to track the duty portion of a products cost when the product is sold as export. Assume branch currency is Canadian (CD). If a product was purchased from the US and had duty costs associated with it then when the product was re-sold to a US customer the duty recoverable can be tracked. This is done by crediting the Duty Recoverable for the duty cost portion of product sold as export. The export order flag when the order is entered must be flagged as an export order
E.g. Product A Cost $10 (duty portion $2), Price $15 (Canadian) Product group reason code AN
US customer orders 2 of product A
Inv. Account for AN credit for $20
COGS for AN debit $16
Duty Recoverable for AN debit $4
Sales for AN debit $30
A/R for customer credit for $30 (Canadian)
This is a non mandatory field.
Enter the branch and account code that will be used for Discount Allowed, for this warehouse.
If this account is populated, the Invoice Update (oe4100) program will debit this account and credit the sales account for the amount of the discount on each line of the order.
(Note : If this account is populated and is used in conjunction with the Trade Spending Maintenance (oe5500), the debit to this account will be a portion of discount amount depending
on the percentage assigned to the principal/product combination set up in Trade Spending Maintenance. Please see Trade Spending Maintenance for clarification).
These two accounts are strictly statistical accounts that accumulate the actual product weight and number of units each time an item is sold (OE2100).
E.g. Sell 200 cases of Product A that weighs 10lbs/per case
Sales Weight accrues 2000
Sales Units accrues 200
Used to track inventory value. When an item is sold (OE2100) this account is decreased by the cost of the item (not the sale price). The offset is the COGS control account.
If the inventory auto G/L posting
flag in system flags (GB2800) is set to ‘detail’ and ‘Standard Costing’ is
being used, then the Inventory account will be split out into three distinct
accounts as follows:
Inventory Material
Inventory Labour
Inventory
Overhead
This allows for the detailed tracking of the above values as to their values on the stock file for the given product.
This account is a variance account when the std. cost of an item changes. If the std. cost of an item is changed then the variance produced between the value of the item at the old cost and the value at the new cost is posted to this account.
E.g. Product A – Std. cost $10
100 in stock so inventory control account is $1000
New cost (IN1110 – IN1130) set to $11.00
100 in stock so inventory is debited $100
Inventory Revaluation account credited by $100
This account is a variance account when the inventory value is changed by way of a physical inventory (i.e. Qty count). If the value of an item is changed then the variance produced between the value of the item at the old qty and the value at the new qty is posted to this account.
E.g. Product A – Std. cost $10
100 in stock before physical count so inventory control account is $1000
Physical Count (IN4200 – IN4400) counts Qty 120
120 in stock so inventory is increased 20 credit $200
Physical Inventory account debit by $200
Used with Inter-warehouse transfers. When an item is transferred from one warehouse to another the inventory account of the sending warehouse is decreased and this ‘In Transit’ account increased until such time as the actual receiving warehouse receives the item. At this point this ‘In Transit’ account is decreased by the value of the item and the inventory control account increased by the value of the item. If the item at the receiving warehouse has a different std. cost then any variance produced will go to the IWT variance account below.
Used only with ‘Standard Costing’. When an inter-warehouse transfer is done (IN3300) the inventory control account of the transferring warehouse is reduced by the std. cost of the product. The receiving warehouse’s (IN3400) inventory control account is then increased by the same std. cost. If the receiving warehouse had a different std. cost for the product then the variance would be posted into this account.
E.g. WH1 for product A $100
WH2 for product A $110
Transfer 1 from WH1 to WH2
Inventory control at WH1 credit by $100
Inventory control at WH2 debit by $110
IWT variance account at WH1 credit $10
Balances variance with the A/P control account and the currency accrued liability account. If there is a variance between the currency transfer costs and/or exchange rate then the currency accrued liability account gets the posting and the variances are tracked into these accounts.
Used only with ‘Standard Costing’ by A/P (AP1100) to post any variances between the Freight Clear account below when matching billed freight charges to the PO freight charges. Main accounts are the A/P control account and the vendor accrued liability.
Used only with ‘Standard Costing’ by A/P (AP1100) to post any variances between the Duty Clear account below when matching billed duty charges to the PO duty charges. Main accounts are the A/P control account and the vendor accrued liability.
Used only with ‘Standard Costing’ by A/P (AP1100) to post any variances between the Other charges Clear account below when matching billed other charges to the PO other charges. Main accounts are the A/P control account and the vendor accrued liability.
Used only with manufacturing and ‘Standard Costing’. Used to track variance between material usage and job confirmation (See WIP Material account below)
Used only with ‘Standard Costing’. Purchase Order update (PO5300) will accrue to this account for any freight charges. The offset will be the freight variance account above and the A/P control account at A/P – P/O matching time in AP1100
Used only with ‘Standard Costing’. Purchase Order update (PO5300) will accrue to this account for any duty incurred. The offset will be the duty variance account above and the A/P control account at A/P – P/O matching time in AP1100
Used only with ‘Standard Costing’. Purchase Order update (PO5300) will accrue to this account if other charges are entered. The offset will be the other variance account above and the A/P control account at A/P – P/O matching time in AP1100.
E.g. PO for $100, $10 is freight, $10 is duty, $5 service charge.
Inventory will be debited for $100
Vendor liability account will be credited for $75 dollars
Freight clear credit $10,
Duty clears credit $10
Other clear credit $5
Used only with manufacturing. Material usage (PC3100) will reduce the inventory control account and increase into this account for the product. Job confirmation (PC5100) will then clear this account into the inventory account of the finished good. Any variance will go to the Material Variance account above.
E.g. Usage of product A value - $100 debit WIP Material
Job confirm product B (Cost $200) for an amount that uses $110 of A
WIP Material for A would credit for $100,
Inventory control account for B debit $200,
Material variance for A credit $10
Used only with Average Costing. This account is used to accumulate variances between the expected cost of inventory from purchasing and the actual amount billed in A/P (AP1100). If the inventory variance flag on System Flags (GB2800) is set then any matching variances are posted to this account. If the flag is not set then A/P invoice entry will post to the inventory control account if enough on hand exists to cover the variance of the average cost. Main account is the A/P control account. Standard Costing uses the variance and clearing accounts listed above.
E.g Inventory System flag set to post to suspense
Inventory System flag not set
(i.e. use inventory control account)
Enter the branch and account codes that will be used for Accrued Cost of Goods Sold with this reason code, for this warehouse. Order Entry will accrue cost of the product into this account at time product is shipped. Invoice Update (OE4100) will clear the cost from this account and post it to the Cost of Goods Sold (COGS) account under Sales tab above. Note. If the COGS account and this Accrued Account are the same then the extra ‘clearing’ posting will not occur and the Invoice Update (OE4100) will post directly to the Cost of Goods Sold (COGS) account.