Accounts in the General Ledger

To reconcile inventory and capacity ledger entries with the general ledger, the related value entries are posted to different accounts in the general ledger.

From the Inventory Ledger

The below table shows the relationship between different types of inventory value entries and the accounts and balancing accounts in the general ledger.

Value entry				General ledger accounts
Item ledger entry type	Value entry type	Variance type	Expected cost	Account	Balancing account
Purchase	Direct Cost		Yes	Inventory (Interim)	Invt. Accrual Acc. (Interim)
	Direct Cost		No	Inventory	Direct Cost Applied
	Indirect Cost		No	Inventory	Overhead Applied
	Variance	Purchase	No	Inventory	Purchase Variance
	Revaluation		No	Inventory	Inventory Adjmt.
	Rounding		No	Inventory	Inventory Adjmt.
Sale	Direct Cost		Yes	Inventory (Interim)	COGS (Interim)
	Direct Cost		No	Inventory	COGS
	Revaluation		No	Inventory	Inventory Adjmt.
	Rounding		No	Inventory	Inventory Adjmt.
Positive Adjmt.,Negative Adjmt., Transfer	Direct Cost		No	Inventory	Inventory Adjmt.
	Revaluation		No	Inventory	Inventory Adjmt.
	Rounding		No	Inventory	Inventory Adjmt.
(Production) Consumption	Direct Cost		No	Inventory	WIP
	Revaluation		No	Inventory	Inventory Adjmt.
	Rounding		No	Inventory	Inventory Adjmt.
Assembly Consumption	Direct Cost		No	Inventory	Inventory Adjmt.
	Direct Cost		No	Direct Cost Applied	Inventory Adjmt.
	Indirect Cost		No	Overhead Applied	Inventory Adjmt.
(Production) Output	Direct Cost		Yes	Inventory (Interim)	WIP
	Direct Cost		No	Inventory	WIP
	Indirect Cost		No	Inventory	Overhead Applied
	Variance	Material	No	Inventory	Material Variance
	Variance	Capacity	No	Inventory	Capacity Variance
	Variance	Subcontracted	No	Inventory	Subcontracted Variance
	Variance	Capacity Overhead	No	Inventory	Cap. Overhead Variance
	Variance	Manufacturing Overhead	No	Inventory	Mfg. Overhead Variance
	Revaluation		No	Inventory	Inventory Adjmt.
	Rounding		No	Inventory	Inventory Adjmt.
Assembly Output	Direct Cost		No	Inventory	Inventory Adjmt.
	Revaluation		No	Inventory	Inventory Adjmt.
	Indirect Cost		No	Inventory	Overhead Applied
	Variance	Material	No	Inventory	Material Variance
	Variance	Capacity	No	Inventory	Capacity Variance
	Variance	Capacity Overhead	No	Inventory	Cap. Overhead Variance
	Variance	Manufacturing Overhead	No	Inventory	Mfg. Overhead Variance
	Rounding		No	Inventory	Inventory Adjmt.

From the Capacity Ledger

The below table shows the relationship between different types of capacity value entries and the accounts and balancing accounts in the general ledger. Capacity ledger entries represent labor time consumed in assembly or production work.

Value entry			General ledger accounts
Work type	Capacity ledger entry type	Value entry type	Account	Balancing account
Assembly	Resource	Direct Cost	Direct Cost Applied	Inventory Adjmt.
Assembly	Resource	Indirect Cost	Overhead Applied	Inventory Adjmt.
Production	Machine Center/Work Center	Direct Cost	WIP Account	Direct Cost Applied
Production	Machine Center/Work Center	Indirect Cost	WIP Account	Overhead Applied

Assembly Costs are Always Actual

As shown in the table above, assembly postings are not represented in interim accounts. This is because the concept of work in process (WIP) does not apply in assembly output posting, unlike in production output posting. Assembly costs are only posted as actual cost, never as expected cost.

Calculating the Amount to Post to the General Ledger

The following fields in the Value Entry table are used to calculate the expected cost amount that is posted to the general ledger:

• Cost Amount (Actual)


• Cost Posted to G/L


• Cost Amount (Expected)


• Expected Cost Posted to G/L

The following table shows how the amounts to post to the general ledger are calculated for the two different cost types.

Cost type	Calculation
Actual Cost	Cost Amount (Actual) –Cost Posted to G/L
Expected Cost	Cost Amount (Expected) – Expected Cost Posted to G/L