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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