Purpose of this Blog
To explain the concept of Inventory Posting in D365 Business Central (NAV) in crisp and easy-to-understand words. In this blog, I will write the theory and in the next blog (which will be a continuation of this blog), I will demonstrate the same with a transaction in BC.
Concept of Inventory Posting
This is a precise diagram to explain the concept of Inventory Posting in brief.
I have attached the PDF file for the same as well here 👇🏻
Quantity Vs Value (Item Ledger Entries Vs Value Entries)
Inventory transactions result in two kinds of postings:
Quantity posting describes the change in quantity on inventory. The program stores this information in item ledger entries.
Value posting describes the change in inventory value. This information is stored in value entries. One or more value entries can exist per item ledger entry.
Capacity Ledger Entries
For WIP inventory, there is a special kind of quantity posting that accounts for capacity, which is measured in either time or units. This information is stored in capacity ledger entries. The related value entries describe the added value of the conversion cost. One or more value entries can exist per capacity ledger entry.
Item Application Entries
Item ledger entries are applied against each other. To apply means to link an inventory increase with an inventory decrease so that it is possible to say exactly which increase was used for which decrease and vice versa. The program stores this information in item application entries.
Item ledger, capacity ledger, value, and item application entries are created when you post an item journal line.
Important points to note in inventory posting:
The item journal line can either be posted directly, for example, from the item journal, or it can be posted indirectly, for example, from a purchase line.
When a purchase line is posted, it is first transferred to an item journal line, and then the journal line is posted as if the transaction had been entered directly.
Note that the entry type indicates which G/L account to post to—not whether it is an inventory increase or decrease. That is determined either by the sign of the quantity on the item ledger entry or the valued quantity on the value entry (as they always have the same sign). For example, a sales entry with a positive quantity describes an inventory decrease caused by a sale, and a sales entry with a negative quantity describes an inventory increase caused by a sales return.
Hope it helps! Cheers! 🥂