Janet Salmon Accounting Entries in SAP® ERP Controlling This E-Bite is protected by copyright It contains a digital watermark, a signature that indicates which person may use this copy Full Legal Notes and Notes on Usage can be found at the end of this publication SAP PRESS E-Bites SAP PRESS E-Bites provide you with a high-quality response to your specific project need If you’re looking for detailed instructions on a specific task; or if you need to become familiar with a small, but crucial sub-component of an SAP product; or if you want to understand all the hype around a certain product: SAP PRESS E-Bites have you covered Authored by the top professionals in the SAP universe, E-Bites provide the excellence you know from SAP PRESS, in a digestible electronic format, delivered (and consumed) in a fraction of the time! Janet Salmon SAP Simple Finance: How Do I Get Started without Migrating? ISBN 978-1-4932-1284-2 | $12.99 | 81 pages Eli Klovski Configuring Funds Management for SAP Public Sector Management ISBN 978-1-4932-1302-3 | $14.99 | 99 pages Narayanan Veeriah Configuring FI-TV for Business Travel ISBN 978-1-4932-1283-5 | $9.99 | 53 pages The Author of this E-Bite Janet Salmon is currently chief product owner for management accounting at SAP SE and has accompanied many developments to the Controlling components of SAP ERP Financials as both product and solution manager She regularly works with key customers and user groups in the United States and Germany to understand their Controlling challenges and requirements Learn more about Janet at www.sap-press.com/accounting- entries-in-sap-erp-controlling_3954/author/ What You’ll Learn The best way to get a feel for the nature of the accounting entries—also known as actual postings or journal entries—is to walk through a business process from beginning to end, examining what transactions initiate the postings and what data is then available for you to monitor in CO This E‐Bite follows two raw materials from their initial purchase through the manufacturing process, where they are converted into a finished product (a music CD) for final sale to the customer, and discusses the issues that a controller monitors at each stage We’ll also look at some special cases in addition to this simple example Integrated Process Flows: Buy, Make, and Sell 1.1 Procure to Pay 1.2 Plan to Manufacture 1.3 Order to Cash Distribution of Usage Variances 2.1 Capturing Physical Inventory Documents 2.2 Distribution of Usage Variances 2.3 Distribution of Activities Integrated Process Flows: Other Logistics Scenarios 3.1 Product Cost by Order 3.2 Product Cost by Period 3.3 Product Cost by Sales Order 3.4 Project Controlling 3.5 Controlling for Maintenance and Service Orders Corrections or Adjustment Postings 4.1 Reposting Line Items 4.2 Correcting an Activity Allocation 4.3 Reposting Values Cross-Company Postings What’s Next? Integrated Process Flows: Buy, Make, and Sell Because of the integrated nature of SAP ERP, it’s rare for a controller to make a manual posting In many cases, the controller simply monitors the postings created in Logistics and Human Capital Management and anticipates their impact on the Controlling component of SAP ERP Financials (which we’ll refer to in this E-Bite as CO) A controller in a manufacturing environment monitors the following key logistics processes: The procurement process and the impact of the price his buyers are able to negotiate on the product costs The manufacturing process and the impact of the value added during production on the product costs The sales process and the impact of the product costs on profitability This section is based on a very simple example involving the sale of a finished product (ACT-DCD) to the final customer, looking at how the raw materials ACT-BCD and ACTLCD are procured for use in the manufacture of this finished product and how these raw materials are issued to production and delivered to stock as the finished product for sale In each step, we’ll look at the logistics steps and then explain their impact on CO 1.1 Procure to Pay Let’s start by looking at how CO works for a material purchased to stock for use in a manufacturing process Figure shows the basic flow of the procure-to-pay process Usually, a materials requirements planning (MRP) run and the creation of a purchase request precedes the creation of the purchase order, but we’ll start in the middle of the workflow with the purchase order (purchase order processing step), because this is where the choice of account assignment (cost center, project, neutral stock, and so on) impacts how the values will be transferred to CO Figure Procure-to-Pay Process The purchase order is an agreement with a vendor to supply materials at a given price This price is established in a purchasing info record that defines the agreement between the supplier/vendor and the buyer This price can be used to set the standard price in the material master, but it may change depending on the business climate The receipt of the materials into stock (goods receipt step) and the invoice (invoice processing step) reference this purchase order (you’ll hear this process referred to as a three-way match) The goods receipt is valued initially using the price in the purchase order, and the invoice may adjust this price The controller’s concern in this process is purchase price variances 1.1.1 Purchase Order Processing The first step is to create a purchase order to request the supply of our two raw materials from a vendor To create a purchase order, use Transaction ME21N or follow the menu path Logistics • Materials Management • Purchasing • Purchase Order • Create • Vendor/Supplying Plant Known Then enter the vendor, purchasing organization, and company code in the header and, below, the material, plant, and quantity for each item (see Figure 2) To view the price of each item, select the item and select the Conditions tab Here we see that the first item for the blank CD costs 1,100 Mexican pesos per 100 units This may already be the source of a purchase price variance if the agreement with the vendor is based on a different price than that currently in the material master The controller might also check the account assignment In our example, column A (Account Assignment category) is blank, meaning the purchase order will be delivered to regular inventory and can be used by any production order that reserves it The next step is to record the arrival of the goods into stock Figure Creating a Purchase Order (Purchase Order Processing Step) 1.1.2 Posting a Goods Receipt Now we’ll create the goods receipt for the purchase order by referencing the purchase order and the prices contained in it The easiest way to this is to stay in the Purchasing menu and select Follow-On Functions • Goods Receipt or Transaction MIGO Enter the purchase order from Figure as a reference Figure shows the two items we ordered and indicates that they’re to be delivered into unrestricted stock By comparison, in Section 3.3 we’ll look at what happens if goods are delivered to sales order stock, where they can only be used for the relevant sales order If you select the Account Assignment tab, you’ll see that there’s no account assignment to a CO object (as we saw in Figure 2), but that the posting will be assigned to a profit center using the profit center entered in the material master for the items concerned This is the standard process for the procurement of stock materials By comparison, in Section 3.1 we’ll look at a purchase order for outsourced manufacturing in which the purchase costs are assigned to a CO production order, and in Section 3.4 we’ll look at a purchase order for a project-specific purchase in which the purchase costs are assigned to a WBS element Figure Creating a Goods Receipt (Goods Receipt Step) Goods receipts for stock materials don’t show up as actual costs on a cost center or order until the material is issued to production later However, if the Material Ledger is active in the plant concerned, the goods receipt is recorded in the Material Ledger To display the postings for the goods receipt, use Transaction CKM3N or go to Controlling • Product Cost Controlling • Actual Costing/Material Ledger • Information System • Detailed Reports • Material Price Analysis Enter the material number for the blank CD, the plant, and the current period Figure shows that the price in the purchase order differs from the standard price for the raw material in the material master The preliminary valuation is based on the standard price for the material (10 pesos per unit), whereas the price conditions in the purchase order item were 11 pesos per unit This difference of 10 pesos for 10 units is recorded in the Material Ledger and would be included in the actual costs for the material during the periodic costing run to calculate the periodic unit price for the material during period close Figure Material Price Analysis following Goods Receipt System Performance with the Material Ledger When people first hear that the Material Ledger stores an extra document for each goods movement, invoice, and so on, they tend to worry that this will put an unnecessary burden on their system The act of writing a Material Ledger document adds a couple of percent to the time it takes to post the goods receipt If you want to find more information about system performance metrics, check the information in SAP Note 668170 The Purchase Order line in the Material Price Analysis screen shows both the Material Ledger document number (1000000315) and the purchase order item (4500018780) that initiated the posting To display the Material Ledger document created during the goods receipt, click on the document line in Figure This takes you to the Material Ledger document shown in Figure As the controller, you won’t have created the goods receipt as we just did, so normally upon checking this list you might click on the Source Document button to display the goods receipt document if you need to check the details of what we entered in Figure To display all the accounting documents associated with the goods movement, click on the Accounting Documents… button, as shown in Figure Figure Material Ledger Document and Links to Accounting Documents Figure 74 Reposting—Row View Figure 75 Line Item Report following Reposting Figure 76 Repost Activity Allocation: Row View Figure 77 Manual Cost Reposting Figure 78 Cross-Company Stock Transport Order Figure 79 Material Price Analysis for Legal Valuation in Supplying Plant Figure 80 Material Price Analysis in Legal Valuation for Receiving Plant Figure 81 Material Ledger Document Showing Both Plants Figure 82 Material Price Analysis in Group Valuation in Supplying Plant Figure 83 Material Price Analysis in Group Valuation in Receiving Plant Footnotes ... groups in the United States and Germany to understand their Controlling challenges and requirements Learn more about Janet at www .sap- press.com /accounting- entries- in- sap- erp- controlling_ 3954/author/... nature of the accounting entries also known as actual postings or journal entries is to walk through a business process from beginning to end, examining what transactions initiate the postings and... using that milk Figure Entering an Incoming Invoice (Invoice Processing Step) Figure Material Price Analysis following Invoicing Again, we can display the Material Ledger document by clicking