Inventory adjustment and matching issue in stock transfer transactions in the Indian version of Microsoft Dynamics AX 2012 R3 and Microsoft Dynamics AX 2012 R2

This issue will arise when you select method of valuation of inventory other than weighted average or standard cost method. During transaction posting, weighted average price will be considered. After inventory closing process, the system reevaluates the item cost based on the selected costing method and posts the adjustments. However, stock transfer transactions are not considered. Therefore, financial and physical inventory will not match.

AX inventory closing process revaluates the item cost based on the costing method and posts the adjustments to the appropriate inventory accounts. Stock transfer transactions should also be considered when revaluating the item cost and updating the adjusted cost to the inventory account.

Here are the setup steps and stock transfer process with inventory closure for this issue:

1. Set up Item model group as FIFO. Make sure the Stocked product, Financial negative inventory, Post physical inventory, Post financial inventory, Receiving requirements, Deduction requirements, and Include physical value check boxes are selected. In addition, Pick criteria should be Expiration date and Approved vendor check method should be No check
2. Set up Storage dimension
3. You should select the Mandatory check box. In addition, the For purchase prices and For sales prices check boxes should also be selected for Site and Warehouse
4. Create an item and attach the Item model group with FIFO
5. Define required setups
6. Click on the Mange cost on the action pane
7. Create movement journals for items or Create Purchase order for the item
8. Post Invoice and check the On hand Inventory Qty. and Value
9. Create a transfer order with transfer type "Stock transfer". Enter the quantity and confirm the default price
10. Post shipment and Receive
11. Confirm the voucher entry after Shipment and Receive of the transfer order
12. Go to Released products > Item number > Manage inventory > Onhand inventory
13. Click Transactions before running Inventory closing
14. Go to Inventory management > Periodic > Closing and adjustments
    • Click Close procedure > Close
    • Select Period code = CP
    • Define Close inventory up to date
    • Click Ok
    • Click Ledger > Voucher
    • Validate voucher entries
15. Voucher entry will generate to adjust price difference of item to match financial inventory value with physical inventory value ( Weighted average price minus FIFO method price)
16. After closing validate inventory on hand, go to Release products > Item number > Mange inventory > Onhand inventory