Understanding AAIs by Cost Component Setup

Automatic accounting instructions (AAIs) are the links between your day-to-day functions, chart of accounts, and financial reports. The system uses AAIs to determine how to distribute general ledger (GL) entries that the system generates. For example, in the Sales Order Management system, AAIs indicate how to record the inventory, costs of goods sold (COGS), and revenue transactions when you sell an item to a customer. The system stores AAIs in the Distribution/Manufacturing - AAI Values table (F4095).

Programs that post to specific GL accounts use AAIs to create journal entries. Create an AAI entry for each unique combination of company, transaction, document type, and GL class. AAIs for manufacturing also use the cost type. The JD Edwards EnterpriseOne Advanced Cost Accounting system allows you to separate the inventory and COGS accounts by cost component such as materials, labor, and overhead.

Note: You must use the standard cost method (07) to calculate COGS for inventory and sales to capture detailed product cost information in the distribution system.

Although the JD Edwards EnterpriseOne Advanced Cost Accounting system uses all types of AAIs, the following information explains how to use AAIs for JD Edwards EnterpriseOne Advanced Cost Accounting within the distribution and manufacturing systems.

You define AAIs by a unique combination of company number, document type, and GL class code. The system also uses a series of specific search steps to locate the correct AAI rule before creating the transactions for the journal entry. If the system cannot find an AAI rule, it returns an error message for the missing rule number for the transaction by company, document type, and GL class code.

The following scenario illustrates how the system uses the search steps within the AAI rules:

If the company number is 00001, the document type is SO, and the GL class code is IN20, then the system first searches for a rule that is specific to company 00001 and a GL class code of IN20.
If a rule is not found, the system searches for a rule that is defined for company 00001 and a GL class code of ****.
If a rule is not found, the system searches for a rule that is defined for company 00000 and a GL class code of IN20.
If a rule is not found, the system searches for a rule that is defined for company 00000 and a GL class code of ****.
If a rule is not found, the system does not create the transaction, and you receive an error message that says the AAI rule is invalid because the rule is not defined.

You can also locate GL class codes using inventory interface rules. Transactions originating in manufacturing and distribution use inventory interface rules by order line type. This information tells the system where to locate the GL class code information. Then the GL class code is used in the AAI to locate the corresponding AAI rule.

To locate the inventory interface rules information, use the Line Type Constants program (P40205). Each order line type contains a value for the inventory interface rule. The following list of values determines how the system locates the GL class code information:

Y and D use the GL class code for the item using item branch/plant location.
N does not use the GL class code because it has no inventory interface.
A uses the GL class code for purchase price variances for the item by line type.
B uses the GL class code for purchase price variances for the item using item branch/plant location.

The system can create journal transactions using the AAIs for purchasing when a difference exists between receipted cost of an item and the actual cost of an item. The system uses this value for line types with a value of A or B as the value for inventory interface rule. The Voucher Match Variance Account field for the order line type must be checked if you want the system to create a journal entry for any cost differences using a cost variance AAI rule.