Subcontracting Overview
Subcontracting allows companies to send raw materials, unfinished goods, or partially finished goods for further processing elsewhere. The subcontractor works on the raw materials or goods, and sends the finished products back to the company.
You can use subcontracting to do the following:
Create a subcontract order for use in sending components to the subcontractor.
Move excisable, non-excisable, and capital goods using subcontracting.
Accept components when they arrive at the company location from the vendor location.
Reject components on company accounts.
Reject components on vendor accounts, and send debit notes to vendors.
Receive components back from the vendor location, and create excise entries for them.
Bill vendors for subcontracting work.
Close subcontracting orders when the actual number of products is less than what was listed on the original plan (short closure).
Generate reports for delivery challans.
Subcontracting Entries
After you dispatch components to a vendor for subcontracting, the following entries are posted.
| Entry | Description |
|---|---|
Item ledger |
Inventory is transferred from the company location to the vendor location. This transaction type is considered to be a Transfer, as the inventory still belongs to the company. For more information, see Item Ledger Entries Window. |
General ledger |
The corresponding chart of accounts is debited and credited based on Inventory Setup. For more information, see General Ledger Entries Window and Inventory Setup Window. |
Excise |
Entries in the excise register are created for non-excisable items, RG 23 A Part I register for excisable items, and RG 23 C Part I register for capital items. For more information, see Excise Entries Window. |
After the company receives the goods from the subcontractor's location, the following entries are posted.
| Entry | Description |
|---|---|
Item ledger |
Components at the vendor location (consumption) and finished goods at the company location (output). For more information, see Item Ledger Entries Window. |
General ledger |
The Work in Process (WIP) takes items from the company's inventory, and credits them to the vendor's inventory. For more information, see General Ledger Entries Window. |
Excise |
If any of the goods are excisable, the finished goods quantity updates the Daily Stock Account (DSA). For more information, see Excise Entries Window and How to: Update Daily Stock Account Balances. |
If any of the finished goods received from the subcontractor are rejected, and the company decides to bear the cost, the following entries are posted.
| Entry | Description |
|---|---|
Item ledger |
Components at the vendor location (consumption). There is no output reported for the finished goods. For more information, see Item Ledger Entries Window. |
General ledger |
The WIP takes items from the company's inventory, and credits them to the vendor's inventory. For more information, see General Ledger Entries Window. |
Excise |
If any of the components are excisable, WIP debits to CENVAT recoverable credit (excise value). All costs are moved, and considered to be production costs. Finished goods are deleted from the company’s account. For more information, see Excise Entries Window. |
If any of the finished goods received from the subcontractor are rejected, and the company decides that the subcontractor will bear the cost, a debit note is created for the subcontractor. The quantity rejected is tracked on the vendor account.
After finished goods are sent back for rework, then the following entry is posted.
| Entry | Description |
|---|---|
Item ledger |
Components are transferred from the vendor location to the company location, and then back to the vendor location. For more information, see Item Ledger Entries Window. |
After receiving the components back from the vendor, the following entries are posted.
| Entry | Description |
|---|---|
Item ledger |
Transfer of components from the vendor location to the company location. For more information, see Item Ledger Entries Window. |
General ledger |
Corresponding general ledger entries are removed from the company's inventory. For more information, see General Ledger Entries Window. |
Excise |
The RG 23 A Part I or RG 23 C Part I value is entered in the register. For more information, see Excise Entries Window. |
Reports
Microsoft Dynamics NAV provides the following subcontracting reports.
| Report | Description |
|---|---|
Delivery Challan |
The details for the raw material components sent to a subcontracting vendor against the subcontracting order. This report also provides details about delivery challans created against multiple subcontracting orders. For more information, see How to: Print Delivery Challan Reports. |
Stock Register for Job Work |
The details for the transfer, consumption and output entries of the subcontracting order, with the excise liability value created, and CENVAT credit used. For more information, see How to: Print Stock Register for Job Work Reports. |
See Also
Tasks
How to: Set Up Subcontracting
How to: Generate Subcontracting Orders
How to: Close Subcontracting Orders Without Full Delivery of Goods
How to: Print Delivery Challan Reports
How to: Print Stock Register for Job Work Reports
How to: Print RG 23 A and RG 23 C Reports
How to: Update Daily Stock Account Balances
Concepts
India Local Functionality
Capital Work in Process Overview
Other Resources
Item Ledger Entries Window
General Ledger Entries Window
Excise Entries Window
Inventory Setup Window
About Subcontracting