Working with movement journal in Dynamics 365 Finance and Operations - Functional Consultant series

Movement journals in Dynamics 365 Finance and Operations (D365FO) serve as a powerful tool to manage inventory adjustments. They enable businesses to handle inventory corrections, and reclassifications efficiently without the need for a sales or purchase order. This article is part of the Functional Consultant Series and aims to provide a detailed understanding of the movement journal, its applications, and how to work with it effectively.

What is the Movement Journal, and what is its primary purpose?

Movement journal is used for adjusting the stock either increasing the inventory in the specific warehouse or decreasing the inventory from the particular warehouse.

Movement journal vs Inventory adjustment journal understanding

The key difference lies in the accounting: with an adjustment journal, you cannot directly select the offset account, whereas a movement journal allows you to do so.

The movement journal is especially useful when you need to override the default posting accounts. It allows you to allocate additional costs to a specific general ledger account by specifying an offset account during its creation.

On the other hand, when using an inventory adjustment journal, you can also add costs to an item when adding inventory. However, the additional cost is automatically posted to a predefined general ledger account, based on the item group's posting profile setup

Scenario when we can use the movement journal

Here, I have discussed two scenarios but in real life, we have alot of cases when we use the movement journal.

Case A: Imagine you own a business that sells electronic goods. Recently, you purchased a few washing machines, but during the QA process, you discovered that one of them is damaged. To remove this damaged unit from your inventory, you can use a movement journal.

Case B: Now, let's say you work for a clothing brand, and you need to send some designs to a fashion show. In this situation, you can create a movement journal to decrease the inventory.

If you're wondering why not create a sales order instead, it's worth noting that using a sales order in this scenario is not recommended. Creating a sales order would require setting up a dummy customer, posting an invoice, and dealing with unnecessary financial impacts, which can complicate the process.

What to keep in mind while posting the movement journal in Dynamics 365 F&O

Whenever you post a movement journal, it has both a physical and a financial impact on your inventory. Physically, it increases or decreases the stock in the warehouse for a specific item. Financially, it impacts the relevant general ledger accounts.

Let’s understand this using the Case A scenario mentioned earlier. If you have a damaged unit, you need to remove it from your inventory, which results in a physical decrease in stock. When you post the journal, the stock reduction creates a physical impact, but at the same time, it also creates a financial impact. Since it’s a loss, the inventory profit/loss account will be affected, and the loss will be recorded by debiting the inventory profit/loss account.

How to create the movement journal and post it in D365 ERP

1) Go to Inventory management > Setup > Journal names > Inventory

2) Create a New journal name with Movement type.

3) Go to Inventory management > Journal entries > Items > Movement

Let’s consider a scenario where we have an item "FGEXP001" stored in the warehouse "SD_DMZ", and 3 units of this item are damaged. To account for these damaged units, we need to create a movement journal to reduce them from the inventory.

Currently, the On-hand list shows that there are 23 units physically available in the warehouse. After removing the 3 damaged units, the remaining stock will be 20. This blog will cover how to handle this scenario. You can access the On-hand list by navigating to Inventory management > Inquiries and reports > On-hand list

4) Create a new record and specify the Site and Warehouse and click Ok. Alternatively, you can select the Site and Warehouse directly on the journal details form.

5) Add a new line and select the following

Item number: Select the item you want to adjust the stock.

Inventory dimensions: Specify the Site, Warehouse, location, or batch detail for the inventory adjustment

.Quantity: Enter a positive value to increase inventory or a negative value to decrease inventory.

Cost price: The system does not allow you to specify the cost for a negative quantity, as it automatically determines the cost based on the weighted average model. However, you can manually enter the cost price when adding stock (positive quantity) to the inventory

Offset account: Specify the offset account for financial posting. You can specify it manually, or it may default based on the journal name setup

6) Post the journal.

7) After successfully posting the movement journal, return to the On-hand list to check the updated stock. It will now show 20 units, as the 3 damaged units have been removed from the inventory by posting the movement journal.

This is the end of this blog.

Happy learning,

Syed Amir Ali.