IFS ERP Finance- Procure 2 Pay (With Posting Control Analysis)

In continuation of my earlier article about “IFS ERP Finance- P2P (Procurement to Pay)” now, we will understand how accounting and posting control work to create automatic accounting in IFS for P2P.

Note: It is highly recommended that please go through my other article “Posting Control” before you go through this article

Objective:

By the end of this article, you would come to know about the below points

• What posting control fires during the P2P process?

When does the first accounting entry hit in IFS P2P process?

Yes, you are right “at the time of arrival/receipts of inventory”. So, at the time of Requisition or Purchase order, there would not be any accounting, of course you already know.

Types of purchases

In IFS, there are two types of procurement you can do from Purchase Order

• You can buy something which is a tangible item which would be used for further consumption as raw material or for trading like inventory for your business, we called them an “Inventory Part”. (i.e. Purchase Order-> Part Order Line)
• You can also buy services, consumables or fixed assets, which we called them as “Non-Inventory Parts”. (i.e. Purchase Order-> No Part Order Line)

Important Information!!

Normally, in traditional accounting all the purchase books as expenses in the purchase account (Expense Type Account i.e. P&L) and later as Month end/ Quarter end/ Year-end activities, they booked as Inventory (Current Assets i.e. BS) and reverse previous Inventory booked and transfer the remaining balance to P&L. Now most of the ERP including IFS integrate financial accounting with cost accounting therefor we can directly book all the inventoriesd purshaed as Inventory (i.e. Current Assets) rather in purchase account. So no need to book inventory as month/year activity, even accounts will have real-time Inventory value for a business. All the Invetory transfer to COGS when it sold to customer.

When we receive the purchase order the below entries trigger in the GL Accounting

Accounting Entry:

If the received PO has a line as “Inventory”

Dr Posting Control M1(Normally map Inventory (Current Asset/BS) Account with posting control M1.)

Cr Posting Control M10 (Map Interim Purchase Liability (Current Liability/BS) Account with posting control M10.)

Please read my article on what is posting control and how posting control works in IFS.

If the received PO has a line as “Non-Inventory” then the below-posting control is used for accounting.

Dr Posting Control M92 (Normally map with an expense account.)

Cr Posting Control M91 (Map Interim Purchase Liability-Non Invoiced(Current Liability) Account with posting control M10.)

When we book the supplier invoice against the purchase order the below entries fire in the accounting

IFS Screen: Manual Supplier Invoice

Accounting Entry:

In the case of “Inventory”.

Dr Posting Control M18 (Map Interim Purchase Liability (Current Liability) Account same as mapped with posting control M10.)

Cr Posting Control IP1(Map Final Supplier Liability (Current Liability))

In the case of “Non-Inventory”

Cr Posting Control M92 (Normally map with an expense account.)

Dr Posting Control M91 (Map Interim Purchase Liability-Non Invoiced(Current Liability) Account with posting control M10.)

Dr Posting Control M93 (Normally map with an expense account.)

Cr Posting Control IP1(Map Final Supplier Liability (Current Liability))

When payment is against the approved supplier invoice.

IFS Screen: Supplier Payment/Mixed Payment

Accounting Entry:

Dr Posting Control IP1(Map Final Supplier Liability (Current Liability))

Cr Posting Control PP1(Map with Bank Account)

Thanks for reading this article…

Hope you would have enjoyed reading this article… So, don’t worry if you need any guidance I would be more than happy to assist you. You can reach me at vivekkhare22@gmail.com. Also, please let me know if you would like to know read something else related to IFS Finance.