Direct Cost Applied when an inventory purchase receipt is invoiced (vouchered) in NAV or BC.
When working in Dynamics NAV implementations, we get a lot of questions about the Purchases and Direct Cost Applied Accounts.
BC - Dynamics NAV will post as follows. When we look at the General Posting Setup in Dynamics NAV 2013 (see below), we see that there is a column for the Purchases Account and the Direct Cost Applied Account.
Figure 1 - General Posting Setup in Dynamics NAV 2013 When a purchase receipt is invoiced (vouchered) in NAV, we get the following General Ledger entries:
- Dr Purchases Account for the Actual Invoice Amount
- Cr Accounts Payable Account for the Actual Invoice Amount
- Dr Inventory Account for the Actual Invoice Amount (or Standard Cost if using Standard cost Method)
- Cr Direct Cost Applied Account for the Actual Invoice Amount
The Purchases and Direct Cost Applied accounts should net to zero. The net effect of these postings is that the Inventory and Accounts Payable Accounts are debited for the actual amount.