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Eight Tips for Handling Inventory Close with Microsoft Dynamics AX 2009
As the year draws to a close, it's time to do inventory closing with Microsoft Dynamics AX 2009. From an accounting perspective, this means settling transactions between issues and receipts, as items can be issued at one value and received at another value.
While inventory close is no longer required when using the standard cost method, it is required for other costing methods. With standard close, differences between the item's standard cost (used for issues) and receipt transactions will post to variance accounts, as determined, resulting in inventory always valued at the standard cost.
So the following points apply to all costing methods except standard costing:
- Inventory values are based on the running calculated average cost when financially posted.
- Before a receipt is invoiced (financially posted), there can be a difference between the actual (physical) receipt cost and the expected (financial) cost. When this occurs, the receipt value is known as the floating value.
- Inventory close settles the initially posted average cost to an item cost based on the inventory model selected (i.e. FIFO, LIFO, Weighted average, etc.). Dynamics AX attempts to match issues to receipts based on the inventory model. If a match cannot be made, an adjustment on the issue will occur to match the receipt cost.
- When not using the standard cost method, there can be a link made between the item receipt and item issue cost. Marking is performed to create this link and is considered by inventory close when settling. Transactions "marked" inventory dimensions can control the settlement process within a specific dimension, i.e. an item issued in an inventory dimension cannot be settled against another inventory dimension. To control within a specific dimension, the financial inventory parameter must be selected on the dimension. This control does apply to the Marking functionality.
With the previous points in mind, this checklist can be used in closing a fiscal year:
1. If you are using Inventory Management, run the Inventory Close process through the end of your fiscal year. (Inventory Management | Periodic | Closing and Adjustment)
The Inventory Close process will take into account the Inventory Valuation selection you have selected on the Inventory Model Group from the Weighted Average Method that is used during the month.
2. Create a new Fiscal Year. (General Ledger | Setup | Periods | Periods)
Create the next Fiscal Year that you will be creating transactions for. This step may have been done previously if the Fiscal Year is not closed right at Year End.
3. Set the appropriate Periods to Stopped in the current Fiscal Year. Also Open the Closing Period to allow posting of the Closing Entries. (General Ledger | Setup | Periods | Periods)
Change the status of any period that should not have further transactions posted to it to Closed.
Note - That a Closed Period may not be reopened.
4. Backup Data.
Backup the Dynamics AX data.
5. Make Adjusting Entries. (General Ledger | Periodic | Fiscal Year Close | Closing Sheet)
Use the Closing Sheet to enter any Adjusting Entries you or your auditor has deemed necessary.
6. Print final Financial Statements. (General Ledger | Reports | Periodic | Financial
Print your Final Financial Statements. This would include the Cash Flow Statement, Statement of Stockholder's Equity, Profit and Loss Statement (Income Statement), and Balance Sheet. If you have any other reports that you require, print those at this time as well.
7. Transfer Opening Balances into the new Fiscal Year. (General Ledger | Periodic | Fiscal Year Close | Opening Transactions)
Use this job to move the Balance\Asset Account Balances forward into the New Fiscal Year. This job will also move the balances of your Profit & Loss\Cost\Revenue accounts to the Year-end Result account which is set up in the System Accounts (General Ledger | Setup | Posting | System Accounts).
8. Reset Number Sequences (optional). (Basic | Setup | Number Sequences | Number Sequence)