How does a Purchase Order Receipt and Invoice update the GL?

The article describes the GL effect of posting a Purchase Order Receipt and separate invoice for an inventory item in Business Central.  There are two different behaviors based on the Expected Cost Posting toggle in the Inventory Setup page.

Expected Cost Posting Disabled

Posting a purchase order receipt

Purchase receipts do not update the GL.

Posting a purchase invoice or receipt with invoice

Whether posting an invoice for a receipt, or posting a receipt with invoice, the GL activity is the same. The inventory value is posted to the inventory asset account using the cost on the vendor invoice.

Note the Purchases and Direct Cost Applied accounts are used.  These are offsetting entries.  The accounts should be set to a P&L account, such as COGS.

Account	Debit	Credit	How is selection made?	Account Source
Inventory	100.00		-Inventory posting group assigned to the item -Location code on the sales line	Inventory posting setup (Inventory Account)
Direct Cost Applied		100.00	-General Business Posting Group for the customer -General Product Posting Group assigned to the item	General posting setup (Direct Cost Applied Account)
Purchases	100.00		-General Business Posting Group assigned to the customer -General Product Posting Group assigned to the item	General posting setup (Purch Account)
A/P		100.00	Vendor Posting Group assigned to the vendor	Vendor posting groups (Payables Account)

Expected Cost Posting Enabled

Posting a purchase order receipt

When posting a purchase receipt, Business Central posts to the interim accounts.  The inventory interim accrual account (Accrued Purchases) holds the expected future liability that will post to Accounts Payable.  The inventory is received according to the PO cost, $99 in this example.

Account	Debit	Credit	How is selection made?	Account Source
Inventory - Interim	99.00		-Inventory posting group assigned to the item -Location code on the sales line	Inventory posting setup (Inventory Account - Interim)
Accrued Purchases		99.00	-General Business Posting Group assigned to the customer -General Product Posting Group assigned to the item on the sales line	General posting setup (Invt Accrual Acc - Interim)

Posting a purchase invoice

When posting the purchase invoice for a receipt, the interim entries are reversed.  The inventory value is posted to the inventory asset account using the cost on the vendor invoice.  The prior example of a receipt at $99 has a vendor invoice cost of $100.

Note the Purchases and Direct Cost Applied accounts are used.  These are offsetting entries.  The accounts should be set to a P&L account, such as COGS.

Account	Debit	Credit	How is selection made?	Account Source
Inventory - Interim		99.00	-Inventory posting group assigned to the item -Location code on the sales line	Inventory posting setup (Inventory Account - Interim)
Accrued Purchases	99.00		-General Business Posting Group assigned to the customer -General Product Posting Group assigned to the item on the sales line	General posting setup (Invt Accrual Acc - Interim)
Inventory	100.00		-Inventory posting group assigned to the item -Location code on the sales line	Inventory posting setup (Inventory Account)
Direct Cost Applied		100.00	-General Business Posting Group for the customer -General Product Posting Group assigned to the item	General posting setup (Direct Cost Applied Account)
Purchases	100.00		-General Business Posting Group assigned to the customer -General Product Posting Group assigned to the item	General posting setup (Purch Account)
A/P		100.00	Vendor Posting Group assigned to the vendor	Vendor posting groups (Payables Account)

Posting a receipt with invoice

When posting a receipt with an invoice, the interim accounts are not used.  The inventory value is posted to the inventory asset account using the cost on the vendor invoice, $100 in this example.

Note the Purchases and Direct Cost Applied accounts are used.  These are offsetting entries.  The accounts should be set to a P&L account, such as COGS.

Account	Debit	Credit	How is selection made?	Account Source
Inventory	100.00		-Inventory posting group assigned to the item -Location code on the sales line	Inventory posting setup (Inventory Account)
Direct Cost Applied		100.00	-General Business Posting Group for the customer -General Product Posting Group assigned to the item	General posting setup (Direct Cost Applied Account)
Purchases	100.00		-General Business Posting Group assigned to the customer -General Product Posting Group assigned to the item	General posting setup (Purch Account)
A/P		100.00	Vendor Posting Group assigned to the vendor	Vendor posting groups (Payables Account)