Inventory is issued to customers either by filling usage orders or by issuing it directly. Usage orders are created by customers in the Inventory module and result in encumbrances that are posted to the GL during the nightly offline procedure.

Both usage orders and direct issues result in a decrease in the asset account and an increase in the expense account. The NCAS debits the Inventory asset account and credits the Reserve for Inventory account. Depending on whether the transaction is within the same company or intercompany, the consumption expense (59XXXX) account or a purchases for resale (53XXXX) account is debited and an expense offset is credited.

If customers return items to the warehouse, the accounting entries are reversed. The Inventory asset account is increased and the expense account is decreased. The Reserve for Inventory account is debited and the Inventory asset account is credited. For the expense reversal, the expense offset is debited and the consumption or purchases for resale expense account is credited.

Accounting for the above transactions will be explained in more detail in the Accounting for Inventory Transactions section. That section will also explain the accounting implications of other inventory transactions such as account changes, cost and quantity adjustments, inventory transfers, inventory markups and intercompany transactions.