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Monday, March 9, 2015

Accounting documents during SAP Procurement

Please note there is no accounting entries generated during Purchase orders / sales order / production order. Often found that guys make mistake in this part.
In the normal procurement cycle accounting generates at the time Good Receipt from the vendor. One thing you need to understand there are several movement type can be used based on the customer requirement.
Accounting document generated usually at time of 101 movement type. In some cases user can use 103 and 105. In this case 105 generates accounting document.
Accounting journal entries will be similar to below. Here I am considering a case where base price of material is USD 100. However I am not going to handle freight or tax part. Things may get complicated, if go in detail. I will cover those case in forthcoming session.

MIGO journal entry

Inventory USD 100 Db
GR/IR clearing account USD 100 Cr
Do not think that always system pick the value from Purchase order price for the inventory. This will happen only if the goods are moving in Moving average price. If any reason, material’s pricing indicator is set to standard price, system will pick material master standard price and make necessary posting. In most of the cases procurement material’s pricing indicator set as moving average. Rarely some business required to keep the standard price for the raw material. This decision is a very critical decision so ensure that you need standard price only.
Let us assume that standard price of the material set as USD 80/-. Purchase order price is USD.100/-. In such case accounting entries will be as follows:
MIGO journal entry – Standard price

Inventory USD 80 Db
Price difference account USD 20 Db
GR/IR clearing account USD 100 Cr

I believe, I have made it very clear about MIGO part.

MIRO journal entry

Vendor USD 100 Cr
GR / IR Clearing USD 100 Db

Accounting entry will be as above in both the cases. Ie. Materials price is maintained in moving average or standard price.
In any reason, at the time of MIRO if there any change in the vendor invoice then case is difference. Let us assume that vendor has given an invoice of USD 90. But this may not be the standard practice. But one must understand the system behavior or best practice.

MIRO journal entry – Change in invoice value

GR /IR clearing USD 100 Db
Vendor USD 90 Cr
Inventory USD 10 Cr

But above case is applicable only if the material in stock. If material is not in the stock, instead of inventory it will be charged to the consumption.
MIRO journal entry – Change in invoice value- No stock available

GR /IR clearing USD 100 Db
Vendor USD 90 Cr
Consumption / Changes in stock USD 10 Cr

Interestingly above entries will be applicable only if the material is managed in moving average price. In the case of standard price it go as below:

MIRO journal entry – Change in invoice value- No stock available

GR /IR clearing USD 100 Db
Vendor USD 90 Cr
Price difference account USD 10 Cr

I hope, I have made it very clear. Please make some likes, if you have enjoyed the reading..


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2 comments:

  1. Yeah, I already know all this about Accounting documents. My professor Dr. Aloke Ghosh also shared a great tutorial on this topic. It was a very informative article shared by him. Anyways, you also shared the information in a nice way! Keep it up!

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  2. What you have written in this post is exactly what I have experience when I first started my blog.I’m happy that I came across with your site this article is on point,thanks again and have a great day.Keep update more information.
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