Janet Salmon Accounting Entries in SAP* ERP Controlling © Rheinwerk® Bonn + Boston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. 1 Integrated Process Flows: Buy, Make, and Sell.............. 5 1.1 Procure to Pay.......... wee fees 5 4.2 Plan to Manufacture. 16 1.3 Order to Cash 30 2 Distribution of Usage Variances ...........-0....0005 -. 39 2.1 Capturing Physical Inventory Documents . 40 2.2 Distribution of Usage Variances . 42 2.3. Distribution of Activities. 43 3 Integrated Process Flows: Other Logistics Scenarios ......... 45 3.1 Product Cost by Order. . . cee cece 45 3.2. Product Cost by Period 0.0... 00.0020 cece cece eee 53 3.3. Product Cost by Sales Order 56 3.4 Project Controlling. . . . 61 3.5 Controlling for Maintenance and Service Orders 68 4 Corrections or Adjustment Postings ..........0..0eeeeeees 71 4.1 Reposting Line Items bev e beet cee ceereees 72 4.2 Correcting an Activity Allocation seveees 75 4.3. Reposting Values ....... sees seveeees 76 5 Cross-Company Postings 78 6 What's Next 834 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 antici- pates 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 fin- ished product (ACT-DCD) to the final customer, looking at how the raw materials ACT-BCD and ACT-LCD are procured for use in the manufacture of this finished product and how these raw materials are issued to pro- duction 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. 44 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 1 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.Integrated Process Flows: Buy, Make, and Sell | 1 ‘Master data (material senviee, apd supple) Demand Purchase wee rurcase \\ coves eceiot \ ngage creation and request ong rer Sndserice YY IMOKE NS payment honing processing precesing ty Figure 1 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 mate- rials 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. 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 Trans- action ME21N or follow the menu path Locistics + MATERIALS MANAGE- MENT * PURCHASING + PURCHASE ORDER * CREATE * VENDOR/SUFPLYING PLANT KNOWN. Then enter the vendor, purchasing organization, and com- pany 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 ConprTiONs 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Integrated Process Flows: Buy, Make, and Sell | 1 category) is blank, meaning the purchase order will be delivered to regu- lar 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. ©. Create Purchase Order name vert On D2 Hs Fae Sb Dre revew Manes i) EDhemlsemms Sr Tenete Lede Teens Ewen i moe Bec Aimed ste . zim Sac Ses omarse o Bite > BE utes is ie ie Ns oa ai tes Ten td wm ses oer Figure 2 Creating a Purchase Order (Purchase Order Processing Step) 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 do this is to stay in the PURCHASING menu and select FOLLOW-ON FUNCTIONS + Goops RECEIPT or Transaction MIGO, Enter the purchase order from Figure 2 asa reference. Figure 3 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Integrated Process Flows: Buy, Make, and Sell | 1 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 pur- chase order for a project-specific purchase in which the purchase costs are assigned to a WBS element. © «Goods Receipt Purchase Order 4500018760 Janet Dorothy Simon esos (Det once he [90 |ermpe ~) peomn owe ~ SS es oasis TM ne ett tm om 8 GG me Domes FR wer aise ee Figure 3 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 4Integrated Process Flows: Buy, Make, and Sell 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 Led- ger 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. BOTs GAT comma cockoe set cong Ran tea aca steko ane (000) wos On vataton Te 5B sues ow toc Sock Period/Year 2 2014) [4] >| Period Status @OGEO LF) aunties and Vabies Entered mvaaton Comes cae cater ~ vow tree Oeternaton Stucice—~ "Per and et bes 9%) GDS |) Ba Re [messages | sr Docurmer coger unity Unt _ Paki pice ft 8d ica_curency - Began ian Sie eo 76a] opens” noo ison fore toga fom oon 1200400 ore tae00 1000 1.00100 10% 1w.00 1000 1.00000 ove ta cn 10% 10000800 10.00% Figure 4. 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 perfor- mance metrics, check the information in SAP Note 668170.