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Setting up and maintaining inventory close and adjustments
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Setting up and maintaining inventory close and adjustments See Also
The topics in this section provide background and conceptual information about the process of inventory close, with emphasis on how the various inventory models handle transaction adjustments during the process. Note Integration considerations, such as supported environments and platforms, are discussed in the System and Application Setup Help. The following topics provide information about: About inventory close About physical and financial updates About Include physical value About running average cost price Track running average cost per item dimenson Specify an inventory model for inventory close About FIFO About LIFO About LIFO Date About weighted average About weighted average date About inventory posting About posting search
See Also
Inventory close Inventory adjustments Inventory recalculation Inventory batch processing Send comments about this topic to Microsoft Dynamics AX Content Publishing Team.
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Build date: 2008-04-01 [03:27] About inventory close See Also
The Microsoft Dynamics AX inventory close process settles issue transactions to receipt transactions based on the inventory valuation method that is selected in the item's inventory model group. You can also choose to have the general ledger updated to reflect the adjustments that have been made. Until inventory close or recalculation is run, however, Microsoft Dynamics AX posts issue transactions at the calculated running average cost price. After inventory close, it is no longer possible to post in periods prior to the inventory close date that you set unless you cancel a completed inventory close process. For example, if inventory close is run for the period ending January 31, Microsoft Dynamics AX will prevent any transactions from being posted with a date prior to January 31. Note Beginning with this version of Microsoft Dynamics AX, inventory close is not required with the Standard cost valuation method.
The frequency of running inventory close varies by company, but transaction volume will have an impact on how often you choose to run inventory close. In general, most companies run inventory close as part of their month-end closing and reconciliation procedures. Note We recommended that you run inventory close during off-peak hours to more evenly distribute computing resources.
If adjustments to inventory and the general ledger are necessary during the course of a month or other inventory period, you can run inventory recalculation instead of inventory close. Inventory recalculation makes adjustments, but not settlements, to inventory transactions. Items in inventory are assigned to one of three inventory types: item, bill of materials (BOM), or service. Inventory close will perform the same functions for all three types, but for service items, inventory close will still settle issues to receipts.
See Also
About running average cost price Run inventory close Run inventory recalculation
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Send comments about this topic to Microsoft Dynamics AX Content Publishing Team. Build date: 2008-04-01 [03:27] About physical and financial updates See Also
Inventory transactions can be physically updated and financially updated in Microsoft Dynamics AX, and certain types of physical and financial transactions increase inventory quantities, while others decrease the quantity. This topic provides an overview of which types of transactions increase and decrease inventory quantities. When a physical transaction is posted, the status of the transaction record is Received. The following transactions are considered physical increases: Purchase order receipt Sales order packing slip return Production order report as finish By-product on a production order picking list When a financial receipt transaction is posted, the status of the transaction record that increases the quantity is Purchased. The following transactions are considered financial increases: Purchase order invoice Sales order invoice for a return Production order costing Positive quantity inventory journals, such as movement, profit loss, counting journals, bills of material, and transfer When transactions that increase quantity are posted, Microsoft Dynamics AX calculates a running average cost price that is based on the cost of each of these transactions for each inventory dimension that is being tracked financially. (For information on running average cost price, see About running average cost price.) Microsoft Dynamics AX uses the calculated running average cost price when a transaction that decreases quantity is posted, no matter which inventory model is associates with that inventory, so long as the transaction that decreases quantity was not previously marked to another transaction before posting. If the physical on-hand inventory goes negative, then Microsoft Dynamics AX will use the cost defined for the item on the Price/Discount tab of the Item form (click Inventory management > Places > Items).
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Note If multi site functionality is enabled, this cost will instead be the inventory cost defined for a site on the Default order settings form (Inventory management > Places > Items > Default order settings).
When a physical issue transaction is posted, the status of the transaction record is Deducted. The following transactions are considered physical issues: Production order picking list journal Sales order packing slip Purchase order packing slip return When a financial transaction is posted, the status of the transaction record is Sold. The following transactions are considered financial issues: Production order ended Sales order invoice Purchase order invoice return Negative quantity inventory journals, such as movement, profit loss, counting journal, bills of material, and transfer Since transactions that decrease quantity are posted at the running average cost price, the inventory close procedure is needed to settle the issue transaction to a receipt transaction based on the inventory model assigned to an item.
See Also
About running average cost price Send comments about this topic to Microsoft Dynamics AX Content Publishing Team. Build date: 2008-04-01 [03:27] About Include physical value See Also
The model group setup for an item determines whether physically updated transactions are factored into the calculation of the item's running average cost price. Specifically, if the Include physical value box is selected on the Inventory model tab of the Inventory model groups form, then both physically updated transactions and financially updated transactions will
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be used to calculate the running average cost price. If the Include physical value box is cleared, only financially updated transactions will be used in the calculation of the running average cost price. The Include physical value parameter leads to some slightly different results depending on the inventory model you choose: If you select the Include physical value box when using the FIFO, LIFO, or LIFO Date inventory models, then inventory close will also make adjustments to physically updated transactions. If you do not select the Include physical value box with these inventory models, then inventory close will make settlements only to financially updated transactions. When you use the weighted average or weighted average date inventory models, inventory close will settle only financially updated transactions whether or not you select the Include physical value box.
Example
You have selected the Include physical value box and receive the following purchase orders: Purchase order for a quantity of 2; cost price is USD 10.00; packing slip updated Purchase order for a quantity of 3; cost price is USD 12.00; invoiced updated In this case, the running average cost price will be USD 11.20 because both physically and financially updated transactions are used to calculate the cost price.
Example
You have not selected the Include physical value box and the cost price on the item setup is USD 10.00. You receive the following purchase order: Purchase order for a quantity of 20; cost price is USD 12.00; packing slip updated When a sales order is posted, the system will post the cost amount at USD 10.00 because the running average cost price will not include physically posted transactions. Note For comparison, if this item had been set up with Include physical value selected, the sales order would have been posted with a cost amount of USD 12.00.
See Also
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About running average cost price Specify an inventory model for inventory close Send comments about this topic to Microsoft Dynamics AX Content Publishing Team. Build date: 2008-04-01 [03:26] About running average cost price See Also
The inventory close process in Microsoft Dynamics AX settles issue transactions to receipt transactions based on the inventory valuation method that is selected in the item's inventory model group. Before inventory close is run, however, Microsoft Dynamics AX calculates a running average cost price that in most cases is used for posting issue transactions. Microsoft Dynamics AX estimates this running average cost price for an item by using the following formula: Estimated price = (physical amount + financial amount) / (physical quantity + financial quantity) The following table indicates when Microsoft Dynamics AX posts inventory transactions using the running average cost price, and when it uses the cost price defined on the item master record instead. Cost price defined on the item master
IF
Estimated running average cost price THEN Microsoft Dynamics x AX uses THEN Microsoft Dynamics Blank AX uses THEN Microsoft Dynamics Blank AX uses
Both the numerator and denominator are positive The numerator, denominator, or both are negative If the denominator is 0 (zero)
Blank
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* Numerator = (physical amount + financial amount); Denominator = (physical quantity + financial quantity) Note If the Include physical value option is not selected for an item, Microsoft Dynamics AX uses 0 (zero) for both physical amount and physical quantity.
The Pricing Amplification Issue

On rare occasions, you may encounter a pricing amplification scenario that yields overly inflated running average cost price estimates. These are possible when Microsoft Dynamics AX prices several issues before it has sufficient receipts to base a price on. There are, however, steps you can take to avoid the issue, or to mitigate its impact when it does occur, as explained in the following scenario. Scenario The following transactions occur with an item for which you have applied the Include physical value option: 1. You receive 100 @USD 100.00 financially. 2. You issue 200 financially. 3. You receive 101 @USD 202.00 physically. When you examine the estimated running average cost price for the item, although you expected a cost price of USD 1.51, you discover an estimated running average of USD 102.00 based on the following formula: Estimated price = [202 + (-100)] / [101 + (-100)] = 102/1 = 102 This occurs because when 200 items are issued financially in step 2, Microsoft Dynamics AX is forced to price 100 of the items before it has any corresponding receipts, which results in negative inventory. Microsoft Dynamics AX then estimates a unit price of USD 1.00, which we might expect, but when the corresponding 100 receipts come, they are at a unit price of USD 2.00 each. Note Even though the issues result in negative inventory, inventory is positive at the time the issue price is computed. That is why the running average cost price is used, rather than the price on the item master.
At this point, Microsoft Dynamics AX has an inventory value offset of USD 100.00. And while that offset was built up over 100 pieces, with a unit offset of USD 1.00 each, we now have only one piece in inventory, and that offset of USD 100.00 is allocated to this single piece, resulting in the overly inflated
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estimated cost price. Note For comparison, note that if steps 2 and 3 are reversed in the example above, 200 items will be issued at a unit price of USD 1.51, and one piece will remain at a unit price of USD 1.51.
Because this pricing amplification scenario can occur when negative inventory is involved, it is difficult to avoid in the following cases: You must estimate issue prices on the on-hand value and quantity You must adjust the on-hand value and quantity on issues and receipts Your business model allows for sending out, or pricing, more pieces than you have You must accept any receipt value and quantity submitted to you If your business model allows them, however, the following practices can help you avoid the negative quantities that make the pricing amplification scenario possible: If you select the Include physical value option for an item, then clear the Physical negative inventory check box on the Setup tab in the Inventory model groups form. If you do not select the Include physical value option for an item, then clear the Financial negative inventory option on the Setup tab in the Inventory model groups form. Bear in mind also that the maximum offset in your physical inventory value is limited by the number of physical transactions and the difference between physical and financial prices. As long as all physical transactions are eventually updated financially, then the physical value cannot rise to extreme levels. In addition, the amplification effect decreases significantly when the accumulated offset is spread out over a number of on-hand pieces rather than just one.
See Also
About inventory close About physical and financial updates About Include physical value Track running average cost per item dimenson Send comments about this topic to Microsoft Dynamics AX Content Publishing Team. Build date: 2008-04-01 [03:27] Track running average cost per item dimenson See Also
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Each inventory item is assigned an inventory dimension group. The running average cost price for an item is therefore calculated based on the selection of inventory dimensions that are being tracked financially. There are two different types of inventory dimensions: item and storage. Item dimensions include configuration, size, and color. Item dimensions are always tracked financially. Storage dimensions include site, warehouse, batch number, location, pallet ID, and serial number. You can choose which storage dimensions will be tracked financially.
Example
If the inventory dimension group attached to the item is financially tracked by warehouse, the running average cost price will be calculated for each warehouse. The following purchase orders have been invoiced: Purchase order for a quantity of 2 at a cost price of USD 10.00 has been invoiced for warehouse GW Purchase order for a quantity of 3 at a cost price of USD 12.00 has been invoiced for warehouse GW Purchase order for a quantity of 5 at a cost price of USD 15.00 has been invoiced for warehouse MW The running average cost price for warehouse GW is USD 11.20 The running average cost price for warehouse MW is USD 15.00. When a sales order invoice is posted for warehouse GW, the value of the inventory and cost of goods sold (before inventory close is run and with no marking) will be USD 11.20. When a sales order is posted for warehouse MW, the value of the inventory and cost of goods sold (before inventory close is run with no marking) will be USD 15.00.
Example
If the inventory dimension group attached to the item is financially tracked by both warehouse and batch number, the running average cost price will be calculated for each batch. Note We recommend always viewing the cost price with all financial dimensions being tracked.
The following purchase orders have been invoiced:
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Purchase order for a quantity of 2 at a cost price of USD 10.00; invoiced for warehouse GW and batch AAA Purchase order for a quantity of 3 at a cost price of USD 12.00; invoiced for warehouse GW and batch AAA Purchase order for a quantity of 2 at a cost price of USD 15.00; invoiced for warehouse GW and batch BBB The running average cost price for warehouse GW and batch AAA is USD 11.20. The running average cost price for warehouse GW and batch BBB is USD 15.00.
See Also
About running average cost price Send comments about this topic to Microsoft Dynamics AX Content Publishing Team. Build date: 2008-04-01 [03:27] Specify an inventory model for inventory close See Also
An inventory model is typically assigned to an item when you are configuring its inventory model group. We recommend, however, that you confirm that the inventory model you want to use for each model group is selected before you run the inventory close procedure. 1. Click Inventory management > Setup > Inventory model groups. 2. Click the Inventory model tab. 3. Make a selection in the Inventory model field. For more information including examples of each of the inventory models available to you, see the following topics: About FIFO About LIFO About LIFO Date About weighted average About weighted average date
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Prerequisites for standard costs
See Also
Preparing to run inventory close Run inventory close Send comments about this topic to Microsoft Dynamics AX Content Publishing Team. Build date: 2008-04-01 [03:27] About FIFO See Also
First in, First out (FIFO) is an inventory model in which the first acquired receipts are issued first. Financially updated issues from inventory are settled against the first financially updated receipts into inventory based on the financial date of the inventory transaction. When using FIFO, you can choose to mark inventory transactions so that a specific receipt is settled against a specific issue instead of following the FIFO rule. We recommend a periodic inventory closing when you use the FIFO inventory model. The following examples illustrate the impact of using FIFO with three different configurations: FIFO without the Include physical value option FIFO with the Include physical value option FIFO with marking
FIFO without the Include physical value option

In this FIFO example, the inventory model group is not marked to include physical value. The following transactions are illustrated in the graphic below: 1a. Inventory physical receipt for a quantity of 1 at a cost of USD 10.00 each. 1b. Inventory financial receipt for a quantity of 1 at a cost of USD 10.00 each. 2a. Inventory physical receipt for a quantity of 1 at a cost of USD 20.00 each. 2b. Inventory financial receipt for a quantity of 1 at a cost of USD 20.00 each. 3a. Inventory physical receipt for a quantity of 1 at a cost of USD 25.00 each.
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4a. Inventory physical receipt for a quantity of 1 at a cost of UD 30.00 each. 4b. Inventory financial receipt for a quantity of 1 at a cost of USD 30.00 each. 5a. Inventory physical issue for a quantity of 1 at cost price of USD 20.00 each (running average of financially updated transactions). 5b. Inventory financial issue for a quantity of 1 at cost price of USD 20.00 each (running average of financially updated transactions). 6. Inventory close is performed. Based on the FIFO method, the first financially updated issue will be settled to the first financially updated receipt. An adjustment of negative USD 10.00 will be made on the issue transaction. The new running average cost price reflects the average of the financially updated transactions. The following diagram illustrates this series of transactions with the effects of choosing the FIFO inventory model without the Include physical value option.
Key to diagram Inventory transactions are represented by vertical arrows. Receipts into inventory are represented by vertical arrows above the timeline. Issues out of inventory are represented by vertical arrows below the timeline. Above (or below) each vertical arrow, the value of the inventory transaction is specified in the format Quantity@Unit price. An inventory transaction value surrounded by brackets indicates that the inventory transaction is physically posted into inventory. An inventory transaction value without brackets indicates that the inventory transaction is financially posted into inventory. Each new receipt or issue transaction is designated with a new label.
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Each vertical arrow is labeled with a sequential identifier, such as 1a. The identifiers indicate the sequence of inventory transaction postings in the timeline. Inventory closings are represented by a red vertical dashed line and the label Inventory Close. Settlements that are performed by inventory close are represented by dotted red arrows going diagonally from a receipt to an issue.
FIFO with the Include physical value option

If the Include physical value box is selected for an item in the Inventory model group form, Microsoft Dynamics AX will use both physical and financial receipt transactions to calculate the running average cost price. Where applicable, the system will also make adjustments to the physically updated issue transaction. When the Include physical value box is cleared, inventory close with the FIFO inventory model will make settlements only to transactions that are financially updated. The following transactions are illustrated in the graphic below: 1a. Inventory physical receipt for a quantity of 1 at a cost of USD 10.00 each. 1b. Inventory financial receipt for a quantity of 1 at a cost of USD 10.00 each. 2a. Inventory physical receipt for a quantity of 1 at a cost of USD 20.00 each. 2b. Inventory financial receipt for a quantity of 1 at a cost of USD 20.00 each. 3a. Inventory physical receipt for a quantity of 1 at a cost of USD 25.00 each. 4a. Inventory physical receipt for a quantity of 1 at a cost of USD 30.00 each. 4b. Inventory financial receipt for a quantity of 1 at a cost of USD 30.00 each. 5a. Inventory physical issue for a quantity of 1 at a cost price of USD 21.25 each (running average of financial and physical updated transactions). 5b. Inventory financial issue for a quantity of 1 at a cost price of USD 21.25 each (running average of financial and physical updated transactions). 6a. Inventory physical issue for a quantity of 1 at a cost price of USD 21.25 each. 7. Inventory close is performed. Based on the FIFO method, the first financial issue transaction will be adjusted or settled to the first updated receipt, either financial or physical. Transaction 5b will be settled to the receipt transaction 1b. There will be an adjustment of negative USD 11.25 to this issue transaction. The new running average cost price reflects the average of the financially and physically updated transactions at USD 27.50.
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The following diagram illustrates this series of transactions with the effects of choosing the FIFO inventory model with the Include physical value option.
Key to diagram Inventory transactions are represented by vertical arrows. Receipts into inventory are represented by vertical arrows above the timeline. Issues out of inventory are represented by vertical arrows below the timeline. Above (or below) each vertical arrow, the value of the inventory transaction is specified in the format Quantity@Unit price. An inventory transaction value surrounded by brackets indicates that the inventory transaction is physically posted into inventory. An inventory transaction value without brackets indicates that the inventory transaction is financially posted into inventory. Each new receipt or issue transaction is designated with a new label. Each vertical arrow is labeled with a sequential identifier, such as 1a. The identifiers indicate the sequence of inventory transaction postings in the timeline. Inventory closings are represented by a red vertical dashed line and the label Inventory Close. Settlements that are performed by inventory close are represented by dotted red arrows going diagonally from a receipt to an issue.
FIFO with marking

Marking is a process in Microsoft Dynamics AX that allows you to link, or mark, an issue transaction to a receipt transaction. Marking can occur either before or after a transaction is posted. You can use marking when you want to be sure of the exact cost of the inventory when the transaction is posted or when the inventory close is performed.
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For example, suppose the Customer Service department accepted a rush order from an important customer. Because this is a rush order, you will have to pay more for this item to accommodate your customer's request. You would like to be certain that the cost of this inventory item is reflected in the margin, or cost of goods sold (COGS) for this sales order invoice. When the purchase order is posted, the inventory is received at a cost of USD 120.00. If this sales order document is marked to the purchase order before the packing slip or invoice is posted, the COGS will be USD 120.00 instead of the current running average cost for the item. If the sales order packing slip or invoice is posted before the marking occurs, the COGS will be posted at the running average cost price. Before inventory close is performed these two transactions can still be marked to each other. When a receipt transaction is marked to an issue transaction, the valuation method defined in the item's inventory model group will be disregarded and Microsoft Dynamics AX will settle these transactions to each other. To mark an issue transaction to a receipt before the transaction is posted, open the Sales order form, select a transaction line, and then click the Inventory button on the transaction line and select Marking. The Marking form will open and display all the open receipt transactions. You can then select one of these transactions to match to, or mark, this issue transaction. To mark an issue transaction to a receipt after the transaction has been posted, navigate to the inventory item on the Transactions on Item form and click the Transaction button. Select the issue transaction that you want to mark, and then click the Inventory button and select Marking. The Marking form will open and display all the open receipt transactions. You can then select one of these transactions to match to, or mark, this issue transaction. The following transactions are illustrated in the graphic below: 1a. Inventory physical receipt for a quantity of 1 at a cost of USD 10.00 each. 1b. Inventory financial receipt for a quantity of 1 at a cost of USD 10.00 each. 2a. Inventory physical receipt for a quantity of 1 at a cost of USD 20.00 each. 2b. Inventory financial receipt for a quantity of 1 at a cost of USD 20.00 each. 3a. Inventory physical receipt for a quantity of 1 at a cost of USD 25.00 each. 4a. Inventory physical receipt for a quantity of 1 at a cost of USD 30.00 each. 4b. Inventory financial receipt for a quantity of 1 at a cost of USD 30.00 each. 5a. Inventory physical issue for a quantity of 1 at a cost price of USD 21.25 each (running average of financial and physical updated transactions). 5b. Inventory financial issue for a quantity of 1 is marked to the inventory receipt 2b before the transaction is posted. This transaction is posted at a cost price of USD 20.00 each. 6a. Inventory physical issue for a quantity of 1 at a cost price of USD 21.25 each.
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7 Inventory close is performed. Since the financially updated FIFO transaction is marked to an existing receipt, these transactions are settled to each other and no adjustment is made. The new running average cost price reflects the average of the financially and physically updated transactions at USD 27.50. The following diagram illustrates this series of transactions with the effects of choosing the FIFO inventory model with marking between issues and receipts.
See Also
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Specify an inventory model for inventory close Send comments about this topic to Microsoft Dynamics AX Content Publishing Team. Build date: 2008-04-01 [03:26] About LIFO See Also
Last in, First out (LIFO) is an inventory model in which the last (newest) receipts are issued first. Issues from inventory are settled against the last receipts into inventory based on the date of the inventory transaction. When using LIFO, you can choose to mark inventory transactions so that a specific item issue is settled against a specific receipt instead of using the LIFO rule. We recommend a periodic inventory closing when you use the LIFO inventory model. The following examples illustrate the impact of using LIFO with three different configurations: LIFO without the Include physical value option LIFO with the Include physical value option LIFO with marking
LIFO without the Include physical value option

In this LIFO illustration, the inventory model group is not marked to include physical value. The following transactions are illustrated in the graphic below: 1a. Inventory physical receipt for a quantity of 1 at a cost of USD 10.00 each. 1b. Inventory financial receipt for a quantity of 1 at a cost of USD 10.00 each. 2a. Inventory physical receipt for a quantity of 1 at a cost of USD 20.00 each. 2b. Inventory financial receipt for a quantity of 1 at a cost of USD 20.00 each. 3a. Inventory physical receipt for a quantity of 1 at a cost of USD 25.00 each. 4a. Inventory physical receipt for a quantity of 1 at a cost of USD 30.00 each. 4b. Inventory financial receipt for a quantity of 1 at a cost of USD 30.00 each. 5a. Inventory physical issue for a quantity of 1 at a cost price of USD 20.00 each (running average
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of financially updated transactions). 5b. Inventory financial issue for a quantity of 1 at a cost price of USD 20.00 each (running average of financially updated transactions). 6. Inventory close is performed. Based on the LIFO method, the last financially updated issue will be settled to the last financially updated receipt. An adjustment of USD 10.00 will be made on the issue transaction. The new running average cost price reflects the average of the financially updated transactions at USD 15.00. The following diagram illustrates this series of transactions with the effects of choosing the LIFO inventory model without the Include physical value option.
Key to diagram Inventory transactions are represented by vertical arrows. Receipts into inventory are represented by vertical arrows above the timeline. Issues out of inventory are represented by vertical arrows below the timeline. Above (or below) each vertical arrow, the value of the inventory transaction is specified in the format Quantity@Unit price. An inventory transaction value surrounded by brackets indicates that the inventory transaction is physically posted into inventory. An inventory transaction value without brackets indicates that the inventory transaction is financially posted into inventory. Each new receipt or issue transaction is designated with a new label. Each vertical arrow is labeled with a sequential identifier, such as 1a. The identifiers indicate the sequence of inventory transaction postings in the timeline. Inventory closings are represented by a red vertical dashed line and the label Inventory Close.
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Settlements that are performed by inventory close are represented by dotted red arrows going diagonally from a receipt to an issue.
LIFO with the Include physical value option

If the Include physical value box is selected for an item in the Inventory model groups form, Microsoft Dynamics AX will use both physical and financial receipt transactions to calculate the running average cost price. Where applicable, the system will also make adjustments to the physically updated issue transaction. When the Include physical value box is cleared, inventory close with the LIFO inventory model will make settlements only to transactions that are financially updated. The following transactions are illustrated in the graphic below: 1a. Inventory physical receipt for a quantity of 1 at a cost of USD 10.00 each. 1b. Inventory financial receipt for a quantity of 1 at a cost of USD 10.00 each. 2a. Inventory physical receipt for a quantity of 1 at a cost of USD 20.00 each. 2b. Inventory financial receipt for a quantity of 1 at a cost of USD 20.00 each. 3a. Inventory physical receipt for a quantity of 1 at a cost of USD 25.00 each. 4a. Inventory physical receipt for a quantity of 1 at a cost of USD 30.00 each. 4b. Inventory financial receipt for a quantity of 1 at a cost of USD 30.00 each. 5a. Inventory physical issue for a quantity of 1 at a cost price of USD 21.25 each (running average of financial and physical updated transactions). 5b. Inventory financial issue for a quantity of 1 at a cost price of USD 21.25 each (running average of financial and physical updated transactions). 6a. Inventory physical issue for a quantity of 1 at a cost price of USD 21.25 each. 7. Inventory close is performed. Based on the LIFO method, the last issue transaction will be adjusted or settled to the last updated receipt. Transaction 6a will be adjusted to the receipt transaction 4b. The system will not settle these transactions since the receipt is updated only physically and not financially. Instead, only an adjustment of USD 8.75 will be posted to the physical issue transaction. Transaction 5b will be adjusted to the physical receipt transaction 3a. The system will not settle these transactions since they are not both financially updated. Instead, only an adjustment of negative USD 3.75 will be made to this issue transaction. The new running average cost price reflects the average of the financially and physically updated transactions at USD 20.00.
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The following diagram illustrates this series of transactions with the effects of choosing the LIFO inventory model with the Include physical value option.
LIFO with marking

Marking is process in Microsoft Dynamics AX that allows you to link, or mark, an issue transaction to a receipt transaction. Marking can occur either before or after a transaction is posted. You can use marking when you want to be sure of the exact cost of the inventory when the transaction is posted or when the inventory close is performed.
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For example, suppose the Customer Service department accepted a rush order from an important customer. Because this is a rush order, you will have to pay more for this item to accommodate your customer's request. You would like to be certain the cost of this inventory item is reflected in the margin, or cost of goods sold (COGS), for this sales order invoice. When the purchase order is posted, the inventory is received at a cost of USD 120.00. If this sales order document is marked to the purchase order before the packing slip or invoice is posted, the COGS will be USD 120.00 instead of the current running average cost for the item. If the sales order packing slip or invoice is posted before the marking occurs, the COGS will be posted at the running average cost price. Before inventory close is performed these two transactions can still be marked to each other. To mark an issue transaction to a receipt before the transaction is posted, open the Sales order form, select a transaction line, and then click the Inventory button on the transaction line and select Marking. The Marking form will open and display all the open receipt transactions. You can then select one of these transactions to match to, or mark, this issue transaction. To mark an issue transaction to a receipt after the transaction has been posted, navigate to the inventory item on the Transactions on Item form and click the Transaction button. Select the issue transaction that you want to mark, and then click the Inventory button and select Marking. The Marking form will open and display all the open receipt transactions. You can then select one of these transactions to match to, or mark, this issue transaction. The following transactions are illustrated in the graphic below: 1a. Inventory physical receipt for a quantity of 1 at a cost of USD 10.00 each. 1b. Inventory financial receipt for a quantity of 1 at a cost of USD 10.00 each. 2a. Inventory physical receipt for a quantity of 1 at a cost of USD 20.00 each. 2b. Inventory financial receipt for a quantity of 1 at a cost of USD 20.00 each. 3a. Inventory physical receipt for a quantity of 1 at a cost of USD 25.00 each. 4a. Inventory physical receipt for a quantity of 1 at a cost of USD 30.00 each. 4b. Inventory financial receipt for a quantity of 1 at a cost of USD 30.00 each. 5a. Inventory physical issue for a quantity of 1 at a cost price of USD 21.25 each (running average of financial and physical updated transactions). 5b. Inventory financial issue for a quantity of 1 is marked to the inventory receipt 2b before the transaction is posted. This transaction is posted with a cost price of USD 20.00 each. 6a. Inventory physical issue for a quantity of 1 at a cost price of USD 21.25 each. 7. Inventory close is performed. Since the financially updated FIFO transaction is marked to an existing receipt, these transactions are settled to each other and no adjustment is made.
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The new running average cost price reflects the average of the financially and physically updated transactions at USD 27.50. The following diagram illustrates this series of transactions with the effects of choosing the LIFO inventory model with marking between issues and receipts.
See Also
Specify an inventory model for inventory close
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Send comments about this topic to Microsoft Dynamics AX Content Publishing Team. Build date: 2008-04-01 [03:27] About LIFO Date See Also
Last in, First out Date (LIFO Date) is an inventory model based on the LIFO principle that issues from inventory are settled against the last receipts into inventory based on the date of the inventory transaction. With LIFO Date, if there is no receipt before the issue, the issue is settled against any receipts that occur after the date of the issue. Several issues on the same date may be settled in the order of last issue, last receipt. When using LIFO Date, you can choose to mark inventory transactions so that a specific item receipt is settled against a specific issue instead of using the LIFO Date rule. We recommend a periodic inventory closing when you use the LIFO Date inventory model. The following examples illustrate the impact of using LIFO Date with three different configurations: LIFO Date without the Include physical value option LIFO Date with the Include physical value option LIFO Date with marking
LIFO Date without the Include physical value option

In this LIFO Date illustration, the inventory model group is not marked to include physical value. The following transactions are illustrated in the graphic below: 1a. Inventory physical receipt for a quantity of 1 at a cost of USD 10.00 each. 1b. Inventory financial receipt for a quantity of 1 at a cost of USD 10.00 each. 2a. Inventory physical receipt for a quantity of 1 at a cost of USD 20.00 each. 2b. Inventory financial receipt for a quantity of 1 at a cost of USD 20.00 each. 3a. Inventory physical receipt for a quantity of 1 at a cost of USD 25.00 each. 4a. Inventory physical issue for a quantity of 1 at a cost price of USD 15.00 (running average of financially updated transactions). 4b. Inventory financial issue for a quantity of 1 at a cost price of USD 15.00 (running average of
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financially updated transactions). 5a. Inventory physical receipt for a quantity of 1 at a cost of USD 30.00 each. 5b. Inventory financial receipt for a quantity of 1 at a cost of USD 30.00 each. 6. Inventory close is performed. Based on the LIFO Date method, the last financially updated issue will be settled to the last financially updated receipt by date. An adjustment of USD 5.00 will be made on the issue transaction. These transactions will be settled to each other. The new running average cost price reflects the average of the financially updated transactions at USD 15.00. The following diagram illustrates this series of transactions with the effects of choosing the LIFO Date inventory model without the Include physical value option.
Key to diagram Inventory transactions are represented by vertical arrows. Receipts into inventory are represented by vertical arrows above the timeline. Issues out of inventory are represented by vertical arrows below the timeline. Above (or below) each vertical arrow, the value of the inventory transaction is specified in the format Quantity@Unit price. An inventory transaction value surrounded by brackets indicates that the inventory transaction is physically posted into inventory. An inventory transaction value without brackets indicates that the inventory transaction is financially posted into inventory. Each new receipt or issue transaction is designated with a new label. Each vertical arrow is labeled with a sequential identifier, such as 1a. The identifiers indicate the sequence of inventory transaction postings in the timeline.
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Inventory closings are represented by a red vertical dashed line and the label Inventory Close. Settlements that are performed by inventory close are represented by dotted red arrows going diagonally from a receipt to an issue.
LIFO Date with the Include physical value option

If the Include physical value box is selected for an item in the Inventory model groups form, Microsoft Dynamics AX will use both physical and financial receipt transactions to calculate the running average cost price. Where applicable, the system will also make adjustments to the physically updated issue transaction. When the Include physical value box is cleared, inventory close with the LIFO Date inventory model will make settlements only to transactions that are financially updated. In this LIFO Date illustration, the inventory model group is marked to include physical value. The following transactions are illustrated in the graphic below: 1a. Inventory physical receipt for a quantity of 1 at a cost of USD 10.00 each. 1b. Inventory financial receipt for a quantity of 1 at a cost of USD 10.00 each. 2a. Inventory physical receipt for a quantity of 1 at a cost of USD 20.00 each. 2b. Inventory financial receipt for a quantity of 1 at a cost of USD 20.00 each. 3a. Inventory physical receipt for a quantity of 1 at a cost of USD 25.00 each. 4a. Inventory physical issue for a quantity of 1 at a cost price of USD 18.33 each (running average of financially updated transactions). 4b. Inventory financial issue for a quantity of 1 at a cost price USD 18.33 each (running average of financially updated transactions). 5a. Inventory physical receipt for a quantity of 1 at a cost of USD 30.00 each. 5b. Inventory financial receipt for a quantity of 1 at a cost of USD 30.00 each. 6. Inventory close is performed. Based on the LIFO Date method, the last updated issue will be adjusted or settled to the last updated receipt by date. These transactions will not be settled to each other since the financial receipt transaction is adjusted to a physical update transaction. Instead only an adjustment of USD 6.67 will be made on the issue transaction. The new running average cost price reflects the average of the financially updated transactions at USD 20.00. The following diagram illustrates this series of transactions with the effects of choosing the LIFO inventory model with the Include physical value option.
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LIFO Date with marking

Marking is process in Microsoft Dynamics AX that allows you to link, or mark, an issue transaction to a receipt transaction. Marking can occur either before or after a transaction is posted. You can use marking when you want to be sure of the exact cost of the inventory when the transaction is posted or when the inventory close is performed. For example, suppose the Customer Service department accepted a rush order from an important customer. Because this is a rush order, you will have to pay more for this item to accommodate your customer's request. You would like to be certain the cost of this inventory item is reflected in the margin,
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or cost of goods sold (COGS), for this sales order invoice. When the purchase order is posted, the inventory is received at a cost of USD 120.00. If this sales order document is marked to the purchase order before the packing slip or invoice is posted, the COGS will be USD 120.00 instead of the current running average cost for the item. If the sales order packing slip or invoice is posted before the marking occurs, the COGS will be posted at the running average cost price. Before Inventory close is performed these two transactions can still be marked to each other. When a receipt transaction is marked to an issue transaction, the valuation method defined in the item's inventory model group will be disregarded and Microsoft Dynamics AX will settle these transactions to each other. To mark an issue transaction to a receipt before the transaction is posted, open the Sales order form, select a transaction line, and then click the Inventory button on the transaction line and select Marking. The Marking form will open and display all the open receipt transactions. You can then select one of these transactions to match to, or mark, this issue transaction. To mark an issue transaction to a receipt after the transaction has been posted, navigate to the inventory item on the Transactions on Item form and click the Transaction button. Select the issue transaction that you want to mark, and then click the Inventory button and select Marking. The Marking form will open and display all the open receipt transactions. You can then select one of these transactions to match to, or mark, this issue transaction. The following transactions are illustrated in the graphic below: 1a. Inventory physical receipt for a quantity of 1 at a cost of USD 10.00 each. 1b. Inventory financial receipt for a quantity of 1 at a cost of USD 10.00 each. 2a. Inventory physical receipt for a quantity of 1 at a cost of USD 20.00 each. 2b. Inventory financial receipt for a quantity of 1 at a cost of USD 20.00 each. 3a. Inventory physical receipt for a quantity of 1 at a cost of USD 25.00 each. 4a. Inventory physical receipt for a quantity of 1 at a cost of USD 30.00 each. 4b. Inventory financial receipt for a quantity of 1 at a cost of USD 30.00 each. 5a. Inventory physical issue for a quantity of 1 at a cost price of USD 21.25 each (running average of financial and physical updated transactions). 5b. Inventory financial issue for a quantity of 1 is marked to the inventory receipt 2b before the transaction is posted. This transaction is posted with a cost price of USD 20.00 each. 6a. Inventory physical issue for a quantity of 1 at a cost price of USD 21.25 each. 7. Inventory close is performed. Since the financially updated FIFO transaction is marked to an existing receipt, these transactions are settled to each other and no adjustment is made.
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The new running average cost price reflects the average of the financially and physically updated transactions at USD 27.50. The following diagram illustrates this series of transactions with the effects of choosing the LIFO inventory model with marking between issues and receipts.
See Also
Specify an inventory model for inventory close
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Send comments about this topic to Microsoft Dynamics AX Content Publishing Team. Build date: 2008-04-01 [03:27] About weighted average See Also
Weighted average is an inventory model based on the weighted average principle, where issues from inventory are valued at the average value of the items that are received into inventory during the inventory closing period, plus any on-hand inventory from the previous period. When you run an inventory closing, all receipts are settled against a virtual issue, which holds the total received quantity and value. This virtual issue has a corresponding virtual receipt from which the issues are settled. In this way, all issues get the same average cost. The virtual issue and receipt can be seen as a virtual transfer, called the weighted average inventory closing transfer. If there is only one receipt, all issues can be settled from it and the virtual transfer will not be created. When using weighted average, you can choose to mark inventory transactions so that a specific item receipt is settled against a specific issue, instead of using the weighted average rule. We recommend a monthly inventory closing when you use the weighted average inventory model. In Microsoft Dynamics AX, the weighted average inventory costing method is calculated by the following formula: Weighted average = (Q1*P1 + Q2*P2 + Qn*Pn) / (Q1 + Q2 + Qn) Inventory transactions leaving the inventory issues, including sales orders, inventory journals, purchase credit notes, and production orders, will take place at an estimated cost price on the date of posting. This estimated cost price is also referred to as running average. At the time of inventory close, Microsoft Dynamics AX will analyze the inventory transactions for previous and current periods and determine which of the following closing principles should be used. Direct settlement Summarized settlement Settlements are inventory close postings that adjust the issues to the correct weighted average as of the closing date. The following examples illustrate the impact of using weighted average with five different configurations: Weighted average direct settlement without the Include physical value option Weighted average summarized settlement without the Include physical value option
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Weighted average direct settlement with the Include physical value option Weighted average summarized settlement with the Include physical value option Weighted average with marking
Weighted average direct settlement without Include physical value

The direct settlement principle used in this version of Microsoft Dynamics AX is the same used for weighted average in previous versions. The system will settle directly between receipts and issues. Microsoft Dynamics AX uses this direct settlement principle in certain specific situations: One receipt and one or several issues has been posted in the period Only issues have been posted in the period and the inventory contains on-hand items from a previous closing In the scenario below, a financially updated receipt and issue have been posted. During inventory close, Microsoft Dynamics AX will settle the receipt directly against the issue, and no adjustment to the cost price is needed on issue. The following transactions are illustrated in the graphic below: 1a. Inventory physical receipt updated for a quantity of 5 at USD 10.00 each 1b. Inventory financial receipt updated for a quantity of 5 at USD 10.00 each 2a. Inventory physical issue updated for a quantity of 2 at USD 10.00 each 2b. Inventory financial issue updated for a quantity of 2 at USD 10.00 each 3. Inventory close is performed using the direct settlement method to settle the inventory financial receipt to the inventory financial issue. The following diagram illustrates this series of transactions with the effects of choosing the Weighted average inventory model and the direct settlement principle without the Include physical value option.
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Weighted average summarized settlement without the Include physical value option
In this version of Microsoft Dynamics AX, a new settlement principle has been introduced for weighted average based on the principle that all receipts within in a closing period are summarized into a new inventory transfer transaction called Weighted average inventory closing. All the receipts for the period will be settled against the issue of the newly created inventory transfer transaction. All issues for the period will be settled against the receipt of the new inventory transfer transaction.
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If the on-hand inventory is positive after the inventory close, that on-hand inventory and value of the inventory are summarized on the new inventory transfer transaction (receipt). If the inventory on-hand is negative after the inventory close, the on-hand inventory and value of the inventory is the sum of individual issues that have not been fully settled. In the scenario below, several financially updated receipts and one issue have been posted. During inventory close, Microsoft Dynamics AX will generate and post the summarized inventory transfer transaction in order to settle all the receipts for the period against the summarized inventory transfer issue transaction. All the issues posted for the period will be settled against the summarized inventory transfer receipt transaction. The weighted average is calculated to be USD 15.00. Because the issue was originally posted with an estimated cost price of USD 14.67, an adjustment of negative USD 0.33 will be created and posted on the issue. As of the inventory closing date, the on-hand inventory is 3 pieces with a value of USD 45.00. The following transactions are illustrated in the graphic below: 1a. Inventory physical receipt updated for a quantity of 2 at a cost of USD 11.00 each. 1b. Inventory financial receipt updated for a quantity of 2 at a cost of USD 14.00 each. 2a. Inventory physical receipt updated for a quantity of 1 at a cost of USD 12.00 each. 2b. Inventory financial receipt updated for a quantity of 1 at a cost of USD 16.00 each. 3a. Inventory physical issue updated for a quantity of 1 at a cost of USD 14.67 each (running average). 3b. Inventory financial issue updated for a quantity of 1 at a cost of USD 14.67 each (running average). 4a. Inventory physical receipt updated for a quantity of 1 at a cost of USD 14.00 each. 4b. Inventory financial receipt updated for a quantity of 1 at a cost of USD 16.00 each. 5. Inventory close is performed. 6a. "Weighted average inventory close transaction" financial issue is created to sum the settlements of all the inventory financial receipts. 6b. "Weighted average inventory close transaction" financial receipt is created as the offset to 5a. The following diagram illustrates this series of transactions with the effects of choosing the Weighted average inventory model and the summarized settlement principle without the Include physical value option.
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Key to diagram Inventory transactions are represented by vertical arrows. Receipts into inventory are represented by vertical arrows above the timeline. Issues out of inventory are represented by vertical arrows below the timeline. Above (or below) each vertical arrow, the value of the inventory transaction is specified in the format Quantity@Unit price. An inventory transaction value surrounded by brackets indicates that the inventory transaction is physically posted into inventory. An inventory transaction value without brackets indicates that the inventory transaction is financially posted into inventory. Each new receipt or issue transaction is designated with a new label. Each vertical arrow is labeled with a sequential identifier, such as 1a. The identifiers indicate the sequence of inventory transaction postings in the timeline. Inventory closings are represented by a red vertical dashed line and the label Inventory Close. Settlements that are performed by inventory close are represented by dotted red arrows going diagonally from a receipt to an issue. Red arrows illustrate the receipt transactions being settled to the issue transaction created by the system. The green arrow represents the offsetting system-generated receipt transaction to which the originally posted issue transaction is settled
Weighted average direct settlement with the Include physical value option
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In this version of Microsoft Dynamics AX, the parameter Include physical value works differently with the weighted average inventory model than in previous versions of the product. If the Include physical value box is selected for an item in the Inventory model group form, Microsoft Dynamics AX will use physically updated receipts when calculating the estimated cost price, or running average. Issues will be posted based on this estimated cost price during the period. During the inventory close, financially updated receipts only will be considered in the weighted average calculation. We recommend a monthly inventory close when you use the weighted average inventory model. In this weighted average direct settlement example, the inventory model group is marked to include physical value. The following transactions are illustrated in the graphic below: 1a. Inventory physical receipt updated for a quantity of 1 at a cost of USD 11.00 each. 1b. Inventory financial receipt updated for a quantity of 1 at a cost of USD 10.00 each. 2a. Inventory physical receipt updated for a quantity of 1 at a cost of USD 15.00 each. 3a. Inventory physical issue updated for a quantity of 1 at a cost of USD 12.50 each (running average cost, since the physical receipt value is taken into consideration). 3b. Inventory financial issue updated for a quantity of 1 at a cost of USD 12.50 each (running average cost, since the physical receipt value is taken into consideration). 4. Inventory close is performed. During inventory close, Microsoft Dynamics AX will disregard all inventory transactions that have been only physically updated. Instead, the direct settlement principle will be used because only one financial receipt exists. An adjustment of USD 2.50 will be posted to the inventory transaction that has been financially issued as of the inventory closing date. After inventory close, the on hand inventory will be a quantity of 1 with a running average cost price of USD 15.00. The following diagram illustrates this series of transactions with the effects of choosing the Weighted average inventory model and the direct settlement principle with the Include physical value option.
Key to diagram
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Inventory transactions are represented by vertical arrows. Receipts into inventory are represented by vertical arrows above the timeline. Issues out of inventory are represented by vertical arrows below the timeline. Above (or below) each vertical arrow, the value of the inventory transaction is specified in the format Quantity@Unit price. An inventory transaction value surrounded by brackets indicates that the inventory transaction is physically posted into inventory. An inventory transaction value without brackets indicates that the inventory transaction is financially posted into inventory. Each new receipt or issue transaction is designated with a new label. Each vertical arrow is labeled with a sequential identifier, such as 1a. The identifiers indicate the sequence of inventory transaction postings in the timeline. Inventory closings are represented by a red vertical dashed line and the label Inventory Close. Settlements that are performed by inventory close are represented by dotted red arrows going diagonally from a receipt to an issue.
Weighted average summarized settlement with the Include physical value option
In this version of Microsoft Dynamics AX, the Include physical value parameter works differently with weighted average than in previous versions of the program. If the Include physical value box is selected for an item in the Inventory model group form, Microsoft Dynamics AX will use physically updated receipts in the calculation of estimated cost price, or running average. Issues will be posted based on this estimated cost price during the period. During the inventory close financially updated receipts only will be considered in the weighted average calculation. We recommend a monthly inventory close when you use the weighted average inventory model. In this weighted average summarized settlement example, the inventory model is marked to include physical value. The following transactions are illustrated in the graphic below: 1a. Inventory physical receipt updated for a quantity of 2 at a cost of USD 11.00 each. 1b. Inventory financial receipt updated for a quantity of 2 at a cost of USD 14.00 each. 2. Inventory physical receipt updated for a quantity of 1 at a cost of USD 10.00 each.
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3a. Inventory physical receipt updated for a quantity of 1 at a cost of USD 12.00 each. 3b. Inventory financial receipt updated for a quantity of 1 at a cost of USD 16.00 each. 4a. Inventory physical issue updated for a quantity of 1 at a cost of USD 13.50 each (running average cost, since the physical receipt value is taken into consideration). 4b. Inventory financial issue updated for a quantity of 1 at a cost of USD 13.50 each (running average cost, since the physical receipt value is taken into consideration). 5a. Inventory physical receipt updated for a quantity of 1 at a cost of USD 14.00 each. 5b. Inventory financial receipt updated for a quantity of 1 at a cost of USD 16.00 each. 6.Inventory close is performed. During inventory close, Microsoft Dynamics AX will disregard all inventory transactions that are updated only physically. The summarized settlement principle will be used because only one financial receipt exists. An adjustment of USD 1.50 will be posted to the inventory transaction that has been financially issued as of the inventory closing date. After inventory close, the on- hand inventory will be a quantity of 3 with a running average cost price of USD 15.00. 7a. "Weighted average inventory close transaction" financial issue is created to sum the settlements of all the inventory financial receipts. 7b. "Weighted average inventory close transaction" financial receipt is created as the offset to 5a. The following diagram illustrates this series of transactions with the effects of choosing the weighted average inventory model and the summarized settlement principle without the Include physical value option.
Key to diagram Inventory transactions are represented by vertical arrows. Receipts into inventory are represented by vertical arrows above the timeline. Issues out of inventory are represented by vertical arrows below the timeline.
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Above (or below) each vertical arrow, the value of the inventory transaction is specified in the format Quantity@Unit price. An inventory transaction value surrounded by brackets indicates that the inventory transaction is physically posted into inventory. An inventory transaction value without brackets indicates that the inventory transaction is financially posted into inventory. Each new receipt or issue transaction is designated with a new label. Each vertical arrow is labeled with a sequential identifier, such as 1a. The identifiers indicate the sequence of inventory transaction postings in the timeline. Inventory closings are represented by a red vertical dashed line and the label Inventory Close. Settlements that are performed by inventory close are represented by dotted red arrows going diagonally from a receipt to an issue. Red arrows illustrate the receipt transactions being settled to the issue transaction created by the system. The green arrow represents the offsetting system-generated receipt transaction to which the originally posted issue transaction is settled
Weighted average with marking

Marking is a process in Microsoft Dynamics AX that allows you to link, or mark, an issue transaction to a receipt transaction. Marking can occur either before or after a transaction is posted. You can use marking when you want to be sure of the exact cost of the inventory when the transaction is posted or when the inventory close is performed. For example, your Customer Service department accepted a rush order from an important customer. Because this is a rush order, you will have to pay more for this item to accommodate your customer's request. You would like to be certain the cost of this inventory item is reflected in the margin, or cost of goods sold (COGS), for this sales order invoice. When the purchase order is posted, the inventory is received at a cost of USD 120.00. If this sales order document is marked to the purchase order before the packing slip or invoice is posted, the COGS will be USD 120.00 instead of the current running average cost for the item. If the sales order packing slip or invoice is posted before the marking occurs, the COGS will be posted at the running average cost price. Before inventory close is performed, these two transactions can still be marked to each other. When a receipt transaction is marked to an issue transaction, the valuation method selected for the item's inventory model group will be disregarded and Microsoft Dynamics AX will settle these transactions to each other. To mark an issue transaction to a receipt before the transaction is posted, open the Sales order form,
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select a transaction line, and then click the Inventory button on the transaction line and select Marking. The Marking form will open and display all the open receipt transactions. You can then select one of these transactions to match to, or mark, this issue transaction. To mark an issue transaction to a receipt after the transaction has been posted, navigate to the inventory item on the Transactions on Item form and click the Transaction button. Select the issue transaction that you want to mark, and then click the Inventory button and select Marking. The Marking form will open and display all the open receipt transactions. You can then select one of these transactions to match to, or mark, this issue transaction. The following transactions are illustrated in the graphic below: 1a. Inventory physical receipt for a quantity of 1 at a cost of USD 10.00 each. 1b. Inventory financial receipt for a quantity of 1 at a cost of USD 10.00 each. 2a. Inventory physical receipt for a quantity of 1 at a cost of USD 20.00 each. 2b. Inventory financial receipt for a quantity of 1 at a cost of USD 20.00 each. 3a. Inventory physical receipt for a quantity of 1 at a cost of USD 25.00 each. 4a. Inventory physical receipt for a quantity of 1 at a cost of USD 30.00 each. 4b. Inventory financial receipt for a quantity of 1 at a cost of USD 30.00 each. 5a. Inventory physical issue for a quantity of 1 at a cost price USD 21.25 (running average of financial and physical updated transactions). 5b. Inventory financial issue for a quantity of 1 is marked to the inventory receipt 2b before the transaction is posted. This transaction is posted with a cost price of USD 20.00. 6a. Inventory physical issue for a quantity of 1 at a cost price of USD 21.25 each. 7 Inventory close is performed. Since the financially updated transaction is marked to an existing receipt these transactions are settled to each other and no adjustment is made. The new running average cost price reflects the average of the financially and physically updated transactions at USD 27.50. The following diagram illustrates this series of transactions with the effects of choosing the Weighted average inventory model with marking.
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See Also
About running average cost price About inventory close Run inventory close Send comments about this topic to Microsoft Dynamics AX Content Publishing Team. Build date: 2008-04-01 [03:26]
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About weighted average date
Weighted average date is an inventory model based on the weighted average principle, where issues from inventory are valued at the average value of the items that are received into inventory for each separate day in the inventory closing period. When you run an inventory closing with weighted average date, all receipts for a day are settled against a virtual issue, which holds the total received quantity and value for that day. This virtual issue has a corresponding virtual receipt from which the issues will be settled. In this way, all issues get the same average cost. The virtual issue and receipt can be seen as a virtual transfer, called the weighted average inventory closing transfer". If only one receipt has occurred on or before the date, it is not necessary to value the average because all issues are settled from it and the virtual transfer will not be created. Likewise, if only issues occur on the date, there are no receipts from which to value the average, and the virtual transfer will not be created in this case either. When using weighted average date, you can choose to mark inventory transactions so that a specific item receipt is settled against a specific issue, instead of using the weighted average date rule. We recommend a monthly inventory closing when you use the weighted average date inventory model. In Microsoft Dynamics AX, weighted average date the inventory costing method is calculated by the following formula: Weighted average = (Q1*P1 + Q2*P2 + Qn*Pn) / (Q1 + Q2 + Qn) During inventory close, the calculation will be executed on a daily basis through the closing period as illustrated in the following graphic.
Inventory transactions leaving the inventory, including sales orders, inventory journals, purchase credit notes, and production orders, will take place at an estimated cost price on the date of posting. This estimated cost price is also referred to as the running average cost price On the date of inventory close, Microsoft Dynamics AX will analyze the inventory transactions for previous periods, previous days, and the current day to determine which of the following closing principles should be used:
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Direct settlement Summarized settlement Settlements are inventory close postings that adjust the issues to the correct weighted average as of the closing date. Note For more information on settlements in Microsoft Dynamics AX, see About inventory close. The following examples illustrate the impact of using weighted average with five different configurations: Weighted average date direct settlement without the Include physical value option Weighted average date summarized settlement without the Include physical value option Weighted average date direct settlement with the Include physical value option Weighted average date summarized settlement with the Include physical value option Weighted average date with marking
Weighted average date direct settlement without the Include physical value option
The direct settlement principle used in this version of Microsoft Dynamics AX is the same used for weighted average in previous versions of the product. The system will settle directly between receipts and issues. Microsoft Dynamics AX uses this direct settlement principle in certain specific situations: One receipt and one or several issues has been posted in the period Only issues have been posted in the period and the inventory contains on-hand items from a previous closing In the scenario below, a financially updated receipt and issue have been posted. During inventory close, Microsoft Dynamics AX will settle the receipt directly against the issue, and no adjustment to the cost price is needed on issue. The following transactions are illustrated in the graphic below: 1a. Inventory physical receipt updated for a quantity of 5 at a cost of USD 10.00 each 1b. Inventory financial receipt updated for a quantity of 5 at a cost of USD 10.00 each 2a. Inventory physical issue updated for a quantity of 2 at a cost of USD 10.00 each 2b. Inventory financial issue updated for a quantity of 2 at a cost of USD 10.00 each
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3. Inventory close was performed using the direct settlement method to settle the inventory financial receipt to the inventory financial issue.
Weighted average date summarized settlement without the Include physical value option
In this version of Microsoft Dynamics AX, a new settlement principle has been introduced for weighted average based on the principle that all receipts within in a closing period are summarized into a new inventory transfer transaction called Weighted average inventory closing. All the receipts for the day
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will be settled against the issue of the newly created inventory transfer transaction. All issues for the day will be settled against the receipt of the new inventory transfer transaction. If the on-hand inventory is positive after the inventory close, that on-hand inventory and value of the inventory are summarized on the new inventory transfer transaction (receipt). If the inventory on-hand is negative after the inventory close, the on-hand inventory and value of the inventory is the sum of individual issues that have not been fully settled. In the scenario below, several financially updated receipts and issues have been posted during the period. During inventory close, Microsoft Dynamics AX will evaluate every day to determine how each one should be treated by closing. The following are illustrated in the graph below: DAY 1: 1a. Inventory physical receipt updated for a quantity of 3 at USD 15.00 each. 1b. Inventory financial receipt updated for a quantity of 3 at USD 15.00 each. 2a. Inventory physical issue for a quantity of 1 at a running average cost of USD 15.00. 2b. Inventory financial issue for a quantity of 1 at a running average cost of USD 15.00. The system will use the direct settlement approach for Day 1. DAY 2: 3a. Inventory physical issue for a quantity of 1 at a running average cost of USD 15.00. 3b. Inventory financial issue for a quantity of 1 at a running average cost of USD 15.00. The system will use the direct settlement approach for Day 2. DAY 3: 4a. Inventory physical issue for a quantity of 1 at a running average cost of USD 15.00. 4b. Inventory financial issue for a quantity of 1 at a running average cost of USD 15.00. 5a. Inventory physical receipt for a quantity of 1 at USD 17.00 each. 5b. Inventory financial receipt for a quantity of 1 at USD 17.00 each. Inventory close is performed. The direct settlement will need to be used because there are multiple receipts crossing multiple days. 7a. A weighted average inventory close transaction financial issue is created at for a quantity of 2 at USD 32.00 to summarize the settlements of all inventory financial receipts to date that have not
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been closed. 7b. A weighted average inventory close transaction financial receipt is created as the offset to 7a. Microsoft Dynamics AX will generate and post the summarized inventory transfer transaction and settle all the receipts for the day and on-hand inventory for previous days against the summarized inventory transfer issue transaction. All the issues for the day will be settled against the summarized inventory transfer receipt transaction. The weighted average cost price is calculated to be USD 16.00. The issue will have an adjustment of USD 1.00 to adjust to the weighted average cost. The new running average cost price is USD 16.00. The following diagram illustrates this series of transactions with the effects of choosing the Weighted average inventory model and the summarized settlement principle without the Include physical value option.
Key to diagram Inventory transactions are represented by vertical arrows. Receipts into inventory are represented by vertical arrows above the timeline. Issues out of inventory are represented by vertical arrows below the timeline. Above (or below) each vertical arrow, the value of the inventory transaction is specified in the format Quantity@Unit price. An inventory transaction value surrounded by brackets indicates that the inventory transaction is physically posted into inventory. An inventory transaction value without brackets indicates that the inventory transaction is financially posted into inventory. Each new receipt or issue transaction is designated with a new label. Each vertical arrow is labeled with a sequential identifier, such as 1a. The identifiers indicate the sequence of inventory transaction postings in the timeline. Inventory closings are represented by a red vertical dashed line and the label Inventory Close. Settlements that are performed by inventory close are represented by dotted red arrows going
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diagonally from a receipt to an issue. Red diagonal arrows illustrate the receipt transactions being settled to the issue transaction created by the system. The green diagonal arrow represents the offsetting system-generated receipt transaction to which the originally posted issue transaction is settled.
Weighted average date direct settlement with Include physical value option
The direct settlement principle used for weighted average date in this version of Microsoft Dynamics AX is the same as used in previous versions. The system will settle directly between receipts and issues. Microsoft Dynamics AX uses this direct settlement principle in certain specific situations: One receipt and one or several issues has been posted in the period Only issues have been posted in the period and the inventory holds an on-hand inventory from a previous closing In this version of Microsoft Dynamics AX, the parameter Include physical value works differently with the weighted average date inventory model than in previous versions of the product. If the Include physical value box is selected for an item in the Inventory model group form, Microsoft Dynamics AX will use physically updated receipts when calculating the estimated cost price, or running average. Issues will be posted based on this estimated cost price during the period. During the inventory close, financially updated receipts only will be considered in the weighted average calculation.
Weighted average date summarized settlement with the Include physical value option
In this version of Microsoft Dynamics AX, the parameter Include physical value works differently with the weighted average date inventory model than in previous versions of the product. If the Include physical value box is selected for an item in the Inventory model group form, Microsoft Dynamics AX will use physically updated receipts when calculating the estimated cost price, or running average. Issues will be posted based on this estimated cost price during the period. During the inventory close, financially updated receipts only will be considered in the weighted average calculation. In this version of Microsoft Dynamics AX, a new settlement principle has been introduced for weighted average based on the principle that all receipts within in a closing period are summarized into a new inventory transfer transaction called Weighted average inventory closing. All the receipts for the day will be settled against the issue of the newly created inventory transfer transaction. All issues for the day will be settled against the receipt of the new inventory transfer transaction. If the on-hand inventory is positive after the inventory close, that on-hand inventory and value of the
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inventory are summarized on the new inventory transfer transaction (receipt). If the inventory on-hand is negative after the inventory close, the on-hand inventory and value of the inventory is the sum of individual issues that have not been fully settled.
Weighted average date marking

Marking is a process in Microsoft Dynamics AX that allows you to link, or mark, an issue transaction to a receipt transaction. Marking can occur either before or after a transaction is posted. You can use marking when you want to be sure of the exact cost of the inventory when the transaction is posted or when the inventory close is performed. For example, your Customer Service department accepted a rush order from an important customer. Because this is a rush order, you will have to pay more for this item to accommodate your customer's request. You would like to be certain the cost of this inventory item is reflected in the margin, or cost of goods sold (COGS), for this sales order invoice. When the purchase order is posted, the inventory is received at a cost of USD 120.00. If this sales order document is marked to the purchase order before the packing slip or invoice is posted, the COGS will be USD 120.00 instead of the current running average cost for the item. If the sales order packing slip or invoice is posted before the marking occurs, the COGS will be posted at the running average cost price. Before inventory close is performed, these two transactions can still be marked to each other. When a receipt transaction is marked to an issue transaction, the valuation method defined in the item's inventory model group will be disregarded and Microsoft Dynamics AX will settle these transactions to each other. To mark an issue transaction to a receipt before the transaction is posted, open the Sales order form, select a transaction line, and then click the Inventory button on the transaction line and select Marking. The Marking form will open and display all the open receipt transactions. You can then select one of these transactions to match to, or mark, this issue transaction. To mark an issue transaction to a receipt after the transaction has been posted, navigate to the inventory item on the Transactions on Item form and click the Transaction button. Select the issue transaction that you want to mark, and then click the Inventory button and select Marking. The Marking form will open and display all the open receipt transactions. You can then select one of these transactions to match to, or mark, this issue transaction. The following transactions are illustrated in the graphic below: 1a. Inventory physical receipt for a quantity of 1 at a cost price of USD 10.00 each. 1b. Inventory financial receipt for a quantity of 1 at a cost price of USD 10.00 each. 2a. Inventory physical receipt for a quantity of 1 at a cost price of USD 20.00 each. 2b. Inventory financial receipt for a quantity of 1 at a cost price of USD 20.00 each.
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3a. Inventory physical receipt for a quantity of 1 at a cost price of USD 25.00 each. 4a. Inventory physical receipt for a quantity of 1 at a cost price of USD 30.00 each. 4b. Inventory financial receipt for a quantity of 1 at a cost price of USD 30.00 each. 5a. Inventory physical issue for a quantity of 1 at a cost price of USD 21.25 (running average of financial and physical updated transactions). 5b. Inventory financial issue for a quantity of 1 is marked to the inventory receipt 2b before the transaction is posted. This transaction is posted at a cost price of USD 20.00. 6a. Inventory physical issue for a quantity of 1 at a cost price of USD 21.25. 7. Inventory close is performed. Because the financially updated transaction is marked to an existing receipt, these transactions are settled to each other and no adjustment is made. The new running average cost price reflects the average of the financially and physically updated transactions at USD 27.50. The following diagram illustrates this series of transactions with the effects of choosing the Weighted average date inventory model with marking.
Key to diagram Inventory transactions are represented by vertical arrows. Receipts into inventory are represented by vertical arrows above the timeline. Issues out of inventory are represented by vertical arrows below the timeline. Above (or below) each vertical arrow, the value of the inventory transaction is specified in the format Quantity@Unit price. An inventory transaction value surrounded by brackets indicates that the inventory transaction is physically posted into inventory. An inventory transaction value without brackets indicates that the inventory transaction is
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financially posted into inventory. Each new receipt or issue transaction is designated with a new label. Each vertical arrow is labeled with a sequential identifier, such as 1a. The identifiers indicate the sequence of inventory transaction postings in the timeline. Inventory closings are represented by a red vertical dashed line and the label Inventory Close. Settlements that are performed by inventory close are represented by dotted red arrows going diagonally from a receipt to an issue.
Send comments about this topic to Microsoft Dynamics AX Content Publishing Team. Build date: 2008-04-01 [03:27] About inventory posting See Also
Microsoft Dynamics AX provides control over the following inventory posting accounts: Fixed receipt price profit Fixed receipt price loss Issue Loss Receipt Profit Fixed asset issue You can generate transactions for inventory profits and losses when you record transactions in the inventory, for example, in a profit/loss journal. For inventory profits, the receipts account is debited, and the account for inventory gains is credited. For inventory losses, the issues account is credited and the account for inventory gains is debited.
See Also
Fixed assets integration Send comments about this topic to Microsoft Dynamics AX Content Publishing Team.
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Build date: 2008-04-01 [03:26] About posting search
By default, posting specifies the current item number, the current account, and the current sales-tax code. If there is no specification for this combination, posting for the current item number and the current account is used but without specification of the sales-tax code. Microsoft Dynamics AX then continues to search in the posting table until it finds a posting that matches the current transaction. The search sequence is defined by the current settings in the customer and vendor parameters in the Primary sales posting, Primary consumption transaction, Primary discount posting, Primary receipt posting, and Primary discount posting fields for the current account. If primary posting is set to Item, Microsoft Dynamics AX searches in the following order: 1. Item number, Account, Sales tax code. 2. Item number, Account. 3. Item number, Account group, Sales tax code. 4. Item number, Account group. 5. Item number, All accounts, Sales tax code. 6. Item number, All accounts. 7. Item group, Account, Sales tax code. 8. Item group, Account 9. Item group, Account group, Sales tax code. 10. Item group, Account group. If primary posting is set to Customer and Vendor, Microsoft Dynamics AX searches in the following order: 1. Item number, Account, Sales tax code. 2. Item number, Account. 3. Item group, Account, Sales tax code. 4. Item group, Account. 5. All items, Account, Sales tax code. 6. All items, Account.
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7. Item number, Account group, Sales tax code. 8. Item number, Account group. 9. Item group, Account group, Sales tax code. 10. Item group, Account group. The above allows you to set up general posting rules for all items, all accounts, and all sales-tax codes. You can define primary posting in customer parameters for sales, consumption, and discounts, and in vendor parameters for receipts and discounts.
Send comments about this topic to Microsoft Dynamics AX Content Publishing Team. Build date: 2008-04-01 [03:27]
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Setting up and maintaining inventory close and adjustments

Setting up and maintaining inventory close and adjustments See Also

Setting up and maintaining inventory close and adjustments

Build date: 2008-04-01 [03:27] About inventory close See Also

Setting up and maintaining inventory close and adjustments

Setting up and maintaining inventory close and adjustments

Setting up and maintaining inventory close and adjustments

Setting up and maintaining inventory close and adjustments

Setting up and maintaining inventory close and adjustments

The Pricing Amplification Issue

Setting up and maintaining inventory close and adjustments

Setting up and maintaining inventory close and adjustments

The following purchase orders have been invoiced:

Setting up and maintaining inventory close and adjustments

Setting up and maintaining inventory close and adjustments

Prerequisites for standard costs

FIFO without the Include physical value option

Setting up and maintaining inventory close and adjustments

Setting up and maintaining inventory close and adjustments

FIFO with the Include physical value option

Setting up and maintaining inventory close and adjustments

FIFO with marking

Setting up and maintaining inventory close and adjustments

Setting up and maintaining inventory close and adjustments

Setting up and maintaining inventory close and adjustments

LIFO without the Include physical value option

Setting up and maintaining inventory close and adjustments

Setting up and maintaining inventory close and adjustments

LIFO with the Include physical value option

Setting up and maintaining inventory close and adjustments

LIFO with marking

Setting up and maintaining inventory close and adjustments

Setting up and maintaining inventory close and adjustments

Setting up and maintaining inventory close and adjustments

LIFO Date without the Include physical value option

Setting up and maintaining inventory close and adjustments

Setting up and maintaining inventory close and adjustments

LIFO Date with the Include physical value option

Setting up and maintaining inventory close and adjustments

LIFO Date with marking

Setting up and maintaining inventory close and adjustments

Setting up and maintaining inventory close and adjustments

Setting up and maintaining inventory close and adjustments

Setting up and maintaining inventory close and adjustments

Weighted average direct settlement without Include physical value

Setting up and maintaining inventory close and adjustments

Setting up and maintaining inventory close and adjustments

Setting up and maintaining inventory close and adjustments

Setting up and maintaining inventory close and adjustments

Setting up and maintaining inventory close and adjustments

Setting up and maintaining inventory close and adjustments

Setting up and maintaining inventory close and adjustments

Weighted average with marking

Setting up and maintaining inventory close and adjustments

Setting up and maintaining inventory close and adjustments

Setting up and maintaining inventory close and adjustments

About weighted average date

Setting up and maintaining inventory close and adjustments

Setting up and maintaining inventory close and adjustments

Setting up and maintaining inventory close and adjustments

Setting up and maintaining inventory close and adjustments

Setting up and maintaining inventory close and adjustments

Setting up and maintaining inventory close and adjustments