Accounting by Transaction

An ERP consultant does not need to be a CPA, but the ones who succeed read finance fluently. Configuration choices in the chart of accounts, posting profiles, dimensions, fiscal calendar, and tax codes are accounting decisions disguised as IT decisions, and getting them wrong means broken reporting, painful re-implementations, or audit findings. This page covers the conceptual ground a consultant should walk into a finance workshop already knowing.

Why this mattersThe role of accounting in an ERP project

Every operational transaction in F&O eventually becomes an accounting entry. A vendor invoice, a customer shipment, a worker timesheet, a depreciation run, a stock count: all of them post journals. The consultant decides which accounts those journals hit through three setup areas:

Posting profiles (per vendor group, customer group, item group, project group, etc.) which map operational events to general-ledger accounts.
Account structures and advanced rules which define which combinations of main account plus financial dimensions are valid.
Tax setup (sales tax codes, item / customer / vendor tax groups, posting groups) which routes VAT / sales tax to the right accounts.

If you cannot read a balance sheet or trace a journal back to its source transaction, you cannot configure these areas competently. Finance will know, and so will the auditors.

FoundationDouble-entry accounting and the accounting equation

Every accounting entry has at least one debit and at least one credit, and total debits equal total credits. This is the constraint that keeps the books balanced.

The accounting equation

Assets = Liabilities + Equity. The balance sheet is a snapshot of this equation at a point in time. Income statement activity flows into Equity through Retained earnings at year-end close.

Debit / credit rules by account type

Assets increase with debits, decrease with credits. (Cash, AR, Inventory, Fixed assets.)
Liabilities increase with credits, decrease with debits. (AP, accrued expenses, deferred revenue, taxes payable.)
Equity increases with credits, decreases with debits.
Revenue increases with credits, decreases with debits.
Expenses increase with debits, decrease with credits.

A starter example

Buy 1,000 of inventory on credit:

Account	Description	Dr	Cr
Inventory (asset)	Goods received	1,000.00
Vendor / AP (liability)	Owed to supplier		1,000.00
Totals		1,000.00	1,000.00

Both sides increase: an asset (inventory) and a liability (AP). The accounting equation stays balanced.

FoundationChart of accounts and financial dimensions

The chart of accounts (COA) is the catalog of natural accounts that classify every dollar of activity. F&O combines main accounts with financial dimensions (department, cost center, project, location, business unit, custom) to produce the full account string that posts to the GL.

Lean COA + dimensions

The modern philosophy is a relatively small main account list (a few hundred), with finer detail handled by dimensions. The old approach of encoding department / location / line of business directly into the main account number (so a 5,000-row COA emerges) makes reporting harder, not easier.

Account categories and main account types

Main accounts are tagged by type (asset, liability, equity, revenue, expense, balance, total) and by category (used by financial reports). The type drives the period-close behavior: P&L accounts close to retained earnings each year, balance sheet accounts roll forward.

Account structures

An account structure declares the valid combinations of main account and dimensions. Without one, any combination posts (chaos). With one, the system blocks invalid combos at journal entry. Most clients need 2 or 3 account structures (e.g., P&L with mandatory cost center, balance sheet with optional dimensions, tax-only, etc.).

ReportingThe five core financial reports

Every consultant should be able to describe each of these and where the data comes from in F&O.

1. Balance sheet (Statement of financial position)

Snapshot of assets, liabilities, and equity at a point in time. Reflects the accounting equation. In F&O, balances roll forward across fiscal years; only retained earnings absorbs the prior year P&L.

2. Income statement (Profit & loss / P&L)

Revenues minus expenses over a period (month, quarter, year). Captures operating performance. In F&O, P&L accounts zero out at year-end close and the net flows to retained earnings.

3. Cash flow statement

Sources and uses of cash, split into operating, investing, and financing activities. Reconciles opening cash to closing cash. Often produced via Financial Reporter or Power BI from F&O ledger data.

4. Statement of changes in equity

Movement in equity accounts: opening equity, plus net income, minus dividends, plus / minus capital changes, equals closing equity. Required under IFRS and most local GAAPs.

5. Trial balance

List of every account with its debit or credit balance. Total debits equal total credits. The trial balance is the bridge between the GL and the financial statements, and it is the first report every consultant should reconcile after a go-live.

ReportingTrial balance: the bridge to financial statements

The trial balance is a list of every account with its current debit or credit balance. It is the most important report for an ERP consultant during go-live because it proves three things at once.

Mathematical integrity: total debits equal total credits. If they do not, journals are out of balance, period.
Subledger reconciliation: AR balance on the trial balance equals the customer aging total. AP balance equals the vendor aging total. Inventory account equals the inventory valuation report. Cash equals reconciled bank statements.
Reporting input: the trial balance is the source for every formal financial statement. The balance sheet and income statement are just trial balance lines grouped by account category.

The most common cause of broken reporting at go-live is a trial balance that does not tie to subledger balances. Reconcile each subledger to the GL before declaring close ready.

FoundationAccrual vs. cash basis

Two ways of recognizing transactions; consultants need to know which one their client uses (and which is required by law for them).

Cash basis

Revenue recognized when cash is received; expenses recognized when cash is paid. Simple, but distorts the picture of business performance. Permitted for very small entities in many jurisdictions; rarely used in ERP-scale businesses.

Accrual basis

Revenue recognized when earned (delivery, performance) regardless of cash timing. Expenses recognized when incurred regardless of cash timing. Required by GAAP, IFRS, and most countries' tax rules above certain size thresholds.

F&O is fundamentally an accrual system. The accruals you see (period-end accruals, prepaid amortization, deferred revenue, depreciation) all exist to align P&L recognition with the period of economic activity, not the period of cash movement.

StandardsGAAP vs. IFRS: what a consultant should know

The two dominant accounting frameworks. F&O can support either or both (often via multiple ledgers / books). Consultants need to know enough to ask the right setup questions.

US GAAP (Generally Accepted Accounting Principles)

Rules-based, US-centric, governed by FASB. Detailed prescriptive guidance per topic (revenue, leases, inventory, etc.).

IFRS (International Financial Reporting Standards)

Principles-based, used by 140+ countries (including all of the EU, most of Asia, Africa, Latin America). Governed by the IASB. Generally shorter standards leaving more room for judgment.

Differences a consultant should remember

Inventory: US GAAP allows LIFO; IFRS does not. F&O supports FIFO, weighted average, standard, moving average across either framework.
Development costs: US GAAP expenses R&D; IFRS allows capitalization of development phase if criteria are met (see Concept to market accounting).
Inventory write-downs: Reversals are allowed under IFRS; not allowed under US GAAP.
Leases: Both frameworks now require most leases on the balance sheet (ASC 842 / IFRS 16) but classification rules and lessor accounting differ.
Revenue recognition: Largely converged under ASC 606 / IFRS 15 (5-step model), but disclosure differences remain.
Component depreciation: Required under IFRS; permitted but not required under US GAAP.
Property revaluation: Allowed under IFRS (revaluation model); generally not under US GAAP (cost model only).

Many multinationals run dual ledgers: one for local statutory (often local-GAAP or IFRS) and one for parent-company reporting (often US GAAP). F&O handles this via multiple posting layers and multiple FA books.

ImplementationOpening balances: what happens on ERP import

Opening balances are the data brought from the legacy system at go-live. Get them wrong and every report from day one is wrong. The process has three layers, and a consultant should be able to discuss each.

1. GL opening balances

The trial balance from the legacy system, posted as a single opening journal in F&O dated the cut-over date (typically the last day of the prior period or the first day of the new period). This journal must balance to zero across debits and credits.

Pattern: Dr each asset account, Cr each liability and equity account, totals match. Use a dedicated journal name (e.g., "Opening balance") and reference the legacy trial balance source.

2. Subledger opening balances

Customer open invoices, vendor open invoices, fixed assets, and inventory must be loaded into their subledgers, not just summed into the GL. Every customer needs the open invoice list (with original invoice date, due date, currency, amount), every vendor needs the same, every fixed asset needs cost / accumulated depreciation / book / placed-in-service date, every item with on-hand inventory needs quantity and unit cost.

Critical reconciliation: subledger totals must tie to the GL opening journal. AR subledger total = AR opening balance from the GL journal. Inventory subledger total = Inventory opening balance. Mismatch on day one means broken reporting forever.

3. Statistical / informational data

Open POs, open sales orders, open quotations, open production orders. These do not impact the GL on import (they are operational documents, not accounting events) but they are essential for operations to start day-one transactions cleanly.

What can go wrong

Off-by-rounding. Currency rounding differences accumulate during cut-over. Reserve a "Cut-over rounding" account and post the rounding to it, with the controller's blessing.
Missing dimensions. Opening journal posted to main account only; reporting by department breaks because the opening balances have no department.
Wrong as-of date. Opening balances dated 1 January when the legacy cut-off was 31 December causes the first day to look like a massive transaction day.
Sub-ledger to GL drift. AR subledger built from a different cut-off than the GL trial balance. Reconcile to one source of truth.

OperationsPeriod close: month-end, quarter-end, year-end

The period close is the disciplined sequence of work that converts operational data into reportable financials. F&O has explicit period status mechanics: open, on hold, closed, permanently closed.

Month-end close: the standard sequence

Cut-off: stop transactional activity for the period at a defined time, or freeze data for a "soft close" while finance does the work.
Sub-ledgers ready: AP invoices and payments posted, AR invoices and receipts posted, receipts and product receipts up to date, expense reports approved.
Run cost processes: inventory close or recalculation, production order ending, project estimate process.
Run period-end accruals: uninvoiced receipts accrual, manual accruals for known unbilled events, prepaid amortization, depreciation.
FX revaluation: revalue open AR, AP, and bank balances in foreign currency.
Reconcile clearing accounts: bank clearing, GRNI (purchase accrual), inventory in transit, asset clearing, remittance clearing, VAT accounts.
Subledger to GL reconciliation: trial balance ties to AR aging, AP aging, inventory valuation, FA register, bank reconciliation.
Run consolidation if multi-entity.
Generate financial statements: trial balance, P&L, balance sheet, cash flow, management pack.
Close period status: sub-ledgers first (AP, AR, inventory), then GL.

Quarter-end close

Same as month-end plus: external reporting (10-Q in the US, half-year report in the EU), audit interim reviews, larger management commentary.

Year-end close

Same as month-end plus: full inventory count and reconciliation, full FA register tie-out, FX year-end revaluation, statutory audit, year-end accruals (bonus, vacation, deferred tax), year-end closing journal that closes P&L accounts to retained earnings, opening transactions for the new fiscal year.

F&O period status

Open: transactions can post. On hold: only specific roles can post (used for soft close). Closed: nothing posts; can be reopened by a security-restricted role. Permanently closed: nothing posts ever again, no reopen possible. Use Permanently closed only after audit sign-off.

TaxIndirect tax (VAT / sales tax) mechanics

Indirect tax is collected on sales (output tax) and paid on purchases (input tax). Net is remitted to the tax authority. Mechanics differ between true VAT regimes (most of the world) and US-style sales tax (consumer-only), but the F&O configuration is similar.

Output tax

Tax collected from the customer on a sales invoice. Posted to a Sales tax payable account at invoice time.

Account	Description	Dr	Cr
Customer (AR)	1,000 net + 110 VAT (11%)	1,110.00
Sales revenue	Net		1,000.00
Sales tax payable (output)	Tax to remit		110.00
Totals		1,110.00	1,110.00

Input tax

Tax paid to the supplier on a purchase invoice. Posted to a Sales tax recoverable account, which is recoverable against output tax (in true VAT regimes) or expensed (in US sales tax, where buyers are usually exempt and only end-consumers pay).

Periodic settlement (declaration)

At each tax-period end (monthly or quarterly per jurisdiction), the consultant runs Tax > Periodic tasks > Declarations > Sales tax > "Settle and post sales tax". F&O nets output against input per Sales tax authority and posts the difference to the Settlement account on the Ledger posting group, which is then paid to the authority. If the authority is linked to a vendor, the balance can be transferred to the vendor as an open invoice via the same process.

Account	Description	Dr	Cr
Sales tax payable (output)	Clear period collected	10,000.00
Sales tax recoverable (input)	Clear period recovered		6,000.00
VAT settlement payable	Net to authority		4,000.00
Totals		10,000.00	10,000.00

Tax declaration

The official filing to the authority. Uses electronic reporting (ER) configurations in F&O (e.g., Making Tax Digital in the UK, FEC in France, SAF-T in Portugal / Norway / Poland, declaracao mensal in Brazil). The consultant should know whether a country-specific ER configuration exists for the client's jurisdiction or whether it must be built.

Special VAT cases

Reverse charge: Buyer accounts for both input and output tax on the same invoice (intra-EU acquisitions, certain services). Net cash impact is zero, but compliance reporting requires both lines.
Exempt supplies: No output tax charged; corresponding input tax not recoverable.
Zero-rated supplies: Output tax charged at 0%; input tax fully recoverable. Different from exempt despite the zero appearance.
Partial exemption: Mixed exempt and taxable activity; only a proportion of input tax is recoverable. Calculation rules are jurisdiction-specific.

TaxDirect tax (corporate income, withholding)

Direct tax is tax on income / profit, not on transactions. It does not flow through every transaction; it is calculated on the period's results.

Corporate income tax

Tax on the company's profit at a country-specific rate (e.g., 21% US federal, 25% France, 17% Lebanon for most companies, 19% UK, 15% Germany federal plus solidarity / trade tax). Calculated quarterly or annually based on accounting profit adjusted for tax-allowable / disallowable items.

F&O does not natively calculate corporate income tax (that lives in tax provision tools or Excel for most clients). What F&O does book is the tax expense and the income tax liability:

Account	Description	Dr	Cr
Income tax expense	Period tax accrual	25,000.00
Income tax payable	Liability to authority		25,000.00
Totals		25,000.00	25,000.00

Deferred tax

Differences between accounting profit and taxable profit (timing differences) create deferred tax assets or liabilities. Examples: depreciation differences between book and tax, accrued expenses not yet deductible, NOL carryforwards. These are not posted via F&O routine flows; they are manual GL journals based on tax provision calculation.

Withholding tax

Tax withheld at source from a payment. The payer deducts the tax from the gross payment, pays the supplier the net, and remits the withheld amount to the tax authority. Common on professional services, royalties, dividends, interest, especially cross-border. F&O has full withholding tax setup under Tax. (See the worked example in Source to pay, withholding tax.)

LocalizationLebanon-specific accounting and tax notes

Lebanon's accounting and tax landscape has its own rhythm. The notes below cover the items most likely to come up on an implementation. Tax rules in Lebanon have moved frequently since 2019; verify current rates and forms with a Lebanese tax advisor before configuring.

Accounting framework

Lebanon follows a French-style Plan Comptable General influence: a numeric account class structure (1xxx for equity / liabilities, 2xxx for fixed assets, 3xxx for inventory, 4xxx for receivables / payables, 5xxx for cash, 6xxx for expenses, 7xxx for revenues). IFRS is widely used by listed companies and many groups; SMEs often follow Lebanese GAAP which leans on French principles.

Currency reporting

Lebanon's accounting currency is the Lebanese Pound (LBP), but practical bookkeeping in many businesses runs in US Dollars. After 2019 the country has had multiple effective exchange rates, including the official central-bank rate, the bank rate, and the parallel market rate. ERP setups frequently need:

LBP as accounting currency for statutory filings (income tax, VAT).
USD as a reporting currency for management and group reporting.
Multiple exchange rate types (official, bank, market) maintained per period.
Awareness of "lollar" (banked USD pre-2019, subject to capital controls) versus "fresh USD" (post-2019 inflows, free-flowing). The distinction is operational rather than accounting, but contracts and customer / vendor balances often specify which currency variant applies.

VAT

Standard VAT rate has historically been 11% (introduced in 2002).
VAT registration threshold is set in LBP and has been revised after the currency adjustments; verify the current threshold before scoping.
VAT declarations are typically filed quarterly.
Standard forms include the L-3 quarterly declaration and the L-15 annual recap.
Some supplies are exempt (financial services, education, certain medical) and some zero-rated (exports). Standard VAT mechanics apply.

Withholding tax

3% withholding on services rendered by non-residents (including professional services), and other rates apply per service type and residency.
10% withholding on income from movable capital (interest, dividends).
Specific withholding on rental income paid to non-residents.
Form R5 / R6 / R10 (and revisions) are used for various withholding declarations, verify the current forms in scope.

Income tax on profits

Corporate income tax rate has been 17% for the standard regime; specific sectors and free zones have different treatment.
Annual filing typically due in the months following fiscal year-end (calendar-year is dominant).
Estimated payments / advances are required during the year.

Payroll tax (R10)

Income tax on salaries and wages is withheld monthly by the employer and remitted to the Ministry of Finance. The R10 form is the standard payroll-tax declaration. National Social Security (NSSF / CNSS) contributions are calculated separately and remitted on a different cadence.

Stamp duty

4 per mille (0.4%) stamp duty applies to many contracts and invoices in Lebanon. Often booked as a small expense line at contract signing rather than embedded in transaction taxes; confirm with the client whether it should be configured as an additional tax in F&O or treated as a manual journal.

Built-in property tax

Annual tax on rental value of real estate held by the company. Calculated outside F&O and posted via journal.

Practical implementation notes

F&O does not ship a Microsoft-delivered Lebanon localization. Tax codes, withholding tax codes, and electronic reporting (declaration) configurations must be built or sourced from a partner.
Bilateral books (LBP / USD) are best handled as accounting currency LBP plus USD reporting currency, not as two separate ledgers; only do dual ledgers when group reporting is in a different framework (e.g., IFRS group + Lebanese GAAP local).
VAT-exclusive vs. VAT-inclusive pricing: Lebanese practice varies by industry; confirm at requirements stage. Wrong direction yields visible price differences immediately at testing.

OperationsReconciliations every consultant should know

Reconciliations are the audit trail that proves the books are right. A consultant who can list these (and explain how to fix each one) is automatically more credible.

Bank reconciliation: bank statement balance to GL bank account. Difference is unreconciled items (timing differences). Run advanced bank reconciliation in F&O for serious volumes.
AR aging to GL: sum of customer open transactions equals AR control account. Mismatch usually means a manual journal hit AR without going through the customer.
AP aging to GL: same as AR but for vendors.
Inventory subledger to GL: inventory valuation report by item equals inventory control account. Mismatch means manual journals or wrong posting profile setup.
Fixed asset register to GL: sum of asset cost minus accumulated depreciation equals net book value on the balance sheet.
Clearing account zero-out: bank clearing, GRNI / purchase accrual, inventory in transit, asset clearing, remittance, VAT settlement. None of these should have a stale balance at period end.
Intercompany reconciliation: IC receivable in entity A equals IC payable in entity B. Mismatch is a sign of one-sided IC postings.
Tax reconciliation: output tax in GL equals total of customer invoices' VAT lines for the period. Input tax in GL equals total of vendor invoices' VAT lines.

If you can produce these reconciliations cleanly, the financial close is on solid ground. If you cannot, the close is a hope and not a process.

Posting ProfileSales order

Sales order tab Inventory posting profile. Controls how SALES order packing slips (physical) and invoices (financial) hit the GL. Path: Inventory management > Setup > Posting > Posting > Sales order.

Posting Type	Purpose	When It Posts	Account Type	Dr/Cr	P/F	Prerequisites	Guidance
Cost of units, delivered	Records the inventory value being shipped out when a sales order packing slip is posted. Provides visibility of inventory leaving the warehouse before invoicing.	Sales order packing slip posting (physical update). Reversed automatically when the sales invoice is posted.	Asset (Inventory / Materials shipped not invoiced)	Credit. Offset = Cost of goods sold, delivered.	Physical (P). Clearing account reverses at invoice.	Inventory & warehouse management parameters: 'Post packing slip in ledger' = Yes. Item model group: 'Post physical inventory' = Yes.	Provide an interim inventory clearing account (e.g., 'Materials shipped not invoiced'). Many clients reuse the main Inventory account; controller decides whether to split out a clearing GL.
Cost of goods sold, delivered	Records the estimated/temporary COGS on packing slip, so the P&L can reflect cost-of-sale as soon as goods physically ship.	Sales order packing slip posting (physical update). Reversed when invoice posts.	Expense (Deferred / accrued COGS)	Debit. Offset = Cost of units, delivered.	Physical (P). Clearing reverses at invoice.	Same prerequisites as Cost of units, delivered.	Provide a 'Deferred COGS' or 'COGS – packing slip' P&L account. Reverses to actual COGS at invoice.
Cost of units, invoiced	Records the actual/permanent reduction of inventory on the balance sheet when the customer invoice posts.	Sales order invoice posting (financial update).	Asset (Inventory)	Credit. Offset = Cost of goods sold, invoiced.	Financial (F). Not a clearing account.	Item model group: 'Post financial inventory' = Yes.	Provide the main Inventory asset GL account on the balance sheet. Typically the SAME account used for 'Cost of purchased materials invoiced' (PO) and 'Inventory issue/receipt'.
Cost of goods sold, invoiced	Records the actual Cost of Goods Sold expense on the P&L when the customer invoice is posted.	Sales order invoice posting (financial update).	Expense (COGS)	Debit. Offset = Cost of units, invoiced.	Financial (F). Not clearing.	Item model group: 'Post financial inventory' = Yes.	Provide the COGS P&L account. Usually segmented by item group / product category for reporting (e.g., COGS – Raw materials, COGS – Finished goods).
Revenue	Records the sales revenue earned when the customer invoice posts.	Sales order invoice posting.	Revenue	Credit. Offset = Customer balance (Summary) account on the AR posting profile.	Financial (F). Not clearing.	Standard sales invoice.	Provide the Revenue GL account(s). Almost always segmented by product line / item group / business unit. Ask the controller for the revenue mapping by category or item group.
Commission	Records sales commission expense earned by the sales rep / agent for the invoiced order line.	Sales order invoice posting, when commission is calculated.	Expense	Debit. Offset = Commission offset (Commissions payable).	Financial (F). Not clearing.	Commission groups configured on customer + product; commission calculation defined.	Provide a 'Sales commission expense' P&L account. Leave blank only if commissions are not used in this implementation.
Discount	Records the portion of sales price discounted, if the controller wants discounts visible on a separate GL rather than netted into Revenue.	Sales order invoice posting, when line or total discounts exist.	Revenue (contra) or Expense	Debit (reduces revenue). Offset = Revenue / Customer balance.	Financial (F). Not clearing.	Sales line/total discount entered or calculated.	OPTIONAL. Most GAAP/IFRS clients leave this BLANK so discounts net into Revenue. Fill only if the controller wants discounts visible on a separate contra-revenue GL.
Commission offset	Records the commission liability payable to the sales rep / agent.	Sales order invoice posting (when commission is calculated).	Liability	Credit. Offset = Commission expense.	Financial (F). Clearing.	Commission groups configured.	Provide a 'Commissions payable' liability account. Required only if commissions are used.
Deferred revenue on delivery	Records ESTIMATED (accrued) revenue at packing slip, deferred until invoicing for clients that want revenue visibility on shipment for month-end accruals.	Sales order packing slip posting (when deferred revenue on sales delivery is enabled). Auto-reverses at invoice.	Revenue (clearing accrued sales)	Credit. Offset = Deferred revenue offset on delivery.	Physical (P). Clearing.	Item model group: 'Post to Deferred Revenue Account on Sales Delivery' = Yes. AR parameters 'Post packing slip in ledger' = Yes. Inventory & warehouse mgmt 'Post physical sales tax' = Yes.	Provide an 'Accrued sales' / unbilled revenue account. Required only if the client wants packing-slip revenue accrual. Many clients skip this and use Revenue Recognition module instead.
Deferred revenue offset on delivery	Asset / unbilled-AR counterpart to 'Deferred revenue on delivery' records the unbilled receivable on the balance sheet between shipment and invoicing.	Sales order packing slip posting (same trigger as Deferred revenue on delivery).	Asset (Unbilled AR)	Debit. Offset = Deferred revenue on delivery.	Physical (P). Clearing.	Same as Deferred revenue on delivery.	Provide an 'Accounts receivable – not invoiced' / unbilled AR asset account.
Deferred sales tax on delivery	Records estimated sales tax when packing slip posts, in jurisdictions/configurations that require posting tax on physical update.	Sales order packing slip posting (with Post physical sales tax enabled). Reverses at invoice.	Liability (Deferred tax)	Credit.	Physical (P). Clearing.	Inventory & warehouse management parameters: 'Post physical sales tax' = Yes.	Provide a 'Deferred sales tax payable' liability account. Required only if physical tax posting is enabled (uncommon outside specific tax regimes).
Customer prepayment	Records advance customer deposits captured via the Prepayment customer invoice feature (sales-side deposit before final invoice).	Posting a prepayment invoice on a sales order; reversed at final sales invoice.	Liability (Customer deposits / unearned)	Credit (on prepayment receipt); offset = Customer balance.	Financial (F). Clearing (settles at final invoice).	Feature management: 'Prepayment customer invoice' = Enabled. AR parameters configured.	Provide a 'Customer deposits' / 'Unearned revenue' liability account. Required only if the prepayment-customer-invoice feature is in scope.

Posting ProfilePurchase order

Purchase order tab Inventory posting profile. Controls how PO product receipts (physical) and vendor invoices (financial) hit the GL. Path: Inventory management > Setup > Posting > Posting > Purchase order.

Posting Type	Purpose	When It Posts	Account Type	Dr/Cr	P/F	Prerequisites	Guidance
Cost of purchased materials received	Records the inventory value of goods physically received but not yet invoiced i.e., the inventory side of GRNI (goods received not invoiced).	Purchase order product receipt posting (physical). Auto-reverses at invoice.	Asset (Inventory clearing / Materials received not invoiced)	Debit. Offset = Purchase expenditure, un-invoiced.	Physical (P). Clearing.	Inventory & warehouse management parameters: 'Post product receipt in ledger' = Yes. Item model group: 'Post physical inventory' + 'Accrue liability on product receipt' = Yes.	Provide an inventory clearing account typically 'Materials received not invoiced' or the same as main Inventory. Reverses at vendor invoice.
Purchase expenditure, un-invoiced	P&L clearing account that captures the product-receipt expenditure side pending invoice. Used by D365 to generate the second voucher that tracks purchase price variances on standard-cost items.	Purchase order product receipt posting (physical) and PO invoice (reversal).	Expense (clearing)	Debit on receipt; reversed (credit) on invoice.	Physical (P). Clearing.	Same prerequisites as 'Cost of purchased materials received'.	Provide a 'Material receipts' / 'Purchase clearing' P&L account. CRITICAL should net to ~zero each period if everything is invoiced. Common choice: a dedicated clearing GL the controller monitors at close.
Cost of purchased materials invoiced	Records the permanent inventory value on the balance sheet when the vendor invoice is posted.	PO invoice posting (financial).	Asset (Inventory)	Debit. Offset = Purchase expenditure for product.	Financial (F). Not clearing.	Item model group: 'Post financial inventory' = Yes.	Provide the main Inventory asset GL account. SAME account as 'Cost of units invoiced' (sales) and 'Inventory issue/receipt'.
Purchase expenditure for product	P&L clearing counterpart for invoiced inventory. For standard-cost items, the net of this account and 'Purchase expenditure, un-invoiced' captures the purchase price variance.	PO invoice posting (financial). Two vouchers generated for standard-cost items.	Expense (clearing)	Credit. Offset = Purchase expenditure, un-invoiced (received side).	Financial (F). Clearing.	Standard PO invoice.	Provide a 'Materials receipt' clearing P&L account typically the SAME account as 'Purchase expenditure, un-invoiced' so the net is the variance only.
Discount	Records vendor purchase discount when the controller wants discounts visible separately from inventory cost.	PO invoice posting where a vendor discount applies.	Expense (contra) / Revenue	Credit. Offset = Inventory or Purchase expenditure.	Financial (F). Not clearing.	Vendor discount on PO line.	OPTIONAL. Leave BLANK unless the controller wants 'Purchase discounts received' visible as a separate GL. Otherwise discounts net into the inventory/expense cost.
Fixed receipt price profit	(INVENTORY tab) Favorable variance on inventory receipt journals (not PO) when fixed receipt price is used.	Inventory journal receipt for items using Fixed receipt price.	Expense (Variance)	Credit.	Financial (F). Not clearing.	Item model group: 'Fixed receipt price' = Yes.	Provide same PPV / variance account used for the PO version.
Fixed receipt price loss	(INVENTORY tab) Unfavorable variance on inventory receipt journals using fixed receipt price.	Inventory journal receipt for items using Fixed receipt price.	Expense (Variance)	Debit.	Financial (F). Not clearing.	Same as above.	Same PPV / variance account.
Fixed receipt price offset	Balancing entry to fixed-receipt-price profit/loss postings.	PO invoice posting on Fixed receipt price items.	Asset (Stock variation offset)	Either Debit or Credit (depending on profit/loss direction).	Financial (F). Not clearing.	Fixed receipt price configured.	Provide a 'Stock variation' or inventory adjustment offset account. Often a balance-sheet stock variation GL.
Charge	DEPRECATED. Microsoft has retired this posting type. Use 'Stock variation' instead (when 'Post to charge account in ledger' is enabled).	Not applicable no longer used in current versions.	N/A	N/A	N/A	None superseded.	LEAVE BLANK. Per Microsoft documentation: 'This account is no longer used. Use Stock variation instead.' No GL required.
Stock variation	Captures differences between product receipt and invoice unit price differences, miscellaneous charges, and indirect costs added to purchased items.	PO product receipt / invoice where there is a unit price diff, charges, or indirect cost.	Expense (Stock variation)	Credit. Offset = Purchase expenditure, un-invoiced.	Physical & Financial (Both). Not clearing.	AP parameters: 'Post to charge account in ledger' = Yes. Procurement & sourcing: 'Generate charges on product receipt' = Yes. Inventory & warehouse: 'Post packing slip in ledger' = Yes. Item model group: 'Post physical' + 'Post financial' + 'Accrue liabil	Provide a 'Stock variation' / cost-of-materials-variance P&L account. Required when using procurement charges or when receipt/invoice prices may differ.
Purchase, accrual	Records the accrued vendor liability (GRNI Goods Received Not Invoiced) at product receipt.	PO product receipt posting (when accrual is enabled). Reverses at invoice.	Liability (Accrued purchases / GRNI)	Credit. Offset = Purchase expenditure, un-invoiced.	Physical (P). Clearing.	Item model group: 'Accrue liability on product receipt' = Yes.	Provide an 'Accrued purchases' / GRNI liability account. ONE OF THE MOST IMPORTANT BALANCE-SHEET CLEARING ACCOUNTS the controller must monitor this every month-end to ensure receipts get invoiced.
Accrued sales tax on receipt	Records sales/use tax accrued at PO product receipt for taxable purchases (where tax is recognized on physical update).	PO product receipt where 'Post physical tax' is enabled and the line has tax. Reverses at invoice.	Liability (Accrued tax)	Credit.	Both physical and financial. Clearing.	Inventory & warehouse management parameters: 'Post physical tax' = Yes.	Provide an 'Accrued sales tax' liability account. Required ONLY if posting physical tax on receipt is enabled (uncommon outside specific tax regimes).
Fixed asset receipt	Records the acquisition of a fixed asset when a PO line is configured to acquire an FA on product receipt or invoice.	PO product receipt or invoice on FA-linked PO line (per the FA integration setting).	Asset (Fixed asset acquisition)	Debit.	Both. Not clearing.	PO line set up for Fixed asset acquisition; FA integration parameter set to 'Acquire on receipt' or 'Acquire on invoice'.	Provide the Fixed Asset acquisition account. COORDINATE with FA posting profile setup so the FA module and the inventory posting profile agree on the acquisition GL.
Purchase expenditure for expense	P&L account used for non-stocked items, service purchases, or category-based (procurement category) PO lines.	PO receipt/invoice for non-stocked items or procurement-category lines.	Expense (varies based on category)	Debit. Offset = Purchase accrual / Vendor balance.	Both. Not clearing.	Item is non-stocked OR procurement category is used on the line (no item number).	CRITICAL for chart of accounts mapping set up MULTIPLE records of this posting type, one per procurement category. Each category should map to its target expense GL (e.g., Office supplies, IT services, Travel). Get the category-to-GL mapping from the co
Prepayment	Records a vendor prepayment (advance to supplier) when a PO prepayment invoice is posted.	PO prepayment invoice posting; settles when final vendor invoice posts.	Asset (Prepaid expense)	Debit. Offset = Vendor balance.	Both. Not clearing settles at final invoice.	Prepayment feature configured; prepayment posting profile assigned.	Provide a 'Prepaid expense – vendor' asset account. Required only if PO prepayment invoices are in scope.
Landed cost goods in transit	Records inventory in transit when a Landed cost PO is INVOICED before goods physically arrive replaces standard GRNI for landed-cost flows. Goods are owned (asset) but not yet at destination warehouse.	Landed cost PO invoice posting (when goods-in-transit is enabled). Clears when goods are physically received at destination.	Asset (Inventory in transit)	Debit.	Financial (F). Clearing.	Landed cost module enabled; 'Goods in transit management' = Yes on Terms of delivery; goods-in-transit warehouse configured.	Provide an 'Inventory in transit' / 'Goods in transit' asset account. Required ONLY if the Landed Cost module is in scope for this implementation.
Landed cost charge accrual	Accrues the ESTIMATED landed cost charges (freight, duty, insurance) at PO invoice time. Reversed when the actual cost vendor invoice is posted.	Landed cost PO invoice posting estimated voyage costs are accrued; cleared by actual cost invoice.	Liability (Landed cost accrual / clearing)	Credit.	Financial (F). Clearing.	Landed cost module; cost type codes and auto-cost setup configured.	Provide a 'Landed cost accrual' liability/clearing account. Required ONLY if Landed Cost module is in scope.

Posting ProfileInventory

Inventory tab Inventory posting profile. Controls how inventory journals (movement, adjustment, transfer, BOM, counting, quality, quarantine) hit the GL i.e., transactions NOT originating from sales, purchase or production.

Posting Type	Purpose	When It Posts	Account Type	Dr/Cr	P/F	Prerequisites	Guidance
Fixed receipt price profit	(Inventory tab) Favorable variance on inventory journal receipt for items using Fixed receipt price (standard-cost alternative).	Inventory journal receipt for items using Fixed receipt price.	Expense (Variance)	Credit.	Both. Not clearing.	Item model group: 'Fixed receipt price' = Yes; 'Post physical inventory' = Yes.	Use the same PPV/variance GL as the PO version of Fixed receipt price profit.
Fixed receipt price loss	(Inventory tab) Unfavorable variance on inventory journal receipt for items using Fixed receipt price.	Inventory journal receipt for items using Fixed receipt price.	Expense (Variance)	Debit.	Both. Not clearing.	Same as above.	Same PPV/variance GL as Fixed receipt price loss on PO tab.
Inventory issue	Records the reduction of inventory for journal-based transactions (movement, adjustment, transfer journals) that are NOT linked to sales, purchase, or production.	Inventory journals (movement, adjustment, transfer, BOM journal) with a negative quantity.	Asset (Inventory)	Credit. Offset = Inventory expenditure, loss.	Both. Not clearing.	Standard inventory journals.	Provide the main Inventory asset account on the balance sheet. Should match 'Cost of units invoiced' (sales) and 'Cost of purchased materials invoiced' (PO) for consistency.
Inventory expenditure, loss	Records the P&L impact when inventory leaves stock via a non-sales adjustment (write-off, sample, shrinkage).	Inventory issue (negative qty) journal posting.	Expense (Inventory adjustment / shrinkage)	Debit. Offset = Inventory issue.	Both. Not clearing.	Same.	Provide an 'Inventory adjustment – loss / shrinkage' expense account. Many clients use the SAME account for loss and profit; controller can split if wanted.
Inventory receipt	Records the increase to inventory for journal-based receipts not linked to PO/production (movement, counting gain, BOM finished good).	Inventory journals with positive quantity.	Asset (Inventory)	Debit. Offset = Inventory expenditure, profit.	Both.	Standard inventory journals.	Provide same Inventory asset account as 'Inventory issue'.
Inventory expenditure, profit	Records the P&L impact when inventory is added via an adjustment (counting gain, write-up).	Inventory receipt (positive qty) journal posting.	Other income / Expense (gain)	Credit. Offset = Inventory receipt.	Both.	Same.	Provide an 'Inventory adjustment – gain' account, often the SAME account as 'Inventory expenditure, loss'.
Inter-unit payable	Records inter-site / inter-warehouse balancing entry when an item is transferred between sites where the cost differs.	Inventory transfer journal between sites where standard cost differs between sites.	Liability	Debit.	Both.	Multi-site setup with site-specific costs; usually used with standard cost or fixed receipt price.	Provide an 'Inter-unit / inter-site payable' liability account. Required ONLY if running multiple sites with different costs.
Inter-unit receivable	Asset-side counterpart to inter-unit payable for inter-site cost-difference transfers.	Same as above.	Asset	Credit.	Both.	Same.	Provide an 'Inter-unit / inter-site receivable' asset account.
Catch weight loss account	Records inventory loss when the issued weight of a catch-weight item is LESS than the received weight.	Catch-weight item inventory transaction with weight variance (low side).	Expense (Inventory adjustment)	Either.	Both.	Catch weight functionality enabled; item configured as catch-weight product.	Required ONLY if catch-weight items are used (typical for food/meat/produce). Provide an 'Inventory adjustment' P&L account; same account is often used for both loss and profit.
Catch weight profit account	Records inventory gain when issued weight is MORE than received weight on catch-weight items.	Catch-weight item inventory transaction with weight variance (high side).	Expense (Inventory adjustment)	Either.	Both.	Same as above.	Same account as catch weight loss typical practice.
Fixed asset issue	Records inventory leaving stock when an Inventory-to-Fixed-Asset journal converts an inventory item into a fixed asset.	Inventory to fixed asset journal posting.	Asset (Inventory credit)	Credit.	Both.	FA integration enabled; inventory-to-fixed-asset journal used.	Provide the Fixed Asset acquisition account on the FA side; the inventory side credits this posting type. Coordinate with FA posting profile.
Price difference for moving average	Records the cost difference between receipt and invoice for moving-average items that has been expensed because the inventory was already issued before the invoice posted.	PO invoice on moving-average item where price differs from receipt and on-hand isn't sufficient to absorb the difference.	Expense (Variance)	Either.	Both.	Item uses 'Moving average' inventory model.	Provide a 'Moving average price difference' P&L account. Required ONLY if any items use the Moving Average costing method.
Cost revaluation for moving average	Records the impact of explicit cost adjustments on moving-average items (e.g., revaluation journal).	Adjustment of moving-average cost via inventory cost adjustment journal.	Expense (Variance)	Either.	Both.	Item uses 'Moving average'.	Provide a 'Moving average revaluation' P&L account. Required only with Moving Average costing.

Posting ProfileProduction

Production tab Inventory posting profile. Controls how production orders (picking list, report-as-finished, end) hit the GL. Active when 'Ledger posting' on Production control parameters = 'Item and resource' or 'Item and category'. (When set to 'Produc

Posting Type	Purpose	When It Posts	Account Type	Dr/Cr	P/F	Prerequisites	Guidance
Estimated cost of materials consumed	Records the ESTIMATED value of raw materials issued to a production order when the picking list journal is posted. Held until production order is ended.	Production picking list journal posting (physical update). Reversed when the production order is Ended (cost calculated).	Asset (Raw materials Inventory)	Credit. Offset = Estimated cost of materials consumed, WIP.	Physical (P). Clearing.	Production control parameters: 'Post picking list in ledger' = Yes. Item model group: 'Post physical inventory' = Yes.	Provide the raw materials Inventory asset account. Typically the SAME as Inventory issue / Cost of purchased materials invoiced. Required if production is in scope.
Estimated cost of materials consumed, WIP	WIP-side debit when raw materials are issued to production via picking list. Captures the materials at WIP stage on the balance sheet.	Picking list journal posting.	Asset (Work in Process)	Debit. Offset = Estimated cost of materials consumed.	Physical (P). Clearing.	Same as above.	Provide a 'Production WIP – Materials' (or 'WIP Inventory') asset account. Required for production with WIP accounting.
Estimated manufactured cost	Records the ESTIMATED value of the finished good in Finished Goods inventory when 'Report as Finished' is posted (before final cost calculation).	Report-as-finished journal posting on a production order (physical update). Reversed when the production order is Ended.	Asset (Finished Goods)	Debit. Offset = Estimated manufactured cost, WIP.	Physical (P). Clearing.	Production control parameters: 'Post report as finished in ledger' = Yes. Item model group: 'Post physical inventory' = Yes.	Provide the Finished Goods inventory asset account.
Estimated manufactured cost, WIP	WIP-side credit when finished good is reported as finished reduces WIP as it becomes finished inventory.	Report-as-finished journal posting.	Asset (Work in Process)	Credit. Offset = Estimated manufactured cost.	Physical (P). Clearing.	Same.	Same WIP asset account (typically the same as 'Estimated cost of materials consumed, WIP').
Cost of materials consumed	Records the ACTUAL value of materials consumed when the production order is Ended (post-cost calculation). Replaces the estimated entries.	Production order End (cost calculation with End Job).	Asset (Raw materials Inventory)	Credit. Offset = Cost of materials consumed, WIP.	Financial (F). Not clearing.	End production order with 'End job' = Yes.	Same raw materials Inventory account as estimated.
Cost of materials consumed, WIP	WIP-side debit for the ACTUAL materials in WIP on production-order end.	Production order End.	Asset (Work in Process)	Debit. Offset = Cost of materials consumed.	Financial (F).	Same.	Same WIP-materials account as estimated.
Manufactured cost	Records the ACTUAL value of finished goods on the production order End represents finished inventory permanently on the balance sheet.	Production order End (cost calculation).	Asset (Finished Goods)	Debit. Offset = Manufactured cost, WIP.	Financial (F).	Same.	Same Finished Goods account as Estimated manufactured cost.
Manufactured cost, WIP	WIP-side credit at production order End reduces WIP to zero as finished goods are recognized at actual cost.	Production order End.	Asset (Work in Process)	Credit. Offset = Manufactured cost.	Financial (F).	Same.	Same WIP asset account.
Lean service WIP receipt	Used for backflush costing in Lean Manufacturing records WIP receipt for service/process items in lean (kanban) flows.	Lean manufacturing kanban completion / backflush processing.	Asset (Lean WIP)	Debit.	Both.	Lean manufacturing module + backflush costing configured.	LEAVE BLANK unless Lean Manufacturing is in scope. If lean is used, provide a 'Lean service WIP' asset account.
Lean service WIP clearing	Offset / clearing account for the Lean service WIP receipt entries (backflush).	Lean manufacturing backflush processing.	Asset / Liability (Clearing)	Credit.	Both.	Same.	Same required only if Lean Manufacturing is used.

Posting ProfileStandard cost variance

Standard cost variance tab Inventory posting profile. Required for STANDARD COST items. Captures all variances between standard cost and actual cost on purchases, production, and revaluations. Per Microsoft prerequisites, 'Inventory cost revaluation' is

Posting Type	Purpose	When It Posts	Account Type	Dr/Cr	P/F	Prerequisites	Guidance
Purchase price variance	Records the variance between standard cost and actual invoiced price on a PO for standard-cost items. Most common variance account in standard costing.	PO invoice posting on items using Standard cost inventory model.	Expense (Variance)	Either Dr or Cr (favorable vs unfavorable).	Financial (F). Not clearing.	Item uses 'Standard cost' inventory model; cost group assigned.	Provide a 'Purchase price variance' P&L account. Often segmented by cost group (e.g., PPV – Raw materials, PPV – Components). Required for any standard-cost implementation.
Inventory cost revaluation	Records the P&L impact when a new costing version is activated and on-hand standard-cost inventory is revalued to the new cost.	Activation of a new active cost version that changes standard cost on items with on-hand inventory.	Expense (Variance / Revaluation)	Either.	Financial (F).	Standard cost item; new cost version activated.	Provide an 'Inventory cost revaluation' P&L account. MANDATORY per Microsoft prerequisites for standard-cost conversions must be assigned at minimum for all items and all cost groups.
Cost change variance	Records the difference when standard cost differs between sites (multi-site) or when an item is returned and original standard cost differs from current standard cost.	Inter-site transactions on standard-cost items; sales returns where standard cost has changed.	Expense (Variance)	Either.	Financial (F).	Standard cost items with cost changes between original and current.	Provide a 'Cost change variance' P&L account. Controller can combine with PPV or keep separate depends on reporting needs.
Production lot size variance	Records the variance from amortizing constant costs (setup, fixed components) when the production order's good quantity differs from the standard order quantity used in the BOM cost calculation.	Production order End on standard-cost manufactured items where actual run quantity differs from the standard lot size.	Expense (Variance)	Either.	Financial (F).	Standard cost manufactured item; Standard Order Quantity defined; production order ended.	Provide a 'Production lot size variance' P&L account, typically grouped with other production variances.
Production price variance	Records variance from cost-category price differences e.g., labor rate change between standard cost calc and actual reported on the production order.	Production order End when cost category prices on routes differ from those used in the standard cost calc.	Expense (Variance)	Either.	Financial (F).	Standard cost manufactured items; route operations with cost categories.	Provide a 'Production price variance' P&L account.
Production quantity variance	Records variance from quantity differences between estimated and actual over/under-issuing materials, over/under-reporting time, over/under-receiving good quantity.	Production order End where actual consumption qty differs from BOM-based estimate.	Expense (Variance)	Either.	Financial (F).	Standard cost manufactured items.	Provide a 'Production quantity variance' P&L account.
Production substitution variance	Records variance from substitution events using items not on the BOM, manually adding components to the production BOM or operations to the production route, or using a different BOM/route version than the one used in standard cost calc.	Production order End where component substitution or BOM/route changes occurred.	Expense (Variance)	Either.	Financial (F).	Standard cost manufactured items.	Provide a 'Production substitution variance' P&L account.
Rounding variance	Captures rounding differences in standard cost calculation small immaterial residuals.	Production cost calculation when standard cost calc produces a rounding remainder.	Expense (Variance)	Either.	Financial (F).	Standard cost manufactured items.	Provide a 'Rounding difference' P&L account; balances are typically very small and can be a single GL across the company.

Packing slip, physical issue

Sales order · Delivery posting

Inventory physically leaves the warehouse on the packing slip. D365 F&O posts a temporary deferred-COGS entry that gets reversed at the invoice step. No customer receivable yet.

Account	Description	Dr	Cr
Cost of goods sold, delivered	Interim COGS at packing slip (cost of items shipped)	700.00
Cost of units, delivered	Interim inventory issue (offset)		700.00
Totals		700.00	700.00

Note: The two account names here are the actual posting types on the Inventory posting profile (Sales order tab): "Cost of goods sold, delivered" (debit, P&L interim) and "Cost of units, delivered" (credit, balance-sheet interim). They post only when "Post physical inventory" is enabled on the item model group. Both legs reverse on invoice posting and the final COGS / Inventory accounts hit at the invoice step. The cost is the moving-average / FIFO / standard cost of the item, not the sales price.

Sales-order invoice, revenue, COGS, and tax

Sales order · Invoice posting

The invoice is the moment AR, revenue, and final COGS all crystallize. The packing-slip interim entries reverse and the final journals post. Net 1,000 + 20% VAT = 1,200 invoice; cost of the goods sold = 700.

Account	Description	Dr	Cr
Customer (AR)	Invoice total	1,200.00
Sales revenue	Net sales		1,000.00
Sales tax payable	Output VAT 20%		200.00
Cost of goods sold (invoiced)	Final COGS	700.00
Inventory, finished goods (issue)	Reduce inventory at cost		700.00
Cost of units, delivered	Reverse packing-slip interim	700.00
Cost of goods sold, delivered	Reverse packing-slip interim		700.00
Totals		2,600.00	2,600.00

Note: If the invoice is posted directly (no packing slip first), the four interim lines drop out, only the AR / revenue / VAT / COGS (invoiced) / Inventory issue lines remain. Account selection comes from the customer posting profile (AR), the inventory posting profile (Issue, COGS at invoice and at packing slip), and the sales tax setup.

Customer payment, direct deposit

AR · Payment journal

Customer pays the invoice in full by bank transfer. When the method of payment has no Bridging account configured, the bank account is debited directly.

Account	Description	Dr	Cr
Bank, operating account	Customer remittance	1,200.00
Customer (AR)	Settle invoice		1,200.00
Totals		1,200.00	1,200.00

Note: Settlement against the invoice can be automatic (mark-to-settle on the payment journal) or manual via the customer transactions form.

Customer payment, via a bridging account

AR · Method of payment with bridging posting

When the method of payment is configured with "Bridging posting" enabled and a Bridging account specified, the receipt first hits the bridging account at payment posting; the bank account is debited later via a separate transfer (manual bridge-clearing journal, or auto-cleared by Advanced bank reconciliation when the bank statement reconciles).

Account	Description	Dr	Cr
Bridging account	Receipt pending bank confirmation	1,200.00
Customer (AR)	Settle invoice		1,200.00
Step 1 totals		1,200.00	1,200.00
Bank, operating account	Bank statement reconciled	1,200.00
Bridging account	Clear bridged transaction		1,200.00
Step 2 totals		1,200.00	1,200.00

Note: The bridging account is set on the Method of payment (Cash and bank management), not on the bank itself, the same MoP can be reused across customers. The bridging account should reconcile to zero against unreconciled bank statement lines at every period close. Step 2 is performed manually via "Functions > Select bridged transactions" in a general journal, or automated when Advanced bank reconciliation matches the statement (the auto-clear behaviour is itself a feature, separate from bridging itself).

Customer prepayment, unapplied receipt

AR · Customer pays before invoicing

Customer wires money before the invoice is issued. The cash is real but the obligation isn't recognized as revenue yet, sits as a customer advance / unapplied receipt liability.

Account	Description	Dr	Cr
Bank, operating account	Customer wire received	12,000.00
Customer advances / unapplied receipts	Liability until invoiced		12,000.00
Step 1: receipt		12,000.00	12,000.00
Customer advances / unapplied receipts	Apply prepayment to invoice	12,000.00
Customer (AR)	Settle invoice with prepayment		12,000.00
Step 2: application		12,000.00	12,000.00

Note: The customer advances account is driven by a dedicated Customer posting profile (set up under Accounts receivable > Setup > Customer posting profiles). That profile is then selected on AR parameters > Ledger and sales tax in the "Posting profile with prepayment journal voucher" field, F&O uses it for any payment journal line marked as a Prepayment journal voucher. Track its balance, old prepayments that never got invoiced are an audit flag.

Cash discount taken at payment

AR · Early-payment discount

Customer pays within the discount window (e.g., 2/10 net 30). The discount reduces revenue (or sales discounts contra-revenue) and the customer settles the invoice with less cash.

Account	Description	Dr	Cr
Bank, operating account	Cash received (1,200 less 24)	1,176.00
Sales discounts (contra-revenue)	2% early-payment discount	24.00
Customer (AR)	Settle invoice in full		1,200.00
Totals		1,200.00	1,200.00

Note: The cash discount account is the dedicated Main account on the Cash discounts setup (Accounts receivable > Setup > Payment > Cash discounts), not a generic contra-revenue account. Most clients map it to a "Sales discounts taken" or "Cash discount given" GL account. Whether the discount is taken on the gross invoice or net of VAT depends on local tax rules and is a setup option (Calculate cash discount on amount including sales tax).

Credit memo, customer return / dispute

AR · Credit memo on returned goods

Customer returns 100 EUR of damaged goods (cost 60). Credit memo reverses the original invoice partially, returns the inventory, and reverses VAT.

Account	Description	Dr	Cr
Sales returns / allowances	Reverse revenue	100.00
Sales tax payable	Reverse output VAT	20.00
Customer (AR)	Reduce receivable		120.00
Inventory, finished goods	Goods back on hand	60.00
COGS	Reverse cost		60.00
Totals		180.00	180.00

Note: If the goods are not physically returned (e.g., a goodwill credit), the inventory and COGS lines drop out. Use a sales-allowance reason code to keep these scenarios reportable separately.

Customer write-off, uncollectible

AR · Bad-debt write-off

An invoice has aged past collectibility. After approval, the balance is written off to bad-debt expense (or against the allowance for doubtful accounts if a reserve is in use).

Account	Description	Dr	Cr
Bad-debt expense (or Allowance for doubtful accounts)	Write off the receivable	500.00
Customer (AR)	Clear the open invoice		500.00
Totals		500.00	500.00

Note: If a reserve was previously booked (Dr Bad-debt expense / Cr Allowance), the write-off only debits the Allowance, the P&L hit was taken at reserve time. Approval limits live in the AR write-off setup.

Customer overpayment, refund

AR · Refund of excess payment

Customer pays 1,300 against a 1,200 invoice. The 100 overpayment sits as a customer advance, then refunded.

Account	Description	Dr	Cr
Bank	Receipt 1,300	1,300.00
Customer (AR)	Settle 1,200 invoice		1,200.00
Customer advances / unapplied	100 overpayment		100.00
Step 1: overpayment received		1,300.00	1,300.00
Customer advances / unapplied	Refund the customer	100.00
Bank	Refund issued		100.00
Step 2: refund		100.00	100.00

Note: A refund in D365 F&O can be processed via a refund journal in AR, which creates an offsetting payment to the customer; the customer balance reconciles to zero after both legs.

Deferred revenue, annual subscription invoiced upfront

AR · Subscription billing / ASC 606

Customer is invoiced for a 12-month subscription (12,000) in January. Revenue is deferred and recognized 1,000 per month.

Account	Description	Dr	Cr
Customer (AR)	Annual invoice	14,400.00
Deferred revenue	Liability until earned		12,000.00
Sales tax payable	VAT 20% on full invoice		2,400.00
Step 1: invoice		14,400.00	14,400.00
Deferred revenue	Recognize Jan revenue	1,000.00
Subscription revenue	Earn 1/12		1,000.00
Step 2: monthly recognition		1,000.00	1,000.00

Note: In F&O, this is handled via Revenue recognition / Subscription billing module, or with an amortization schedule on a free-text invoice. The deferral schedule must align with delivery, not invoice date, ASC 606 / IFRS 15.

Multi-currency invoice, period-end FX revaluation

AR · Foreign currency revaluation

Invoice issued in USD when the company's accounting currency is EUR. The open AR balance is revalued at period end to current rates; difference is unrealized FX. At payment, the difference between revalued and paid amount becomes realized FX.

Account	Description	Dr	Cr
Customer (AR)	USD 12,000 @ 0.92 = EUR 11,040	11,040.00
Sales revenue	Net		9,200.00
Sales tax payable	VAT		1,840.00
Step 1: invoice (initial)		11,040.00	11,040.00
Customer (AR)	Reval at 0.94 → EUR 11,280; gain 240	240.00
FX gain (unrealized)	Period-end revaluation		240.00
Step 2: month-end reval		240.00	240.00
Bank	Receipt at 0.93 → EUR 11,160	11,160.00
FX loss (realized)	Reval gain reversed; rate moved back	120.00
Customer (AR)	Settle revalued AR 11,280		11,280.00
Step 3: receipt		11,280.00	11,280.00

Note: Use the Foreign currency revaluation routine in GL (or AR sub-ledger reval). Only the open balance is revalued; settled invoices have already crystallized their FX. Set the unrealized vs. realized accounts deliberately, reporting requires telling them apart.

Customer rebate accrual, volume incentive

Sales · Rebate at invoice

Customer earns a 2% volume rebate on a 10,000 invoice. Net revenue is reduced; the rebate liability accrues until claim and settlement.

Account	Description	Dr	Cr
Sales rebate (contra-revenue)	Accrue 2% rebate at invoice	200.00
Customer rebate accrual	Liability to customer		200.00
Step 1: accrual		200.00	200.00
Customer rebate accrual	Settle on claim approval	200.00
Customer (AR)	Issue credit memo		200.00
Step 2: settlement		200.00	200.00

Note: Driven by the Rebate Management or Trade allowance management module. Rebate accruals must be reconciled at period end; old accruals indicate broken claim flow.

Product receipt, inventory item with PO

Inventory PO · Receipt accrual (GRNI)

Goods are received before the vendor invoice arrives. D365 F&O accrues the inventory liability via the Purchase accrual / Receipt accrual account, often called GRNI (Goods Received Not Invoiced).

Account	Description	Dr	Cr
Inventory, raw materials	1,000 kg @ 15.00	15,000.00
Purchase accrual (GRNI)	Liability for uninvoiced receipt		15,000.00
Totals		15,000.00	15,000.00

Note: Posting requires the parameter "Post product receipt in ledger" to be enabled (PO module parameters). VAT does not post at receipt, it waits for the invoice. If destination is "Inspection, " an interim Receiving inspection account is used before being moved to inventory at put-away.

Vendor invoice, three-way matched

AP · Invoice posting

Vendor invoice arrives. Net 15,000 + 20% VAT = 18,000. The GRNI accrual clears, the supplier liability is recognized, and recoverable VAT is captured.

Account	Description	Dr	Cr
Purchase accrual (GRNI)	Clear receipt accrual	15,000.00
Sales tax recoverable (Input VAT)	VAT 20%	3,000.00
Vendor (AP, trade)	Total liability		18,000.00
Totals		18,000.00	18,000.00

Note: If product receipt is not posted to the ledger (parameter off), the receipt has no accounting and the invoice debits Inventory directly: Dr Inventory 15,000 / Dr Sales tax recoverable 3,000 / Cr Vendor 18,000. The GRNI account in either case must reconcile to "received-not-invoiced" reports at every close.

Vendor invoice, service / expense item, accrue at receipt

AP · Service PO · Accrual policy "perpetual"

For non-stocked services, F&O can accrue at receipt (perpetual) or at period end (manual accrual). Accrue-at-receipt mirrors the inventory pattern.

Account	Description	Dr	Cr
Maintenance expense (615600)	Service received in January	1,200.00
Purchase accrual (GRNI)	Liability		1,200.00
Step 1: service receipt (Jan)		1,200.00	1,200.00
Purchase accrual (GRNI)	Clear accrual	1,200.00
Sales tax recoverable	VAT 20%	240.00
Vendor (AP)	Invoice 1,440		1,440.00
Step 2: invoice (Feb)		1,440.00	1,440.00

Note: The expense is recognized in the right period (Jan) even though the invoice arrives in Feb. VAT is recoverable only when the invoice is recorded (legally Feb), so it sits at Inventory/expense level until then.

Period-end accrual, service received but not invoiced

R2R close · Manual or generated accrual

Same service as above, but the policy is to accrue only at month-end (no receipt accounting). At period end, an accrual is booked and reverses the next period.

Account	Description	Dr	Cr
Maintenance expense	Accrue Jan expense	1,200.00
Accrued expenses	Liability for unbilled		1,200.00
Step 1: Jan close accrual		1,200.00	1,200.00
Accrued expenses	Reverse on Feb 1	1,200.00
Maintenance expense	Reverse		1,200.00
Step 2: Feb 1 reversal		1,200.00	1,200.00

Note: The Feb invoice then posts cleanly (Dr Expense / Dr VAT / Cr Vendor), and the auto-reversal cancels out. Use a journal name with auto-reversing checked to make this routine.

Vendor payment, direct deposit

AP · Payment journal

Pay the 18,000 invoice by bank transfer. When the method of payment has no Bridging account, the bank account is credited directly.

Account	Description	Dr	Cr
Vendor (AP)	Settle invoice	18,000.00
Bank, operating account	Outflow		18,000.00
Totals		18,000.00	18,000.00

Note: If the method of payment has a Bridging account configured, replace Bank with Bridging account at payment posting; a second entry (manual select-bridged-transactions journal, or auto-clear via Advanced bank reconciliation) moves the balance from the bridging account to the bank when the statement reconciles.

Vendor payment, early-payment cash discount taken

AP · 2/10 net 30

Pay the 18,000 invoice within the discount window. 2% discount (360) reduces the cost or hits a Purchase discount income account.

Account	Description	Dr	Cr
Vendor (AP)	Settle invoice in full	18,000.00
Bank	Net cash 17,640		17,640.00
Purchase discounts (contra expense / income)	2% discount earned		360.00
Totals		18,000.00	18,000.00

Note: The vendor cash discount account is set on the same Cash discounts page (linked to a payment term in AP setup). Some jurisdictions require the discount to reduce the inventory cost or expense, not flow to a separate income account, F&O supports this via the "Discount offset accounts" parameter (Use main accounts on the invoice lines). Confirm policy with the controller, it's an audit-flagged area.

Vendor prepayment, advance against future invoice

AP · Prepayment vendor invoice

Pay a vendor 5,000 advance in January. February: receive the actual invoice for 12,000 + VAT and apply the prepayment.

Account	Description	Dr	Cr
Vendor advances / prepayments (asset)	Recognize prepaid asset	5,000.00
Vendor (AP)	Liability		5,000.00
Step 1: prepayment invoice		5,000.00	5,000.00
Vendor (AP)	Settle prepayment liability	5,000.00
Bank	Pay vendor		5,000.00
Step 2: prepayment payment		5,000.00	5,000.00
Inventory / expense	Net invoice	12,000.00
Sales tax recoverable	VAT 20%	2,400.00
Vendor (AP)	Total invoice		14,400.00
Step 3: standard invoice		14,400.00	14,400.00
Vendor (AP)	Apply prepayment	5,000.00
Vendor advances / prepayments	Clear prepaid asset		5,000.00
Step 4: prepayment application		5,000.00	5,000.00

Note: D365 F&O distinguishes "Prepayment invoice" (a real invoice creating a prepaid asset, with VAT recoverable per the prepayment VAT rules of the country) from a vendor "Prepayment journal voucher" (no invoice, just a cash advance posted directly). The two are accounted differently, confirm with the controller which one applies.

Return to vendor (RTV), quality reject

Inventory · Return on PO

100 kg of the 1,000 kg shipment fails quality. Return to vendor before the invoice; vendor issues a credit memo.

Account	Description	Dr	Cr
Purchase accrual (GRNI)	Reverse accrual for 100 kg	1,500.00
Inventory, raw materials	Reduce on-hand		1,500.00
Step 1: physical return		1,500.00	1,500.00
Vendor (AP)	Vendor credit memo	1,800.00
Purchase accrual (GRNI)	Clear remaining accrual		1,500.00
Sales tax recoverable	Reverse VAT		300.00
Step 2: credit memo		1,800.00	1,800.00

Note: If the return happens after the invoice has been posted, step 1 looks different, Dr Vendor / Cr Inventory. The matching mechanism in F&O links the return to the original PO line so quantities reconcile.

Vendor invoice with withholding tax (WHT)

AP · Withholding at payment

Consulting invoice for 10,000 (no VAT, professional services). 10% WHT is withheld at payment and remitted to the tax authority.

Account	Description	Dr	Cr
Consulting expense	Service expense	10,000.00
Vendor (AP)	Gross liability		10,000.00
Step 1: invoice		10,000.00	10,000.00
Vendor (AP)	Settle full liability	10,000.00
Bank	Net to vendor		9,000.00
Withholding tax payable	WHT held back		1,000.00
Step 2: payment with WHT		10,000.00	10,000.00
Withholding tax payable	Remit to authority	1,000.00
Bank	WHT remittance		1,000.00
Step 3: WHT remittance		1,000.00	1,000.00

Note: WHT in F&O is set up under Tax → Withholding tax codes / groups. Some jurisdictions require WHT certificates for the vendor, ensure the right reporting layout is configured for ER (Electronic Reporting).

Purchase price variance (PPV), standard cost item

Cost · Standard cost variance

For standard-cost items, the standard cost is fixed at receipt; any difference between PO/invoice price and standard goes to Purchase price variance, not into inventory. Standard 10/unit; PO and invoice both 11/unit; 100 units.

Account	Description	Dr	Cr
Inventory, at standard	100 × 10 (standard)	1,000.00
Purchase price variance (PPV)	Receipt 100 over standard	100.00
Purchase accrual (GRNI)	Receipt at PO price		1,100.00
Step 1: receipt		1,100.00	1,100.00
Purchase accrual (GRNI)	Clear accrual	1,100.00
Vendor (AP)	Invoice at PO price		1,100.00
Step 2: invoice (no further variance)		1,100.00	1,100.00

Note: PPV applies only to items with costing method "Standard" on the item model group, the variance is recognized at receipt, when the unit posts into inventory at the standard cost. The "Purchase price variance" account is on the Inventory posting profile (Standard cost variance tab). Persistent PPV signals stale standards.

Price difference, invoice price higher than PO (non-standard cost)

Cost · Invoice vs. PO price

For items costed FIFO / LIFO / weighted average / moving average, the receipt posts at PO price. If the invoice price differs from the PO price, the gap posts to "Price difference" at invoice time. PO 10/unit; invoice 11/unit; 100 units.

Account	Description	Dr	Cr
Inventory	100 × 10 at receipt (PO price)	1,000.00
Purchase accrual (GRNI)	Receipt accrual		1,000.00
Step 1: receipt		1,000.00	1,000.00
Purchase accrual (GRNI)	Clear accrual at PO price	1,000.00
Price difference	Invoice 100 over PO	100.00
Vendor (AP)	Invoice at actual price		1,100.00
Step 2: invoice posting		1,100.00	1,100.00

Note: Under moving average / weighted average, you can choose to absorb the price difference into inventory cost instead of expensing it via the Price difference account, this is controlled by the "Price difference for moving average" / cost-management feature settings. The default is to expense to Price difference. Costing method on the item model group drives the behavior. Track Price difference; persistent variance signals stale PO pricing or supplier price drift.

Multi-currency vendor invoice, period-end FX revaluation

AP · Foreign currency revaluation

Vendor invoice in USD when the entity is EUR-based. Revaluation logic mirrors AR: open balance revalued at period end, realized FX at payment.

Account	Description	Dr	Cr
Inventory / expense	USD 10,000 @ 0.92 → EUR 9,200	9,200.00
Vendor (AP)	Liability in EUR		9,200.00
Step 1: invoice (initial)		9,200.00	9,200.00
FX loss (unrealized)	Reval at 0.94 → liability now 9,400	200.00
Vendor (AP)	Increase liability		200.00
Step 2: month-end reval		200.00	200.00
Vendor (AP)	Settle revalued 9,400	9,400.00
Bank	Pay USD 10,000 @ 0.93 → 9,300		9,300.00
FX gain (realized)	Settled below revalued		100.00
Step 3: payment		9,400.00	9,400.00

Note: Run AP foreign currency revaluation as part of the close. Realized vs. unrealized FX accounts should be separate to support P&L analysis.

Consignment inventory, ownership at consumption

Inventory · Vendor-managed stock

Vendor-owned stock physically at the warehouse. No accounting at receipt; ownership transfers (and accounting hits) at consumption.

Account	Description	Dr	Cr
Step 1: physical receipt, no accounting (vendor still owns the stock).
Step 1 totals		0.00	0.00
Inventory, raw materials	Move to owned stock at consumption	500.00
Purchase accrual (GRNI)	Liability accrual		500.00
Step 2: ownership change		500.00	500.00

Note: The consumption-triggered "consignment replenishment order" in F&O moves the units from vendor stock to owned stock and creates the PO/receipt automatically. The vendor invoice arrives later and clears the GRNI as normal.

Retainage / holdback

AP · Construction / project holdback

Construction vendor invoice for 100,000. 10% retainage held back until project acceptance.

Account	Description	Dr	Cr
CIP / construction expense	Full cost recognized	100,000.00
Vendor (AP), current portion	90% payable now		90,000.00
Retainage payable	10% held back		10,000.00
Step 1: invoice with retainage		100,000.00	100,000.00
Vendor (AP)	Pay current portion	90,000.00
Bank	Outflow		90,000.00
Step 2: pay 90%		90,000.00	90,000.00
Retainage payable	Release at acceptance	10,000.00
Bank	Final payment		10,000.00
Step 3: release retainage		10,000.00	10,000.00

Note: Retainage in F&O is enabled per project / vendor and posts via a dedicated retainage account. Track aged retainage, un-released retainage is a vendor relationship issue waiting to happen.

Lockbox / auto-applied receipts

AR/Cash · High-volume settlement

Bank lockbox file imports hundreds of customer payments. F&O auto-matches each line to its open invoice. The journal pattern is the same as a manual receipt, multiplied by N.

Account	Description	Dr	Cr
Bank clearing	Total file amount	125,000.00
Customer (AR)	Settle multiple invoices		125,000.00
Step 1: lockbox import		125,000.00	125,000.00
Bank, operating account	Bank statement reconciled	125,000.00
Bank clearing	Clear pending		125,000.00
Step 2: bank reconciliation		125,000.00	125,000.00

Note: Unmatched lockbox lines fall to a suspense / unidentified receipt account and require treasury triage. Auto-application rules (by customer, by amount, by reference) drive match rate, tune them.

Counting journal, positive adjustment (found stock)

Inventory · Cycle count

Physical count finds 50 units more than the system. The difference is booked to inventory adjustment income.

Account	Description	Dr	Cr
Inventory	50 units × 10.00 unit cost	500.00
Inventory adjustment / Misc income	Found stock		500.00
Totals		500.00	500.00

Note: Use a dedicated inventory adjustment account, not generic income, auditors want to see counting variances broken out separately from operational results.

Counting journal, negative adjustment (shrinkage)

Inventory · Cycle count

Count is short by 25 units. Booked to inventory write-off / shrinkage expense.

Account	Description	Dr	Cr
Inventory write-off / shrinkage	25 × 10.00	250.00
Inventory	Reduce on-hand		250.00
Totals		250.00	250.00

Note: Separate accounts for shrinkage, scrap, and quality loss when reporting needs to distinguish them. Shrinkage trend is a KPI for warehouse operations.

Movement journal, internal consumption

Inventory · Issue to expense

Issue 30 units of supplies to maintenance use. Inventory drops; expense recognized.

Account	Description	Dr	Cr
Maintenance expense	Internal consumption	120.00
Inventory, supplies	Reduce on-hand		120.00
Totals		120.00	120.00

Note: The offset account is set on the movement journal line. For repeat scenarios, use journal templates so the offset is defaulted correctly.

Transfer journal, between warehouses (no in-transit)

Inventory · Same legal entity transfer

Move 100 units from Warehouse A to Warehouse B in the same legal entity. With basic transfer (no in-transit), there is no GL impact at all, only sub-ledger inventory dimension change.

Account	Description	Dr	Cr
No GL accounting, only inventory dimensions change. Cost remains in the same Inventory account.
Totals		0.00	0.00

Note: If you need GL postings for site-level reporting (e.g., site is a financial dimension that splits Inventory by warehouse), the dimension change does flow but the natural account is unchanged.

Transfer order, with in-transit

Inventory · Inter-site transfer

Transfer order ships 100 units from Site A to Site B via In-transit. Posting splits across ship and receive events.

Account	Description	Dr	Cr
Inventory in transit	Goods on the road	1,000.00
Inventory, Site A	Reduce origin		1,000.00
Step 1: ship		1,000.00	1,000.00
Inventory, Site B	Increase destination	1,000.00
Inventory in transit	Clear in-transit		1,000.00
Step 2: receive		1,000.00	1,000.00

Note: Inventory in transit is a clearing account, it must reconcile to "transfer orders shipped but not received" at every period close. Aged in-transit is a sign of broken transfer-order receipt discipline.

BOM journal, assemble a kit

Inventory · Light manufacturing

Components are consumed and a kit (parent item) is assembled, no production order, just an inventory BOM journal.

Account	Description	Dr	Cr
Inventory, kit (parent)	Receive 10 kits at total component cost	800.00
Inventory, component A	Issue 20 × 30		600.00
Inventory, component B	Issue 10 × 20		200.00
Totals		800.00	800.00

Note: BOM journal does not capture labor or overhead, for that you need a production order. Use BOM journal only for simple assemblies.

Landed cost, estimated charge allocation at receipt

LCM · Estimated voyage charge

Import 8,000 bags @ 2.00. Estimated freight = 1,000, allocated by quantity. Receipt accounting splits material and landed cost.

Account	Description	Dr	Cr
Inventory, raw materials (material)	8,000 × 2.00	16,000.00
Inventory, raw materials (landed cost portion)	Estimated freight allocated	800.00
Purchase accrual (GRNI)	Goods accrual		16,000.00
Landed cost clearing	Estimated charge clearing		800.00
Totals		16,800.00	16,800.00

Note: The estimated charge is allocated only to the received quantity (8,000 of 10,000); the 200 unallocated portion stays in the voyage until the rest is received. Charge basis (aggregate, per-unit, % of value) and allocation basis (quantity, weight, volume, value) are decisions per charge type.

Landed cost, actual freight invoice and variance

LCM · Actual charge invoice

Freight vendor's actual invoice: 1,200 + VAT. The 200 variance vs. estimate is allocated to the received units, increasing inventory cost.

Account	Description	Dr	Cr
Landed cost clearing	Charge invoice debits clearing	1,200.00
Sales tax recoverable	VAT 20%	240.00
Vendor (freight carrier)	Liability		1,440.00
Step 1: actual charge invoice		1,440.00	1,440.00
Inventory, raw materials	Allocate variance to received qty (160)	160.00
Landed cost clearing	Reduce clearing		160.00
Step 2: actual variance allocation		160.00	160.00

Note: If the inventory has already been issued (sold or consumed) before the actual charge invoice arrives, the variance must be allocated to COGS / WIP for those units rather than to inventory. F&O Cost Accounting handles the post-issue cost adjustment.

Inventory revaluation, cost adjustment

Cost Mgmt · Manual revaluation

Standard cost is updated for an item with on-hand stock. Inventory value adjusts to the new standard.

Account	Description	Dr	Cr
Inventory	Increase to new standard	2,000.00
Inventory revaluation gain	Cost-change recognized		2,000.00
Totals		2,000.00	2,000.00

Note: Direction reverses if the new standard is lower (Dr Inventory revaluation loss / Cr Inventory). Revaluation runs as part of the cost-version activation when a new standard is published.

Obsolescence reserve

Inventory · Period-end reserve

Aged inventory analysis flags 5,000 of stock as slow-moving / likely-obsolete. Reserve booked; no physical write-off yet.

Account	Description	Dr	Cr
Inventory obsolescence expense	Recognize provision	5,000.00
Inventory obsolescence reserve (contra-asset)	Reduce net inventory value		5,000.00
Step 1: book reserve		5,000.00	5,000.00
Inventory obsolescence reserve	Use reserve when scrapped	5,000.00
Inventory	Physical write-off		5,000.00
Step 2: physical write-off		5,000.00	5,000.00

Note: If there is no reserve and the stock is scrapped directly, debit Inventory write-off (P&L) instead of the reserve. The reserve approach gives smoother P&L and earlier disclosure.

Picking list, issue raw materials to WIP

Production order · Material consumption

Issue 200 kg resin (40/kg) and 100 kg additive (15/kg) to a production order for 100 finished units.

Account	Description	Dr	Cr
WIP, material	Resin to WIP	8,000.00
Inventory, raw materials	Consume resin		8,000.00
WIP, material	Additive to WIP	1,500.00
Inventory, raw materials	Consume additive		1,500.00
Totals		9,500.00	9,500.00

Note: Picking list is "estimated" until the production order is fully ended; final variance posts at end. Posting at picking-list time is controlled per item model group / production parameters.

Route card, labor and overhead to WIP

Production order · Resource charges

50 machine hours @ 30 = 1,500 labor cost. Overhead applied at 25% of labor = 375.

Account	Description	Dr	Cr
WIP, labor	50 hours × 30	1,500.00
Labor / production absorption	Credit absorption account		1,500.00
WIP, overhead	25% of labor	375.00
Overhead absorbed	Apply burden		375.00
Totals		1,875.00	1,875.00

Note: The credit side of labor/overhead in F&O depends on whether you absorb actuals (labor accrual) or use rate-based standards (absorption clearing accounts that reconcile to actual payroll / overhead pools at period end).

Report as finished (RAF), receive finished goods

Production order · Completion

100 finished units received into FG inventory at estimated cost (material + labor + overhead = 11,375 / 100 = 113.75 per unit).

Account	Description	Dr	Cr
Inventory, finished goods	RAF at estimated cost	11,375.00
WIP, material	Clear material WIP		9,500.00
WIP, labor	Clear labor WIP		1,500.00
WIP, overhead	Clear overhead WIP		375.00
Totals		11,375.00	11,375.00

Note: Under standard costing, RAF is at standard cost (e.g., 11,000) and the difference (375) becomes a variance at order End. Under moving average, the RAF cost is the actual cost of inputs.

End production order, variance posting (standard cost)

Production order · End

Standard cost of the FG was 110 per unit (total 11,000). Actuals were 11,375. The 375 variance is recognized at End.

Account	Description	Dr	Cr
Production variance, usage / efficiency	Recognize variance	375.00
WIP (residual)	Clear remaining WIP		375.00
Totals		375.00	375.00

Note: F&O distinguishes substitution, lot-size, quantity, and price variances. Each posts to a separate account if configured, lets finance see why a production order was off-plan.

Scrap, recognize loss during production

Production order · Scrap

5 units scrapped during production. Scrap cost (5 × 110 standard = 550) booked to scrap expense.

Account	Description	Dr	Cr
Scrap expense	Recognize scrap	550.00
WIP	Reduce WIP for scrap		550.00
Totals		550.00	550.00

Note: Some policies absorb scrap into the unit cost of the surviving units (treating it as expected loss); others recognize it explicitly. The choice is set in the production parameters.

Outside processing (OSP), subcontracted operation

Production · Subcontract

A coating operation is subcontracted. The PO line is linked to the production order. The vendor invoice posts to WIP, not to expense.

Account	Description	Dr	Cr
WIP, subcontract	Subcontract receipt	800.00
Purchase accrual (GRNI)	Accrual		800.00
Step 1: receipt		800.00	800.00
Purchase accrual (GRNI)	Clear accrual	800.00
Sales tax recoverable	VAT 20%	160.00
Vendor (AP)	Total invoice		960.00
Step 2: invoice		960.00	960.00

Note: If OSP is wired as a regular service PO without the production-order link, the cost lands in operating expense, not WIP, and the unit cost is wrong. Verify the link in UAT.

Sale of finished goods, COGS recognition

SO invoice · COGS to GL

Sell 50 of those FG units at 200 each. Revenue 10,000; COGS at standard 110 × 50 = 5,500.

Account	Description	Dr	Cr
Customer (AR)	50 × 200 × 1.20	12,000.00
Sales revenue, finished goods	Net		10,000.00
Sales tax payable	VAT 20%		2,000.00
COGS	50 × 110 standard	5,500.00
Inventory, finished goods	Reduce on-hand at cost		5,500.00
Totals		17,500.00	17,500.00

Note: COGS is the same flow as Order to cash, included here to close the manufacturing loop. Gross margin per unit (200 − 110 = 90) is what production-order variances ultimately distort.

A misconfigured posting profile is the fastest way to break a financial reconciliation. The tables below map out the required setup for Customer, Vendor, Fixed Assets, and System-level Automatic Transactions.

ProfileCustomer

Field / Posting Type	Definition	Used For	Transactions	Account Type	Implementation Guidance
Summary account	The main Accounts Receivable (A/R) trade control account that holds the open balance owed by customers. The AR subledger's link to the General Ledger.	Posts the customer balance each time a customer invoice (sales order, free text, project) is created (debit) or a payment is received (credit). Used by the 'Customer balance' posting type.	Sales order invoices; Free text invoices; Project invoices; Customer payment journals; Credit notes; Collection letters; Interest notes; Settlement.	Asset (Balance Sheet) current asset sub-ledger control account.	Provide the GL account used (or to be created) as 'Accounts Receivable Trade'. Use separate posting profiles + accounts if the client wants to split domestic vs. foreign currency AR, intercompany AR, or AR for prepayments.
Liquidity account for payments	Pointer to the bank/cash account used by Cash Flow Forecasting for incoming customer payments. NOT used for accounting posting.	Indicates the liquidity account D365 should assume for forecasted cash inflows from open customer invoices.	Cash flow forecast reports only. No voucher created.	Asset (Bank/Cash) informational only.	If Cash flow forecasting is enabled, provide the bank account into which customer receipts are typically deposited. Otherwise, leave blank.
Sales tax prepayments	Clearing account for the tax portion of customer prepayments (deposits/advances) before the invoice is issued.	Holds VAT/sales tax on customer prepayments. Reversed when the prepayment is settled against the actual invoice. The default posting profile for prepayments is configured in AR parameters.	Customer prepayment journals (with tax); Settlement of prepayment against an invoice.	Liability Sales tax clearing (Balance Sheet).	If the client receives prepayments/deposits from customers that include tax, provide a Tax-on-prepayments clearing account. Otherwise, leave blank.
Liabilities for discount account	The liability account where the future cash discount allowed to a customer is parked at invoice time, before the discount is actually taken.	When an invoice is issued with a cash discount potentially available, this account temporarily holds the discount as a liability. It is reversed when the discount is either taken (becomes an expense) or expires (released back to revenue / AR).	Customer invoice posting (when cash discount is offered); Settlement (clears the liability).	Liability Deferred Revenue / Discounts (Balance Sheet, clearing).	Provide this account ONLY if the client uses the 'Liabilities for discount' feature for early-payment discounts. Many clients ignore this and post the discount directly when taken in that case leave it blank.
Collection letter sequence	Default collection letter sequence (dunning workflow) used for customers under this posting profile.	Determines which collection letter cadence (e.g., Reminder -> 1st Notice -> Final Notice -> Legal) is applied when collection letters are run for these customers.	Collection letter generation and posting; aging-based dunning runs.	Setting (a sequence code) not an account.	Decide with the client whether collections are managed via D365 dunning. If yes, set up a collection letter sequence first (Credit and collections > Setup) and reference it here. If they outsource collections or run them outside D365, leave blank.
Interest code	Default interest/finance-charge code used to compute interest on overdue customer balances.	Drives interest calculation rules (rate, basis, grace days) for the customers assigned to this profile.	Interest note calculation and posting; aging reports that show projected interest.	Setting (an interest code) not an account.	Only required if the client charges interest on overdue receivables. If used, set up the interest code first (Credit and collections > Setup > Interest) and reference it here.
TABLE RESTRICTIONS Behavior toggles applied to this posting profile
Allow automatic settlement	Toggle that controls whether customer transactions on this posting profile can be settled automatically.	When Yes, customer payments are matched to invoices automatically based on settlement priority. When No, the user must manually mark transactions in 'Settle open transactions' or 'Enter customer payments'.	Customer payment journals; Settle open transactions; Periodic settlements.	Setting (Yes/No) not an account.	Most AR teams keep this ON so that cash application is fast. Confirm with the AR lead whether they want full auto-match or manual control.
Interest	Toggle that controls whether interest is calculated for transactions under this posting profile.	Even if an interest code is assigned (Setup tab), this toggle is the master ON/OFF switch. When No, no interest will be generated for any customer on this profile.	Interest note calculation runs.	Setting (Yes/No) not an account.	Turn on only if interest will actually be charged on this profile. Common pattern: have a separate 'NoInterest' profile for strategic customers.
Collection letter	Toggle that controls whether collection letters are generated for transactions under this posting profile.	Master ON/OFF switch for dunning. Even if a Collection letter sequence is assigned, no letters are issued if this is No.	Collection letter runs; dunning reports.	Setting (Yes/No) not an account.	Turn on only if the client wants automated dunning. Some clients exclude key accounts (government, intercompany) by putting them on a profile with this toggle OFF.
Close	The posting profile a customer transaction is reclassified into once it has been fully settled.	Allows reporting closed AR separately from open AR. After settlement, D365 stamps transactions with this profile.	Settlement of any customer transaction; closed-vs-open reporting.	Setting (a posting profile name) not an account.	Optional. Use only if the client requires separate reporting of historical/closed AR. Typically left blank for greenfield implementations.

ProfileVendor

Field / Posting Type	Definition	Used For	Transactions	Account Type	Implementation Guidance
Summary account	The main Accounts Payable (A/P) trade control account that holds the open balance owed to vendors. This is the AP subledger's link to the General Ledger and is the single most important account on the profile.	Posts the vendor's balance each time a vendor invoice is created (credit) or a vendor payment is made (debit). Used by the 'Vendor balance' posting type. D365 sets 'Do not allow manual entry' on this account automatically so users cannot post journals directly to it.	Vendor invoice posting (PO and non-PO); Invoice journal; Vendor payment journal; Promissory notes; Credit notes; Settlement.	Liability (Balance Sheet) typically a current liability sub-ledger control account.	Provide the GL account that the client uses (or wants to create) as 'Accounts Payable Trade'. If the client distinguishes between domestic and foreign-currency payables, intercompany payables, or one-time vendors, create a separate posting profile for each and provide a separate AP control account per profile.
Liquidity account for payments	A pointer to the bank/cash account used by Cash Flow Forecasting. This account is NOT used for actual posting it only feeds the cash flow forecast.	Indicates which liquidity (bank) account should be assumed when forecasting future cash outflows for open vendor invoices. Only appears if Cash flow forecasts are enabled in General ledger parameters.	Cash flow forecast reports and inquiries. No accounting voucher is ever created from this field.	Asset (Bank/Cash) informational only.	If the client uses Cash flow forecasting, provide the primary bank/operating account that vendor payments are expected to be drawn from. If they don't use the feature, this field can be left blank.
Sales tax prepayments	The clearing account used when a vendor prepayment that includes tax is recorded, before the actual invoice is posted.	Holds the tax portion of vendor prepayments until the related invoice arrives. It is reversed automatically when the prepayment is settled against the invoice. Linked via the 'Prepayment journal voucher' posting profile in AP parameters.	Vendor prepayment journals (with sales tax); Application/settlement of the prepayment against an invoice.	Liability Sales tax clearing (Balance Sheet).	If the client makes prepayments to vendors that include VAT/sales tax, provide a Tax-on-prepayments clearing account. If prepayments don't include recoverable tax, this can usually be omitted.
Arrival	The 'Goods invoiced not approved' or 'Pending invoice' liability account, used when invoices are registered (basic info captured) but not yet approved.	Records unapproved vendor invoices entered through the Invoice register journal. On approval, the balance is reclassified from this Arrival account to the Summary account (real AP).	Invoice register journal (Step 1 of the 2-step AP process); Approval journal that reverses the registration.	Liability Accrued / Unapproved AP (Balance Sheet, clearing).	Required ONLY if the client uses the Invoice register / 2-step approval process (typical when AP enters invoices and Accounting approves them later). Provide an 'Invoices received pending approval' liability account. If they post invoices directly, this can be left blank.
Offset account	The debit offset used together with the Arrival account when registering an unapproved invoice.	Acts as the offset (debit) for the credit posted to the Arrival account when an invoice is registered in the Invoice register journal. Cleared on approval.	Invoice register journal (debit side); Approval journal (credit side).	Asset / Clearing (Balance Sheet, typically the same nature as the Arrival account but the offset side often a 'Purchases pending approval' clearing).	Required only if the Invoice register journal is used. Provide a clearing/suspense account. Often this is configured to be the same nature as Arrival so the net of the two is zero until approval.
TABLE RESTRICTIONS Behavior toggles applied to this posting profile
Allow automatic settlement	Toggle that controls whether transactions on this posting profile can be settled automatically when payments are posted.	When set to Yes, D365 will match payments to invoices automatically (FIFO or by settlement priority) without requiring the user to manually mark the invoices. When No, users must use the 'Settle open transactions' page.	Vendor payment journals; Settle open transactions; Periodic settlement runs.	Setting (Yes/No) not an account.	Decide with the client whether AP wants automatic matching (faster, fewer clicks, but harder to audit) or manual matching (slower, full control). Most clients start with No to give AP visibility, then switch on automatic settlement once they trust the process.
Close	The posting profile that a transaction is moved to once it has been fully settled (i.e., when the open balance becomes zero).	Lets the client report on closed/historical AP separately from open AP. After settlement, D365 stamps the transaction with this 'Close' posting profile so the original profile contains only open items.	Settlement of any vendor transaction; reporting on closed vs. open balances.	Setting (a posting profile name) not an account.	Optional. If the client wants closed transactions reported against a different AR/AP control account (e.g., historical AP), create a second posting profile (e.g., 'CLOSED') and reference it here. Most implementations leave this blank or reference the same profile.

ProfileFixed Assets

Field / Posting Type	Definition	Used For	Transactions	Account Type	Implementation Guidance
LEDGER ACCOUNTS One row per fixed asset transaction type (set per Posting profile / Book / Group)
Acquisition	The asset account that captures the purchase/acquisition cost of a fixed asset (the gross book value).	Posted when the asset is acquired either via an acquisition proposal, a fixed asset journal, a vendor invoice with a fixed asset line, or a free text invoice. This account holds the original cost of the asset on the balance sheet.	Acquisition transactions (FA journal); Acquisition proposal from a PO/AP invoice; Capitalization from project/WIP.	Asset Property, Plant & Equipment (cost / gross book value).	Provide an asset cost account for each fixed asset group (e.g., Buildings Cost, Vehicles Cost, IT Equipment Cost). Best practice is one cost account per asset group.
Acquisition adjustment	Adjustment account used when the original acquisition cost of an existing asset is increased or decreased after initial capitalization (e.g., capitalized improvements, freight/tax additions, refunds).	Posted when an Acquisition adjustment transaction is run against an existing asset. Increases or decreases the gross cost without overwriting the original Acquisition record.	Acquisition adjustment journal; Capitalization of additional invoice costs after the asset is already in service.	Asset PPE Adjustments (same nature as Acquisition; often the same account).	Common practice: use the SAME account as the Acquisition account so cost and adjustments roll up together. Confirm whether the client wants them separated for reporting.
Depreciation	Accumulated depreciation (contra-asset) account that records the periodic reduction in the asset's book value.	Posted when the Calculate depreciation proposal is run and the resulting journal is posted. Credit accumulates over the asset's life.	Monthly/periodic depreciation runs; manual depreciation journals.	Contra-asset Accumulated Depreciation (Balance Sheet). Offset (debit) goes to Depreciation Expense (P&L).	Provide a contra-asset (Accumulated Depreciation) account AND a P&L Depreciation Expense account for each fixed asset group. The expense account is entered as the Offset account on the same posting line.
Depreciation adjustment	Adjustment to accumulated depreciation, used when prior-period depreciation needs to be corrected outside the normal monthly run.	Posted via a Depreciation adjustment journal. Common when changing service life, method, or correcting an error.	Depreciation adjustment journal; lifecycle change re-calculations.	Contra-asset Accumulated Depreciation (often same account as Depreciation).	Standard practice: use the same Accumulated Depreciation account as the regular Depreciation line. Same for the offset (Depreciation expense).
Revaluation	Account used when an asset's value is revalued upward or downward to fair value (IFRS revaluation model).	Posted when a revaluation transaction is run. Typical offset is a Revaluation Surplus equity account (upward) or P&L expense (downward).	Fixed asset revaluation journal; periodic revaluation under IFRS/local GAAP.	Asset (or Equity Revaluation surplus, depending on direction).	Required only if the client revalues fixed assets (IFRS revaluation model or local statutory revaluation). Provide a Revaluation account and a Revaluation surplus offset. If they use cost model only, leave blank.
Write up adjustment	Records an increase in the carrying value of an asset (other than standard revaluation), typically reversing a previous impairment.	Posted via a Write-up adjustment journal to increase NBV. Offsets a previously recognized impairment loss or recognizes appreciation.	Write-up journal; impairment reversal.	Asset PPE / Other income (offset).	Required only if the client uses write-ups (impairment reversals). Many clients leave this unused.
Write down adjustment	Records a decrease in the carrying value of an asset due to impairment.	Posted via a Write-down adjustment journal. Reduces NBV with an offset to impairment loss (P&L expense).	Write-down journal; impairment events.	Asset (contra) PPE write-downs / P&L Impairment loss (offset).	Required if the client performs impairment testing. Provide a balance sheet 'Accumulated Write-down' account and a P&L 'Impairment Loss' offset.
Disposal sale	Header-level disposal sale account. Acts as the gain/loss on disposal account. The actual breakdown of what reverses where is controlled by the Disposal: Sale grid below.	Posted when an asset is sold (via free text invoice, FA journal disposal sale, or sales order with FA). The full disposal accounting is then expanded by the Disposal: Sale post-value rows.	Free text invoice with FA line and Disposal type = Sale; FA journal Disposal Sale; Sales order with FA.	P&L Gain/Loss on Sale of Fixed Assets (typically).	Provide a 'Gain/(Loss) on Sale of Fixed Assets' P&L account. This same account is typically referenced as the offset on every line of the Disposal: Sale section.
Disposal scrap	Header-level disposal scrap account. Acts as the gain/loss on scrap account. Detailed reversal mechanics live in the Disposal: Scrap grid.	Posted when an asset is scrapped/written off (no sales value). The Disposal: Scrap section breaks down the reversal of acquisition and depreciation.	FA journal Disposal Scrap; mass-disposal proposals.	P&L Loss on Scrap of Fixed Assets.	Provide a 'Loss on Scrap of Fixed Assets' P&L account. Same logic as Disposal sale: this account also appears as the offset on each Disposal: Scrap detail line.
Provision for reserve	Used in jurisdictions or industries that require a tax/statutory reserve to be set aside against fixed asset gains (e.g., reinvestment reserves).	Posted when a provision-for-reserve transaction is created against a disposal gain.	Statutory reserve postings tied to disposal gains (rare outside specific localizations).	Equity / Liability Statutory Reserve.	Only relevant in specific localizations (e.g., some European tax regimes). Most implementations leave this blank.
Transfer from reserve	Used to release a previously created Provision for reserve back to retained earnings or income.	Posted when the reserve is released (usually at the end of the statutory holding period).	Reserve release transactions.	Equity release to retained earnings.	Only required if 'Provision for reserve' is used. Otherwise leave blank.
DISPOSAL Sale (Post-value rows; sets accounts used when an asset is SOLD)
Setup rule (applies to every line below)	During disposal, D365 reverses each prior posting and routes the offset to the Gain/Loss on Sale account.	Triggered on any disposal-sale transaction.	FA journal Disposal Sale; Free text invoice with FA line; Sales order with FA.	See per-line account types below	MAIN ACCOUNT: the ORIGINAL account where the transaction type was posted (e.g., for 'Depreciation (Prior year)' use the Accumulated Depreciation account). OFFSET ACCOUNT: the Gain/Loss on Sale of Fixed Assets account. EXCEPTION Net book value: BOTH main
Depreciation (Prior year)	Reverses the accumulated depreciation recorded in prior fiscal years for the asset being disposed.	On disposal, D365 reverses the prior-year depreciation out of Accumulated Depreciation and routes the offset to the Gain/Loss on disposal account.	Disposal Sale processing on the asset.	Reverses the ORIGINAL account from the Ledger accounts section	MAIN ACCOUNT = the same account used in the Ledger accounts section above for this transaction type. OFFSET = the Gain/(Loss) on Sale of Fixed Assets account.
Depreciation (this year)	Reverses the accumulated depreciation recorded in the current fiscal year for the asset being disposed.	Same as Depreciation (Prior year) but for current-year depreciation. Often configured to use the same accounts.	Disposal Sale processing on the asset.	Reverses the ORIGINAL account from the Ledger accounts section	MAIN ACCOUNT = the same account used in the Ledger accounts section above for this transaction type. OFFSET = the Gain/(Loss) on Sale of Fixed Assets account.
Acquisition value	Lump-sum reversal of the gross acquisition cost (all years combined) when disposal is configured as non-detailed. Used when the Fixed assets parameter 'Post disposal transactions in detail' = No.	Reverses the entire acquisition cost (original + adjustments, all years) in one line.	Disposal Sale processing on the asset.	Reverses the ORIGINAL account from the Ledger accounts section	MAIN ACCOUNT = the same account used in the Ledger accounts section above for this transaction type. OFFSET = the Gain/(Loss) on Sale of Fixed Assets account.
Net book value	Captures the asset's net book value at the moment of disposal. The KEY line on the disposal profile.	This is the ONLY line where BOTH main account and offset account should be the Gain/Loss on Disposal account effectively zeroing the asset's NBV and recognizing the gain or loss against the sale value (or zero for scrap).	Disposal Sale processing on the asset.	P&L Gain/(Loss) on Sale of Fixed Assets (BOTH sides)	BOTH Main account AND Offset account = Gain/Loss on Sale of Fixed Assets. This is what writes the NBV off to P&L.
Sales value	Records the proceeds received from selling the asset (only meaningful in Disposal sale).	The proceeds are credited to this account; in most setups this is the same Gain/Loss on Disposal account so that the net P&L impact = Sale value NBV.	Disposal Sale processing on the asset.	P&L Gain/(Loss) on Sale of Fixed Assets	Main account = Gain/Loss on Sale of Fixed Assets. Offset is the AR/Bank account (filled in by the document).
Acquisition adjustments (this year)	Reverses current-year adjustments to the acquisition cost.	Used when 'Post disposal transactions in detail' = Yes and acquisition adjustments are tracked separately from initial acquisition.	Disposal Sale processing on the asset.	Reverses the ORIGINAL account from the Ledger accounts section	MAIN ACCOUNT = the same account used in the Ledger accounts section above for this transaction type. OFFSET = the Gain/(Loss) on Sale of Fixed Assets account.
Acquisition adjustments (Prior years)	Reverses prior-year acquisition adjustments.	Same as 'Acquisition adjustments (this year)' but for prior fiscal years.	Disposal Sale processing on the asset.	Reverses the ORIGINAL account from the Ledger accounts section	MAIN ACCOUNT = the same account used in the Ledger accounts section above for this transaction type. OFFSET = the Gain/(Loss) on Sale of Fixed Assets account.
Acquisition (this year)	Reverses the current-year portion of the original acquisition cost (detail mode).	Used when 'Post disposal transactions in detail' = Yes. Mutually exclusive with the lump-sum 'Acquisition value' line.	Disposal Sale processing on the asset.	Reverses the ORIGINAL account from the Ledger accounts section	MAIN ACCOUNT = the same account used in the Ledger accounts section above for this transaction type. OFFSET = the Gain/(Loss) on Sale of Fixed Assets account.
Acquisition (prior years)	Reverses the prior-years portion of the original acquisition cost (detail mode).	Used in conjunction with 'Acquisition (this year)' when disposal detail mode is enabled.	Disposal Sale processing on the asset.	Reverses the ORIGINAL account from the Ledger accounts section	MAIN ACCOUNT = the same account used in the Ledger accounts section above for this transaction type. OFFSET = the Gain/(Loss) on Sale of Fixed Assets account.
Depreciation adjustments (Prior year)	Reverses prior-year depreciation adjustments (manual corrections).	Typically uses the same accounts as Depreciation (Prior year).	Disposal Sale processing on the asset.	Reverses the ORIGINAL account from the Ledger accounts section	MAIN ACCOUNT = the same account used in the Ledger accounts section above for this transaction type. OFFSET = the Gain/(Loss) on Sale of Fixed Assets account.
Depreciation adjustments (this year)	Reverses current-year depreciation adjustments.	Typically uses the same accounts as Depreciation (this year).	Disposal Sale processing on the asset.	Reverses the ORIGINAL account from the Ledger accounts section	MAIN ACCOUNT = the same account used in the Ledger accounts section above for this transaction type. OFFSET = the Gain/(Loss) on Sale of Fixed Assets account.
Revaluations (this year)	Reverses revaluation amounts booked in the current year.	Only relevant for clients using the revaluation model.	Disposal Sale processing on the asset.	Reverses the ORIGINAL account from the Ledger accounts section	MAIN ACCOUNT = the same account used in the Ledger accounts section above for this transaction type. OFFSET = the Gain/(Loss) on Sale of Fixed Assets account.
Revaluations (prior years)	Reverses revaluation amounts booked in prior years.	Only relevant for clients using the revaluation model.	Disposal Sale processing on the asset.	Reverses the ORIGINAL account from the Ledger accounts section	MAIN ACCOUNT = the same account used in the Ledger accounts section above for this transaction type. OFFSET = the Gain/(Loss) on Sale of Fixed Assets account.
Write up adjustments (prior years)	Reverses prior-year write-ups (impairment reversals).	Used only when write-up adjustments have been historically posted.	Disposal Sale processing on the asset.	Reverses the ORIGINAL account from the Ledger accounts section	MAIN ACCOUNT = the same account used in the Ledger accounts section above for this transaction type. OFFSET = the Gain/(Loss) on Sale of Fixed Assets account.
Write up adjustments (this year)	Reverses current-year write-ups.	Used only when write-up adjustments have been historically posted.	Disposal Sale processing on the asset.	Reverses the ORIGINAL account from the Ledger accounts section	MAIN ACCOUNT = the same account used in the Ledger accounts section above for this transaction type. OFFSET = the Gain/(Loss) on Sale of Fixed Assets account.
Write down adjustments (prior years)	Reverses prior-year impairment write-downs.	Used only when write-down adjustments have been historically posted.	Disposal Sale processing on the asset.	Reverses the ORIGINAL account from the Ledger accounts section	MAIN ACCOUNT = the same account used in the Ledger accounts section above for this transaction type. OFFSET = the Gain/(Loss) on Sale of Fixed Assets account.
Write down adjustments (this year)	Reverses current-year impairment write-downs.	Used only when write-down adjustments have been historically posted.	Disposal Sale processing on the asset.	Reverses the ORIGINAL account from the Ledger accounts section	MAIN ACCOUNT = the same account used in the Ledger accounts section above for this transaction type. OFFSET = the Gain/(Loss) on Sale of Fixed Assets account.
Provision for reserve	Reverses statutory reserves previously created against this asset.	Only relevant in jurisdictions that require such reserves.	Disposal Sale processing on the asset.	Reverses the ORIGINAL account from the Ledger accounts section	MAIN ACCOUNT = the same account used in the Ledger accounts section above for this transaction type. OFFSET = the Gain/(Loss) on Sale of Fixed Assets account.
Transfer from reserve	Releases reserves back to equity at disposal.	Only relevant in jurisdictions that require statutory reserves.	Disposal Sale processing on the asset.	Reverses the ORIGINAL account from the Ledger accounts section	MAIN ACCOUNT = the same account used in the Ledger accounts section above for this transaction type. OFFSET = the Gain/(Loss) on Sale of Fixed Assets account.
Extraordinary depreciation (prior years)	Reverses prior-year extraordinary depreciation (accelerated/bonus depreciation).	Used by clients that take special/extraordinary tax depreciation.	Disposal Sale processing on the asset.	Reverses the ORIGINAL account from the Ledger accounts section	MAIN ACCOUNT = the same account used in the Ledger accounts section above for this transaction type. OFFSET = the Gain/(Loss) on Sale of Fixed Assets account.
Extraordinary depreciation (this year)	Reverses current-year extraordinary depreciation.	Used by clients that take special/extraordinary tax depreciation.	Disposal Sale processing on the asset.	Reverses the ORIGINAL account from the Ledger accounts section	MAIN ACCOUNT = the same account used in the Ledger accounts section above for this transaction type. OFFSET = the Gain/(Loss) on Sale of Fixed Assets account.
Special depreciation allowance	Reverses any special depreciation allowance (e.g., bonus depreciation in the US tax book) previously booked.	Used by clients with special depreciation rules (US Sec.179/bonus, special allowances).	Disposal Sale processing on the asset.	Reverses the ORIGINAL account from the Ledger accounts section	MAIN ACCOUNT = the same account used in the Ledger accounts section above for this transaction type. OFFSET = the Gain/(Loss) on Sale of Fixed Assets account.
DISPOSAL Scrap (Post-value rows; sets accounts used when an asset is SCRAPPED)
Setup rule (applies to every line below)	During scrap, D365 reverses prior postings and routes the offset to the Loss on Scrap account. No sales proceeds.	Triggered on any disposal-scrap transaction.	FA journal Disposal Scrap; mass scrap proposals.	See per-line account types below	MAIN ACCOUNT: the ORIGINAL account where the transaction type was posted. OFFSET ACCOUNT: Loss on Scrap of Fixed Assets. EXCEPTION Net book value: BOTH main and offset = Loss on Scrap of Fixed Assets so the NBV is written off to P&L. Tip: most clients u
Depreciation (Prior year)	Reverses the accumulated depreciation recorded in prior fiscal years for the asset being disposed.	On disposal, D365 reverses the prior-year depreciation out of Accumulated Depreciation and routes the offset to the Gain/Loss on disposal account.	Disposal Scrap processing on the asset.	Reverses the ORIGINAL account from the Ledger accounts section	MAIN ACCOUNT = the same account used in the Ledger accounts section above. OFFSET = the Loss on Scrap of Fixed Assets account.
Depreciation (this year)	Reverses the accumulated depreciation recorded in the current fiscal year for the asset being disposed.	Same as Depreciation (Prior year) but for current-year depreciation. Often configured to use the same accounts.	Disposal Scrap processing on the asset.	Reverses the ORIGINAL account from the Ledger accounts section	MAIN ACCOUNT = the same account used in the Ledger accounts section above. OFFSET = the Loss on Scrap of Fixed Assets account.
Acquisition value	Lump-sum reversal of the gross acquisition cost (all years combined) when disposal is configured as non-detailed. Used when the Fixed assets parameter 'Post disposal transactions in detail' = No.	Reverses the entire acquisition cost (original + adjustments, all years) in one line.	Disposal Scrap processing on the asset.	Reverses the ORIGINAL account from the Ledger accounts section	MAIN ACCOUNT = the same account used in the Ledger accounts section above. OFFSET = the Loss on Scrap of Fixed Assets account.
Net book value	Captures the asset's net book value at the moment of disposal. The KEY line on the disposal profile.	This is the ONLY line where BOTH main account and offset account should be the Gain/Loss on Disposal account effectively zeroing the asset's NBV and recognizing the gain or loss against the sale value (or zero for scrap).	Disposal Scrap processing on the asset.	P&L Loss on Scrap of Fixed Assets (BOTH sides)	BOTH Main account AND Offset account = Loss on Scrap of Fixed Assets. Writes the NBV off to P&L.
Sales value	Records the proceeds received from selling the asset (only meaningful in Disposal sale).	The proceeds are credited to this account; in most setups this is the same Gain/Loss on Disposal account so that the net P&L impact = Sale value NBV.	Disposal Scrap processing on the asset.	Not typically used for scrap	Usually not configured for scrap (no proceeds). Leave blank unless partial recovery is expected.
Acquisition adjustments (this year)	Reverses current-year adjustments to the acquisition cost.	Used when 'Post disposal transactions in detail' = Yes and acquisition adjustments are tracked separately from initial acquisition.	Disposal Scrap processing on the asset.	Reverses the ORIGINAL account from the Ledger accounts section	MAIN ACCOUNT = the same account used in the Ledger accounts section above. OFFSET = the Loss on Scrap of Fixed Assets account.
Acquisition adjustments (Prior years)	Reverses prior-year acquisition adjustments.	Same as 'Acquisition adjustments (this year)' but for prior fiscal years.	Disposal Scrap processing on the asset.	Reverses the ORIGINAL account from the Ledger accounts section	MAIN ACCOUNT = the same account used in the Ledger accounts section above. OFFSET = the Loss on Scrap of Fixed Assets account.
Acquisition (this year)	Reverses the current-year portion of the original acquisition cost (detail mode).	Used when 'Post disposal transactions in detail' = Yes. Mutually exclusive with the lump-sum 'Acquisition value' line.	Disposal Scrap processing on the asset.	Reverses the ORIGINAL account from the Ledger accounts section	MAIN ACCOUNT = the same account used in the Ledger accounts section above. OFFSET = the Loss on Scrap of Fixed Assets account.
Acquisition (prior years)	Reverses the prior-years portion of the original acquisition cost (detail mode).	Used in conjunction with 'Acquisition (this year)' when disposal detail mode is enabled.	Disposal Scrap processing on the asset.	Reverses the ORIGINAL account from the Ledger accounts section	MAIN ACCOUNT = the same account used in the Ledger accounts section above. OFFSET = the Loss on Scrap of Fixed Assets account.
Depreciation adjustments (Prior year)	Reverses prior-year depreciation adjustments (manual corrections).	Typically uses the same accounts as Depreciation (Prior year).	Disposal Scrap processing on the asset.	Reverses the ORIGINAL account from the Ledger accounts section	MAIN ACCOUNT = the same account used in the Ledger accounts section above. OFFSET = the Loss on Scrap of Fixed Assets account.
Depreciation adjustments (this year)	Reverses current-year depreciation adjustments.	Typically uses the same accounts as Depreciation (this year).	Disposal Scrap processing on the asset.	Reverses the ORIGINAL account from the Ledger accounts section	MAIN ACCOUNT = the same account used in the Ledger accounts section above. OFFSET = the Loss on Scrap of Fixed Assets account.
Revaluations (this year)	Reverses revaluation amounts booked in the current year.	Only relevant for clients using the revaluation model.	Disposal Scrap processing on the asset.	Reverses the ORIGINAL account from the Ledger accounts section	MAIN ACCOUNT = the same account used in the Ledger accounts section above. OFFSET = the Loss on Scrap of Fixed Assets account.
Revaluations (prior years)	Reverses revaluation amounts booked in prior years.	Only relevant for clients using the revaluation model.	Disposal Scrap processing on the asset.	Reverses the ORIGINAL account from the Ledger accounts section	MAIN ACCOUNT = the same account used in the Ledger accounts section above. OFFSET = the Loss on Scrap of Fixed Assets account.
Write up adjustments (prior years)	Reverses prior-year write-ups (impairment reversals).	Used only when write-up adjustments have been historically posted.	Disposal Scrap processing on the asset.	Reverses the ORIGINAL account from the Ledger accounts section	MAIN ACCOUNT = the same account used in the Ledger accounts section above. OFFSET = the Loss on Scrap of Fixed Assets account.
Write up adjustments (this year)	Reverses current-year write-ups.	Used only when write-up adjustments have been historically posted.	Disposal Scrap processing on the asset.	Reverses the ORIGINAL account from the Ledger accounts section	MAIN ACCOUNT = the same account used in the Ledger accounts section above. OFFSET = the Loss on Scrap of Fixed Assets account.
Write down adjustments (prior years)	Reverses prior-year impairment write-downs.	Used only when write-down adjustments have been historically posted.	Disposal Scrap processing on the asset.	Reverses the ORIGINAL account from the Ledger accounts section	MAIN ACCOUNT = the same account used in the Ledger accounts section above. OFFSET = the Loss on Scrap of Fixed Assets account.
Write down adjustments (this year)	Reverses current-year impairment write-downs.	Used only when write-down adjustments have been historically posted.	Disposal Scrap processing on the asset.	Reverses the ORIGINAL account from the Ledger accounts section	MAIN ACCOUNT = the same account used in the Ledger accounts section above. OFFSET = the Loss on Scrap of Fixed Assets account.
Provision for reserve	Reverses statutory reserves previously created against this asset.	Only relevant in jurisdictions that require such reserves.	Disposal Scrap processing on the asset.	Reverses the ORIGINAL account from the Ledger accounts section	MAIN ACCOUNT = the same account used in the Ledger accounts section above. OFFSET = the Loss on Scrap of Fixed Assets account.
Transfer from reserve	Releases reserves back to equity at disposal.	Only relevant in jurisdictions that require statutory reserves.	Disposal Scrap processing on the asset.	Reverses the ORIGINAL account from the Ledger accounts section	MAIN ACCOUNT = the same account used in the Ledger accounts section above. OFFSET = the Loss on Scrap of Fixed Assets account.
Extraordinary depreciation (prior years)	Reverses prior-year extraordinary depreciation (accelerated/bonus depreciation).	Used by clients that take special/extraordinary tax depreciation.	Disposal Scrap processing on the asset.	Reverses the ORIGINAL account from the Ledger accounts section	MAIN ACCOUNT = the same account used in the Ledger accounts section above. OFFSET = the Loss on Scrap of Fixed Assets account.
Extraordinary depreciation (this year)	Reverses current-year extraordinary depreciation.	Used by clients that take special/extraordinary tax depreciation.	Disposal Scrap processing on the asset.	Reverses the ORIGINAL account from the Ledger accounts section	MAIN ACCOUNT = the same account used in the Ledger accounts section above. OFFSET = the Loss on Scrap of Fixed Assets account.
Special depreciation allowance	Reverses any special depreciation allowance (e.g., bonus depreciation in the US tax book) previously booked.	Used by clients with special depreciation rules (US Sec.179/bonus, special allowances).	Disposal Scrap processing on the asset.	Reverses the ORIGINAL account from the Ledger accounts section	MAIN ACCOUNT = the same account used in the Ledger accounts section above. OFFSET = the Loss on Scrap of Fixed Assets account.

ProfileAccounts for Automatic Transactions

Field / Posting Type	Definition	Used For	Transactions	Account Type	Implementation Guidance
Penny difference in reporting currency	Catches sub-cent rounding differences that arise when foreign-currency amounts are translated to the reporting currency.	D365 posts the tiny residual (typically less than 1 cent) here so the voucher balances.	Any multi-currency voucher where reporting-currency translation produces a rounding remainder.	Expense Miscellaneous Expense (P&L).	Provide a 'Rounding Differences Reporting Currency' expense account. A single small P&L account is sufficient; balances should be near zero.
Error account	Fallback account used when the system cannot determine the correct posting account for a transaction.	Receives postings that would otherwise fail. Should be monitored every period and re-classified.	Any voucher where the configured posting profile is missing or invalid for a posting type.	Expense Suspense / Error Account (P&L or Balance Sheet).	REQUIRED. Provide an 'Error / Suspense' account. The team should reconcile this account monthly any balance means something posted incorrectly and needs investigation.
Penny difference in accounting currency	Catches sub-cent rounding differences when foreign-currency amounts are translated to the accounting (transaction) currency.	Same concept as the reporting-currency penny difference but for the accounting currency.	Multi-currency vouchers where translation to accounting currency leaves a small residual.	Expense Miscellaneous Expense (P&L).	Provide a 'Rounding Differences Accounting Currency' account (or use the same one as Reporting currency).
Year-end result	The destination account for the net Profit or Loss when the Year-end close process is run usually Retained Earnings.	During year-end close, D365 moves balances of all P&L (Profit & Loss type) main accounts into this single account.	Year-end closing process only (not periodic close).	Equity Retained Earnings (Balance Sheet).	REQUIRED. Provide the Retained Earnings account. This is one of the most important automatic accounts to configure correctly before the first fiscal year-end.
Cash discount	Default cash discount account used when no more specific cash discount account is configured (lowest priority in the cash-discount account resolution).	Cash discount account selection order: (1) Alternative cash discount on Settle page > (2) Customer/Vendor cash discount on Ledger posting group > (3) Cash discount code's Main account > (4) THIS field on Accounts for automatic transactions.	Cash discount on customer or vendor settlement when the more specific accounts are blank.	Revenue contra (customer) or Expense (vendor).	Generally NOT used directly the client should configure the Cash discount account on each Cash discount code instead. Leave this blank or point it at the same account as the cash discount codes.
Balance account for consolidation differences	Balance sheet (capital) side of penny differences that arise during consolidation when foreign-currency subsidiaries are revalued.	Posted when consolidation revaluation produces a rounding/translation residual on a balance sheet account.	Consolidation runs with currency revaluation.	Equity / OCI Cumulative Translation Adjustment (Balance Sheet).	Required only for clients running D365 consolidation. Provide a 'CTA Balance' equity/OCI account.
Profit and loss account for consolidation differences	P&L side of penny differences arising during consolidation revaluation.	Same concept as the balance sheet account above, but for P&L translation residuals.	Consolidation runs with currency revaluation.	Expense / Revenue Translation gain/loss (P&L).	Required only for clients running D365 consolidation. Provide a P&L translation account.
Customer cash discount	Default account for cash discounts GIVEN to customers when they pay early.	Not directly used from this page by default D365 actually resolves the cash discount account through the Cash discount code itself. The value here serves as the absolute fallback.	Customer payment settlement that triggers a cash discount.	Revenue contra (Sales discounts taken).	Best practice: configure the cash-discount account on each Cash discount code. This row can be left blank or set to a generic 'Sales Discounts' account.
Customer invoice discount	Default account for invoice-level discounts on customer invoices (line-independent, applied to the invoice total).	Used when a customer is granted an invoice discount at invoice time. Falls back from charges code configuration.	Sales orders / free text invoices with an invoice discount.	Revenue contra (Sales discounts).	Provide a 'Sales Invoice Discounts' contra-revenue account if the client uses invoice-level discounts on AR. Otherwise leave blank.
Vendor cash discount	Default account for cash discounts TAKEN from vendors when invoices are paid early.	Same fallback role as Customer cash discount but on the AP side. Real-world account resolution typically happens at the Cash discount code level.	Vendor payment settlement that triggers a cash discount.	Revenue / Other income (Purchase discounts taken) or contra-expense.	Best practice: configure on each Cash discount code. Leave blank here or point to a generic 'Purchase Discounts' income account.
Vendor invoice discount	Default account for invoice-level discounts received from vendors.	Used when a vendor invoice carries an invoice-total discount.	Vendor invoices with an invoice discount.	Revenue / Other income or contra-expense.	Provide a 'Purchase Invoice Discounts' account if the client receives invoice discounts. Otherwise leave blank.
Order, freight	Default freight charges account on sales or purchase orders when no specific charges-code account is configured.	Fallback for the 'Order, freight' posting type used in Charges codes. Most clients configure freight directly on each Charges code.	Sales / purchase orders with a freight charge code.	Revenue (customer freight income) or Expense (vendor freight cost).	Best practice: configure the freight account on each Charges code (one for AR-side freight income, one for AP-side freight expense). Leave this field blank or point to a generic freight account.
Order fee	Default order-fee account when no specific charges-code account is configured.	Fallback for the 'Fee' posting type on Charges codes (e.g., handling fees, surcharges).	Sales / purchase orders with an order-fee charges code.	Revenue (customer fees) or Expense (vendor fees).	Same approach as Order freight configure on Charges codes. Leave blank or point to a generic fee account.
Order invoice rounding	Account that captures rounding differences applied to sales-order invoices when the invoice is rounded (e.g., to the nearest 0.05).	Posted only when AR invoice rounding is activated and produces a non-zero rounding adjustment line.	Sales order invoices when invoice rounding is configured (typically required in some countries: CHF, SEK, etc.).	Revenue / Expense Rounding (P&L).	Required only if the client activates invoice rounding for AR (typical for countries that no longer use small coinage). Provide a 'Rounding AR' P&L account.
Vendor invoice rounding-off	Account that captures rounding differences applied to vendor invoices when AP invoice rounding is enabled.	Same mechanism as 'Order invoice rounding' but for AP.	Vendor invoices when AP invoice rounding is configured.	Revenue / Expense Rounding (P&L).	Required only if AP invoice rounding is used. Provide a 'Rounding AP' P&L account (can be the same as Order invoice rounding).
Purchase, fixed receipt price profit	Variance account used when an item uses Fixed Receipt Price costing and the invoiced price is LOWER than the configured cost price (favorable variance).	When AP invoices a PO for an item with Fixed Receipt Price set, any difference between the cost price and the invoiced price goes to a profit (favorable) or loss (unfavorable) account. THIS field captures the absolute fallback profit account when not conf	Vendor invoice posting against a PO for items with the Fixed receipt price item-model-group option enabled.	Expense / Revenue Purchase Price Variance (P&L).	Best practice: configure profit & loss variance accounts on the INVENTORY posting profile (Inventory management > Setup > Posting > Posting > Purchase order tab) for the relevant item group. This automatic-transactions field can be left blank or used as a
Interunit debit	Auto-balancing debit account used when a journal does not balance at the level of the financial dimension that is configured as the 'Balancing financial dimension' on the Ledger page.	If a transaction would leave a financial dimension (e.g., Business Unit) out of balance, D365 automatically creates an additional balancing line using this account as the DEBIT side.	Any cross-dimension journal where the balancing dimension is not equal on debit and credit (e.g., shared services postings, cross-BU allocations).	Asset Interunit Receivable (Balance Sheet).	Required if the client uses a balancing financial dimension (most multi-entity setups do). Provide an 'Interunit Receivable' / 'Due From' control account.
Interunit credit	Auto-balancing credit account, the companion to Interunit debit, used when the balancing financial dimension is out of balance on the credit side.	Posted automatically by D365 to make the journal balance at the dimension level.	Same scenarios as Interunit debit.	Liability Interunit Payable (Balance Sheet).	Required if a balancing financial dimension is used. Provide an 'Interunit Payable' / 'Due To' control account. The Interunit Debit and Interunit Credit balances should net to zero in consolidated reporting.

Asset acquisition, from a PO (direct capitalization at invoice)

CapEx · PO line linked to a fixed asset

Buy 10 laptops at 1,500 each + VAT. The PO line is linked to a fixed asset (or to a "Fixed asset" item that has the FA item posting profile). With Fixed asset parameters > "Allow asset acquisition from Purchasing" set to Yes, the AP invoice posts directly to the asset acquisition account, no separate "asset clearing" GL account is involved.

Account	Description	Dr	Cr
Fixed asset, IT equipment, acquisition	10 × 1,500 capitalized	15,000.00
Sales tax recoverable	VAT 20%	3,000.00
Vendor (AP)	Total liability		18,000.00
Totals (single voucher at AP invoice)		18,000.00	18,000.00

Note: If a product receipt was posted first (Post product receipt in ledger = Yes), there is an interim purchase accrual on the FA item's inventory posting profile, "Fixed asset receipt" debits at receipt and "Fixed asset issue" credits at invoice, both within the FA voucher chain. They net to zero per receipt-invoice pair, this is the closest thing F&O has to an "asset clearing" account, but it lives on the inventory posting profile, not as a stand-alone clearing GL. There is no separate Mass Additions / bridge step.

Asset acquisition, deferred (parameter off, or no FA link on PO line)

CapEx · Acquisition proposal from a balance-sheet account

If "Allow asset acquisition from Purchasing" is Off, or the PO line is not linked to a fixed asset, the AP invoice debits whatever account the procurement category / item drives (often a CIP, prepaid asset, or expense). The asset is capitalized later via an Acquisition proposal in the FA journal, which moves the cost from that account to the FA acquisition account.

Account	Description	Dr	Cr
CIP / asset suspense (per category)	10 × 1,500 awaiting capitalization	15,000.00
Sales tax recoverable	VAT 20%	3,000.00
Vendor (AP)	Total liability		18,000.00
Step 1: AP invoice		18,000.00	18,000.00
Fixed asset, IT equipment, acquisition	Capitalize via acquisition proposal	15,000.00
CIP / asset suspense	Clear suspense balance		15,000.00
Step 2: FA acquisition proposal		15,000.00	15,000.00

Note: The credit side in step 2 is the offset account on the FA journal line, you pick the same balance-sheet account that received the AP invoice in step 1. The CIP / asset suspense account should reconcile to zero at period end against acquired-not-capitalized assets.

Monthly depreciation

FA · Depreciation proposal

15,000 capitalized over 36 months straight-line = 416.67/month.

Account	Description	Dr	Cr
Depreciation expense	Monthly amortization	416.67
Accumulated depreciation, IT	Reduce NBV		416.67
Totals		416.67	416.67

Note: If multiple books are configured (corporate, tax, IFRS), each book runs its own depreciation. Posting layer (Current, Operations, Tax, plus custom layers) segregates the postings within the GL, all layers post to the GL, the layer is just a filter for reporting and the trial balance. Books with "Post to general ledger" set to No skip the GL entirely (used for purely informational books).

Asset transfer, between cost centers

FA · Reclassification

Move asset from Production cost center to R&D. The asset cost and accumulated depreciation accounts are unchanged; only the financial dimension shifts.

Account	Description	Dr	Cr
FA cost, IT (cost center R&D)	Move asset to R&D	15,000.00
FA cost, IT (cost center Production)	Remove from Production		15,000.00
Accumulated dep, IT (cost center R&D)	Move accum depreciation		2,500.00
Accumulated dep, IT (cost center Production)	Remove from Production	2,500.00
Totals		17,500.00	17,500.00

Note: Natural account is unchanged, only the financial dimensions move. P&L impact is zero. Future depreciation hits the new cost center.

Asset disposal, sale with gain

FA · Disposal, sale

Sell an old laptop. Cost 1,500; accumulated depreciation 1,200; NBV 300. Sold for 500, gain 200.

Account	Description	Dr	Cr
Bank (or AR if invoiced)	Sale proceeds	500.00
Accumulated depreciation, IT	Remove accumulated dep	1,200.00
FA cost, IT	Remove asset		1,500.00
Gain on disposal of fixed assets	Proceeds 500 − NBV 300		200.00
Totals		1,700.00	1,700.00

Note: If the sale runs through AR (free-text invoice), the AR side picks up the receivable and VAT, and the FA disposal removes the cost / accumulated depreciation. Two separate transactions, same net effect.

Asset disposal, scrap with loss

FA · Disposal, scrap

Same laptop scrapped instead of sold. NBV 300 → loss 300.

Account	Description	Dr	Cr
Accumulated depreciation, IT	Remove accumulated dep	1,200.00
Loss on disposal of fixed assets	NBV written off	300.00
FA cost, IT	Remove asset		1,500.00
Totals		1,500.00	1,500.00

Note: Disposal, scrap and disposal, sale use different transaction types in F&O. They post to different gain/loss accounts so reporting splits them clearly.

Asset impairment

FA · Value adjustment

Machinery's carrying value (50,000) exceeds recoverable amount (35,000), impair by 15,000.

Account	Description	Dr	Cr
Impairment expense	Recognize loss	15,000.00
Accumulated impairment, machinery	Reduce NBV		15,000.00
Totals		15,000.00	15,000.00

Note: Use a value-adjustment journal of type "Write-down" in F&O. Future depreciation is calculated on the impaired NBV. Reversal is allowed under IFRS but not US GAAP.

CIP capitalization, self-constructed asset

FA · Project to CIP to FA

Capital project accumulates 100,000 in CIP through AP invoices. When placed in service, transfer CIP balance to the FA cost account.

Account	Description	Dr	Cr
CIP, capital projects	Cost accumulation via AP	100,000.00
Vendor (AP)	Invoice liability		100,000.00
Step 1: AP cost to CIP (multiple invoices)		100,000.00	100,000.00
FA, machinery, cost	Capitalize on placed-in-service	100,000.00
CIP, capital projects	Clear CIP		100,000.00
Step 2: capitalization		100,000.00	100,000.00

Note: CIP must reconcile to "open capital projects" at every close. Aged CIP signals projects that finished but were never capitalized, material P&L impact (no depreciation = understated expense).

Lease accounting (ASC 842 / IFRS 16), initial recognition

FA · Operating lease as a right-of-use asset

5-year office lease, present value of payments = 250,000 (rate implicit). Recognize a right-of-use (ROU) asset and a lease liability.

Account	Description	Dr	Cr
Right-of-use asset	PV of lease payments	250,000.00
Lease liability, long-term	Future payments		200,000.00
Lease liability, current	Next 12 months		50,000.00
Totals		250,000.00	250,000.00

Note: The Asset leasing module (a separate module, not part of Fixed assets, shipped in F&O 10.0.16, October 2020) handles ASC 842 / IFRS 16 end-to-end, books the ROU asset and lease liability, generates the amortization and interest schedules, and posts each period. Without the module, this is journal-driven and error-prone. Asset leasing integrates with Fixed assets, AP, and GL but lives under its own menu.

Monthly lease payment, interest and principal

FA · Lease amortization

Monthly cash payment of 4,500. Interest portion 1,200 (declining), principal portion 3,300. ROU asset amortized 4,167/month (straight-line over 60).

Account	Description	Dr	Cr
Interest expense, leases	Effective interest	1,200.00
Lease liability, current	Principal portion	3,300.00
Bank (or vendor for lessor)	Cash payment		4,500.00
Step 1: cash payment		4,500.00	4,500.00
Lease amortization expense	Straight-line ROU	4,167.00
Accumulated amortization, ROU	Reduce ROU NBV		4,167.00
Step 2: monthly amortization		4,167.00	4,167.00

Note: ASC 842 operating leases recognize a single straight-line lease expense (combining interest + amortization to a flat number). Finance leases recognize them separately as shown. Determine classification at inception.

Hour transaction, labor on a T&M project

Project · Hour journal / timesheet

Worker logs 8 hours at cost rate 50 to a customer T&M project.

Account	Description	Dr	Cr
Project cost, labor	8 × 50 cost	400.00
Payroll allocation / labor absorption	Credit absorption		400.00
Totals		400.00	400.00

Note: The credit side depends on the labor accounting model, direct charge to a payroll accrual, allocation from a labor pool, or absorption from labor rates. Set per project group.

Expense transaction, T&E posted to project

Project · Expense from T&E

Worker submits a 200 travel expense to a billable project. Posted via Expense Management to AP, with the project on the distribution.

Account	Description	Dr	Cr
Project cost, expense	Travel cost on project	200.00
Vendor (Worker) (AP)	Reimbursement liability		200.00
Totals		200.00	200.00

Note: Project Management & Accounting receives the expense from Expense Management when the expense report is approved. The project transaction is what drives revenue recognition / billing for the cost.

Item transaction, material consumed on project

Project · Item issued to project

Issue 5 units at 100 each to a project (from inventory).

Account	Description	Dr	Cr
Project cost, item	Material to project	500.00
Inventory	Reduce on-hand		500.00
Totals		500.00	500.00

Note: Item costs flow through the inventory posting profile but project segments are captured. Reconciliation requires checking both inventory and project sub-ledgers.

Project invoice, T&M billing

Project · Invoice proposal

Bill the customer for 8 hours at 100/hour billing rate (800), 200 travel pass-through, and 5 items at 150 (750). Total net 1,750 + 20% VAT.

Account	Description	Dr	Cr
Customer (AR)	Project invoice total	2,100.00
Project revenue, services	Hours billed		800.00
Project revenue, expense	Travel pass-through		200.00
Project revenue, item	Items billed		750.00
Sales tax payable	VAT 20%		350.00
Totals		2,100.00	2,100.00

Note: T&M revenue is typically recognized as costs are incurred. The project invoice posting is the AR realization of revenue already accrued via the cost-side recognition (or is the recognition itself, depending on the policy).

Fixed-price project, POC revenue recognition

Project · Estimate / WIP recognition

Fixed-price contract value 100,000. Total estimated cost 70,000. Through Q1, actual cost = 21,000 (30% complete). Recognize 30,000 of revenue (POC × contract value).

Account	Description	Dr	Cr
Unbilled receivable / accrued revenue	Earn 30% of contract	30,000.00
Project revenue, fixed price	Recognize 30,000		30,000.00
Step 1: revenue accrual via Estimate process		30,000.00	30,000.00
Customer (AR)	Milestone invoice 25,000 + VAT	30,000.00
Unbilled receivable	Convert accrual to billed		25,000.00
Sales tax payable	VAT 20%		5,000.00
Step 2: milestone invoice		30,000.00	30,000.00

Note: Run "Estimate process" in Project to drive POC. The Estimate periodically reverses and re-recognizes, keeping the unbilled receivable at the right balance for current % complete.

Capital project to FA, placed in service

Project · CIP to capitalization

Internal capital project accumulated 100,000. On placed-in-service, post the capitalization journal that moves CIP to FA cost.

Account	Description	Dr	Cr
FA, machinery cost	Capitalize	100,000.00
CIP, capital projects	Clear CIP		100,000.00
Totals		100,000.00	100,000.00

Note: Same accounting as in Acquire to dispose, just driven from a project. The project type is "Investment" (or Internal with elimination to FA). Project costs accumulate on the WIP / CIP account configured per project group. When the asset is placed in service, the consultant runs Project management and accounting > Periodic > Eliminate, with "Eliminate to: Fixed asset", which moves the WIP balance to the FA acquisition account on the linked fixed asset record.

On-account invoice, milestone deposit

Project · Advance / on-account

Customer pays a 20,000 deposit before any project cost is incurred. Liability until earned.

Account	Description	Dr	Cr
Customer (AR)	On-account invoice 20,000 + VAT	24,000.00
Customer deposits / on-account	Liability		20,000.00
Sales tax payable	VAT 20%		4,000.00
Totals		24,000.00	24,000.00

Note: On-account is realized revenue only when matched against subsequent fee / hour / milestone invoices. Maintain the on-account balance as a liability until consumed.

Monthly payroll run, gross to net

Payroll · GL costing

Gross 80,000. Employee deductions (taxes + social) 20,000. Employer charges 15,000. Net pay 60,000.

Account	Description	Dr	Cr
Salaries expense	Gross wages	80,000.00
Employer social charges	Employer share	15,000.00
Payroll payable (net pay)	Owed to employees		60,000.00
Payroll taxes payable	Employee + employer		35,000.00
Totals		95,000.00	95,000.00

Note: The cost is allocated by department / cost center via the payroll costing setup. Validate the GL posting amount against the payroll register every cycle, payroll-to-GL reconciliation is non-negotiable.

Pay employees, net pay distribution

Payroll · Cash payment

Pay the net pay to employees by ACH.

Account	Description	Dr	Cr
Payroll payable	Settle obligation	60,000.00
Bank, payroll account	Outflow		60,000.00
Totals		60,000.00	60,000.00

Note: Maintaining a separate payroll bank sub-account simplifies reconciliation and audit.

Pay tax authorities and social

Payroll · Authority remittance

Settle the 35,000 payroll tax liability to authorities.

Account	Description	Dr	Cr
Payroll taxes payable	Remit to authority	35,000.00
Bank	Outflow		35,000.00
Totals		35,000.00	35,000.00

Note: Different authorities (income tax, social, unemployment) usually require separate remittances on different cadences. The payroll-tax liability account must reconcile to "open authority obligations" each month.

Year-end bonus accrual + reversal

Payroll · Period-end accrual

Accrue 50,000 of bonuses payable in March. Auto-reverses Jan 1; actual bonus posted with March payroll.

Account	Description	Dr	Cr
Bonus expense	Accrue Dec	50,000.00
Accrued bonuses	Liability		50,000.00
Step 1: Dec 31 accrual		50,000.00	50,000.00
Accrued bonuses	Reverse Jan 1	50,000.00
Bonus expense	Reverse		50,000.00
Step 2: Jan 1 reversal		50,000.00	50,000.00
Bonus expense	Mar payroll posts actual	50,000.00
Payroll payable	Net of withholding		50,000.00
Step 3: Mar payroll		50,000.00	50,000.00

Note: Use a journal name with "Reversal" enabled to schedule the auto-reverse, avoids double-counting in the new period.

Leave accrual, vacation earned

HR · Leave plan accrual

Each pay period, employees earn vacation hours. The dollar value of the obligation is accrued.

Account	Description	Dr	Cr
Vacation expense	Period accrual	2,500.00
Accrued vacation liability	Future obligation		2,500.00
Totals		2,500.00	2,500.00

Note: When vacation is taken, the liability is settled (no new expense), Dr Accrued vacation / Cr Payroll payable. When paid out at termination, it's the same mechanism.

T&E expense reimbursement

Expense Management · Worker reimbursement

Approved expense report with 500 of business travel; non-billable.

Account	Description	Dr	Cr
Travel expense	Business travel	500.00
Vendor (Worker as supplier) (AP)	Reimbursement liability		500.00
Totals		500.00	500.00

Note: When reimbursed by AP payment, it's the standard vendor settlement journal. Corporate cards work differently, the expense often hits a corporate-card payable rather than the worker.

Severance, termination payout

Payroll · Termination

One-time severance payment of 20,000.

Account	Description	Dr	Cr
Severance expense	One-time termination cost	20,000.00
Payroll payable / accrual	Liability before payment		20,000.00
Totals		20,000.00	20,000.00

Note: Reserve / accrue at the date the obligation becomes both probable and estimable, not at the cash date, period-matching matters for restructuring disclosures.

Prepaid expense, annual insurance

R2R · Multi-period accounting

Pay 12,000 in January for a 12-month insurance policy. Recognize 1,000 expense each month.

Account	Description	Dr	Cr
Prepaid expenses	Treat as asset	12,000.00
Vendor (AP)	Insurance invoice		12,000.00
Step 1: invoice		12,000.00	12,000.00
Insurance expense	January 1/12	1,000.00
Prepaid expenses	Reduce asset		1,000.00
Step 2: monthly amortization		1,000.00	1,000.00

Note: Use the Allocations / amortization-schedule feature in F&O General Ledger to automate the monthly reclass. Manual recurring journals work but drift over time.

Period-end accrual, utility

R2R · Reversing accrual

3,000 of utility usage in Dec; invoice arrives in Jan. Accrue Dec; reverse Jan; the actual invoice posts cleanly.

Account	Description	Dr	Cr
Utility expense	Estimate Dec usage	3,000.00
Accrued expenses	Liability for unbilled		3,000.00
Step 1: Dec 31 accrual		3,000.00	3,000.00
Accrued expenses	Reverse Jan 1	3,000.00
Utility expense	Reverse		3,000.00
Step 2: Jan 1 reversal		3,000.00	3,000.00
Utility expense	Actual Jan invoice	2,950.00
Sales tax recoverable	VAT 20%	590.00
Vendor (AP)	Total		3,540.00
Step 3: actual invoice (Jan)		3,540.00	3,540.00

Note: The 50 estimate variance (3,000 accrual vs. 2,950 actual) lands in the period the invoice posts. Don't go back and adjust Dec, that's a re-open.

Reclass journal, correct an account assignment

R2R · Manual reclass

1,500 was posted to Office supplies; should be IT supplies. Reclass between accounts (no P&L net change).

Account	Description	Dr	Cr
IT supplies expense	Correct account	1,500.00
Office supplies expense	Reverse mis-post		1,500.00
Totals		1,500.00	1,500.00

Note: Reclass journals should reference the original voucher and include rationale in the description for audit trail.

Allocation, overhead to cost centers

R2R · Allocation rule

10,000 of facilities cost is allocated 60/30/10 to Production, R&D, and Admin cost centers based on headcount.

Account	Description	Dr	Cr
Facilities expense (CC: Production)	60%	6,000.00
Facilities expense (CC: R&D)	30%	3,000.00
Facilities expense (CC: Admin)	10%	1,000.00
Facilities expense (CC: unallocated)	Clear allocation source		10,000.00
Totals		10,000.00	10,000.00

Note: Same natural account; only the cost-center dimension changes. Use Ledger allocation rules in F&O, reproducible, auditable, version-controlled.

FX revaluation, open AR balance

R2R · Foreign-currency revaluation

Open AR includes USD 50,000 at month-end. Original spot was 0.92 → 46,000 EUR. Month-end rate is 0.94 → 47,000 EUR. Unrealized FX gain 1,000.

Account	Description	Dr	Cr
Customer (AR)	Increase to revalued amount	1,000.00
FX gain (unrealized)	Mark-to-market		1,000.00
Totals		1,000.00	1,000.00

Note: Reverses the next period (depending on revaluation policy: previous + current, or current only). At eventual receipt, the difference between revalued and paid is realized FX. Run AP, AR, and bank revaluations in sequence at close.

Intercompany allocation, service charge

R2R · IC due-to / due-from

Parent company charges Subsidiary A 25,000 for shared services. Intercompany journal creates due-to / due-from positions.

Account	Description	Dr	Cr
IC receivable, from Sub A	Parent books receivable	25,000.00
IC service revenue	Parent revenue		25,000.00
Parent entity		25,000.00	25,000.00
Shared services expense	Sub A picks up cost	25,000.00
IC payable, to Parent	Sub A obligation		25,000.00
Subsidiary A entity		25,000.00	25,000.00

Note: Set up Intercompany accounting in GL with each entity pair's due-to / due-from accounts. F&O auto-balances IC postings if configured. At consolidation, IC receivable / payable eliminate against each other.

Consolidation, IC elimination

R2R · Consolidation entity

Eliminate the 25,000 IC receivable / payable in the consolidation entity.

Account	Description	Dr	Cr
IC payable	Eliminate Sub A liability	25,000.00
IC receivable	Eliminate Parent receivable		25,000.00
Step 1: balance sheet eliminations		25,000.00	25,000.00
IC service revenue	Eliminate Parent revenue	25,000.00
Shared services expense	Eliminate Sub A expense		25,000.00
Step 2: P&L eliminations		25,000.00	25,000.00

Note: IC eliminations live only in the consolidation entity, not in the operating ledgers. The originals stay intact for statutory reporting per legal entity.

Year-end closing, opening transactions

R2R · Fiscal-year close

At fiscal-year close, P&L accounts are closed to retained earnings; balance sheet rolls forward.

Account	Description	Dr	Cr
All revenue accounts	Close credit balances	5,000,000.00
All expense accounts	Close debit balances		4,200,000.00
Retained earnings	Net income for the year		800,000.00
Totals		5,000,000.00	5,000,000.00

Note: F&O's year-end closing process auto-generates the opening balance journal in the new year. Run only after all subledgers are closed and the trial balance is finalized.

VAT settlement, periodic remittance

Tax · VAT settle

Output VAT 20,000; input VAT 12,000; net payable 8,000.

Account	Description	Dr	Cr
Sales tax payable (output)	Clear period collected	20,000.00
Sales tax recoverable (input)	Clear period recovered		12,000.00
VAT settlement payable	Net to authority		8,000.00
Step 1: settle		20,000.00	20,000.00
VAT settlement payable	Pay authority	8,000.00
Bank	Cash out		8,000.00
Step 2: remittance		8,000.00	8,000.00

Note: Run "Settle and post sales tax" in F&O. If input exceeds output, you have a refund position, the difference goes to a VAT receivable, not payable.

Service-order item consumption, parts on a work order

Service · Item issue to service order

Technician consumes 80 of parts on a service order.

Account	Description	Dr	Cr
Service cost, parts	WIP equivalent for service	80.00
Inventory	Reduce on-hand		80.00
Totals		80.00	80.00

Note: If the service order is project-based, this routes via Project transactions instead, same accounting effect, different reporting / billing logic.

Technician hour, labor on a service order

Service · Hour transaction

Technician logs 4 hours @ 60 cost = 240 to a service order.

Account	Description	Dr	Cr
Service cost, labor	Recognize labor cost	240.00
Labor allocation / payroll absorption	Credit labor pool		240.00
Totals		240.00	240.00

Note: The credit side mirrors how labor is accounted in production (absorption account or payroll accrual).

Service invoice, billed to customer

AR · Service invoice

Bill 4 hours @ 120 = 480 + 80 parts at cost passthrough + 50% markup → 120 parts billed = 600 + VAT.

Account	Description	Dr	Cr
Customer (AR)	Total invoice	720.00
Service revenue, labor	Hours billed		480.00
Service revenue, parts	Parts billed		120.00
Sales tax payable	VAT 20%		120.00
Totals		720.00	720.00

Note: Service margin (revenue − cost) = (480+120) − (240+80) = 280 = 47%. Track it per service contract, margin compression on contract renewals is a leading indicator.

Warranty cost, accrual at sale

Service · Warranty reserve

Sell 1,000 units; estimated warranty cost is 1% of sales = 10,000. Accrue at sale; consume the reserve as warranty work happens.

Account	Description	Dr	Cr
Warranty expense	1% of sales	10,000.00
Warranty reserve (liability)	Future obligation		10,000.00
Step 1: accrual at sale		10,000.00	10,000.00
Warranty reserve	Use reserve when serviced	350.00
Inventory / Labor	Parts and labor used		350.00
Step 2: warranty work		350.00	350.00

Note: No reserve = expense at the work-order date. Reserve smooths the P&L and matches the cost to the period of sale. True-up periodically based on actual claim experience.

Goodwill credit, no return

AR · Customer service credit memo

Customer complaint (case) is resolved with a 100 goodwill credit. Goods are not returned. Credit memo reduces AR / revenue.

Account	Description	Dr	Cr
Sales allowances (contra-revenue)	Reduce net revenue	100.00
Sales tax payable	Reverse VAT	20.00
Customer (AR)	Reduce receivable		120.00
Totals		120.00	120.00

Note: Use a reason code on the credit memo so service-driven credits are reportable separately from returns or pricing adjustments. Without reason coding, contra-revenue becomes an opaque bucket.

RMA from a case, return + refund

Case · Return material authorization

Case results in a return. Goods come back (cost 60), original 100 sale is reversed, customer refunded the 120 they paid.

Account	Description	Dr	Cr
Sales returns	Reverse revenue	100.00
Sales tax payable	Reverse VAT	20.00
Customer (AR)	Reduce receivable		120.00
Inventory	Goods back on hand	60.00
COGS	Reverse cost		60.00
Step 1: return / credit memo		180.00	180.00
Customer (AR)	Refund customer	120.00
Bank	Cash refund		120.00
Step 2: refund (if no open invoices to net)		120.00	120.00

Note: If the credit can be applied to other open invoices, skip the cash refund step. Refund decisions tie back to the customer's payment terms and trust level.

Warranty work tied to a case

Service · Warranty service

Case triggers warranty work. If a warranty reserve exists, consume it; otherwise hit warranty expense directly.

Account	Description	Dr	Cr
Warranty reserve (or warranty expense)	Consume reserve / expense work	200.00
Inventory + Labor	Parts and labor used		200.00
Totals		200.00	200.00

Note: Cross-reference: see Service to deliver → Warranty cost, accrual at sale. The reserve and the work-order accounting are two halves of the same lifecycle.

Marketing campaign cost, expensed

AP · Advertising expense

Pay an agency 25,000 for a campaign + VAT. Expensed in the period the service is delivered.

Account	Description	Dr	Cr
Advertising expense	Campaign cost	25,000.00
Sales tax recoverable	VAT 20%	5,000.00
Vendor (AP)	Liability		30,000.00
Totals		30,000.00	30,000.00

Note: Campaign costs spanning multiple periods (e.g., a 3-month TV ad) should match periods via accrual / prepaid mechanics, not all hit at invoice.

R&D cost, expensed (US GAAP / development phase under IFRS not met)

AP · Research expense

Research-phase R&D is expensed as incurred. This is the default treatment for most R&D under US GAAP (ASC 730) and the research phase under IFRS.

Account	Description	Dr	Cr
Research & development expense	R&D cost	15,000.00
Vendor (AP) / Payroll / Inventory	Sourced cost		15,000.00
Totals		15,000.00	15,000.00

Note: The credit side depends on the cost source, vendor invoice, payroll allocation, inventory consumption.

Capitalized development cost, IFRS criteria met

FA · Capitalized R&D / intangible asset

IFRS allows capitalization when development-phase criteria are met (technical feasibility, intent and ability to complete, future economic benefit, measurable cost). Cost accumulates as an intangible asset and amortizes once placed in service.

Account	Description	Dr	Cr
Intangible assets, development costs	Capitalize qualifying cost	50,000.00
Vendor (AP) / Payroll	Sourced cost		50,000.00
Step 1: capitalization		50,000.00	50,000.00
Amortization expense, intangibles	Monthly 50,000 / 60	833.33
Accumulated amortization, intangibles	Reduce NBV		833.33
Step 2: monthly amortization		833.33	833.33

Note: The capitalization decision is policy-driven and audit-tested. Document the criteria assessment by project; auditors will ask.

End-of-life inventory write-off

Inventory · Discontinued product

Item retired from active sale; 800 of remaining inventory has no resale value. Direct write-off (no reserve).

Account	Description	Dr	Cr
Inventory write-off, obsolete	P&L hit	800.00
Inventory	Reduce on-hand to zero		800.00
Totals		800.00	800.00

Note: Cross-reference: see Inventory to deliver → Obsolescence reserve for the reserve-based pattern. Direct write-off is appropriate when retirement was unplanned and no reserve was set.

Last-time buy, held inventory at risk

Inventory · Reserve at retirement decision

Item discontinued; on-hand 5,000 will be sold over 6 months. Book a partial reserve (40%) for excess that's unlikely to sell at full value.

Account	Description	Dr	Cr
Inventory obsolescence expense	Provision 40% × 5,000	2,000.00
Inventory obsolescence reserve	Contra-asset		2,000.00
Totals		2,000.00	2,000.00

Note: True-up the reserve at each period close based on aging analysis and revised sell-through expectations.

BOM rework, engineering change costs

Manufacturing · ECN cost

Engineering change requires rework on 200 units of work-in-progress. Rework labor + material booked to a rework / scrap variance account.

Account	Description	Dr	Cr
Rework expense / variance	ECN-driven labor + material	1,200.00
WIP / Inventory / Labor pool	Sourced cost		1,200.00
Totals		1,200.00	1,200.00

Note: Tracked separately from normal scrap so design-quality issues are visible. Frequent rework expense → re-examine product design or BOM controls.

Master planning, no GL impact

Planning · Planned orders

MRP / Planning Optimization generates planned purchase, transfer, and production orders. None of these post to the GL, they are sub-ledger objects. Accounting begins only when planned orders are firmed and executed.

Account	Description	Dr	Cr
No GL accounting from planning runs.
Totals		0.00	0.00

Note: Planning is a forecasting / scheduling activity, not an accounting event. The first GL impact lands at PO / production order / transfer order execution.

Encumbrance (commitment accounting), when budget control is on

Budgeting · Public sector / encumbrance

Some sectors (notably public sector / government) require encumbrance accounting, the budget is reduced when the PO is issued, not when the invoice posts. F&O supports this through Budget control + commitment accounting.

Account	Description	Dr	Cr
Encumbrance, committed budget	PO issued	10,000.00
Reserve for encumbrance	Reduce available budget		10,000.00
Step 1: PO issued		10,000.00	10,000.00
Reserve for encumbrance	Release commitment	10,000.00
Encumbrance, committed budget	Reverse encumbrance		10,000.00
Step 2: invoice posted (release)		10,000.00	10,000.00

Note: Most commercial businesses don't use encumbrance accounting. Confirm at requirements: the standard pattern is to set a budget figure and let actuals be compared against it without journal-level commitment.

Lead, opportunity, quote, no GL impact

CRM · Pipeline

Recording a lead, qualifying an opportunity, generating a quote, none of this posts to the GL. The accounting begins when the quote becomes a sales order (see Order to cash).

Account	Description	Dr	Cr
No GL accounting in pre-sales activity.
Totals		0.00	0.00

Note: The closest thing to accounting in pre-sales is sales-pipeline reporting (forecasted revenue), informational, not a journal.

Sales commission accrual, at win

Commission · Period accrual

Sales rep wins a 100,000 deal with 5% commission. Accrue at win even if commission is paid in a later period.

Account	Description	Dr	Cr
Sales commission expense	Recognize commission	5,000.00
Accrued commissions payable	Liability to rep		5,000.00
Step 1: accrual at win		5,000.00	5,000.00
Accrued commissions payable	Settle when paid	5,000.00
Payroll payable	Through payroll		5,000.00
Step 2: payment via payroll		5,000.00	5,000.00

Note: Under ASC 606, incremental costs of obtaining a contract (e.g., sales commissions) may need to be capitalized and amortized over the customer life, confirm policy.

The accounting equation

Debit / credit rules by account type

A starter example

Lean COA + dimensions

Account categories and main account types

Account structures

1. Balance sheet (Statement of financial position)

2. Income statement (Profit & loss / P&L)

3. Cash flow statement

4. Statement of changes in equity

5. Trial balance

Cash basis

Accrual basis

US GAAP (Generally Accepted Accounting Principles)

IFRS (International Financial Reporting Standards)

Differences a consultant should remember

1. GL opening balances

2. Subledger opening balances

3. Statistical / informational data

What can go wrong

Month-end close: the standard sequence

Quarter-end close

Year-end close

F&O period status

Output tax

Input tax

Periodic settlement (declaration)

Tax declaration

Special VAT cases

Corporate income tax

Deferred tax

Withholding tax

Accounting framework

Currency reporting

VAT

Withholding tax

Income tax on profits

Payroll tax (R10)

Stamp duty

Built-in property tax

Practical implementation notes

Packing slip, physical issue

Sales-order invoice, revenue, COGS, and tax

Customer payment, direct deposit

Customer payment, via a bridging account

Customer prepayment, unapplied receipt

Cash discount taken at payment

Credit memo, customer return / dispute

Customer write-off, uncollectible

Customer overpayment, refund

Deferred revenue, annual subscription invoiced upfront

Multi-currency invoice, period-end FX revaluation

Customer rebate accrual, volume incentive

Product receipt, inventory item with PO

Vendor invoice, three-way matched

Vendor invoice, service / expense item, accrue at receipt

Period-end accrual, service received but not invoiced

Vendor payment, direct deposit

Vendor payment, early-payment cash discount taken

Vendor prepayment, advance against future invoice

Return to vendor (RTV), quality reject

Vendor invoice with withholding tax (WHT)

Purchase price variance (PPV), standard cost item

Price difference, invoice price higher than PO (non-standard cost)

Multi-currency vendor invoice, period-end FX revaluation

Consignment inventory, ownership at consumption

Retainage / holdback

Lockbox / auto-applied receipts

Counting journal, positive adjustment (found stock)

Counting journal, negative adjustment (shrinkage)

Movement journal, internal consumption

Transfer journal, between warehouses (no in-transit)

Transfer order, with in-transit

BOM journal, assemble a kit

Landed cost, estimated charge allocation at receipt

Landed cost, actual freight invoice and variance

Inventory revaluation, cost adjustment

Obsolescence reserve

Picking list, issue raw materials to WIP