Dynamics 365FO/AX Finance & Controlling

Vendor prepayments (2)

09 Saturday Jan 2016

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Tags
Dynamics AX, Prepayments, Purchase Order, Tax

After illustrating you the problems of the standard Dynamics AX purchase order prepayment
functionality in a VAT company environment in the previous post, I want show you an alternative
approach for recording purchase order related prepayments in Dynamics AX.

Setup
For the implementation of this approach two service items need to be setup that are used for recording
the prepayments. Example:

The first service item (“ANZ”) is setup with the on account (“OA”) item sales tax group illustrated in the
previous post and is used for recording the prepayment vendor invoice.
The second service item (“ANZVERR”) is setup with the ordinary (“FULL”) item sales tax group and is
used in the final vendor invoice to deduct the prepayments made.

The ledger posting for those service items are posted on the same vendor prepayment balance sheet
account (132200) used before but they are setup in a different section of the inventory posting form. For
details, please see the next screenshot.
Process
With this alternative setup in place, the vendor prepayment process can be performed through the
execution of the following four steps.

Step 1: Setup purchase order & record prepayment

The first step required in the process is se�ing up the the purchase order. Different from the previous
posts, the prepayment is now recorded through two additional purchase order lines. The first additional
line holds the first service item (“ANZ”) and is setup with the prepayment amount of 5000 EUR, while
the second additional purchase order line holds the second service item (“ANZVERR”) and is setup with
an equivalent but negative amount of -5000 EUR.

Step 2: Post prepayment vendor invoice

The next step in the prepayment process is posting the prepayment invoice. This time the prepayment
invoice is posted by using the ordinary purchase invoice form and selecting the first additional purchase
order line only. Please see the next screenshots.
Result:
The outcome of the prepayment invoice posting is a voucher that posts the non-deductible VAT on
ledger account 130850. This transaction is identical to the one shown in the previous post on vendor
prepayments.

Step 3: Pay prepayment vendor invoice

Also the third process step – the payment of the vendor invoice – is identical to the one illustrated in the
previous post and results in the following vouchers.
As before, when recording the payment of the prepayment invoice, a transfer of the tax amount from the
non-deductible VAT account (130850) to the ordinary (deductible) VAT account (130800) can be
identified.

Step 4: Post final vendor invoice

The last step in the prepayment process consists of deducting the prepayment made when posting the
final vendor invoice. This time, the deduction is made by including the second service item into the
vendor invoice as illustrated in the next screen-print.

As a result, Dynamics AX generates the following voucher.

The next illustration summarizes all transactions posted by using this second approach.

What you can identify from the posting summary is that the non-deductible VAT account (130850) does
now balance and that the VAT does now get recorded and deducted at the right time.

Summary
The alternative approach for recording vendor prepayments illustrated in this post shows that using
service (“dummy”) items can help overcoming the problems of the standard prepayment functionality
and results in correct ledger and tax postings.

Despite those advantages I would like to emphasize that this alternative approach comes with a higher
risk of errors, as no automatic features exist that ensure e.g. that prepayments can only be deducted once
the payment is made.

Please also join me in the next post that will show you another approach for recording vendor
prepayments.

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