Cost Accounting with Dynamic NAV

I am going to start a series on Cost Accounting module available in Dynamic NAV. Before, write to start on the topic, I want to give my introduction. I am a degree holder of ‘CMA’ Cost and Management Accountant. I have got experience under manufacturing, Capital Market, Trading & Distribution and IT industries. Being a Cost Accountant I have more interest in costing and Analysis of a product.

SO, Today, I wants to share my experience that “How to calculate product costing” by using the accounting software i.e. Dynamic NAV. We learned about Cost Accounting principles, Absorption, Allocations, Cost Centers and Cost Objects. Apart from that we learned about various types of costs i.e. Fixed, Variable, and Semi-Variable.

In Dynamic NAV, one of the reputed software in IT industry have designed in such a way where we can calculate product cost with apply of Cost principles and can identify various type of cost as mentioned above.

In below Steps i explained that how to do cost Accounting in Dynamic NAV.  

1. Cost Accounting and Allocations under finance module of Dynamic NAV-2017

1.       Cost Accounting starts with Chart of Accounts. First we need to make a chart of account and the same will copy in “Chart of Cost Type’ page.

 2. Now please define Cost Center and Cost Object in each of the GL account showing in the Chart of cost type.  For this, please go to ‘’Financial Management-Cost Accounting- Chart of Cost Type” and then Click on any GL Account No. and then click on Edit as showing in below SNIP.

When, you click on EDIT button the following page will open. Cost Center and cost Object need to  prepare in Cost center and Cost object Page. For learn how to prepare the Cost center and Cost object, please see point no. 3 below.

3.        3. In next step, please open ‘Cost Centers’. Cost centers can be set as dimensions and can be create as code also. If you want to get the cost centers from dimension, please click on ‘Get Cost Centers from Dimensions’ on the page of Cost Centers. Path: - ‘’Financial Management- Cost Accounting-Chart of Cost Centers”.

 4.       4. How System will identify that these dimensions are for Cost Centers or Cost Objects:-  The same will define in the Cost Accounting Setup. The below is the SNIP shot of Cost Accounting Setup where user can define the Cost Center dimensions and Cost Object dimensions. Once, user define the dimensions here than only on Cost Center and Cost Object page system will get the dimensions as Cost center and Cost Objects.

5.       5. Please note that the values of Cost centers will allocate into Cost objects. Generally, cost object values not allocated further. In, system we can use cost objects as final product also.

6.       6. Now, please open ‘Cost Objects’. Cost Objects can also be set as dimensions and can be making as code also. If you want to get the cost objects from dimension, please click on ‘Get Cost objects from Dimensions’ on the page of Cost objects. Path: - ‘’Financial Management- Cost Accounting-Chart of Cost Objects”.

7.       7. Cost Allocation:- As mentioned above, cost centers will be allocate in sub cost centers as well as in cost objects. The base of allocation can be sales units, production units and many other bases also. For doing the allocation, please open ‘Cost Allocation’ page and click on new button. It is very important in the allocation that which cost type or expenses user wants to allocate. In below SNIP ‘Credit to cost Type’ should be the cost type account no. which amount user wants to allocate and in Target cost type the GL account should mapped where allocation debit entry will hit.

  

8.       8. Calculation of Allocation Keys:- On cost allocation page, only parameters can be set for allocation. After this user need to run “Calculation of Allocation Keys”. Than system will show below:-

9.       9. Allocate Cost:- On cost allocation page, only parameters can be set for allocation. But, the allocation will take effect after run the report of ‘Allocate Cost’.  Please see the below SNIP:-

Please note, in Dynamic NAV we have two modules, Cost accounting under finance module and Manufacturing module. In manufacturing we can calculate material cost but in cost accounting we can calculate other all costs apart from material. Production BOM will use in manufacturing, but in production BOM page we do not have option to link any other cost apart from ITEMS/Material. Because of this reason, a cost sheet of final product will be come from two sides, cost accounting and manufacturing.

In my next blog, I will show you ‘’How to Create Cost Centers and Objects’’. Here I have only showed the steps involves in cost accounting but in my next blog I will give detail steps to create and use of Cost Center, Cost Objects and Allocation. Apart from that if allocation got wrong, than how the same can be rectify.