10 - MM - FI Integration

KIRLOSKAR BROTHERS LIMITED

MM - FI Integration Training document

[This training document contains the details of integration between MM & FI Modules of SAP at various points of transaction. The user should be familiar with the Materials transactions before proceeding to read this document. This is internal training document of Kirloskar Brothers Limited]

Index Sr. No.

Subject

Page Number

1.

Basics of Accounting

2.

Introduction to Material Valuation

11

3.

Overview of Material Valuation transactions

15

4.

Automatic FI postings at Goods Receipt

20

5.

Excise Entries at GRN

36

6.

FI Entries at Material Issue

38

7.

FI Entries at Invoice booking

40

8.

Assignment

42

Train. Doc. KBL/CIC/SAP/ MM/12/MM-FI Integration

3

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Objective 

After studying the document, you will be able to understand –  Basics of Financial Management  How finance links to Material Management  Effects of actions by Materials Management on Finance.



The target audience for this document is –  Buyers in Purchasing department  Stores In-Charge  Senior Managers in Materials department



Pre-requisites for target audience –  Thorough knowledge of Purchase transactions  Thorough knowledge of Inventory transactions  Basic knowledge of Excise

Hint: –

Example

–

Information


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Basics of Accounting A] Fundamentals of Accounting – Accounting is the systematic process of measuring the economic activity of a business to provide useful information to those who make economic decisions (internal or external parties of an enterprise). It record all economic transactions (usually, but not always, involves money) in a systematic & generally accepted way. The transaction records are organized & presented in certain form of reports. The most used reports are Balance Sheet and Profit & Loss Account. Following are the fundamentals of Accounting: – 1) Accrual basis – Effects of transactions takes place when they occur and not when cash is paid. 2) Going concern – Accounts are prepared based on the assumption that an enterprise will continue its operations in the foreseeable future. The value of assets and liabilities is stated at historical cost and not on the assumption that the enterprise will be liquidated. 3) Consistency – Accounting policies are followed consistently from year to year, so that accounts are comparable. Change in accounting polices are made only in exceptional circumstances.

B] Rules of accounting – Business Transactions having monetary implications: Every debit has an equal corresponding credit. Following are the three types of accounts – 1) Personal Account – This is the account of persons. For example – Accounts of Vendor, Customer are personal accounts. Rule applied for this type of account are „Debit the receiver & credit the giver‟.

For example – When a payment is made to a Vendor for supplying material, the entry is made as below – Debit – Vendor INR 1, 00,000 / Credit – Bank Account INR 1, 00,000 / 2) Real Account – These are the accounts of properties. For example – Cash, Inventory, Machinery. Rule applied for this type of account is „Debit what comes in & Credit what goes out‟.

For example – When a material is received to inventory after GRN against Purchase Order, following entries are posted –


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Debit – Inventory Raw Material INR 1, 00,000 / Credit – GR / IR Clearing Account INR 1, 00,000 / 3) Nominal Account – These are the accounts of income & expenditure. For example – Travelling expenses, Colony Expenses, Rent received from land. Rule applied for this type of account is „Debit Expenses & Credit Incomes‟.

For example – When Travel expenses for an employee are booked, following are the FI postings – Debit – Travel expenses INR 250 / Credit – Bank Account INR 250 / These rules can be applied interchangeably between the different types of accounts depending on the business transaction.

C] Terminology used in Accounting – 1) Financial Statements – At the end of every period, a business entity prepares Balance Sheet and Profit & Loss Account. Balance sheet shows the financial position of the entity on a given date in the terms of its Assets & Liabilities. Balance sheet is prepared as on date (For example – Balance sheet as on 31–March–2008). Income statement (Profit and Loss Account) shows the results in terms of excess of Income over Expenditure. Profit & Loss statement is for the period „From (for example 01.04.2007) To (for example 31.03.2008)‟. It consists accounting for Real & nominal accounts. Funds flow statement (or Cash Flow statement as it is popularly called) shows the movement of funds during a given period i.e. where FUNDS came from and How they were applied. Cash flow statement is for the year ended (For example – Year ended on 31–March–2008). For example – Net cash flows from operating activities / investing activities / financing activities. 2) Assets – Assets are valuable resources that a firm owns or controls, such as Cash, Bank Account, Inventory, Account Receivable, Fixed Asset and Intangible Asset. Assets are of two types – Fixed Assets & Current Assets a.) Fixed Assets: Assets which are held for a long period of time usually for production of the goods sold by the company E.g.: Plant and Machinery, Building, Land, Furniture, Equipment b.) Current Assets: These are short term assets which get converted into cash during the operating cycle of the firm E.g.: Inventories, Debtors, Cash and Bank


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3) Depreciation – Depreciation is the amount of wear and tear of an asset due to use, efflux of time and obsolescence. Companies are required to provide depreciation as per the requirements of Companies Act, 1956. It is provided to reflect the true value of assets. Depreciation also creates a fund for replacement as it prevents distribution of profits. It is an expense charged to Profit and Loss Account. There are two widely used methods of depreciation: – Straight Line method – Written down value Method 4) Liabilities – Liability is what company owes. These are the obligations of the business to convey something of value in the future such as – Account Payable, Notes Payable. Liabilities are of types – Long Term Liabilities, Current Liabilities, Equity capital. a.) Long term liabilities are the liabilities maturing beyond a year. E.g.: Term loans, Debentures, Bonds. b.) Current Liabilities are the liabilities maturing within a year. E.g.: Creditors, Cash credit, bills discounted. c.) Equity Capital is grouped under Liabilities because it is repayable to Shareholders, the owners of the Company. This is because a business and its owners are TWO separate legal entities independent of each other. 5) Profit & Loss Statement – A Profit and Loss statement shows the results of operations of the business concern for the year. It summarises the earnings generated by an enterprise during a specific period of time. It also comprises of a statement of all expenses during a period of time (financial year). It contains at least two major sections: Revenue & expenses. Revenues are inflows of assets from providing Goods & Services to Customers such as Sales to Customer / Gain from foreign currency transactions. Income includes sales, income on investments, miscellaneous income, etc. Expenses are costs incurred to generate revenues. Expenditure includes cost of material consumed or sold, general, administrative and selling expenses, employee costs, depreciation, tax expenses etc. Following are the types of expenditures – Revenue Expenditure / Capital Expenditure. a.) Revenue expenditure: Expenditure incurred for manufacture/sale of the products and for carrying out the day to day activities is Revenue expenditure. The examples of capital expenditure are – Purchase of materials, payment of salaries, administrative expenses are Revenue in nature b.) Capital expenditure: Expenditure incurred to acquire a long term benefit; through the acquisition of assets. The examples of capital expenditure are – Acquisition of assets, development of SAP system, is capital expenditure The difference between revenue & expense is profit (or loss if the expenses are greater than revenues).


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6) Cash Flow – Cash Flow statement shows how funds came into the company and how they were applied. Broadly it shows Cash Flow from operating activities, cash flow from financing activities and cash flow from Investing activities. 7) Balance Sheet – The balance sheet shows an enterprise‟s assets, liabilities & equity at a specific time (such as balance sheet as on 31st March). It is described sometimes as a snapshot of a business in financial terms. 8) Equity – Equity refers to owners‟ interest in business such as Capital Stock, Retained Earning, Current year net profit / loss. 9) Relationship between balance sheet & profit & loss account – Balance sheet & Profit & Loss statement are based on same underlying transaction information, but they present different views of an enterprise. They are not alternative to each other but are complement to each other.


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D] Formats for financial documents – 1) Cash Flow Statement Cash flow statement

Amount (in Rs)

A Cash flow from operating activities Net Profit Depreciation Inventory Increase in Payables Increase in Receivables Current Liability Net cash flow from operating activities B Cash flow from investing activities Purchase of assets Net Cash flow from investing activities C Cash flow from financing activities Equity Net Cash flow from financing activities Net cash flow during the period Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year

1) BALANCE SHEET as on 31st March LIABILITIES SHARE CAPITAL

(Rs.)

ASSETS FIXED ASSETS

Authorized ..... Shares of Rs....... each Issued ..... Shares of Rs....... each Subscribed ..... Shares of Rs....... each Rs. .... per share called up Less: Unpaid calls Add: Forfeited shares

1. 2. 3. 4. 5. 6. 7. 8.

RESERVES AND SURPLUS

9.

1. Capital Reserves 2. Capital Redemption Reserve

3. Share Premium Account 4. Other Reserves

5.

Less: Debit balance in profit and loss account, if any Balance in the profit and loss accounts after providing for proposed

(Rs.)

10. 11.

Goodwill Land Buildings Leaseholds Railway Sidings Plant and Machinery Furniture and Fittings Development of Property Patents, trademarks and designs Livestock Vehicles etc.

INVESTMENTS

1. Investments in Govt. or Trust Securities

2. Investments in shares, 3. 4.

debentures or bonds Immovable properties Investments in the


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6.

allocation namely Dividend Bonus or Reserves Proposed additions to Reserves

SECURED LOANS

1. Debentures 2. Loans and Advances 3. 4.

from Banks Loans and Advances from Subsidiaries Other Loans and Advances

5.

CURRENT ASSETS, LOANS & ADVANCES

A. Current Assets 1.Interest accrued

on investments 2.Stores and spare parts 3.Loose tools 4. Stock-in-trade 5. Works-inprogress 6. Sundry debtors : a. Debts outstanding for a period exceeding 6 months b.Other debts Less: Provision

UNSECURED LOANS

1. Fixed Deposits 2. Loans and Advances from Subsidiaries

3. Short-term Loans and

4.

Advances: a. from Banks b. from others Other Loans and Advances a. from Banks b. from others

CURRENT LIABILITIES & PROVISIONS

A. Current Liabilities 1. Acceptances 2. Sundry Creditors i. Total

ii.

outstanding dues of small scale industrial undertaking(s) . Total outstanding dues of creditors other than small scale industrial undertaking(s) .

capital of partnership firms Balance of unutilized monies raised by Issue

7. a. Cash

B.

balance on hand b. Bank balances Loans and Advances

8. Advances and

9. 10.


Loans a. To subsidiaries b. To partnership firms in which the co./its subsidiary is a partner Bills of Exchange Advances recoverable in cash or in kind or for value to be

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3. Subsidiary

B.

companies 4. Advance payments and unexpired discounts 5. Unclaimed Dividends 6. Other Liabilities (if any) 7. Interest accrued but not due on loans Provisions

11.

MISCELLANEOUS EXPENDITURE (to the extent not written off or adjusted)

1. Preliminary Expenses 2. Expenses including

8. Provision for Taxation

9. Proposed 10. 11. 12.

13.

received; e.g., Rates, Taxes, Insurance, etc. Balances with Customs, Port Trust, etc. (where payable on demand).

Dividends For contingencies For Provident Fund Scheme For Insurance, pension and similar staff benefit schemes Other provisions

3. 4. 5. 6.

commission/ brokerage on underwriting or subscription of shares or debentures Discount allowed on issue of shares or debentures Interest paid out of capital during construction Development expenditure not adjusted Other items (Specifying nature)

PROFIT AND LOSS ACCOUNT (Debit Balance) Total

Total

2) PROFIT & LOSS ACCOUNT For the period ending 01st April to 31st March Expenditure Particulars

1. Consumption of stores and 2. 3. 4. 5. 6. 7.

spare parts Power and fuel Rent Repairs to building Repairs to machinery Commission paid Depreciation

Rs.

Income Particulars 1. 2. 3. 4. 5.

Rs.

Sales Income from investments Other income Miscellaneous income Net Loss


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8. Interest on debentures 9. Income tax 10. Net income TOTAL

XXX


TOTAL

XXX

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Introduction to Material Valuation The valuation area is the organizational level at which the material is valuated. Plant and company code are two possible valuation areas in the SAP system. When stock is valuated at plant level, you can valuate a material in different plants at different prices. When you valuate stock at company code level, the valuation price of a material is the same in all of a company's plants (that is, in a company code). Valuation at plant level is mandatory if you want to use either of the Production Planning or Product Cost Accounting components. In our case, we have valuated all the materials at plant level. Hence, we can maintain the different valuation for the material at different plants. We have maintained the valuation of material at plant level. Terminologies required to be known for FI / MM Integration & Inventory Management – 1) Chart of Accounts – This is a list of all G/L accounts used by one or several company codes. For each G/L account, the chart of accounts contains the account number, account name, and the information that controls how an account functions and how a G/L account is created in a company code. The chart of account is assigned to the company code. This chart of account is the operating chart of accounts & is used for daily postings in this company code. The chart of account can be extended to other company codes. The chart of account used for FI postings for our company is KBL. 2) Valuation Area – The valuation of the material can be done under one of the following areas – a) Company Level or b) Plant Level. When the Company code is set as the Valuation area, the valuation price of the material is same in all plants of the company code. We have set the Plant level as Valuation area for all the materials. This is because we are using Production Planning & Costing application components. Same material if received at 1110 plant can be valuated differently (For example at different Value / different Valuation Class) than if it is received in plant 2510. 3) Valuation Class – It is the key for account determination that enables a differentiation for G/L account assignment depending upon material. The materials are assigned to valuation class for each valuation area (in our case plant) in the accounting view. The assignments of allowed valuation class to the material type (indirectly) are used to enter restrictions. That means the user can select only allowed valuation classes for a material type. The valuation class is a key for grouping materials that have the same account determination. If different accounts are to be posted according to the valuation class in a transaction, the account determination for this transaction is to be set dependent upon the valuation class. This means different G/L accounts can be posted for same material for different transactions. The allowed valuation class depends upon material type. More than one material type can be allowed for a valuation class. The reference between the valuation class & material type can be established by the account category


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reference. The account category reference is a compilation of valuation classes. A material type is assigned to only one account category reference. G/L account determination can be uniformly defined for all material type belonging to a material type. The valuation class for BEARING can be selected as „DOM_RM‟ (Domestics Raw Material) if the same is procured from Domestic Market. The inventory will be maintained as Domestic Raw material inventory. The valuation class will be „IMP_RM‟ (Imported Raw Material) if the material is imported & the inventory will be maintained as Imported Raw material Inventory. 4) General Ledger (G/L) Account – The central task of G/L accounting is to provide a comprehensive picture for external & accounts.

The General Ledger for Domestic Inventory of Raw material is „230120‟ (Inventory – Other Raw Material).

5) Cost Center – Organizational unit within a controlling area that represents a clearly delimited location where costs occur. You can make organizational divisions on the basis of functional, settlement-related, activity-related, spatial, and/or responsibilityrelated standpoints. Cost centers are grouped together into decision, control & responsibility unit. The activity types are assigned to the cost center.

The Cost Center for Foundry Maintenance department of SBG – IP is „11011710‟. The costs incurred for the department Foundry Maintenance will be posted to this cost center.

6) Profit Center – A profit center is an organizational unit in accounting that reflects a management-oriented structure of the organization for the purpose of internal control. You can analyze operating results for profit centers using either the cost-ofsales or the period accounting approach. By calculating the fixed capital as well, you can use your profit centers as investment centers. Profit center Accounting at the profit center level is based on costs and revenues. These are assigned statistically by multiple parallel updating to all logistical activities and other allocations of relevance for a profit center. Transactions in inventory management that affect the accounting are – i)

Purchasing – Goods Receipt against Purchase Order / without PO, Stock transfer from one plant to other plant (against Stock Transfer Purchase Order), Invoice Receipt and GR for Subcontract PO.

ii) Production – Goods Issue to Production Order, Goods Receipt from Production Order. iii) Other – Transfer material to material, Goods Issue to Cost Center, Sales Order, Asset, Scrapping, Physical Inventory Difference posting.


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These transactions can change the valuation price of material depending upon price control (For example – V for moving average price for externally procured material / S for Standard price for in-house produced material.). Posting in Invoice Verification can also affect Material Valuation. Valuation of Goods Movement – Initial Entry of Stock Balances – Receipts are valuated at current material price of using another material price specified externally. ii) Goods Receipt for Purchase Order – Receipts are valuated at the Purchase order price (Goods Receipt before Invoice Receipt). iii) Goods Issue – Issues are valuated at current material price. i)

For materials to be valuated the accounting data for each valuation area (which is plant in our case) is maintained in the accounting view of material master for every plant in which the material is maintained. Material valuation depends upon the price control procedure set in the material master as below – i)

Moving Average price (V) – The moving average price procedure is used for externally procured material. The Goods Receipt from Purchase Order is posted at Purchase Order price (Quantity X Purchase Order Price). The system modifies the material price in the material master according to delivered price. The system automatically calculates the goods issue by dividing total value by total stock value (that means current price of material). Differences between purchase order price and the invoices are posted directly to the relevant stock account if there is sufficient stock coverage. If sufficient stock of material is not available, then the difference (for balance quantity which is not in stock) is posted to the “Expenses / revenue from price difference”. The data used for cost accounting / controlling purpose therefore contains fluctuations. The price can be changed if required, generally at the end of the period. This causes the system to revaluate the total stock for the valuation area.

In our company, „Bearings‟ are procured from Vendor. Hence the material master data of the bearings will have „Moving Average Price‟ control in accounting view. ii) Standard Price (S) – The standard price procedure is used for in-house produced material. The system calculates all stock postings at price defined in the material master. Variances are posted to account “Expenses / revenue from price difference”. Exact values are available for cost accounting / controlling purpose. The material price can be changed if required at the end of period. This causes the system to revaluate the total stock in the valuation area. All goods issues (such as issue to production order) are valuated at same standard price. This allows better analysis of the cost of production orders. A receipt from Production Order is posted at standard price.


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Pumps are in-house manufactured in our company; hence the material master data of all pumps will have „Standard Price Control‟ in accounting view.

Valuation Area details –

Valuation Area

Company Code

Plant level valuation is set-up in KBL


Plant

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Overview of transactions involved in Material Valuation Requirement determined through Material Requirement Planning

External Procurement Purchasing

Internal Procurement Production

Invoice Receipt

Goods Receipt

Invoice Verification

Goods Issue

Transfer Posting

Master Data  Material Master  Vendor  G/L Account  Storage Location  Plant

Internal & External Accounting

Following are the steps involved in Purchasing, which are important from material valuation / financial point of view – Sr. No. 1

2

3

Effect on Materials Management Effect from Finance point point Vendor is ordered to supply material Commitment is done with the Purchase Order is / provide service as per agreed vendor to pay if he supplies created. terms & conditions material / provides service as per agreed terms Purchase Order is Management approval is given for Management approval is given approved agreed terms & conditions for the financial commitment Stock of material (Inventory) Asset (Inventory) is increased. Material is supplied increases if material is Inventoried. GR / IR clearing account is by the vendor & Consumption to cost object is credited (which is ultimately GRN is posted for booked if the purchase order is the liability to pay money to the same account assigned. the vendor as per agreed terms Step Description


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4

5

6

Consumption of service is booked to Service is provided the respective cost object (For by the vendor & example – Cost Center) service entry sheet is created Vendor‟s invoice is checked against Invoice of the the terms & conditions of the vendor is booked in Purchase Order and booked in the system system so that the vendor can be paid on right time. Payment is done to Liability of the Purchasing the vendor organization ends.

GR / IR clearing account is credited (which is ultimately the liability to pay money to the vendor as per agreed terms. Vendor account is credited & GR / IR Clearing account is debited. (The effective entry is „Credit Vendor Account – Debit Inventory‟) Debit Vendor Account / Credit Bank Account.

Following are the steps involved in material movement, which are important from financial point of view – Sr. No.

Transaction

Effect from Materials Management point

1

Stock of material (Inventory) Goods Receipt is increases if material is posted for standard Inventoried. Consumption to bought out material cost object is booked if the PO is account assigned.

2

Stock of the semi-finished Goods Receipt material (which was ordered on posted for sub- vendor) increases. Consumption contracting material of the BOM material (provided to vendor is booked)

3

Goods Receipt Material delivered to customer posted for Traded directly from Vendor (Third Party Material Transaction)

4

Goods Issue is posted to Production Stock of the material decreases Order / Cost Center

5

6

Components Material provided to vendor for transferred to Sub- processing & supplying back the Contractor processed goods Finished Goods / Traded Goods Material delivered to delivered to customer. Own Customer inventory is reduced


Effect from Financial point of view Inventory (which is our asset) is increased. GR / IR clearing account is credited (which is ultimately the liability to pay money to the vendor as per agreed terms). Asset (Inventory) of semifinished material ordered on vendor is increased. Asset (Inventory) of raw material provided to vendor is consumed to manufacture ordered material. GR / IR clearing account is credited (which is ultimately the liability to pay money to the vendor as per agreed terms. Cost of Goods sold to customer is booked. Material value is booked against the respective cost object (Production Order or Cost Center) as consumption No financial entry. The inventory is shown as „Stock provided to Vendor‟. Cost of Goods sold to customer is booked.

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Automatic posting of material for Goods Movement

Valuation

Storage Valuated Inventory posted in Store

Goods Issue Goods Receipt at manufacturing plant To SD Delivery

To Production Order / Cost Center Consumption of material posted directly to consumption account

Cost of Goods Sold

Consumption

Material cost posted to Cost of Goods Sold account


Goods Receipt of Trading Material against Third Party Purchase Order

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MM transactions for which you can configure the automatic posting facility occur within the areas of Inventory Management, Invoice Verification, and Material Valuation. The company code is assigned to the chart of account in FI (Finance module). In transactions within the MM application, the valuation area is hidden, which is determined to same as plant through system settings. The General Ledger accounts are determined automatically depending upon the plant, material master data & the transaction of material posting (For example – Goods Receipt, Goods Issue, Transfer posting). If a material is subject to split valuation, you can valuate partial stocks of this material at different prices and manage those using separate accounts. For example – Imported Bearings can be accounted in separate account (IMP_RM – Imported Raw material) & Bearing procured from domestic vendor can be accounted in separate account (DOM_RM – Domestic Raw Material). The posting transactions for the transactions in Inventory Management & Invoice Management that are relevant for accounting are fixed. Posting records are assigned to event movement type in Inventory Management & each transaction in Invoice Posting. These postings are generalized in a value string (posting rule). Instead of fixed G/L account numbers, these contain keys for respective posting transaction (such as BSX for a stock posting). The G/L account numbers are determined from these keys & posting transactions.

In brief, following are the summarized data for influencing factors for account posting

Organizational Structure

Company Code

Chart of Account Valuation Grouping Code

Plant

Accounting data for valuation area

Material

Valuation Class

Material Type Value / Quantity update

Value String

Business Transaction

Goods Movement / Invoice Verification


Transaction Key

Account Grouping Page 19

Material Price Change – Material price can be changed for an individual material in a valuation area (plant) with immediate effect or activate the price changes for selected materials after maintaining the future prices in material master accounting view. Material credits / debits cause a price change in case of material subject to price control V or posting to price difference account in case of materials having price control S (Depending upon stock position). Changing the material price involves accounting transaction (& not the material master change) in which total stock of the plant is revaluated.


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Automatic FI postings at Goods Receipt Following automatic postings are done in the system, when the Goods Receipt against Purchase Order are posted – A] Accounting (FI) Entries posted at the time of GRN – a) Raw Material posted to Inventory after posting of GRN – A Purchase Order is raised on Vendor for a raw material which is to be used for production of an in-house manufactured material, depending upon the requirement generated from MRP. When you post a GRN for raw material against Purchase Order, the material is placed in a storage location in the plant. The inventory of the received material is increased by first entry. The second entry will increase the clearing account by equivalent amount. An accounting document is also posted along with the GRN. The inventory of imported raw material & raw material procured from domestic vendor is kept separate. The process flow is as below –

Raw Material

Purchase Order

Without account assignment

GRN Quantity

To Store

GRN Value

To Inventory


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The FI entries posted at GRN are as below – Item

10

Posting Key

Debit

20

Credit

30

Credit

G/L Account

Business Account Area Text Respective Business Account of Area, Raw Raw where the material material material is Inventory Inventory received

Amount in INR (Quantity of material X Purchase Order Price) + Freight Charges

Respective Business Account of Area, GR / IR GR / IR where the Clearing Clearing material is Account received

(Quantity of Material X Purchase Order Price)

Respective Business Account of Area, Freight Freight where the Clearing Clearing material is received

Freight amount to be paid to vendor

Text of Material

Currency INR (for domestic Purchase) / Other Currency (For Imported material) INR (for domestic Purchase) / Other Currency (For Imported material) INR (for domestic Purchase) / Other Currency (For Imported material)

Material master short text


Example of Accounting Entries for Raw material posted to inventory – Item

Posting Key

Account

Business Area

1

Debit (89)

230120

BA01

2

Credit (96)

130100

BA01

3

Credit (50)

130110

BA01

Account Short Text Inventory – Other Raw Material GR / IR Clearing Freight Clearing Inland

Amt. in Local Curr.

Curr.

Text

5100.00

INR

BRG 6305 SKF OR EQ

5000.00 -

INR

BRG 6305 SKF OR EQ

100.00 -

INR

BRG 6305 SKF OR EQ

b) Material posted to consumption account after posting of GRN – Following are main account assignment categories (AAC) – AAC A K Q E

Description Asset Cost Center Project Sale Order

Required Account Assignment Data Main Asset Number & Sub-Number Cost Center & G/L Account Number WBS Element Number of the Project Sale Order Number & Line Number of the Sale Order


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Account assignment field in the Purchase Order determines how the accounting general ledgers accounts will be posted in the case of goods receipt (if the GR Non-Valuated indicator was not set in the PO) or while Invoice booking (if GR Non-valuated indicator was set in PO). If the GR non-valuated indicator was maintained in PO, then no accounting entries are posted at GRN posting. It determines the G/L account for debit entry in the accounting journal for GR or IR transaction. Account assignment in the PO can be adopted from the PR from which it has been created. The process flow is as below –

Raw Material / Non Valuated Material

Purchase Order

GRN Quantity GRN Value

i)

With account assignment

To Store (Raw Material) or To Consumption (Non-valuated material)

Consumption Account

Purchase Order with account assignment A (Asset) –

We use account assignment A to order a fixed asset item. A Fixed asset is a long lived asset which is not expected to be fully consumed within one year period or to be converted into cash within that period, such as: property, plant, equipment etc. For PO / PR with account assignment A, we need additional data to be entered as Asset Number. Asset number is a code to identify a single fixed asset. It must be generated first before we can create a PO or PR item with A as account assignment. Asset number is created in FI / CO module. Asset number is linked with a Fixed G/L Account in the company‟s balance sheet. The G/L account is a reconciliation account that means that it reconciles several asset numbers.


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For Purchase Order with account assignment A (Asset), the entry in FI G/L Account at the time of posting GRN is as below – Item

10

20

30

Posting Key

Debit

Credit

Credit

G/L Account

Business Area Respective Business Account of Area, where Asset the Asset is received

Account Text

Amount in INR (Quantity of Asset Asset X Number & Purchase Sub Order Price) Number + Freight Charges Respective (Quantity of Business Asset X Account of GR / IR Area, where Purchase GR / IR Clearing the asset is Order Price) Clearing Account received Respective Business Account of Area, where Freight Freight the asset is Clearing Clearing received

Text of Material

Currency

INR (for domestic Purchase) / Other Currency (For Imported material) INR (for domestic Purchase) / Other Currency (For Imported material) Freight INR (for amount to domestic be paid to Purchase) / vendor Other Currency (For Imported material)



Example of accounting entries for asset posted – Item

Posting Business Account Key Area

1

Debit (70)

211450

BA05

2

Credit (96)

130100

BA05

3

Credit (50)

130110

BA05

Account Short Text Asset Number 000021000780 Sub Number 0000 GR / IR Clearing

Amt. in Local Cur.

Cur.

36500.00 INR

36050.00 - INR

Freight Clearing Inland

450.00 - INR

Text IM-314/318/325 MOUNTING CASING IM-314/318/325 MOUNTING CASING IM-314/318/325 MOUNTING CASING

ii) Purchase Order with account assignment K (Cost Center) – We use account assignment K (Cost Center) to order an expense item (material or service). An expense item in PO is an item that is expected to be fully consumed immediately after Goods Receipt is posted such as consumable material & services. With account assignment K, we need to determine following two additional data to be entered in the PO –


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-

-

General Ledger (G/L) Account Number: We have to determine the expense G/L account number that will be posted when we do Goods Receipt or Service Entry Sheet (if the GR Non-Valuated indicator was not set in the PO) or while Invoice booking (if GR Non-valuated indicator was set in PO). Cost Center: Cost center determines which department or group in the company that will be charged the expenses occurred when we do GR or Invoice

For Purchase Order with account assignment K, the entry in FI G/L Account at the time of posting GRN is as below – Item

Posting Key

10

Debit

20

Credit

30

Credit

G/L Account

Business Area Respective Business Account of Area, where cost the Material center / Service is received Respective Business Account of Area, where GR / IR the material Clearing / service is received Respective Business Account of Area, where Freight the material Clearing is received

Account Text Cost Center account

Amount in INR (Quantity of Material X Purchase Order Price) + Freight Charges GR / IR (Quantity of Clearing Material X Account Purchase Order Price)

Freight Clearing

Currency


Text of Material Material master short text / Service Text Material master short text / Service Text

Example of accounting entry for Account Assignment as Cost Center – Item 1 2

Posting Business Account Key Area Debit 416340 BA08 (81) Credit 130100 BA08 (96)

Account Short Text Legal Exp & Consult Fees GR / IR Clearing

Amt. in Local Cur.

Cur.

Text

42000.00

INR

Visit Charges

42000.00 -

INR

Visit Charges

iii) Purchase Order with account assignment as Q (Project) – Purchase Order with account assignment Q are raised for material required for a Project being / to be executed by the enterprise. For this account assignment, we need to define the additional data WBS (Work Breakdown Structure) to be entered in the detailed account assignment screen. The WBS element is the small element in which the material / service to be procured is planned & budgeted. We can procure following type of materials against the Project account assignment – Raw / Semi Finished material (to be inventoried), Traded Material. When we procure a raw material (to be inventoried)


Page 25

against the account assignment as Project (Q), then the accounting entries posted are as below –

Posting Key

Item

G/L Account

10

Debit

Account of Inventory

20

Credit

Account of GR / IR Clearing

30

Credit

Account of Freight Clearing

Business Area Respective Business Area, where the Material / Service is received Respective Business Area, where the material / service is received Respective Business Area, where the material is received

Account Text

Amount in INR (Quantity of Material X Inventory Purchase account Order Price) + Freight Charges (Quantity of Material X GR / IR Purchase Clearing Order Price) Account

Freight Clearing

Currency



Following is the example of the accounting entries – Item 1 2


Account Short Text Inventory – Other Resale GR / IR Clearing

Amt. in Local Cur.

Cur.

610806.00

INR

610806.00 -

INR

Text MS Flange Dia. 1500 mm MS Flange Dia. 1500 mm

When we post the GRN for traded material for the PO with Project account assignment, following accounting entries are posted – Posting Key

G/L Account

10

Debit

Account of Cost of Goods Sold (COGS)

20

Credit


Item

Business Area Respective Business Area, where the Material / Service is received Respective Business Area, where the material

Account Text

Amount in INR (Quantity of Material X COGS Purchase account Order Price) + Freight Charges (Quantity of GR / IR Material X Clearing Purchase Account Order Price)


Currency INR (for domestic Purchase) / Other Currency (For Imported material) INR (for domestic Purchase) / Other Currency

Text of Material Material master short text / Service Text Material master short text /

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/ service is received

30

Credit

Respective Account of Business Freight Freight Area, where Clearing Clearing the material is received

(For Imported Service material) Text INR (for Freight domestic amount to Purchase) / be paid to Other Currency vendor (For Imported material)

Example of the accounting entry is as below – Item 1 2


Account Short Text COGS – Other Resale Article GR / IR Clearing

Amt. in Local Cur.

Cur.

183401.00

INR

183401.00 -

INR

Text LTAL PVC ArmPVCSH Cable LTAL PVC ArmPVCSH Cable

iv) Purchase Order with account assignment as E (Sale Order) – Purchase Orders with account assignment E (Sale Order) are raised for a material required for Sale Order either for in-house manufactured material or Traded Goods. Depending upon the scenario the item category will change (Blank for Standard procured material) or S (Traded material). In this case after posting GRN, the accounting entries posted will be same as that indicated in scenario Purchase Order with account assignment as Q (Project). Accounting Entries after GRN for Inventory Material – Item

Posting Key

G/L Account

10

Debit

Account of Inventory

20

Credit


30

Credit

Account of Freight Clearing

Business Area Respective Business Area, where the Material / Service is received Respective Business Area, where the material / service is received Respective Business Area, where the material is received

Account Text

Amount in INR (Quantity of Material X Inventory Purchase account Order Price) + Freight Charges (Quantity of Material X GR / IR Purchase Clearing Order Price) Account

Freight Clearing

Currency




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Following is the example of above point – Item

Posting Business Account Key Area

1

Debit (81)

233070

BA01

2

Credit (96)

130100

BA01

Account Short Text Inventory – Traded Electric Motor GR / IR Clearing

Amt. in Local Cur.

Cur.

Text

25830.00

INR

Motor Alstom 22 KW / 4 Pole

25830.00 -

INR

Motor Alstom 22 KW / 4 Pole

When we post GRN for traded goods, following accounting entries are posted – Item

10

Posting Key

Debit

20

Credit

30

Credit

G/L Account Account of Cost of Goods Sold (COGS) / General Expenses Account of GR / IR Clearing

Business Area Respective Business Area, where the Material / Service is received

Respective Business Area, where the material / service is received Account of Respective Freight Business Clearing Area, where the material is received

Account Text COGS account / General Expenses Account

Amount in INR (Quantity of Material X Purchase Order Price) + Freight Charges

Currency INR (for domestic Purchase) / Other Currency (For Imported material)

GR / IR (Quantity of INR (for Clearing Material X domestic Account Purchase Purchase) / Order Price) Other Currency (For Imported material) Freight Freight INR (for Clearing amount to domestic be paid to Purchase) / vendor Other Currency (For Imported material)


Following is the example of above point – Item 1 2

Posting Business Account Account Key Area Short Text Debit General 416320 BA01 (81) Expenses Credit GR / IR 130100 BA01 (96) Clearing

Amt. in Local Cur. 562580.00 562580.00 -

Cur. INR INR

Text KOEL 85 HP / 1800 RPM Engine KOEL 85 HP / 1800 RPM Engine

c) Sub-Contracting Purchase Order – In the sub–Contracting Purchase Order, semi– finished material is ordered on the Sub-Contractor & the components are given to Sub–Contractor for processing. When the processed semi-finished material is received from the sub-contractor, the consumption of the components is booked against the received material. The process flow is as below –


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Semi – Finished Material

Sub – Contracting Purchase Order

Transfer of material to Sub – Contractor

GRN of processed material (Quantity)

GRN Value

BOM of Semi– Finished Material

With / without account assignment

Components in BOM provided to Vendor for processing

Inventory of SemiFinished material is updated

No accounting entry. Stock of material provided to vendor is updated Stock of material provided to Vendor is consumed

Inventory of SemiFinished material = Processing Charges + Value of BOM Components


Page 29

Following FI entries are posted during above process – Item

10

20

30

40

50

60

Posting Key

G/L Account

Business Area

Account Text

Amount in INR

(Quantity of Semi-finished Respective material X Inventory Business Processing – SemiArea, where Charges) + Finished the Material (Inventory Goods is received Value of Components provided) (Quantity of Semi-finished Respective Change of material X Business Stock Processing Area, where from Sub- Charges) + the Material Contract (Value of is received Components provided) Inventory Respective of Business Compone Inventory Value Area, where nts with of Components the Material Subis received Contractor

Currency

Text of Material

INR (for domestic Purchase)

Material master short text of received material


Material master short text of received material

Debit

Inventory account of Semifinished material

Credit

Change of Stock from SubContract

Credit

Inventory of Compone nts with SubContractor

Debit

Inventory of own Compone nts

Respective Business Area, where the Material is received

Inventory of own Inventory Value Compone of Components nts


Debit

Processin g Charges Other

Respective Business Processin Inventory Value Area, where g Charges of Components the Material Other is received


GR / IR Clearing

Processing Charges to be Respective paid to Vendor Business GR / IR (Quantity of Area, where Clearing Ordered the Material Charges material X is received Processing Charges Rate)

Credit




Material master short text of componen ts Material master short text of componen ts Material master short text of received material Material master short text of received material

Page 30

Following is the example of the above transaction – Item 1

Posting Business Account Key Area Debit 235010 BA01 (81)

Account Short Text Inventory SemiFinished Goods Change Stock Semi-Finished from SubContractor Inventory of semi-finished CI Castings Change Stock Castings for Sub-Contract

2

Credit (91)

400040

BA01

3

Credit (99)

235040

BA01

4

Debit (81)

400040

BA01

130100

BA01

GR / IR Clearing

411450

BA01

Processing Charges Other

5 6

Credit (96) Debit (86)


Amt. in Local Cur.

Cur.

Text

3150.00

INR

BRG. Housing 25 / 13

3150.00 -

INR

BRG. Housing 25 / 13

2852.00 -

INR

2852.00

INR

298.00 -

INR

298.00

INR

Bearing Housing (Kanban 30 Qty / Bin) Bearing Housing (Kanban 30 Qty / Bin) BRG. Housing 25 / 13 BRG. Housing 25 / 13

Page 31

d) Import Purchase Order – If a raw material is to be imported, the material should have the relevant valuation class (Imported Raw Material). The PO consists of additional customs & delivery costs to be paid. The invoice of planned delivery cost (to be paid to clearing agent) is booked first when the material arrives in the Port (For example – Mumbai JNPT Port). After material is cleared from port & received in Plant, GRN is posted. Then the customs duty is also inventorised along with the basic price of material & freight charges. After the booking of this invoice, GRN is posted when the imported material actually arrives in the plant. The process flow is as below –

Raw material

Import Purchase Order on Overseas Vendor

Planned delivery cost invoice of Import PO is booked when the material arrives at Port

GRN is posted when material arrives at Plant (Quantity) GRN Value

Valuation class – Imported Raw Material

With / without account assignment

Customs duties, Freight Charges etc. of Clearing Agent are invoiced

Quantity of Imported Material is updated

Basic Value of Material + Planned Delivery Costs + Customs Duty


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Following are the FI entries posted, when the GRN is posted – Item

Posting Key

1

Debit (89)

Inventory Business Area Inventory account of where the material Imported Imported Raw has been received Material Material

2

Credit (96)

GR / Clearing Account

3

Credit (96)

Freight Clearing (Imported) Account

Business Area Freight Clearing where the material – Import (Basic has been received Customs Duty)

4

Credit (96)


Freight Clearing Business Area – Import (Ecess where the material on Basic has been received Customs Duty)

5

Credit (96)


Freight Clearing Business Area – Import (S&H where the material Ecess on Basic has been received Customs Duty)

6

Credit (50)

7

Credit (50)

8

Credit (50)

G/L Account

Business Area

Account Text – Raw

IR Business Area GR / where the material Clearing has been received

IR

Business Area CVD Clearing where the material CVD Clearing Account has been received Business Area CVD Clearing where the material CVD Clearing Account has been received Business Area CVD Clearing where the material CVD Clearing Account has been received

Amount in INR Quantity of Material X Basic Price of material Quantity of Material X Basic Price of material Basic Customs Duty Amount Ecess amount on Basic Customs Duty S&H Ecess amount on Basic Customs Duty CVD Amount Ecess CVD

Currency

INR

INR

INR

INR

INR

INR

on INR

S&H Ecess of CVD

INR

Following is the example of the FI entries of imported material – Item 1 2 3 4 5

Posting Key Debit (89) Credit (96) Credit (96) Credit (96) Credit

G/L Account

Business Area

Account Text

230110

BA01

130100

BA01

Inventory – Imported Raw Material GR / IR Clearing

130120

BA01

130120

BA01

130120

BA01

Freight Clearing – Import Freight Clearing – Import Freight Clearing – Import


Amount in INR

Currency

15518.00

INR

11515.00 -

INR

1744.00 -

INR

34.00 -

INR

17.00 -

INR

Page 33

6 7 8

(96) Credit (50) Credit (50) Credit (50)

130130

BA01

130130

BA01

130130

BA01

CVD Clearing CVD Clearing CVD Clearing

2145.00 -

INR

42.00 -

INR

21.00 -

INR

e) Stock Transport Purchase Order – In a stock transport Purchase Order cycle, material is transferred from one plant of the same company code to another plant. A stock transport purchase order is raised by the receiving plant on supplying plant as vendor. When the material is ready, the supplying plant delivers the material to the receiving plant along with commercial proforma invoice & excise invoice and the receiving plant posts GRN when the material is received. In this case the FI entries are posted when Goods Issue is done against the delivery note as Inventory transfer from supplying plant to receiving plant. Following are the FI entries posted when Goods Issue is posted – Posting Key

G/L Account

10

Credit

Inventory Account

20

Debit

Inventory Account

Item

Business Area Business Area from where material is issued Business Area where material is received

Account Text

Amount in INR

Inventory of Material

Inventory of material

Currency

Plant

Inventory Amount

INR

Plant from where material is issued

Inventory Amount

INR

Plant where material is received

Example of above transaction is as below – Item 10 20

Posting Key Credit (99) Debit (89)

G/L Account 232080 232080

Business Area BA05 BA05

Account Text Inventory of Spares Inventory of Spares

Amount in INR 4302.50 4302.50

Curr.

Plant

INR INR

2530 9010

f) Service Purchase Order – When a Service Purchase Order (Item Category – D) is raised on a service providing vendor, the account assignment field becomes mandatory. This is because the service can not be stored in the way a material can be stored in inventory. Hence the consumption of service is to be posted to some account assignment, either to Cost Center or Sale Order or Project. When the service provider completes the required service, the service entry sheet is posted to indicate that the required service has been delivered by the vendor. When the Service Entry Sheet is accepted, a GRN is


Page 34

automatically posted by the system (which is based on the accepted service entry sheet). Following is the flow chart for Service Purchase Order –

Service Required for Project / Cost Center / Sale Order

Purchase Order with Item Category D (Service) & required account assignment (Q / K / E) is raised.

Account assignment data such as Project or WBS Definition / Cost Center Number / Sale Order Number is maintained.

Service Entry sheet is created & accepted after service is completed by Vendor. GRN is posted automatically by system.

Consumption of the service is posted to the cost object maintained in account assignment field.


Page 35

Following are the FI postings at the time of accepting Service Entry Sheet – Item

Posting Key

G/L Account

10

Debit

Consumption Account

20

Credit

GR / IR Clearing Account

Business Area Business Area from where Service is delivered Business Area where service is delivered

Account Text

Amount in INR

Currency

Text

Process Charges

Service Charges Amount

INR

Service Text

GR / IR Clearing

Service Charges Amount

INR

Service Text

Following is the example of above transaction – Item

Posting Key

G/L Account

Business Area

10

Debit (81)

411420

BA02

20

Debit (96)

130100

BA02

Account Text Process Charges - Foundry GR / IR Clearing


Amount in INR 3847.80 3847.80 -

Curr. INR INR

Text Service Charges Service Charges

Page 36

Excise entries at GRN When we procure an excisable material the entries in the excise registers are updated when the GRN for the material is posted. The Modvat benefit of the excise paid to the vendor can be taken for payment of excise duty on finished material (when sold) which we manufacture by using the raw material which the vendor has supplied. For material not used in manufacturing of finished material or for traded material, the excise paid is inventoried (that means the excise amount is added to the material inventory value.) Following are the entries posted for excise registers when the excisable material is received against GRN – a) Modvatable Excise Item – Item

Posting Key

1

Debit (40)

Excise Cenvat

2

Debit (40)

ECS Cenvat Amount

3

Debit (40)

S&H ECS Cenvat Account

4

Credit (50)

Modvat Clearing Account

Account

Business Area Business Area where the material is received Business Area where the material is received Business Area where the material is received Business Area where the material is received

Account Short Text

Amount in Loc Curr.

Currency

Cenvat Input P F

Basic Excise Duty amount

INR

Cenvat ED Cess

ECS Amount

INR

Cenvat Ces-1%

S&H S&H ECS Amount

INR

Amount Modvat Clearing equivalent to Account amount in 1 + 2+3

INR

Example of Modvatable excise entries is as below –

1 2

Posting Key Debit (40) Debit (40)

244030 244031

3

Debit (40)

244034

4

Credit (50)

130150

Item

Account

Business Account Short Area Text BA01 Cenvat Input P F BA01 Cenvat ED Cess Cenvat S&H BA01 Ces-1% Modvat Clearing BA01 Account


Amount in Currency Loc Curr. 3629.00 INR 73.00 INR 36.00

INR

3738.00 -

INR

Page 37

b) Trading excisable material received against GRN – Item

Posting Key

1

Debit (81)

2

Credit (96)

Business Account Short Area Text Business Area where the material is COGS – received COGS – Trading Trading Material Material Account

ECS Cenvat Amount

Business Area where the material is received

GR / IR Clearing

Amount in Currency Loc Curr. Basic Value of material + Basic Excise Duty + Ecess INR Value + S&H Ecess Value + VAT / CST (as applicable) Basic Value of material + Basic Excise Duty + Ecess INR Value + S&H Ecess Value + VAT / CST (as applicable)

Example of Excise duty inventorised Item

Posting Key

1

Debit (81)

410910

BA01

2

Credit (96)

130100

BA01

Account

Business Area

Account Short Text COGS – Trading Motor GR / IR Clearing


Amount in Loc Curr.

Currency

4,331,083.00

INR

4,331,083.00 -

INR

Page 38

FI entries at Material Consumption When a material is issued to a consumption account (For example – Consumption to Production Order / Cost Center), the inventory reduces & consumption is booked for the cost object. Following are the FI entries posted when material consumption is posted. 1) Material consumption posted to cost center – Item

Posting Key

1

Credit (99)

2

Debit (81)

Amount in Loc Curr. Curr. Business Area Price of Inventory Inventory of where the material Material X INR Account Material is stocked Quantity posted Business Area Price of Consumption Inventory where the material Material X INR of Material Consumption is consumed Quantity posted Account

Business Area

Account Short Text

Following is the example of material consumed to Cost Center – Item 1 2

Posting Account Key Credit 231020 (99) Debit 400240 (81)


Account Short Text Inventory – Other Raw material Consumption – Other Raw Material

Amount in Loc Curr.

Currency

155.00 -

INR

155.00

INR

2) Material consumption posted to Production Order – Item

Posting Key

1

Credit (99)

2

Debit (81)

Amount in Loc Curr. Curr. Business Area Price of Inventory Inventory of where the material Material X INR Account Material is stocked Quantity posted Business Area Price of Consumption Inventory where the material Material X INR of Material Consumption is consumed Quantity posted Account

Business Area

Account Short Text

Following is the example of material consumed to Production Order – Item 1 2

Posting Account Key Credit 235010 (99) Debit 400290 (81)


Account Short Text Inventory – Semi Finished Goods Consumption – Semi Finished Goods


Amount in Loc Curr.

Curr.

3341.00 -

INR

3341.00

INR

Page 39

3) Consumption of Stock provided to Sub – Contractor for processing of finished material when GRN of processed material is posted – In a sub – contracting purchase order, a semi finished material is ordered on the sub – contractor & components are provided to the sub – contractor for processing the ordered material. When the GRN for ordered material is posted, the consumption of ordered material is posted against the ordered material & the concerned FI entries are posted.


Page 40

FI postings at Invoice booking When an Invoice for Vendor is booked in the system for material supplied by the vendor against a Purchase Order, the vendor is credited with the invoice amount & the GR / IR clearing account is debited (this account was credited when the Goods Receipt was posted). If the GR based Invoice (GR based IV) is marked in PO, then system does not allow to post the invoice unless the GRN is posted in the system. That also means invoice posting is possible only for the items for which the GRN is booked. The invoice may refer to a Purchase Order / Scheduling Agreement & based in GRN / Service Entry Sheet quantity not yet invoiced. If required you can simulate the entries before actually posting the Invoice. After invoice is booked, the Purchase Order history is updated. Based on the clear booked invoice, payment can be made to the vendor either through automatic payment run or manually. The invoice may be blocked for automatic payment to vendor due to following reasons – Quantity Variance, Price Variance, Quality Inspection, Manual block, date variance and Amount variance. The process flow is as below –

Purchase Order for Material / Service

GRN for Material / Service Entry Sheet for Services performed Purchase Order History Delivery Costs Material Master

MM Invoice Document

Invoice Verification

FI Invoice Document

G/L Account Assets

Cost Center Project

Vendor Master

Further Document


Sale Order

Page 41

Following entries are posted when an invoice for vendor is posted in the system. Item

Posting Key Credit (31) Debit (86)

Account

Business Area

Vendor Business Area Account GR / IR Business Area 2 Clearing MODVAT Business Area Debit 3 Clearing from where (40) Account payment is made MODVAT Business Area Debit 4 Clearing from where (40) Account payment is made MODVAT Business Area Debit 5 Clearing from where (40) Account payment is made VAT RM Business Area Debit 6 Deductible from where (40) Amount payment is made Example of above is transaction is as below – 1

Item 1 2 3 4 5 6

Posting Key Credit (31) Debit (86) Debit (40) Debit (40) Debit (40) Debit (40)

Account 300664 130100 130150 130150 130150 245039

Account Short Text Vendor Number GR / IR Clearing Modvat Clearing Modvat Clearing Modvat Clearing

Amount in Loc Curr. Amount to be paid to Vendor GR / IR Clearing Amount MODVAT Clearing Amount – B. Excise Duty MODVAT Clearing Amount – ECS Amount MODVAT Clearing Amount – S&H ECS Amt.

VAT RM VAT Amount to Deductible be paid to Vendor

Business Account Short Text Area BA02 WalchandNagar Industries BA02 GR / IR Clearing Modvat Clearing Modvat Clearing Modvat Clearing BA02 VAT RM Deductible

Curr. INR INR INR

INR

INR

INR

Amount in Curr. Loc Curr. 135900.00 - INR 100000.00 INR 16000.00 INR 3200.00 INR 1600.00 INR 15100.00 INR

The diagrammatic view of above example is as below –

Purchase Order GRN for this PO Invoice

: : :

100 PC at INR 1000 100 PC 100 PC at INR 1000 Goods Receipt

Invoice Receipt

Stock Account

100000 +

GR / IR Account

100000 –

100000 +

Modvat clearing

20800 –

20800 +

VAT

15100 +

Vendor

135900 –


Page 42

Assignment

Topic: MM – FI Integration

At the conclusion of this exercise, you will be able to:   

Explain the FI entries when a GRN is posted. Understand the FI entries when consumption of a material is posted Simulate the FI entries at the time of Invoice booking

1) What account types will be used for following – a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center 2) What is meaning of – a) Profit & Loss Statement b) Balance Sheet c) Cash Flow statement 3) State whether following entries will go to Balance Sheet or to Profit & Loss statement – a) b) c) d)

GRN for Raw material posted to store Invoice for receipt of above material posted (payment yet to be made) Material Consumed to Production Order Payment received from customer for material already supplied


Page 43

4) For which material type following price control should be maintained & why? a) Moving Price Control b) Standard Price Control 5) Explain the effect on FI entry at following instances – a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to SubContractor c) Ordered material received from the Sub-Contractor d) Invoice for above Purchase Order booked 6) What is the effect on FI for following inventory transactions – a) Material consumption posted to Production Order b) Material consumption posted to Cost Center c) Material delivered to Customer 7) What FI entries will be posted at the time of posting following transactions? a) Purchase Order for Raw material „12550022‟ (Gland) raised on M/s Vishal Foundry, as per following details – Quantity 100 PC at INR 37.50/- per PC, Freight – 1% (To be inventorised) Excise 14%, Ecess 2%, S&H Ecess 1% (Set-Off to be taken) VAT – 12.5% b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 & Excise Invoice Number 238 from Vendor along with freight & Excise conditions. c) Invoice for above Purchase Order booked in system. 8) A Sub-Contracting Purchase Order is raised on M/s Nitin Engineering Works for material „S2006242‟ (Driving Unit) for Quantity 50. As material in above example No. 7 [„12550022‟ (Gland)] is maintained in BOM of ordered material, the same is sent to the sub-contractor for processing along with following components – 02304010 – Ball Bearing (Price – INR 74, Quantity required – 50 PC) 14000011 – Bearing Housing (Price – INR 689, Quantity required – 50 PC). What entries will be posted at the time of booking GRN for above PO?


Page 44

10 - MM - FI Integration

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