Prior to release 370, all legislations uses the same method to generate financial entries for various production processes. Depending on the production process, double entries created in the production order, uses a single General Ledger (GL) in the Settings, which is linked to production cost, revenue, waste, result, Work In Progress (WIP) and scrap.
This production journalizing method is not acceptable in some of the countries due to the accounting practices/policies in the respective country. Due to this, in release 370 for Czech Republic, Hungary , Slovakia and Vietnam , there is a different method implemented for production order journals; more information can be found in Release 370: Countries specific production journalization.
However, for Romania , the main concern is to segregate the double entries according to different item types. With the current existing logic, regardless of finish goods, sub-assemblies or materials, all the journals will be booked into same GL account during the production process and it is not possible to identify the cost derived from production and differentiate them by item types. To complywith Romania’s requirement, it is required to segregate the financial entries according to production item category.
What has been changed Menu path System/Settings/General ledger settings Manufacturing/Entries/Production orders Manufacturing/Entries/Issue Manufacturing/Entries/Receipts production Manufacturing/To be processed/Complete Manufacturing/Statistics/Rejected In order to complywith Romania accounting policy in production order, a new method has been implemented in release 370.
Main changes for Romania legislation will be the double entries in production order; system will now refer to Cost Of Goods Sold (COGS) GL in item maintenance to generate the financial entries accordingly, other than the WIP and scrap ledgers that will still be referred in general ledger settings.
In order to have financial entries with different GL for each item category, it is important to setup all the items correctly.
Another point to note is that the production waste GL is no longer in use, and as such, if there are any rejected finish goods in the production order, the system will not be able to print this information correctly in [Manufacturing/Statistics/Rejected].
Concept
The illustration above shows the distinction between the old and new logic. For old logic, every financial entry will be made according to single GL ledger that defined in the settings. In the new logic, user can define the desire GL ledger in item maintenance, such as the COGS ledger. Since this COGS Ledger resides in every item, therefore, it is possible to have a different ledger for different items/item types. And with this function, the user can have better insight when they want to view the total production cost per item type in production order.
For example, to view the total cost for materials regardless of number of production orders, user can easily access the GL card to obtain the information.
General ledger settings With the Romanian license in Settings, all the production GL in [System/Settings/General ledger] are hidden, except for Production WIP and Production scrap.
This is to prevent any confusion that may arise, such as, if the user might possibly assume/think that the production GL ledgers are maintained here. With this new logic, all the respective applications should obtain the correct GL from item master and general ledger settings accordingly.
For WIP GL ledger, the default GL account will obtain from the settings but system will allow the change of ledger in project master, just like the current logic. All the production GL value in the general ledger settings will remain but not be maintainable anymore.
For scrap GL ledger, the system will only accept Balance Sheet (BS) ledgers with neutral or stock type. When saving a new GL that is neutral type, the system will automatically save the type to stock.
Recoding logic for existing transactions upon changing of scrap GL ledger will remained the same.
NOTE: For existing customers, there is no B2B script to convert the incomplete production order to map to this new logic. As such, user must aware that all the outstanding production orders have to set to “Complete” before they can make use of this new logic. Inconsistency will be there if user has open production orders with old logic, then followed by using new logic at later stage.
Before the change
Production = No WIP
Issue
Debit
Credit
Materials
Production cost
Stock
Materials waste
Hours item
Salary payment
Receipts
Finish goods
Production revenue
By-product
Extra charges
Extra issue
Materials (issue)
Finish goods (returns)
By-product (returns)
Hours item (extra consumption)
Extra receipts
Materials (returns)
Finish goods (receipts)
Hours item (correction)
Complete
Production result
Waste
Scrap
Production scrap
By-products
Production = WIP
Production WIP
Production waste
After the change
Case data
Items
Item master
Stock = 4010COGS = 5010
5555
4060
Subassemblies
Stock = 4020COGS = 5020
Stock = 4030COGS = 5030
Stock = 4040COGS = 5040
Note: Assuming machine/labor hour/extra charges are having the same GL setup as materials example above.
5020
COGS
4020
5030
4030
4010
5010
4040
5040
Subassemblies (return)
-
WIP