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Transcript of MM FI Integration
KIRLOSKAR BROTHERS LIMITED
MM - FI Integration Training document
[This training document contains the details of integration between MM amp 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]
Train Doc KBLCICSAP MM12MM-FI Integration Page 2
Index
Sr No Subject Page Number
1 Basics of Accounting 3 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 KBLCICSAP MM12MM-FI Integration Page 3
Objective
After studying the document you will be able to understand ndash
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 ndash Buyers in Purchasing department Stores In-Charge Senior Managers in Materials department
Pre-requisites for target audience ndash Thorough knowledge of Purchase transactions Thorough knowledge of Inventory transactions Basic knowledge of Excise
Hint
ndash Example
ndash Information
Train Doc KBLCICSAP MM12MM-FI Integration Page 4
Basics of Accounting
A] Fundamentals of Accounting ndash 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 amp generally accepted way The transaction records are organized amp presented in certain form of reports The most used reports are Balance Sheet and Profit amp Loss Account Following are the fundamentals of Accounting ndash
1) Accrual basis ndash Effects of transactions takes place when they occur and not
when cash is paid
2) Going concern ndash 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 ndash 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 ndash Business Transactions having monetary implications
Every debit has an equal corresponding credit
Following are the three types of accounts ndash
1) Personal Account ndash This is the account of persons For example ndash Accounts of Vendor Customer are personal accounts Rule applied for this type of account are bdquoDebit the receiver amp credit the giver‟
For example ndash When a payment is made to a Vendor for supplying material the entry is made as below ndash
Debit ndash Vendor INR 1 00000 -
Credit ndash Bank Account INR 1 00000 -
2) Real Account ndash These are the accounts of properties For example ndash Cash
Inventory Machinery Rule applied for this type of account is bdquoDebit what comes in amp Credit what goes out‟
For example ndash When a material is received to inventory after GRN against Purchase Order following entries are posted ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 5
Debit ndash Inventory Raw Material INR 1 00000 -
Credit ndash GR IR Clearing Account INR 1 00000 -
3) Nominal Account ndash These are the accounts of income amp expenditure For example ndash Travelling expenses Colony Expenses Rent received from land Rule applied for this type of account is bdquoDebit Expenses amp Credit Incomes‟
For example ndash When Travel expenses for an employee are booked following are the FI postings ndash
Debit ndash Travel expenses INR 250 - Credit ndash 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 ndash
1) Financial Statements ndash
At the end of every period a business entity prepares Balance Sheet and Profit amp Loss Account Balance sheet shows the financial position of the entity on a given date in the terms of its Assets amp Liabilities Balance sheet is prepared as on date (For example ndash Balance sheet as on 31ndashMarchndash2008) Income statement (Profit and Loss Account) shows the results in terms of excess of Income over Expenditure Profit amp Loss statement is for the period bdquoFrom (for example 01042007) To (for example 31032008)‟ It consists accounting for Real amp nominal accounts Funds flow statement (or Cash Flow statement as it is popularly called) shows the movement of funds during a given period ie where FUNDS came from and How they were applied Cash flow statement is for the year ended (For example ndash Year ended on 31ndashMarchndash2008) For example ndash Net cash flows from operating activities investing activities financing activities
2) Assets ndash 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 ndash Fixed Assets amp 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 Eg 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 Eg Inventories Debtors Cash and Bank
Train Doc KBLCICSAP MM12MM-FI Integration Page 6
3) Depreciation ndash 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
ndash Straight Line method
ndash Written down value Method
4) Liabilities ndash Liability is what company owes These are the obligations of the business to convey something of value in the future such as ndash Account Payable Notes Payable Liabilities are of types ndash Long Term Liabilities Current Liabilities Equity capital
a) Long term liabilities are the liabilities maturing beyond a year Eg Term
loans Debentures Bonds
b) Current Liabilities are the liabilities maturing within a year Eg 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 amp Loss Statement ndash 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 amp expenses Revenues are inflows of assets from providing Goods amp 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 ndash Revenue Expenditure Capital Expenditure a) Revenue expenditure Expenditure incurred for manufacturesale of the
products and for carrying out the day to day activities is Revenue expenditure The examples of capital expenditure are ndash 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 ndash Acquisition of assets development of SAP system is capital expenditure
The difference between revenue amp expense is profit (or loss if the expenses are greater than revenues)
Train Doc KBLCICSAP MM12MM-FI Integration Page 7
6) Cash Flow ndash 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 ndash The balance sheet shows an enterprise‟s assets liabilities amp
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 ndash Equity refers to owners‟ interest in business such as Capital Stock
Retained Earning Current year net profit loss
9) Relationship between balance sheet amp profit amp loss account ndash Balance sheet amp Profit amp 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 8
D] Formats for financial documents ndash 1) Cash Flow Statement
1) BALANCE SHEET as on 31st March
LIABILITIES (Rs) ASSETS (Rs)
SHARE CAPITAL
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
RESERVES AND SURPLUS
1 Capital Reserves 2 Capital Redemption
Reserve 3 Share Premium Account 4 Other Reserves
Less Debit balance in
profit and loss account
if any 5 Balance in the profit
and loss accounts after
providing for proposed
FIXED ASSETS
1 Goodwill 2 Land 3 Buildings 4 Leaseholds 5 Railway Sidings 6 Plant and Machinery 7 Furniture and Fittings 8 Development of
Property 9 Patents trademarks
and designs 10 Livestock 11 Vehicles etc
INVESTMENTS
1 Investments in Govt
or Trust Securities 2 Investments in shares
debentures or bonds 3 Immovable properties 4 Investments in the
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
Train Doc KBLCICSAP MM12MM-FI Integration Page 9
allocation namely
Dividend Bonus or
Reserves 6 Proposed additions to
Reserves
SECURED LOANS
1 Debentures 2 Loans and Advances
from Banks 3 Loans and Advances
from Subsidiaries 4 Other Loans and
Advances
UNSECURED LOANS
1 Fixed Deposits 2 Loans and Advances
from Subsidiaries 3 Short-term Loans and
Advances a from Banks b from others
4 Other Loans and
Advances a from Banks b from others
CURRENT LIABILITIES amp PROVISIONS
A Current Liabilities 1 Acceptances 2 Sundry Creditors
i Total
outstanding
dues of small
scale industrial
undertaking(s)
ii Total
outstanding
dues of
creditors other
than small
scale industrial
undertaking(s)
capital of partnership
firms 5 Balance of unutilized
monies raised by Issue
CURRENT ASSETS LOANS amp ADVANCES
A Current Assets 1Interest accrued
on investments 2Stores and spare
parts 3Loose tools
4 Stock-in-trade 5 Works-in-
progress 6 Sundry debtors
a Debts
outstanding
for a period
exceeding 6
months bOther debts
Less
Provision 7
a Cash
balance on
hand b Bank
balances B Loans and Advances
8 Advances and
Loans a To
subsidiaries b To
partnership
firms in
which the
coits
subsidiary is
a partner 9 Bills of Exchange 10 Advances
recoverable in
cash or in kind or
for value to be
Train Doc KBLCICSAP MM12MM-FI Integration Page 10
3 Subsidiary
companies 4 Advance
payments and
unexpired
discounts 5 Unclaimed
Dividends 6 Other Liabilities
(if any) 7 Interest accrued
but not due on
loans B Provisions
8 Provision for
Taxation 9 Proposed
Dividends 10 For
contingencies 11 For Provident
Fund Scheme 12 For Insurance
pension and
similar staff
benefit schemes 13 Other provisions
received eg
Rates Taxes
Insurance etc 11 Balances with
Customs Port
Trust etc (where
payable on demand)
MISCELLANEOUS
EXPENDITURE
(to the extent not written off or adjusted)
1 Preliminary Expenses 2 Expenses including
commission brokerage
on underwriting or
subscription of shares
or debentures 3 Discount allowed on
issue of shares or
debentures 4 Interest paid out of
capital during
construction 5 Development
expenditure not
adjusted 6 Other items (Specifying
nature)
PROFIT AND LOSS
ACCOUNT
(Debit Balance)
Total Total
2) PROFIT amp LOSS ACCOUNT For the period ending 01st April to 31st March
Expenditure Particulars Rs Income Particulars Rs
1 Consumption of stores and
spare parts 2 Power and fuel 3 Rent 4 Repairs to building 5 Repairs to machinery 6 Commission paid 7 Depreciation
1 Sales
2 Income from investments
3 Other income
4 Miscellaneous income
5 Net Loss
Train Doc KBLCICSAP MM12MM-FI Integration Page 11
8 Interest on debentures 9 Income tax 10 Net income
TOTAL
XXX
TOTAL
XXX
Train Doc KBLCICSAP MM12MM-FI Integration Page 12
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 companys 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 amp Inventory Management ndash
1) Chart of Accounts ndash This is a list of all GL accounts used by one or several
company codes For each GL account the chart of accounts contains the account number account name and the information that controls how an account functions and how a GL 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 amp 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 ndash The valuation of the material can be done under one of the following areas ndash 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 amp 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 ndash It is the key for account determination that enables a
differentiation for GL 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 GL 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 amp material type can be established by the account category
Train Doc KBLCICSAP MM12MM-FI Integration Page 13
reference The account category reference is a compilation of valuation classes A material type is assigned to only one account category reference GL account determination can be uniformly defined for all material type belonging to a material type
The valuation class for BEARING can be selected as bdquoDOM_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 bdquoIMP_RM‟ (Imported Raw Material) if the material is imported amp the inventory will be maintained as Imported Raw material Inventory
4) General Ledger (GL) Account ndash The central task of GL accounting is to provide a comprehensive picture for external amp accounts
The General Ledger for Domestic Inventory of Raw material is bdquo230120‟ (Inventory ndash Other Raw Material)
5) Cost Center ndash 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 andor responsibility-related standpoints Cost centers are grouped together into decision control amp responsibility unit The activity types are assigned to the cost center
The Cost Center for Foundry Maintenance department of SBG ndash IP is bdquo11011710‟ The costs incurred for the department Foundry Maintenance will be posted to this cost center
6) Profit Center ndash 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-of-sales 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 ndash
i) Purchasing ndash 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 ndash Goods Issue to Production Order Goods Receipt from Production
Order
iii) Other ndash Transfer material to material Goods Issue to Cost Center Sales Order Asset Scrapping Physical Inventory Difference posting
Train Doc KBLCICSAP MM12MM-FI Integration Page 14
These transactions can change the valuation price of material depending upon price control (For example ndash 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 ndash i) Initial Entry of Stock Balances ndash Receipts are valuated at current material price of
using another material price specified externally ii) Goods Receipt for Purchase Order ndash Receipts are valuated at the Purchase order
price (Goods Receipt before Invoice Receipt) iii) Goods Issue ndash Issues are valuated at current material price 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 ndash i) Moving Average price (V) ndash 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 ldquoExpenses revenue from price differencerdquo 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 bdquoBearings‟ are procured from Vendor Hence the material master data of the bearings will have bdquoMoving Average Price‟ control in accounting view
ii) Standard Price (S) ndash 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 ldquoExpenses revenue from price differencerdquo 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 15
Pumps are in-house manufactured in our company hence the material master data of all pumps will have bdquoStandard Price Control‟ in accounting view
Valuation Area details ndash
Valuation Area
Company
Code
Plant Plant
level
valuation
is set-up
in KBL
Train Doc KBLCICSAP MM12MM-FI Integration Page 16
Overview of transactions involved in Material Valuation
Following are the steps involved in Purchasing which are important from material valuation financial point of view ndash
Sr No
Step Description Effect on Materials Management
point Effect from Finance point
1 Purchase Order is created
Vendor is ordered to supply material provide service as per agreed terms amp conditions
Commitment is done with the vendor to pay if he supplies material provides service as per agreed terms
2 Purchase Order is approved
Management approval is given for agreed terms amp conditions
Management approval is given for the financial commitment
3
Material is supplied by the vendor amp GRN is posted for the same
Stock of material (Inventory) increases if material is Inventoried Consumption to cost object is booked if the purchase order is account assigned
Asset (Inventory) is increased GR IR clearing account is credited (which is ultimately the liability to pay money to the vendor as per agreed terms
Goods Receipt
Master Data
Material Master
Vendor
GL Account
Storage Location
Plant
Goods Issue
Transfer Posting
Requirement determined through Material Requirement
Planning
External Procurement Purchasing
Internal Procurement Production
Invoice Receipt
Invoice Verification
Internal amp External Accounting
Train Doc KBLCICSAP MM12MM-FI Integration Page 17
4
Service is provided by the vendor amp service entry sheet is created
Consumption of service is booked to the respective cost object (For example ndash Cost Center)
GR IR clearing account is credited (which is ultimately the liability to pay money to the vendor as per agreed terms
5 Invoice of the vendor is booked in the system
Vendor‟s invoice is checked against the terms amp conditions of the Purchase Order and booked in system so that the vendor can be paid on right time
Vendor account is credited amp GR IR Clearing account is debited (The effective entry is bdquoCredit Vendor Account ndash Debit Inventory‟)
6 Payment is done to the vendor
Liability of the Purchasing organization ends
Debit Vendor Account Credit Bank Account
Following are the steps involved in material movement which are important from financial point of view ndash
Sr No
Transaction Effect from Materials Management point
Effect from Financial point of view
1 Goods Receipt is posted for standard bought out material
Stock of material (Inventory) increases if material is Inventoried Consumption to cost object is booked if the PO is account assigned
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)
2 Goods Receipt posted for sub-contracting material
Stock of the semi-finished material (which was ordered on vendor) increases Consumption of the BOM material (provided to vendor is booked)
Asset (Inventory) of semi-finished 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
3 Goods Receipt posted for Traded Material
Material delivered to customer directly from Vendor (Third Party Transaction)
Cost of Goods sold to customer is booked
4 Goods Issue is posted to Production Order Cost Center
Stock of the material decreases
Material value is booked against the respective cost object (Production Order or Cost Center) as consumption
5 Components transferred to Sub-Contractor
Material provided to vendor for processing amp supplying back the processed goods
No financial entry The inventory is shown as bdquoStock provided to Vendor‟
6 Material delivered to Customer
Finished Goods Traded Goods delivered to customer Own inventory is reduced
Cost of Goods sold to customer is booked
Train Doc KBLCICSAP MM12MM-FI Integration Page 18
Automatic posting of material for Goods Movement
Goods Receipt at
manufacturing plant
Consumption
Storage
Valuation
Valuated
Inventory
posted in Store
Consumption
of material
posted
directly to
consumption
account
Goods Issue
To Production Order
Cost Center
Goods Receipt of Trading
Material against Third Party
Purchase Order
To SD
Delivery
Cost of
Goods Sold
Material cost
posted to
Cost of
Goods Sold
account
Train Doc KBLCICSAP MM12MM-FI Integration Page 19
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 amp the transaction of material posting (For example ndash 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 ndash Imported
Bearings can be accounted in separate account (IMP_RM ndash Imported Raw material) amp Bearing procured from domestic vendor can be accounted in separate account (DOM_RM ndash Domestic Raw Material) The posting transactions for the transactions in Inventory Management amp Invoice Management that are relevant for accounting are fixed Posting records are assigned to event movement type in Inventory Management amp each transaction in Invoice Posting These postings are generalized in a value string (posting rule) Instead of fixed GL account numbers these contain keys for respective posting transaction (such as BSX for a stock posting) The GL account numbers are determined from these keys amp posting transactions
In brief following are the summarized data for influencing factors for account posting
Organizational
Structure
Company
Code
Plant
Chart of Account
Valuation Grouping
Code
Material
Accounting data
for valuation area
Valuation
Class
Material Type
Value
Quantity update
Business
Transaction Goods Movement
Invoice
Verification
Value
String
Transaction
Key
Account
Grouping
Train Doc KBLCICSAP MM12MM-FI Integration Page 20
Material Price Change ndash 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 (amp not the material master change) in which total stock of the plant is revaluated
Train Doc KBLCICSAP MM12MM-FI Integration Page 21
Automatic FI postings at Goods Receipt Following automatic postings are done in the system when the Goods Receipt against Purchase Order are posted ndash
A] Accounting (FI) Entries posted at the time of GRN ndash
a) Raw Material posted to Inventory after posting of GRN ndash 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 amp raw material procured from domestic vendor is kept separate The process flow is as below ndash
Without account assignment
Purchase Order
Raw Material
GRN Quantity
To Store
To Inventory GRN
Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 22
The FI entries posted at GRN are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Raw material Inventory
Respective Business Area where the material is received
Raw material Inventory
(Quantity of material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the material is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of Accounting Entries for Raw material posted to inventory ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Curr
Curr Text
1 Debit (89)
230120 BA01 Inventory ndash Other Raw
Material 510000 INR
BRG 6305 SKF OR EQ
2 Credit (96)
130100 BA01 GR IR Clearing
500000 - INR BRG 6305 SKF
OR EQ
3 Credit (50)
130110 BA01 Freight
Clearing Inland
10000 - INR BRG 6305 SKF
OR EQ
b) Material posted to consumption account after posting of GRN ndash
Following are main account assignment categories (AAC) ndash
AAC Description Required Account Assignment Data
A Asset Main Asset Number amp Sub-Number
K Cost Center Cost Center amp GL Account Number
Q Project WBS Element Number of the Project
E Sale Order Sale Order Number amp Line Number of the Sale Order
Train Doc KBLCICSAP MM12MM-FI Integration Page 23
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 GL 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 ndash
i) Purchase Order with account assignment A (Asset) ndash 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 GL Account in the company‟s balance sheet The GL account is a reconciliation account that means that it reconciles several asset numbers
With account assignment Purchase
Order
Raw Material Non Valuated Material
GRN Quantity
To Store (Raw Material) or To Consumption (Non-valuated material)
Consumption Account
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 24
For Purchase Order with account assignment A (Asset) the entry in FI GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Asset
Respective Business Area where the Asset is received
Asset Number amp Sub Number
(Quantity of Asset X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the asset is received
GR IR Clearing Account
(Quantity of Asset X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the asset is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entries for asset posted ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (70)
211450 BA05
Asset Number 000021000780 Sub Number 0000
3650000 INR
IM-314318325 MOUNTING CASING
2 Credit (96)
130100 BA05 GR IR Clearing 3605000 - INR
IM-314318325 MOUNTING CASING
3 Credit (50)
130110 BA05 Freight Clearing Inland
45000 - INR IM-314318325 MOUNTING CASING
ii) Purchase Order with account assignment K (Cost Center) ndash 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 amp services With account assignment K we need to determine following two additional data to be entered in the PO ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 25
- General Ledger (GL) Account Number We have to determine the expense GL 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 GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of
cost center
Respective Business Area where the Material Service is received
Cost Center account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of
GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of
Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entry for Account Assignment as Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416340 BA08 Legal Exp amp Consult Fees
4200000 INR Visit Charges
2 Credit (96)
130100 BA08 GR IR Clearing
4200000 - INR Visit Charges
iii) Purchase Order with account assignment as Q (Project) ndash
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 amp budgeted We can procure following type of materials against the Project account assignment ndash Raw Semi Finished material (to be inventoried) Traded Material When we procure a raw material (to be inventoried)
Train Doc KBLCICSAP MM12MM-FI Integration Page 26
against the account assignment as Project (Q) then the accounting entries posted are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of the accounting entries ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233040 BA02 Inventory ndash
Other Resale 61080600 INR
MS Flange Dia 1500 mm
2 Credit (96)
130100 BA02 GR IR Clearing
61080600 - INR 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS)
Respective Business Area where the Material Service is received
COGS account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency
Material master short text
Train Doc KBLCICSAP MM12MM-FI Integration Page 27
service is received
(For Imported material)
Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of the accounting entry is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
410920 BA02 COGS ndash Other Resale Article
18340100 INR LTAL PVC
ArmPVCSH Cable
2 Credit (96)
130100 BA02 GR IR Clearing
18340100 - INR LTAL PVC
ArmPVCSH Cable
iv) Purchase Order with account assignment as E (Sale Order) ndash
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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Train Doc KBLCICSAP MM12MM-FI Integration Page 28
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233070 BA01 Inventory ndash
Traded Electric Motor
2583000 INR Motor Alstom 22
KW 4 Pole
2 Credit (96)
130100 BA01 GR IR Clearing
2583000 - INR Motor Alstom 22
KW 4 Pole
When we post GRN for traded goods following accounting entries are posted ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS) General Expenses
Respective Business Area where the Material Service is received
COGS account General Expenses Account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit
Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit
Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416320 BA01 General Expenses
56258000 INR
KOEL 85 HP 1800 RPM Engine
2 Credit (96)
130100 BA01 GR IR Clearing
56258000 - INR
KOEL 85 HP 1800 RPM Engine
c) Sub-Contracting Purchase Order ndash In the subndashContracting Purchase Order semindash
finished material is ordered on the Sub-Contractor amp the components are given to SubndashContractor 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 ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 29
Semi ndash Finished
Material
BOM of Semindash
Finished
Material
With without
account
assignment
Sub ndash
Contracting
Purchase Order
Components in
BOM provided to
Vendor for
processing
Transfer of
material to Sub
ndash Contractor
No accounting
entry Stock of
material
provided to
vendor is
updated
GRN of
processed
material
(Quantity)
Inventory of Semi-
Finished material
is updated
Stock of material
provided to
Vendor is
consumed
GRN Value
Inventory of Semi-
Finished material
= Processing
Charges + Value
of BOM
Components
Train Doc KBLCICSAP MM12MM-FI Integration Page 30
Following FI entries are posted during above process ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR Currency
Text of Material
10 Debit
Inventory account of
Semi-finished material
Respective Business Area where the Material is received
Inventory ndash Semi-Finished Goods
(Quantity of Semi-finished material X Processing Charges) + (Inventory Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
20 Credit
Change of Stock
from Sub-Contract
Respective Business Area where the Material is received
Change of Stock from Sub-Contract
(Quantity of Semi-finished material X Processing Charges) + (Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
30 Credit
Inventory of
Components with
Sub-Contractor
Respective Business Area where the Material is received
Inventory of Components with Sub-Contractor
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
40 Debit
Inventory of own
Components
Respective Business Area where the Material is received
Inventory of own Components
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
50 Debit Processing Charges
Other
Respective Business Area where the Material is received
Processing Charges Other
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of received material
60 Credit GR IR Clearing
Respective Business Area where the Material is received
GR IR Clearing Charges
Processing Charges to be paid to Vendor (Quantity of Ordered material X Processing Charges Rate)
INR (for domestic
Purchase)
Material master short text of received material
Train Doc KBLCICSAP MM12MM-FI Integration Page 31
Following is the example of the above transaction ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
235010 BA01 Inventory Semi-Finished Goods
315000 INR BRG Housing 25
13
2 Credit (91)
400040 BA01
Change Stock Semi-Finished
from Sub-Contractor
315000 - INR BRG Housing 25
13
3 Credit (99)
235040 BA01 Inventory of
semi-finished CI Castings
285200 - INR Bearing Housing (Kanban 30 Qty
Bin)
4 Debit (81)
400040 BA01 Change Stock Castings for Sub-Contract
285200 INR Bearing Housing (Kanban 30 Qty
Bin)
5 Credit (96)
130100 BA01 GR IR Clearing 29800 - INR BRG Housing 25
13
6 Debit (86)
411450 BA01 Processing
Charges Other 29800 INR
BRG Housing 25 13
Train Doc KBLCICSAP MM12MM-FI Integration Page 32
d) Import Purchase Order ndash 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 amp 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 ndash Mumbai JNPT Port) After material is cleared from port amp received in Plant GRN is posted Then the customs duty is also inventorised along with the basic price of material amp 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 ndash
Raw material
Valuation class ndash Imported Raw Material
With without account assignment
Import Purchase Order on Overseas Vendor
Customs duties Freight Charges etc of Clearing Agent are invoiced
Planned delivery cost invoice of Import PO is booked when the material arrives at Port
Quantity of Imported Material is updated
GRN is posted when material arrives at Plant (Quantity)
Basic Value of Material + Planned Delivery Costs + Customs Duty
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 33
Following are the FI entries posted when the GRN is posted ndash
Item Posting
Key GL Account Business Area Account Text
Amount in INR
Currency
1 Debit (89)
Inventory account of Imported Raw Material
Business Area where the material has been received
Inventory ndash Imported Raw Material
Quantity of Material X Basic Price of material
INR
2 Credit (96)
GR IR Clearing Account
Business Area where the material has been received
GR IR Clearing
Quantity of Material X Basic Price of material
INR
3 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Basic Customs Duty)
Basic Customs Duty Amount
INR
4 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Ecess on Basic Customs Duty)
Ecess amount on Basic Customs Duty
INR
5 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (SampH Ecess on Basic Customs Duty)
SampH Ecess amount on Basic Customs Duty
INR
6 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing CVD Amount INR
7 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing Ecess on CVD INR
8 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing SampH Ecess of CVD INR
Following is the example of the FI entries of imported material ndash
Item Posting
Key GL Account
Business Area
Account Text Amount in
INR Currency
1 Debit (89)
230110 BA01 Inventory ndash Imported Raw Material
1551800 INR
2 Credit (96)
130100 BA01 GR IR Clearing
1151500 - INR
3 Credit (96)
130120 BA01 Freight Clearing ndash Import
174400 - INR
4 Credit (96)
130120 BA01 Freight Clearing ndash Import
3400 - INR
5 Credit 130120 BA01 Freight Clearing ndash Import 1700 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 34
(96)
6 Credit (50)
130130 BA01 CVD Clearing
214500 - INR
7 Credit (50)
130130 BA01 CVD Clearing
4200 - INR
8 Credit (50)
130130 BA01 CVD Clearing
2100 - INR
e) Stock Transport Purchase Order ndash 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 amp 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR
Currency Plant
10 Credit Inventory Account
Business Area from where material is issued
Inventory of Material
Inventory Amount
INR
Plant from where
material is issued
20 Debit Inventory Account
Business Area where material is received
Inventory of material
Inventory Amount
INR Plant where material is received
Example of above transaction is as below ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Plant
10 Credit (99) 232080 BA05 Inventory of Spares 430250 - INR 2530
20 Debit (89) 232080 BA05 Inventory of Spares 430250 INR 9010
f) Service Purchase Order ndash When a Service Purchase Order (Item Category ndash 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 35
automatically posted by the system (which is based on the accepted service entry sheet) Following is the flow chart for Service Purchase Order ndash
Service Required for Project Cost Center Sale Order
Account assignment data such as Project or WBS Definition Cost Center Number Sale Order Number is maintained
Purchase Order with Item Category D (Service) amp required account assignment (Q K E) is raised
Service Entry sheet is created amp 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 36
Following are the FI postings at the time of accepting Service Entry Sheet ndash
Item Posting
Key GL Account
Business Area
Account Text
Amount in INR
Currency Text
10 Debit Consumption
Account
Business Area from where Service is delivered
Process Charges
Service Charges Amount
INR Service Text
20 Credit GR IR Clearing Account
Business Area where service is delivered
GR IR Clearing
Service Charges Amount
INR Service Text
Following is the example of above transaction ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Text
10 Debit (81) 411420 BA02 Process Charges - Foundry
384780 INR
Service Charges
20 Debit (96) 130100 BA02 GR IR Clearing 384780 -
INR Service Charges
Train Doc KBLCICSAP MM12MM-FI Integration Page 37
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 ndash a) Modvatable Excise Item ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40)
Excise Cenvat
Business Area where the material is received
Cenvat Input P F Basic Excise Duty amount
INR
2 Debit (40)
ECS Cenvat Amount
Business Area where the material is received
Cenvat ED Cess ECS Amount INR
3 Debit (40)
SampH ECS Cenvat Account
Business Area where the material is received
Cenvat SampH Ces-1
SampH ECS Amount
INR
4 Credit (50)
Modvat Clearing Account
Business Area where the material is received
Modvat Clearing Account
Amount equivalent to amount in 1 + 2 + 3
INR
Example of Modvatable excise entries is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40) 244030 BA01 Cenvat Input P F 362900 INR
2 Debit (40) 244031 BA01 Cenvat ED Cess 7300 INR
3 Debit (40) 244034 BA01 Cenvat SampH Ces-1
3600 INR
4 Credit (50) 130150 BA01 Modvat Clearing Account
373800 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 38
b) Trading excisable material received against GRN ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81)
COGS ndash Trading Material
Business Area where the material is received COGS ndash Trading
Material
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
2 Credit (96)
ECS Cenvat Amount
Business Area where the material is received
GR IR Clearing
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
Example of Excise duty inventorised -
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81) 410910 BA01 COGS ndash Trading Motor
433108300 INR
2 Credit (96) 130100 BA01 GR IR Clearing 433108300 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 39
FI entries at Material Consumption When a material is issued to a consumption account (For example ndash Consumption to Production Order Cost Center) the inventory reduces amp 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 ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Credit (99)
231020 BA05 Inventory ndash Other Raw material
15500 - INR
2 Debit (81)
400240 BA05 Consumption ndash Other Raw Material
15500 INR
2) Material consumption posted to Production Order ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Production Order ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (99)
235010 BA01 Inventory ndash Semi Finished Goods
334100 - INR
2 Debit (81)
400290 BA01 Consumption ndash Semi Finished Goods
334100 INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 40
3) Consumption of Stock provided to Sub ndash Contractor for processing of finished material when GRN of processed material is posted ndash
In a sub ndash contracting purchase order a semi finished material is ordered on the sub ndash contractor amp components are provided to the sub ndash 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 amp the concerned FI entries are posted
Train Doc KBLCICSAP MM12MM-FI Integration Page 41
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 amp 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 amp 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 ndash Quantity Variance Price Variance Quality Inspection Manual block date variance and Amount variance The process flow is as below ndash
Purchase Order for Material Service
GRN for Material Service Entry Sheet for Services performed
Purchase Order History
Delivery Costs
Material Master
Vendor Master
GL Account
Assets
Cost Center
Project
Sale Order
Invoice Verification FI Invoice
Document
MM Invoice Document
Further Document
Train Doc KBLCICSAP MM12MM-FI Integration Page 42
Following entries are posted when an invoice for vendor is posted in the system
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (31)
Vendor Account
Business Area Vendor Number
Amount to be paid to Vendor
INR
2 Debit (86)
GR IR Clearing
Business Area GR IR Clearing
GR IR Clearing Amount
INR
3 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash B Excise Duty
INR
4 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash ECS Amount
INR
5 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash SampH ECS Amt
INR
6 Debit (40)
VAT RM Deductible Amount
Business Area from where payment is made
VAT RM Deductible
VAT Amount to be paid to Vendor
INR
Example of above is transaction is as below ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (31) 300664 BA02 WalchandNagar Industries 13590000 - INR
2 Debit (86) 130100 BA02 GR IR Clearing 10000000 INR
3 Debit (40) 130150 Modvat Clearing 1600000 INR
4 Debit (40) 130150 Modvat Clearing 320000 INR
5 Debit (40) 130150 Modvat Clearing 160000 INR
6 Debit (40) 245039 BA02 VAT RM Deductible 1510000 INR
The diagrammatic view of above example is as below ndash
Purchase Order 100 PC at INR 1000 GRN for this PO 100 PC Invoice 100 PC at INR 1000
Goods Receipt
Invoice Receipt
100000 +
20800 +
15100 +
135900 ndash
100000 +
100000 ndash
20800 ndash
Stock Account
GR IR Account
Modvat clearing
VAT
Vendor
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 2
Index
Sr No Subject Page Number
1 Basics of Accounting 3 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 KBLCICSAP MM12MM-FI Integration Page 3
Objective
After studying the document you will be able to understand ndash
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 ndash Buyers in Purchasing department Stores In-Charge Senior Managers in Materials department
Pre-requisites for target audience ndash Thorough knowledge of Purchase transactions Thorough knowledge of Inventory transactions Basic knowledge of Excise
Hint
ndash Example
ndash Information
Train Doc KBLCICSAP MM12MM-FI Integration Page 4
Basics of Accounting
A] Fundamentals of Accounting ndash 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 amp generally accepted way The transaction records are organized amp presented in certain form of reports The most used reports are Balance Sheet and Profit amp Loss Account Following are the fundamentals of Accounting ndash
1) Accrual basis ndash Effects of transactions takes place when they occur and not
when cash is paid
2) Going concern ndash 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 ndash 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 ndash Business Transactions having monetary implications
Every debit has an equal corresponding credit
Following are the three types of accounts ndash
1) Personal Account ndash This is the account of persons For example ndash Accounts of Vendor Customer are personal accounts Rule applied for this type of account are bdquoDebit the receiver amp credit the giver‟
For example ndash When a payment is made to a Vendor for supplying material the entry is made as below ndash
Debit ndash Vendor INR 1 00000 -
Credit ndash Bank Account INR 1 00000 -
2) Real Account ndash These are the accounts of properties For example ndash Cash
Inventory Machinery Rule applied for this type of account is bdquoDebit what comes in amp Credit what goes out‟
For example ndash When a material is received to inventory after GRN against Purchase Order following entries are posted ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 5
Debit ndash Inventory Raw Material INR 1 00000 -
Credit ndash GR IR Clearing Account INR 1 00000 -
3) Nominal Account ndash These are the accounts of income amp expenditure For example ndash Travelling expenses Colony Expenses Rent received from land Rule applied for this type of account is bdquoDebit Expenses amp Credit Incomes‟
For example ndash When Travel expenses for an employee are booked following are the FI postings ndash
Debit ndash Travel expenses INR 250 - Credit ndash 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 ndash
1) Financial Statements ndash
At the end of every period a business entity prepares Balance Sheet and Profit amp Loss Account Balance sheet shows the financial position of the entity on a given date in the terms of its Assets amp Liabilities Balance sheet is prepared as on date (For example ndash Balance sheet as on 31ndashMarchndash2008) Income statement (Profit and Loss Account) shows the results in terms of excess of Income over Expenditure Profit amp Loss statement is for the period bdquoFrom (for example 01042007) To (for example 31032008)‟ It consists accounting for Real amp nominal accounts Funds flow statement (or Cash Flow statement as it is popularly called) shows the movement of funds during a given period ie where FUNDS came from and How they were applied Cash flow statement is for the year ended (For example ndash Year ended on 31ndashMarchndash2008) For example ndash Net cash flows from operating activities investing activities financing activities
2) Assets ndash 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 ndash Fixed Assets amp 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 Eg 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 Eg Inventories Debtors Cash and Bank
Train Doc KBLCICSAP MM12MM-FI Integration Page 6
3) Depreciation ndash 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
ndash Straight Line method
ndash Written down value Method
4) Liabilities ndash Liability is what company owes These are the obligations of the business to convey something of value in the future such as ndash Account Payable Notes Payable Liabilities are of types ndash Long Term Liabilities Current Liabilities Equity capital
a) Long term liabilities are the liabilities maturing beyond a year Eg Term
loans Debentures Bonds
b) Current Liabilities are the liabilities maturing within a year Eg 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 amp Loss Statement ndash 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 amp expenses Revenues are inflows of assets from providing Goods amp 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 ndash Revenue Expenditure Capital Expenditure a) Revenue expenditure Expenditure incurred for manufacturesale of the
products and for carrying out the day to day activities is Revenue expenditure The examples of capital expenditure are ndash 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 ndash Acquisition of assets development of SAP system is capital expenditure
The difference between revenue amp expense is profit (or loss if the expenses are greater than revenues)
Train Doc KBLCICSAP MM12MM-FI Integration Page 7
6) Cash Flow ndash 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 ndash The balance sheet shows an enterprise‟s assets liabilities amp
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 ndash Equity refers to owners‟ interest in business such as Capital Stock
Retained Earning Current year net profit loss
9) Relationship between balance sheet amp profit amp loss account ndash Balance sheet amp Profit amp 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 8
D] Formats for financial documents ndash 1) Cash Flow Statement
1) BALANCE SHEET as on 31st March
LIABILITIES (Rs) ASSETS (Rs)
SHARE CAPITAL
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
RESERVES AND SURPLUS
1 Capital Reserves 2 Capital Redemption
Reserve 3 Share Premium Account 4 Other Reserves
Less Debit balance in
profit and loss account
if any 5 Balance in the profit
and loss accounts after
providing for proposed
FIXED ASSETS
1 Goodwill 2 Land 3 Buildings 4 Leaseholds 5 Railway Sidings 6 Plant and Machinery 7 Furniture and Fittings 8 Development of
Property 9 Patents trademarks
and designs 10 Livestock 11 Vehicles etc
INVESTMENTS
1 Investments in Govt
or Trust Securities 2 Investments in shares
debentures or bonds 3 Immovable properties 4 Investments in the
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
Train Doc KBLCICSAP MM12MM-FI Integration Page 9
allocation namely
Dividend Bonus or
Reserves 6 Proposed additions to
Reserves
SECURED LOANS
1 Debentures 2 Loans and Advances
from Banks 3 Loans and Advances
from Subsidiaries 4 Other Loans and
Advances
UNSECURED LOANS
1 Fixed Deposits 2 Loans and Advances
from Subsidiaries 3 Short-term Loans and
Advances a from Banks b from others
4 Other Loans and
Advances a from Banks b from others
CURRENT LIABILITIES amp PROVISIONS
A Current Liabilities 1 Acceptances 2 Sundry Creditors
i Total
outstanding
dues of small
scale industrial
undertaking(s)
ii Total
outstanding
dues of
creditors other
than small
scale industrial
undertaking(s)
capital of partnership
firms 5 Balance of unutilized
monies raised by Issue
CURRENT ASSETS LOANS amp ADVANCES
A Current Assets 1Interest accrued
on investments 2Stores and spare
parts 3Loose tools
4 Stock-in-trade 5 Works-in-
progress 6 Sundry debtors
a Debts
outstanding
for a period
exceeding 6
months bOther debts
Less
Provision 7
a Cash
balance on
hand b Bank
balances B Loans and Advances
8 Advances and
Loans a To
subsidiaries b To
partnership
firms in
which the
coits
subsidiary is
a partner 9 Bills of Exchange 10 Advances
recoverable in
cash or in kind or
for value to be
Train Doc KBLCICSAP MM12MM-FI Integration Page 10
3 Subsidiary
companies 4 Advance
payments and
unexpired
discounts 5 Unclaimed
Dividends 6 Other Liabilities
(if any) 7 Interest accrued
but not due on
loans B Provisions
8 Provision for
Taxation 9 Proposed
Dividends 10 For
contingencies 11 For Provident
Fund Scheme 12 For Insurance
pension and
similar staff
benefit schemes 13 Other provisions
received eg
Rates Taxes
Insurance etc 11 Balances with
Customs Port
Trust etc (where
payable on demand)
MISCELLANEOUS
EXPENDITURE
(to the extent not written off or adjusted)
1 Preliminary Expenses 2 Expenses including
commission brokerage
on underwriting or
subscription of shares
or debentures 3 Discount allowed on
issue of shares or
debentures 4 Interest paid out of
capital during
construction 5 Development
expenditure not
adjusted 6 Other items (Specifying
nature)
PROFIT AND LOSS
ACCOUNT
(Debit Balance)
Total Total
2) PROFIT amp LOSS ACCOUNT For the period ending 01st April to 31st March
Expenditure Particulars Rs Income Particulars Rs
1 Consumption of stores and
spare parts 2 Power and fuel 3 Rent 4 Repairs to building 5 Repairs to machinery 6 Commission paid 7 Depreciation
1 Sales
2 Income from investments
3 Other income
4 Miscellaneous income
5 Net Loss
Train Doc KBLCICSAP MM12MM-FI Integration Page 11
8 Interest on debentures 9 Income tax 10 Net income
TOTAL
XXX
TOTAL
XXX
Train Doc KBLCICSAP MM12MM-FI Integration Page 12
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 companys 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 amp Inventory Management ndash
1) Chart of Accounts ndash This is a list of all GL accounts used by one or several
company codes For each GL account the chart of accounts contains the account number account name and the information that controls how an account functions and how a GL 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 amp 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 ndash The valuation of the material can be done under one of the following areas ndash 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 amp 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 ndash It is the key for account determination that enables a
differentiation for GL 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 GL 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 amp material type can be established by the account category
Train Doc KBLCICSAP MM12MM-FI Integration Page 13
reference The account category reference is a compilation of valuation classes A material type is assigned to only one account category reference GL account determination can be uniformly defined for all material type belonging to a material type
The valuation class for BEARING can be selected as bdquoDOM_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 bdquoIMP_RM‟ (Imported Raw Material) if the material is imported amp the inventory will be maintained as Imported Raw material Inventory
4) General Ledger (GL) Account ndash The central task of GL accounting is to provide a comprehensive picture for external amp accounts
The General Ledger for Domestic Inventory of Raw material is bdquo230120‟ (Inventory ndash Other Raw Material)
5) Cost Center ndash 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 andor responsibility-related standpoints Cost centers are grouped together into decision control amp responsibility unit The activity types are assigned to the cost center
The Cost Center for Foundry Maintenance department of SBG ndash IP is bdquo11011710‟ The costs incurred for the department Foundry Maintenance will be posted to this cost center
6) Profit Center ndash 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-of-sales 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 ndash
i) Purchasing ndash 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 ndash Goods Issue to Production Order Goods Receipt from Production
Order
iii) Other ndash Transfer material to material Goods Issue to Cost Center Sales Order Asset Scrapping Physical Inventory Difference posting
Train Doc KBLCICSAP MM12MM-FI Integration Page 14
These transactions can change the valuation price of material depending upon price control (For example ndash 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 ndash i) Initial Entry of Stock Balances ndash Receipts are valuated at current material price of
using another material price specified externally ii) Goods Receipt for Purchase Order ndash Receipts are valuated at the Purchase order
price (Goods Receipt before Invoice Receipt) iii) Goods Issue ndash Issues are valuated at current material price 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 ndash i) Moving Average price (V) ndash 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 ldquoExpenses revenue from price differencerdquo 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 bdquoBearings‟ are procured from Vendor Hence the material master data of the bearings will have bdquoMoving Average Price‟ control in accounting view
ii) Standard Price (S) ndash 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 ldquoExpenses revenue from price differencerdquo 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 15
Pumps are in-house manufactured in our company hence the material master data of all pumps will have bdquoStandard Price Control‟ in accounting view
Valuation Area details ndash
Valuation Area
Company
Code
Plant Plant
level
valuation
is set-up
in KBL
Train Doc KBLCICSAP MM12MM-FI Integration Page 16
Overview of transactions involved in Material Valuation
Following are the steps involved in Purchasing which are important from material valuation financial point of view ndash
Sr No
Step Description Effect on Materials Management
point Effect from Finance point
1 Purchase Order is created
Vendor is ordered to supply material provide service as per agreed terms amp conditions
Commitment is done with the vendor to pay if he supplies material provides service as per agreed terms
2 Purchase Order is approved
Management approval is given for agreed terms amp conditions
Management approval is given for the financial commitment
3
Material is supplied by the vendor amp GRN is posted for the same
Stock of material (Inventory) increases if material is Inventoried Consumption to cost object is booked if the purchase order is account assigned
Asset (Inventory) is increased GR IR clearing account is credited (which is ultimately the liability to pay money to the vendor as per agreed terms
Goods Receipt
Master Data
Material Master
Vendor
GL Account
Storage Location
Plant
Goods Issue
Transfer Posting
Requirement determined through Material Requirement
Planning
External Procurement Purchasing
Internal Procurement Production
Invoice Receipt
Invoice Verification
Internal amp External Accounting
Train Doc KBLCICSAP MM12MM-FI Integration Page 17
4
Service is provided by the vendor amp service entry sheet is created
Consumption of service is booked to the respective cost object (For example ndash Cost Center)
GR IR clearing account is credited (which is ultimately the liability to pay money to the vendor as per agreed terms
5 Invoice of the vendor is booked in the system
Vendor‟s invoice is checked against the terms amp conditions of the Purchase Order and booked in system so that the vendor can be paid on right time
Vendor account is credited amp GR IR Clearing account is debited (The effective entry is bdquoCredit Vendor Account ndash Debit Inventory‟)
6 Payment is done to the vendor
Liability of the Purchasing organization ends
Debit Vendor Account Credit Bank Account
Following are the steps involved in material movement which are important from financial point of view ndash
Sr No
Transaction Effect from Materials Management point
Effect from Financial point of view
1 Goods Receipt is posted for standard bought out material
Stock of material (Inventory) increases if material is Inventoried Consumption to cost object is booked if the PO is account assigned
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)
2 Goods Receipt posted for sub-contracting material
Stock of the semi-finished material (which was ordered on vendor) increases Consumption of the BOM material (provided to vendor is booked)
Asset (Inventory) of semi-finished 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
3 Goods Receipt posted for Traded Material
Material delivered to customer directly from Vendor (Third Party Transaction)
Cost of Goods sold to customer is booked
4 Goods Issue is posted to Production Order Cost Center
Stock of the material decreases
Material value is booked against the respective cost object (Production Order or Cost Center) as consumption
5 Components transferred to Sub-Contractor
Material provided to vendor for processing amp supplying back the processed goods
No financial entry The inventory is shown as bdquoStock provided to Vendor‟
6 Material delivered to Customer
Finished Goods Traded Goods delivered to customer Own inventory is reduced
Cost of Goods sold to customer is booked
Train Doc KBLCICSAP MM12MM-FI Integration Page 18
Automatic posting of material for Goods Movement
Goods Receipt at
manufacturing plant
Consumption
Storage
Valuation
Valuated
Inventory
posted in Store
Consumption
of material
posted
directly to
consumption
account
Goods Issue
To Production Order
Cost Center
Goods Receipt of Trading
Material against Third Party
Purchase Order
To SD
Delivery
Cost of
Goods Sold
Material cost
posted to
Cost of
Goods Sold
account
Train Doc KBLCICSAP MM12MM-FI Integration Page 19
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 amp the transaction of material posting (For example ndash 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 ndash Imported
Bearings can be accounted in separate account (IMP_RM ndash Imported Raw material) amp Bearing procured from domestic vendor can be accounted in separate account (DOM_RM ndash Domestic Raw Material) The posting transactions for the transactions in Inventory Management amp Invoice Management that are relevant for accounting are fixed Posting records are assigned to event movement type in Inventory Management amp each transaction in Invoice Posting These postings are generalized in a value string (posting rule) Instead of fixed GL account numbers these contain keys for respective posting transaction (such as BSX for a stock posting) The GL account numbers are determined from these keys amp posting transactions
In brief following are the summarized data for influencing factors for account posting
Organizational
Structure
Company
Code
Plant
Chart of Account
Valuation Grouping
Code
Material
Accounting data
for valuation area
Valuation
Class
Material Type
Value
Quantity update
Business
Transaction Goods Movement
Invoice
Verification
Value
String
Transaction
Key
Account
Grouping
Train Doc KBLCICSAP MM12MM-FI Integration Page 20
Material Price Change ndash 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 (amp not the material master change) in which total stock of the plant is revaluated
Train Doc KBLCICSAP MM12MM-FI Integration Page 21
Automatic FI postings at Goods Receipt Following automatic postings are done in the system when the Goods Receipt against Purchase Order are posted ndash
A] Accounting (FI) Entries posted at the time of GRN ndash
a) Raw Material posted to Inventory after posting of GRN ndash 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 amp raw material procured from domestic vendor is kept separate The process flow is as below ndash
Without account assignment
Purchase Order
Raw Material
GRN Quantity
To Store
To Inventory GRN
Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 22
The FI entries posted at GRN are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Raw material Inventory
Respective Business Area where the material is received
Raw material Inventory
(Quantity of material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the material is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of Accounting Entries for Raw material posted to inventory ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Curr
Curr Text
1 Debit (89)
230120 BA01 Inventory ndash Other Raw
Material 510000 INR
BRG 6305 SKF OR EQ
2 Credit (96)
130100 BA01 GR IR Clearing
500000 - INR BRG 6305 SKF
OR EQ
3 Credit (50)
130110 BA01 Freight
Clearing Inland
10000 - INR BRG 6305 SKF
OR EQ
b) Material posted to consumption account after posting of GRN ndash
Following are main account assignment categories (AAC) ndash
AAC Description Required Account Assignment Data
A Asset Main Asset Number amp Sub-Number
K Cost Center Cost Center amp GL Account Number
Q Project WBS Element Number of the Project
E Sale Order Sale Order Number amp Line Number of the Sale Order
Train Doc KBLCICSAP MM12MM-FI Integration Page 23
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 GL 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 ndash
i) Purchase Order with account assignment A (Asset) ndash 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 GL Account in the company‟s balance sheet The GL account is a reconciliation account that means that it reconciles several asset numbers
With account assignment Purchase
Order
Raw Material Non Valuated Material
GRN Quantity
To Store (Raw Material) or To Consumption (Non-valuated material)
Consumption Account
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 24
For Purchase Order with account assignment A (Asset) the entry in FI GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Asset
Respective Business Area where the Asset is received
Asset Number amp Sub Number
(Quantity of Asset X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the asset is received
GR IR Clearing Account
(Quantity of Asset X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the asset is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entries for asset posted ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (70)
211450 BA05
Asset Number 000021000780 Sub Number 0000
3650000 INR
IM-314318325 MOUNTING CASING
2 Credit (96)
130100 BA05 GR IR Clearing 3605000 - INR
IM-314318325 MOUNTING CASING
3 Credit (50)
130110 BA05 Freight Clearing Inland
45000 - INR IM-314318325 MOUNTING CASING
ii) Purchase Order with account assignment K (Cost Center) ndash 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 amp services With account assignment K we need to determine following two additional data to be entered in the PO ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 25
- General Ledger (GL) Account Number We have to determine the expense GL 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 GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of
cost center
Respective Business Area where the Material Service is received
Cost Center account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of
GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of
Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entry for Account Assignment as Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416340 BA08 Legal Exp amp Consult Fees
4200000 INR Visit Charges
2 Credit (96)
130100 BA08 GR IR Clearing
4200000 - INR Visit Charges
iii) Purchase Order with account assignment as Q (Project) ndash
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 amp budgeted We can procure following type of materials against the Project account assignment ndash Raw Semi Finished material (to be inventoried) Traded Material When we procure a raw material (to be inventoried)
Train Doc KBLCICSAP MM12MM-FI Integration Page 26
against the account assignment as Project (Q) then the accounting entries posted are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of the accounting entries ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233040 BA02 Inventory ndash
Other Resale 61080600 INR
MS Flange Dia 1500 mm
2 Credit (96)
130100 BA02 GR IR Clearing
61080600 - INR 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS)
Respective Business Area where the Material Service is received
COGS account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency
Material master short text
Train Doc KBLCICSAP MM12MM-FI Integration Page 27
service is received
(For Imported material)
Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of the accounting entry is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
410920 BA02 COGS ndash Other Resale Article
18340100 INR LTAL PVC
ArmPVCSH Cable
2 Credit (96)
130100 BA02 GR IR Clearing
18340100 - INR LTAL PVC
ArmPVCSH Cable
iv) Purchase Order with account assignment as E (Sale Order) ndash
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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Train Doc KBLCICSAP MM12MM-FI Integration Page 28
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233070 BA01 Inventory ndash
Traded Electric Motor
2583000 INR Motor Alstom 22
KW 4 Pole
2 Credit (96)
130100 BA01 GR IR Clearing
2583000 - INR Motor Alstom 22
KW 4 Pole
When we post GRN for traded goods following accounting entries are posted ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS) General Expenses
Respective Business Area where the Material Service is received
COGS account General Expenses Account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit
Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit
Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416320 BA01 General Expenses
56258000 INR
KOEL 85 HP 1800 RPM Engine
2 Credit (96)
130100 BA01 GR IR Clearing
56258000 - INR
KOEL 85 HP 1800 RPM Engine
c) Sub-Contracting Purchase Order ndash In the subndashContracting Purchase Order semindash
finished material is ordered on the Sub-Contractor amp the components are given to SubndashContractor 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 ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 29
Semi ndash Finished
Material
BOM of Semindash
Finished
Material
With without
account
assignment
Sub ndash
Contracting
Purchase Order
Components in
BOM provided to
Vendor for
processing
Transfer of
material to Sub
ndash Contractor
No accounting
entry Stock of
material
provided to
vendor is
updated
GRN of
processed
material
(Quantity)
Inventory of Semi-
Finished material
is updated
Stock of material
provided to
Vendor is
consumed
GRN Value
Inventory of Semi-
Finished material
= Processing
Charges + Value
of BOM
Components
Train Doc KBLCICSAP MM12MM-FI Integration Page 30
Following FI entries are posted during above process ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR Currency
Text of Material
10 Debit
Inventory account of
Semi-finished material
Respective Business Area where the Material is received
Inventory ndash Semi-Finished Goods
(Quantity of Semi-finished material X Processing Charges) + (Inventory Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
20 Credit
Change of Stock
from Sub-Contract
Respective Business Area where the Material is received
Change of Stock from Sub-Contract
(Quantity of Semi-finished material X Processing Charges) + (Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
30 Credit
Inventory of
Components with
Sub-Contractor
Respective Business Area where the Material is received
Inventory of Components with Sub-Contractor
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
40 Debit
Inventory of own
Components
Respective Business Area where the Material is received
Inventory of own Components
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
50 Debit Processing Charges
Other
Respective Business Area where the Material is received
Processing Charges Other
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of received material
60 Credit GR IR Clearing
Respective Business Area where the Material is received
GR IR Clearing Charges
Processing Charges to be paid to Vendor (Quantity of Ordered material X Processing Charges Rate)
INR (for domestic
Purchase)
Material master short text of received material
Train Doc KBLCICSAP MM12MM-FI Integration Page 31
Following is the example of the above transaction ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
235010 BA01 Inventory Semi-Finished Goods
315000 INR BRG Housing 25
13
2 Credit (91)
400040 BA01
Change Stock Semi-Finished
from Sub-Contractor
315000 - INR BRG Housing 25
13
3 Credit (99)
235040 BA01 Inventory of
semi-finished CI Castings
285200 - INR Bearing Housing (Kanban 30 Qty
Bin)
4 Debit (81)
400040 BA01 Change Stock Castings for Sub-Contract
285200 INR Bearing Housing (Kanban 30 Qty
Bin)
5 Credit (96)
130100 BA01 GR IR Clearing 29800 - INR BRG Housing 25
13
6 Debit (86)
411450 BA01 Processing
Charges Other 29800 INR
BRG Housing 25 13
Train Doc KBLCICSAP MM12MM-FI Integration Page 32
d) Import Purchase Order ndash 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 amp 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 ndash Mumbai JNPT Port) After material is cleared from port amp received in Plant GRN is posted Then the customs duty is also inventorised along with the basic price of material amp 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 ndash
Raw material
Valuation class ndash Imported Raw Material
With without account assignment
Import Purchase Order on Overseas Vendor
Customs duties Freight Charges etc of Clearing Agent are invoiced
Planned delivery cost invoice of Import PO is booked when the material arrives at Port
Quantity of Imported Material is updated
GRN is posted when material arrives at Plant (Quantity)
Basic Value of Material + Planned Delivery Costs + Customs Duty
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 33
Following are the FI entries posted when the GRN is posted ndash
Item Posting
Key GL Account Business Area Account Text
Amount in INR
Currency
1 Debit (89)
Inventory account of Imported Raw Material
Business Area where the material has been received
Inventory ndash Imported Raw Material
Quantity of Material X Basic Price of material
INR
2 Credit (96)
GR IR Clearing Account
Business Area where the material has been received
GR IR Clearing
Quantity of Material X Basic Price of material
INR
3 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Basic Customs Duty)
Basic Customs Duty Amount
INR
4 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Ecess on Basic Customs Duty)
Ecess amount on Basic Customs Duty
INR
5 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (SampH Ecess on Basic Customs Duty)
SampH Ecess amount on Basic Customs Duty
INR
6 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing CVD Amount INR
7 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing Ecess on CVD INR
8 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing SampH Ecess of CVD INR
Following is the example of the FI entries of imported material ndash
Item Posting
Key GL Account
Business Area
Account Text Amount in
INR Currency
1 Debit (89)
230110 BA01 Inventory ndash Imported Raw Material
1551800 INR
2 Credit (96)
130100 BA01 GR IR Clearing
1151500 - INR
3 Credit (96)
130120 BA01 Freight Clearing ndash Import
174400 - INR
4 Credit (96)
130120 BA01 Freight Clearing ndash Import
3400 - INR
5 Credit 130120 BA01 Freight Clearing ndash Import 1700 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 34
(96)
6 Credit (50)
130130 BA01 CVD Clearing
214500 - INR
7 Credit (50)
130130 BA01 CVD Clearing
4200 - INR
8 Credit (50)
130130 BA01 CVD Clearing
2100 - INR
e) Stock Transport Purchase Order ndash 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 amp 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR
Currency Plant
10 Credit Inventory Account
Business Area from where material is issued
Inventory of Material
Inventory Amount
INR
Plant from where
material is issued
20 Debit Inventory Account
Business Area where material is received
Inventory of material
Inventory Amount
INR Plant where material is received
Example of above transaction is as below ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Plant
10 Credit (99) 232080 BA05 Inventory of Spares 430250 - INR 2530
20 Debit (89) 232080 BA05 Inventory of Spares 430250 INR 9010
f) Service Purchase Order ndash When a Service Purchase Order (Item Category ndash 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 35
automatically posted by the system (which is based on the accepted service entry sheet) Following is the flow chart for Service Purchase Order ndash
Service Required for Project Cost Center Sale Order
Account assignment data such as Project or WBS Definition Cost Center Number Sale Order Number is maintained
Purchase Order with Item Category D (Service) amp required account assignment (Q K E) is raised
Service Entry sheet is created amp 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 36
Following are the FI postings at the time of accepting Service Entry Sheet ndash
Item Posting
Key GL Account
Business Area
Account Text
Amount in INR
Currency Text
10 Debit Consumption
Account
Business Area from where Service is delivered
Process Charges
Service Charges Amount
INR Service Text
20 Credit GR IR Clearing Account
Business Area where service is delivered
GR IR Clearing
Service Charges Amount
INR Service Text
Following is the example of above transaction ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Text
10 Debit (81) 411420 BA02 Process Charges - Foundry
384780 INR
Service Charges
20 Debit (96) 130100 BA02 GR IR Clearing 384780 -
INR Service Charges
Train Doc KBLCICSAP MM12MM-FI Integration Page 37
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 ndash a) Modvatable Excise Item ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40)
Excise Cenvat
Business Area where the material is received
Cenvat Input P F Basic Excise Duty amount
INR
2 Debit (40)
ECS Cenvat Amount
Business Area where the material is received
Cenvat ED Cess ECS Amount INR
3 Debit (40)
SampH ECS Cenvat Account
Business Area where the material is received
Cenvat SampH Ces-1
SampH ECS Amount
INR
4 Credit (50)
Modvat Clearing Account
Business Area where the material is received
Modvat Clearing Account
Amount equivalent to amount in 1 + 2 + 3
INR
Example of Modvatable excise entries is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40) 244030 BA01 Cenvat Input P F 362900 INR
2 Debit (40) 244031 BA01 Cenvat ED Cess 7300 INR
3 Debit (40) 244034 BA01 Cenvat SampH Ces-1
3600 INR
4 Credit (50) 130150 BA01 Modvat Clearing Account
373800 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 38
b) Trading excisable material received against GRN ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81)
COGS ndash Trading Material
Business Area where the material is received COGS ndash Trading
Material
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
2 Credit (96)
ECS Cenvat Amount
Business Area where the material is received
GR IR Clearing
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
Example of Excise duty inventorised -
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81) 410910 BA01 COGS ndash Trading Motor
433108300 INR
2 Credit (96) 130100 BA01 GR IR Clearing 433108300 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 39
FI entries at Material Consumption When a material is issued to a consumption account (For example ndash Consumption to Production Order Cost Center) the inventory reduces amp 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 ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Credit (99)
231020 BA05 Inventory ndash Other Raw material
15500 - INR
2 Debit (81)
400240 BA05 Consumption ndash Other Raw Material
15500 INR
2) Material consumption posted to Production Order ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Production Order ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (99)
235010 BA01 Inventory ndash Semi Finished Goods
334100 - INR
2 Debit (81)
400290 BA01 Consumption ndash Semi Finished Goods
334100 INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 40
3) Consumption of Stock provided to Sub ndash Contractor for processing of finished material when GRN of processed material is posted ndash
In a sub ndash contracting purchase order a semi finished material is ordered on the sub ndash contractor amp components are provided to the sub ndash 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 amp the concerned FI entries are posted
Train Doc KBLCICSAP MM12MM-FI Integration Page 41
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 amp 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 amp 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 ndash Quantity Variance Price Variance Quality Inspection Manual block date variance and Amount variance The process flow is as below ndash
Purchase Order for Material Service
GRN for Material Service Entry Sheet for Services performed
Purchase Order History
Delivery Costs
Material Master
Vendor Master
GL Account
Assets
Cost Center
Project
Sale Order
Invoice Verification FI Invoice
Document
MM Invoice Document
Further Document
Train Doc KBLCICSAP MM12MM-FI Integration Page 42
Following entries are posted when an invoice for vendor is posted in the system
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (31)
Vendor Account
Business Area Vendor Number
Amount to be paid to Vendor
INR
2 Debit (86)
GR IR Clearing
Business Area GR IR Clearing
GR IR Clearing Amount
INR
3 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash B Excise Duty
INR
4 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash ECS Amount
INR
5 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash SampH ECS Amt
INR
6 Debit (40)
VAT RM Deductible Amount
Business Area from where payment is made
VAT RM Deductible
VAT Amount to be paid to Vendor
INR
Example of above is transaction is as below ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (31) 300664 BA02 WalchandNagar Industries 13590000 - INR
2 Debit (86) 130100 BA02 GR IR Clearing 10000000 INR
3 Debit (40) 130150 Modvat Clearing 1600000 INR
4 Debit (40) 130150 Modvat Clearing 320000 INR
5 Debit (40) 130150 Modvat Clearing 160000 INR
6 Debit (40) 245039 BA02 VAT RM Deductible 1510000 INR
The diagrammatic view of above example is as below ndash
Purchase Order 100 PC at INR 1000 GRN for this PO 100 PC Invoice 100 PC at INR 1000
Goods Receipt
Invoice Receipt
100000 +
20800 +
15100 +
135900 ndash
100000 +
100000 ndash
20800 ndash
Stock Account
GR IR Account
Modvat clearing
VAT
Vendor
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 3
Objective
After studying the document you will be able to understand ndash
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 ndash Buyers in Purchasing department Stores In-Charge Senior Managers in Materials department
Pre-requisites for target audience ndash Thorough knowledge of Purchase transactions Thorough knowledge of Inventory transactions Basic knowledge of Excise
Hint
ndash Example
ndash Information
Train Doc KBLCICSAP MM12MM-FI Integration Page 4
Basics of Accounting
A] Fundamentals of Accounting ndash 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 amp generally accepted way The transaction records are organized amp presented in certain form of reports The most used reports are Balance Sheet and Profit amp Loss Account Following are the fundamentals of Accounting ndash
1) Accrual basis ndash Effects of transactions takes place when they occur and not
when cash is paid
2) Going concern ndash 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 ndash 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 ndash Business Transactions having monetary implications
Every debit has an equal corresponding credit
Following are the three types of accounts ndash
1) Personal Account ndash This is the account of persons For example ndash Accounts of Vendor Customer are personal accounts Rule applied for this type of account are bdquoDebit the receiver amp credit the giver‟
For example ndash When a payment is made to a Vendor for supplying material the entry is made as below ndash
Debit ndash Vendor INR 1 00000 -
Credit ndash Bank Account INR 1 00000 -
2) Real Account ndash These are the accounts of properties For example ndash Cash
Inventory Machinery Rule applied for this type of account is bdquoDebit what comes in amp Credit what goes out‟
For example ndash When a material is received to inventory after GRN against Purchase Order following entries are posted ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 5
Debit ndash Inventory Raw Material INR 1 00000 -
Credit ndash GR IR Clearing Account INR 1 00000 -
3) Nominal Account ndash These are the accounts of income amp expenditure For example ndash Travelling expenses Colony Expenses Rent received from land Rule applied for this type of account is bdquoDebit Expenses amp Credit Incomes‟
For example ndash When Travel expenses for an employee are booked following are the FI postings ndash
Debit ndash Travel expenses INR 250 - Credit ndash 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 ndash
1) Financial Statements ndash
At the end of every period a business entity prepares Balance Sheet and Profit amp Loss Account Balance sheet shows the financial position of the entity on a given date in the terms of its Assets amp Liabilities Balance sheet is prepared as on date (For example ndash Balance sheet as on 31ndashMarchndash2008) Income statement (Profit and Loss Account) shows the results in terms of excess of Income over Expenditure Profit amp Loss statement is for the period bdquoFrom (for example 01042007) To (for example 31032008)‟ It consists accounting for Real amp nominal accounts Funds flow statement (or Cash Flow statement as it is popularly called) shows the movement of funds during a given period ie where FUNDS came from and How they were applied Cash flow statement is for the year ended (For example ndash Year ended on 31ndashMarchndash2008) For example ndash Net cash flows from operating activities investing activities financing activities
2) Assets ndash 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 ndash Fixed Assets amp 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 Eg 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 Eg Inventories Debtors Cash and Bank
Train Doc KBLCICSAP MM12MM-FI Integration Page 6
3) Depreciation ndash 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
ndash Straight Line method
ndash Written down value Method
4) Liabilities ndash Liability is what company owes These are the obligations of the business to convey something of value in the future such as ndash Account Payable Notes Payable Liabilities are of types ndash Long Term Liabilities Current Liabilities Equity capital
a) Long term liabilities are the liabilities maturing beyond a year Eg Term
loans Debentures Bonds
b) Current Liabilities are the liabilities maturing within a year Eg 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 amp Loss Statement ndash 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 amp expenses Revenues are inflows of assets from providing Goods amp 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 ndash Revenue Expenditure Capital Expenditure a) Revenue expenditure Expenditure incurred for manufacturesale of the
products and for carrying out the day to day activities is Revenue expenditure The examples of capital expenditure are ndash 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 ndash Acquisition of assets development of SAP system is capital expenditure
The difference between revenue amp expense is profit (or loss if the expenses are greater than revenues)
Train Doc KBLCICSAP MM12MM-FI Integration Page 7
6) Cash Flow ndash 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 ndash The balance sheet shows an enterprise‟s assets liabilities amp
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 ndash Equity refers to owners‟ interest in business such as Capital Stock
Retained Earning Current year net profit loss
9) Relationship between balance sheet amp profit amp loss account ndash Balance sheet amp Profit amp 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 8
D] Formats for financial documents ndash 1) Cash Flow Statement
1) BALANCE SHEET as on 31st March
LIABILITIES (Rs) ASSETS (Rs)
SHARE CAPITAL
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
RESERVES AND SURPLUS
1 Capital Reserves 2 Capital Redemption
Reserve 3 Share Premium Account 4 Other Reserves
Less Debit balance in
profit and loss account
if any 5 Balance in the profit
and loss accounts after
providing for proposed
FIXED ASSETS
1 Goodwill 2 Land 3 Buildings 4 Leaseholds 5 Railway Sidings 6 Plant and Machinery 7 Furniture and Fittings 8 Development of
Property 9 Patents trademarks
and designs 10 Livestock 11 Vehicles etc
INVESTMENTS
1 Investments in Govt
or Trust Securities 2 Investments in shares
debentures or bonds 3 Immovable properties 4 Investments in the
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
Train Doc KBLCICSAP MM12MM-FI Integration Page 9
allocation namely
Dividend Bonus or
Reserves 6 Proposed additions to
Reserves
SECURED LOANS
1 Debentures 2 Loans and Advances
from Banks 3 Loans and Advances
from Subsidiaries 4 Other Loans and
Advances
UNSECURED LOANS
1 Fixed Deposits 2 Loans and Advances
from Subsidiaries 3 Short-term Loans and
Advances a from Banks b from others
4 Other Loans and
Advances a from Banks b from others
CURRENT LIABILITIES amp PROVISIONS
A Current Liabilities 1 Acceptances 2 Sundry Creditors
i Total
outstanding
dues of small
scale industrial
undertaking(s)
ii Total
outstanding
dues of
creditors other
than small
scale industrial
undertaking(s)
capital of partnership
firms 5 Balance of unutilized
monies raised by Issue
CURRENT ASSETS LOANS amp ADVANCES
A Current Assets 1Interest accrued
on investments 2Stores and spare
parts 3Loose tools
4 Stock-in-trade 5 Works-in-
progress 6 Sundry debtors
a Debts
outstanding
for a period
exceeding 6
months bOther debts
Less
Provision 7
a Cash
balance on
hand b Bank
balances B Loans and Advances
8 Advances and
Loans a To
subsidiaries b To
partnership
firms in
which the
coits
subsidiary is
a partner 9 Bills of Exchange 10 Advances
recoverable in
cash or in kind or
for value to be
Train Doc KBLCICSAP MM12MM-FI Integration Page 10
3 Subsidiary
companies 4 Advance
payments and
unexpired
discounts 5 Unclaimed
Dividends 6 Other Liabilities
(if any) 7 Interest accrued
but not due on
loans B Provisions
8 Provision for
Taxation 9 Proposed
Dividends 10 For
contingencies 11 For Provident
Fund Scheme 12 For Insurance
pension and
similar staff
benefit schemes 13 Other provisions
received eg
Rates Taxes
Insurance etc 11 Balances with
Customs Port
Trust etc (where
payable on demand)
MISCELLANEOUS
EXPENDITURE
(to the extent not written off or adjusted)
1 Preliminary Expenses 2 Expenses including
commission brokerage
on underwriting or
subscription of shares
or debentures 3 Discount allowed on
issue of shares or
debentures 4 Interest paid out of
capital during
construction 5 Development
expenditure not
adjusted 6 Other items (Specifying
nature)
PROFIT AND LOSS
ACCOUNT
(Debit Balance)
Total Total
2) PROFIT amp LOSS ACCOUNT For the period ending 01st April to 31st March
Expenditure Particulars Rs Income Particulars Rs
1 Consumption of stores and
spare parts 2 Power and fuel 3 Rent 4 Repairs to building 5 Repairs to machinery 6 Commission paid 7 Depreciation
1 Sales
2 Income from investments
3 Other income
4 Miscellaneous income
5 Net Loss
Train Doc KBLCICSAP MM12MM-FI Integration Page 11
8 Interest on debentures 9 Income tax 10 Net income
TOTAL
XXX
TOTAL
XXX
Train Doc KBLCICSAP MM12MM-FI Integration Page 12
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 companys 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 amp Inventory Management ndash
1) Chart of Accounts ndash This is a list of all GL accounts used by one or several
company codes For each GL account the chart of accounts contains the account number account name and the information that controls how an account functions and how a GL 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 amp 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 ndash The valuation of the material can be done under one of the following areas ndash 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 amp 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 ndash It is the key for account determination that enables a
differentiation for GL 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 GL 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 amp material type can be established by the account category
Train Doc KBLCICSAP MM12MM-FI Integration Page 13
reference The account category reference is a compilation of valuation classes A material type is assigned to only one account category reference GL account determination can be uniformly defined for all material type belonging to a material type
The valuation class for BEARING can be selected as bdquoDOM_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 bdquoIMP_RM‟ (Imported Raw Material) if the material is imported amp the inventory will be maintained as Imported Raw material Inventory
4) General Ledger (GL) Account ndash The central task of GL accounting is to provide a comprehensive picture for external amp accounts
The General Ledger for Domestic Inventory of Raw material is bdquo230120‟ (Inventory ndash Other Raw Material)
5) Cost Center ndash 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 andor responsibility-related standpoints Cost centers are grouped together into decision control amp responsibility unit The activity types are assigned to the cost center
The Cost Center for Foundry Maintenance department of SBG ndash IP is bdquo11011710‟ The costs incurred for the department Foundry Maintenance will be posted to this cost center
6) Profit Center ndash 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-of-sales 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 ndash
i) Purchasing ndash 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 ndash Goods Issue to Production Order Goods Receipt from Production
Order
iii) Other ndash Transfer material to material Goods Issue to Cost Center Sales Order Asset Scrapping Physical Inventory Difference posting
Train Doc KBLCICSAP MM12MM-FI Integration Page 14
These transactions can change the valuation price of material depending upon price control (For example ndash 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 ndash i) Initial Entry of Stock Balances ndash Receipts are valuated at current material price of
using another material price specified externally ii) Goods Receipt for Purchase Order ndash Receipts are valuated at the Purchase order
price (Goods Receipt before Invoice Receipt) iii) Goods Issue ndash Issues are valuated at current material price 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 ndash i) Moving Average price (V) ndash 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 ldquoExpenses revenue from price differencerdquo 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 bdquoBearings‟ are procured from Vendor Hence the material master data of the bearings will have bdquoMoving Average Price‟ control in accounting view
ii) Standard Price (S) ndash 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 ldquoExpenses revenue from price differencerdquo 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 15
Pumps are in-house manufactured in our company hence the material master data of all pumps will have bdquoStandard Price Control‟ in accounting view
Valuation Area details ndash
Valuation Area
Company
Code
Plant Plant
level
valuation
is set-up
in KBL
Train Doc KBLCICSAP MM12MM-FI Integration Page 16
Overview of transactions involved in Material Valuation
Following are the steps involved in Purchasing which are important from material valuation financial point of view ndash
Sr No
Step Description Effect on Materials Management
point Effect from Finance point
1 Purchase Order is created
Vendor is ordered to supply material provide service as per agreed terms amp conditions
Commitment is done with the vendor to pay if he supplies material provides service as per agreed terms
2 Purchase Order is approved
Management approval is given for agreed terms amp conditions
Management approval is given for the financial commitment
3
Material is supplied by the vendor amp GRN is posted for the same
Stock of material (Inventory) increases if material is Inventoried Consumption to cost object is booked if the purchase order is account assigned
Asset (Inventory) is increased GR IR clearing account is credited (which is ultimately the liability to pay money to the vendor as per agreed terms
Goods Receipt
Master Data
Material Master
Vendor
GL Account
Storage Location
Plant
Goods Issue
Transfer Posting
Requirement determined through Material Requirement
Planning
External Procurement Purchasing
Internal Procurement Production
Invoice Receipt
Invoice Verification
Internal amp External Accounting
Train Doc KBLCICSAP MM12MM-FI Integration Page 17
4
Service is provided by the vendor amp service entry sheet is created
Consumption of service is booked to the respective cost object (For example ndash Cost Center)
GR IR clearing account is credited (which is ultimately the liability to pay money to the vendor as per agreed terms
5 Invoice of the vendor is booked in the system
Vendor‟s invoice is checked against the terms amp conditions of the Purchase Order and booked in system so that the vendor can be paid on right time
Vendor account is credited amp GR IR Clearing account is debited (The effective entry is bdquoCredit Vendor Account ndash Debit Inventory‟)
6 Payment is done to the vendor
Liability of the Purchasing organization ends
Debit Vendor Account Credit Bank Account
Following are the steps involved in material movement which are important from financial point of view ndash
Sr No
Transaction Effect from Materials Management point
Effect from Financial point of view
1 Goods Receipt is posted for standard bought out material
Stock of material (Inventory) increases if material is Inventoried Consumption to cost object is booked if the PO is account assigned
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)
2 Goods Receipt posted for sub-contracting material
Stock of the semi-finished material (which was ordered on vendor) increases Consumption of the BOM material (provided to vendor is booked)
Asset (Inventory) of semi-finished 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
3 Goods Receipt posted for Traded Material
Material delivered to customer directly from Vendor (Third Party Transaction)
Cost of Goods sold to customer is booked
4 Goods Issue is posted to Production Order Cost Center
Stock of the material decreases
Material value is booked against the respective cost object (Production Order or Cost Center) as consumption
5 Components transferred to Sub-Contractor
Material provided to vendor for processing amp supplying back the processed goods
No financial entry The inventory is shown as bdquoStock provided to Vendor‟
6 Material delivered to Customer
Finished Goods Traded Goods delivered to customer Own inventory is reduced
Cost of Goods sold to customer is booked
Train Doc KBLCICSAP MM12MM-FI Integration Page 18
Automatic posting of material for Goods Movement
Goods Receipt at
manufacturing plant
Consumption
Storage
Valuation
Valuated
Inventory
posted in Store
Consumption
of material
posted
directly to
consumption
account
Goods Issue
To Production Order
Cost Center
Goods Receipt of Trading
Material against Third Party
Purchase Order
To SD
Delivery
Cost of
Goods Sold
Material cost
posted to
Cost of
Goods Sold
account
Train Doc KBLCICSAP MM12MM-FI Integration Page 19
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 amp the transaction of material posting (For example ndash 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 ndash Imported
Bearings can be accounted in separate account (IMP_RM ndash Imported Raw material) amp Bearing procured from domestic vendor can be accounted in separate account (DOM_RM ndash Domestic Raw Material) The posting transactions for the transactions in Inventory Management amp Invoice Management that are relevant for accounting are fixed Posting records are assigned to event movement type in Inventory Management amp each transaction in Invoice Posting These postings are generalized in a value string (posting rule) Instead of fixed GL account numbers these contain keys for respective posting transaction (such as BSX for a stock posting) The GL account numbers are determined from these keys amp posting transactions
In brief following are the summarized data for influencing factors for account posting
Organizational
Structure
Company
Code
Plant
Chart of Account
Valuation Grouping
Code
Material
Accounting data
for valuation area
Valuation
Class
Material Type
Value
Quantity update
Business
Transaction Goods Movement
Invoice
Verification
Value
String
Transaction
Key
Account
Grouping
Train Doc KBLCICSAP MM12MM-FI Integration Page 20
Material Price Change ndash 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 (amp not the material master change) in which total stock of the plant is revaluated
Train Doc KBLCICSAP MM12MM-FI Integration Page 21
Automatic FI postings at Goods Receipt Following automatic postings are done in the system when the Goods Receipt against Purchase Order are posted ndash
A] Accounting (FI) Entries posted at the time of GRN ndash
a) Raw Material posted to Inventory after posting of GRN ndash 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 amp raw material procured from domestic vendor is kept separate The process flow is as below ndash
Without account assignment
Purchase Order
Raw Material
GRN Quantity
To Store
To Inventory GRN
Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 22
The FI entries posted at GRN are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Raw material Inventory
Respective Business Area where the material is received
Raw material Inventory
(Quantity of material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the material is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of Accounting Entries for Raw material posted to inventory ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Curr
Curr Text
1 Debit (89)
230120 BA01 Inventory ndash Other Raw
Material 510000 INR
BRG 6305 SKF OR EQ
2 Credit (96)
130100 BA01 GR IR Clearing
500000 - INR BRG 6305 SKF
OR EQ
3 Credit (50)
130110 BA01 Freight
Clearing Inland
10000 - INR BRG 6305 SKF
OR EQ
b) Material posted to consumption account after posting of GRN ndash
Following are main account assignment categories (AAC) ndash
AAC Description Required Account Assignment Data
A Asset Main Asset Number amp Sub-Number
K Cost Center Cost Center amp GL Account Number
Q Project WBS Element Number of the Project
E Sale Order Sale Order Number amp Line Number of the Sale Order
Train Doc KBLCICSAP MM12MM-FI Integration Page 23
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 GL 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 ndash
i) Purchase Order with account assignment A (Asset) ndash 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 GL Account in the company‟s balance sheet The GL account is a reconciliation account that means that it reconciles several asset numbers
With account assignment Purchase
Order
Raw Material Non Valuated Material
GRN Quantity
To Store (Raw Material) or To Consumption (Non-valuated material)
Consumption Account
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 24
For Purchase Order with account assignment A (Asset) the entry in FI GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Asset
Respective Business Area where the Asset is received
Asset Number amp Sub Number
(Quantity of Asset X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the asset is received
GR IR Clearing Account
(Quantity of Asset X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the asset is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entries for asset posted ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (70)
211450 BA05
Asset Number 000021000780 Sub Number 0000
3650000 INR
IM-314318325 MOUNTING CASING
2 Credit (96)
130100 BA05 GR IR Clearing 3605000 - INR
IM-314318325 MOUNTING CASING
3 Credit (50)
130110 BA05 Freight Clearing Inland
45000 - INR IM-314318325 MOUNTING CASING
ii) Purchase Order with account assignment K (Cost Center) ndash 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 amp services With account assignment K we need to determine following two additional data to be entered in the PO ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 25
- General Ledger (GL) Account Number We have to determine the expense GL 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 GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of
cost center
Respective Business Area where the Material Service is received
Cost Center account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of
GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of
Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entry for Account Assignment as Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416340 BA08 Legal Exp amp Consult Fees
4200000 INR Visit Charges
2 Credit (96)
130100 BA08 GR IR Clearing
4200000 - INR Visit Charges
iii) Purchase Order with account assignment as Q (Project) ndash
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 amp budgeted We can procure following type of materials against the Project account assignment ndash Raw Semi Finished material (to be inventoried) Traded Material When we procure a raw material (to be inventoried)
Train Doc KBLCICSAP MM12MM-FI Integration Page 26
against the account assignment as Project (Q) then the accounting entries posted are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of the accounting entries ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233040 BA02 Inventory ndash
Other Resale 61080600 INR
MS Flange Dia 1500 mm
2 Credit (96)
130100 BA02 GR IR Clearing
61080600 - INR 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS)
Respective Business Area where the Material Service is received
COGS account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency
Material master short text
Train Doc KBLCICSAP MM12MM-FI Integration Page 27
service is received
(For Imported material)
Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of the accounting entry is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
410920 BA02 COGS ndash Other Resale Article
18340100 INR LTAL PVC
ArmPVCSH Cable
2 Credit (96)
130100 BA02 GR IR Clearing
18340100 - INR LTAL PVC
ArmPVCSH Cable
iv) Purchase Order with account assignment as E (Sale Order) ndash
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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Train Doc KBLCICSAP MM12MM-FI Integration Page 28
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233070 BA01 Inventory ndash
Traded Electric Motor
2583000 INR Motor Alstom 22
KW 4 Pole
2 Credit (96)
130100 BA01 GR IR Clearing
2583000 - INR Motor Alstom 22
KW 4 Pole
When we post GRN for traded goods following accounting entries are posted ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS) General Expenses
Respective Business Area where the Material Service is received
COGS account General Expenses Account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit
Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit
Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416320 BA01 General Expenses
56258000 INR
KOEL 85 HP 1800 RPM Engine
2 Credit (96)
130100 BA01 GR IR Clearing
56258000 - INR
KOEL 85 HP 1800 RPM Engine
c) Sub-Contracting Purchase Order ndash In the subndashContracting Purchase Order semindash
finished material is ordered on the Sub-Contractor amp the components are given to SubndashContractor 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 ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 29
Semi ndash Finished
Material
BOM of Semindash
Finished
Material
With without
account
assignment
Sub ndash
Contracting
Purchase Order
Components in
BOM provided to
Vendor for
processing
Transfer of
material to Sub
ndash Contractor
No accounting
entry Stock of
material
provided to
vendor is
updated
GRN of
processed
material
(Quantity)
Inventory of Semi-
Finished material
is updated
Stock of material
provided to
Vendor is
consumed
GRN Value
Inventory of Semi-
Finished material
= Processing
Charges + Value
of BOM
Components
Train Doc KBLCICSAP MM12MM-FI Integration Page 30
Following FI entries are posted during above process ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR Currency
Text of Material
10 Debit
Inventory account of
Semi-finished material
Respective Business Area where the Material is received
Inventory ndash Semi-Finished Goods
(Quantity of Semi-finished material X Processing Charges) + (Inventory Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
20 Credit
Change of Stock
from Sub-Contract
Respective Business Area where the Material is received
Change of Stock from Sub-Contract
(Quantity of Semi-finished material X Processing Charges) + (Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
30 Credit
Inventory of
Components with
Sub-Contractor
Respective Business Area where the Material is received
Inventory of Components with Sub-Contractor
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
40 Debit
Inventory of own
Components
Respective Business Area where the Material is received
Inventory of own Components
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
50 Debit Processing Charges
Other
Respective Business Area where the Material is received
Processing Charges Other
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of received material
60 Credit GR IR Clearing
Respective Business Area where the Material is received
GR IR Clearing Charges
Processing Charges to be paid to Vendor (Quantity of Ordered material X Processing Charges Rate)
INR (for domestic
Purchase)
Material master short text of received material
Train Doc KBLCICSAP MM12MM-FI Integration Page 31
Following is the example of the above transaction ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
235010 BA01 Inventory Semi-Finished Goods
315000 INR BRG Housing 25
13
2 Credit (91)
400040 BA01
Change Stock Semi-Finished
from Sub-Contractor
315000 - INR BRG Housing 25
13
3 Credit (99)
235040 BA01 Inventory of
semi-finished CI Castings
285200 - INR Bearing Housing (Kanban 30 Qty
Bin)
4 Debit (81)
400040 BA01 Change Stock Castings for Sub-Contract
285200 INR Bearing Housing (Kanban 30 Qty
Bin)
5 Credit (96)
130100 BA01 GR IR Clearing 29800 - INR BRG Housing 25
13
6 Debit (86)
411450 BA01 Processing
Charges Other 29800 INR
BRG Housing 25 13
Train Doc KBLCICSAP MM12MM-FI Integration Page 32
d) Import Purchase Order ndash 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 amp 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 ndash Mumbai JNPT Port) After material is cleared from port amp received in Plant GRN is posted Then the customs duty is also inventorised along with the basic price of material amp 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 ndash
Raw material
Valuation class ndash Imported Raw Material
With without account assignment
Import Purchase Order on Overseas Vendor
Customs duties Freight Charges etc of Clearing Agent are invoiced
Planned delivery cost invoice of Import PO is booked when the material arrives at Port
Quantity of Imported Material is updated
GRN is posted when material arrives at Plant (Quantity)
Basic Value of Material + Planned Delivery Costs + Customs Duty
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 33
Following are the FI entries posted when the GRN is posted ndash
Item Posting
Key GL Account Business Area Account Text
Amount in INR
Currency
1 Debit (89)
Inventory account of Imported Raw Material
Business Area where the material has been received
Inventory ndash Imported Raw Material
Quantity of Material X Basic Price of material
INR
2 Credit (96)
GR IR Clearing Account
Business Area where the material has been received
GR IR Clearing
Quantity of Material X Basic Price of material
INR
3 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Basic Customs Duty)
Basic Customs Duty Amount
INR
4 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Ecess on Basic Customs Duty)
Ecess amount on Basic Customs Duty
INR
5 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (SampH Ecess on Basic Customs Duty)
SampH Ecess amount on Basic Customs Duty
INR
6 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing CVD Amount INR
7 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing Ecess on CVD INR
8 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing SampH Ecess of CVD INR
Following is the example of the FI entries of imported material ndash
Item Posting
Key GL Account
Business Area
Account Text Amount in
INR Currency
1 Debit (89)
230110 BA01 Inventory ndash Imported Raw Material
1551800 INR
2 Credit (96)
130100 BA01 GR IR Clearing
1151500 - INR
3 Credit (96)
130120 BA01 Freight Clearing ndash Import
174400 - INR
4 Credit (96)
130120 BA01 Freight Clearing ndash Import
3400 - INR
5 Credit 130120 BA01 Freight Clearing ndash Import 1700 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 34
(96)
6 Credit (50)
130130 BA01 CVD Clearing
214500 - INR
7 Credit (50)
130130 BA01 CVD Clearing
4200 - INR
8 Credit (50)
130130 BA01 CVD Clearing
2100 - INR
e) Stock Transport Purchase Order ndash 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 amp 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR
Currency Plant
10 Credit Inventory Account
Business Area from where material is issued
Inventory of Material
Inventory Amount
INR
Plant from where
material is issued
20 Debit Inventory Account
Business Area where material is received
Inventory of material
Inventory Amount
INR Plant where material is received
Example of above transaction is as below ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Plant
10 Credit (99) 232080 BA05 Inventory of Spares 430250 - INR 2530
20 Debit (89) 232080 BA05 Inventory of Spares 430250 INR 9010
f) Service Purchase Order ndash When a Service Purchase Order (Item Category ndash 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 35
automatically posted by the system (which is based on the accepted service entry sheet) Following is the flow chart for Service Purchase Order ndash
Service Required for Project Cost Center Sale Order
Account assignment data such as Project or WBS Definition Cost Center Number Sale Order Number is maintained
Purchase Order with Item Category D (Service) amp required account assignment (Q K E) is raised
Service Entry sheet is created amp 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 36
Following are the FI postings at the time of accepting Service Entry Sheet ndash
Item Posting
Key GL Account
Business Area
Account Text
Amount in INR
Currency Text
10 Debit Consumption
Account
Business Area from where Service is delivered
Process Charges
Service Charges Amount
INR Service Text
20 Credit GR IR Clearing Account
Business Area where service is delivered
GR IR Clearing
Service Charges Amount
INR Service Text
Following is the example of above transaction ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Text
10 Debit (81) 411420 BA02 Process Charges - Foundry
384780 INR
Service Charges
20 Debit (96) 130100 BA02 GR IR Clearing 384780 -
INR Service Charges
Train Doc KBLCICSAP MM12MM-FI Integration Page 37
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 ndash a) Modvatable Excise Item ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40)
Excise Cenvat
Business Area where the material is received
Cenvat Input P F Basic Excise Duty amount
INR
2 Debit (40)
ECS Cenvat Amount
Business Area where the material is received
Cenvat ED Cess ECS Amount INR
3 Debit (40)
SampH ECS Cenvat Account
Business Area where the material is received
Cenvat SampH Ces-1
SampH ECS Amount
INR
4 Credit (50)
Modvat Clearing Account
Business Area where the material is received
Modvat Clearing Account
Amount equivalent to amount in 1 + 2 + 3
INR
Example of Modvatable excise entries is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40) 244030 BA01 Cenvat Input P F 362900 INR
2 Debit (40) 244031 BA01 Cenvat ED Cess 7300 INR
3 Debit (40) 244034 BA01 Cenvat SampH Ces-1
3600 INR
4 Credit (50) 130150 BA01 Modvat Clearing Account
373800 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 38
b) Trading excisable material received against GRN ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81)
COGS ndash Trading Material
Business Area where the material is received COGS ndash Trading
Material
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
2 Credit (96)
ECS Cenvat Amount
Business Area where the material is received
GR IR Clearing
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
Example of Excise duty inventorised -
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81) 410910 BA01 COGS ndash Trading Motor
433108300 INR
2 Credit (96) 130100 BA01 GR IR Clearing 433108300 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 39
FI entries at Material Consumption When a material is issued to a consumption account (For example ndash Consumption to Production Order Cost Center) the inventory reduces amp 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 ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Credit (99)
231020 BA05 Inventory ndash Other Raw material
15500 - INR
2 Debit (81)
400240 BA05 Consumption ndash Other Raw Material
15500 INR
2) Material consumption posted to Production Order ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Production Order ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (99)
235010 BA01 Inventory ndash Semi Finished Goods
334100 - INR
2 Debit (81)
400290 BA01 Consumption ndash Semi Finished Goods
334100 INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 40
3) Consumption of Stock provided to Sub ndash Contractor for processing of finished material when GRN of processed material is posted ndash
In a sub ndash contracting purchase order a semi finished material is ordered on the sub ndash contractor amp components are provided to the sub ndash 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 amp the concerned FI entries are posted
Train Doc KBLCICSAP MM12MM-FI Integration Page 41
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 amp 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 amp 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 ndash Quantity Variance Price Variance Quality Inspection Manual block date variance and Amount variance The process flow is as below ndash
Purchase Order for Material Service
GRN for Material Service Entry Sheet for Services performed
Purchase Order History
Delivery Costs
Material Master
Vendor Master
GL Account
Assets
Cost Center
Project
Sale Order
Invoice Verification FI Invoice
Document
MM Invoice Document
Further Document
Train Doc KBLCICSAP MM12MM-FI Integration Page 42
Following entries are posted when an invoice for vendor is posted in the system
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (31)
Vendor Account
Business Area Vendor Number
Amount to be paid to Vendor
INR
2 Debit (86)
GR IR Clearing
Business Area GR IR Clearing
GR IR Clearing Amount
INR
3 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash B Excise Duty
INR
4 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash ECS Amount
INR
5 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash SampH ECS Amt
INR
6 Debit (40)
VAT RM Deductible Amount
Business Area from where payment is made
VAT RM Deductible
VAT Amount to be paid to Vendor
INR
Example of above is transaction is as below ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (31) 300664 BA02 WalchandNagar Industries 13590000 - INR
2 Debit (86) 130100 BA02 GR IR Clearing 10000000 INR
3 Debit (40) 130150 Modvat Clearing 1600000 INR
4 Debit (40) 130150 Modvat Clearing 320000 INR
5 Debit (40) 130150 Modvat Clearing 160000 INR
6 Debit (40) 245039 BA02 VAT RM Deductible 1510000 INR
The diagrammatic view of above example is as below ndash
Purchase Order 100 PC at INR 1000 GRN for this PO 100 PC Invoice 100 PC at INR 1000
Goods Receipt
Invoice Receipt
100000 +
20800 +
15100 +
135900 ndash
100000 +
100000 ndash
20800 ndash
Stock Account
GR IR Account
Modvat clearing
VAT
Vendor
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 4
Basics of Accounting
A] Fundamentals of Accounting ndash 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 amp generally accepted way The transaction records are organized amp presented in certain form of reports The most used reports are Balance Sheet and Profit amp Loss Account Following are the fundamentals of Accounting ndash
1) Accrual basis ndash Effects of transactions takes place when they occur and not
when cash is paid
2) Going concern ndash 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 ndash 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 ndash Business Transactions having monetary implications
Every debit has an equal corresponding credit
Following are the three types of accounts ndash
1) Personal Account ndash This is the account of persons For example ndash Accounts of Vendor Customer are personal accounts Rule applied for this type of account are bdquoDebit the receiver amp credit the giver‟
For example ndash When a payment is made to a Vendor for supplying material the entry is made as below ndash
Debit ndash Vendor INR 1 00000 -
Credit ndash Bank Account INR 1 00000 -
2) Real Account ndash These are the accounts of properties For example ndash Cash
Inventory Machinery Rule applied for this type of account is bdquoDebit what comes in amp Credit what goes out‟
For example ndash When a material is received to inventory after GRN against Purchase Order following entries are posted ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 5
Debit ndash Inventory Raw Material INR 1 00000 -
Credit ndash GR IR Clearing Account INR 1 00000 -
3) Nominal Account ndash These are the accounts of income amp expenditure For example ndash Travelling expenses Colony Expenses Rent received from land Rule applied for this type of account is bdquoDebit Expenses amp Credit Incomes‟
For example ndash When Travel expenses for an employee are booked following are the FI postings ndash
Debit ndash Travel expenses INR 250 - Credit ndash 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 ndash
1) Financial Statements ndash
At the end of every period a business entity prepares Balance Sheet and Profit amp Loss Account Balance sheet shows the financial position of the entity on a given date in the terms of its Assets amp Liabilities Balance sheet is prepared as on date (For example ndash Balance sheet as on 31ndashMarchndash2008) Income statement (Profit and Loss Account) shows the results in terms of excess of Income over Expenditure Profit amp Loss statement is for the period bdquoFrom (for example 01042007) To (for example 31032008)‟ It consists accounting for Real amp nominal accounts Funds flow statement (or Cash Flow statement as it is popularly called) shows the movement of funds during a given period ie where FUNDS came from and How they were applied Cash flow statement is for the year ended (For example ndash Year ended on 31ndashMarchndash2008) For example ndash Net cash flows from operating activities investing activities financing activities
2) Assets ndash 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 ndash Fixed Assets amp 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 Eg 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 Eg Inventories Debtors Cash and Bank
Train Doc KBLCICSAP MM12MM-FI Integration Page 6
3) Depreciation ndash 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
ndash Straight Line method
ndash Written down value Method
4) Liabilities ndash Liability is what company owes These are the obligations of the business to convey something of value in the future such as ndash Account Payable Notes Payable Liabilities are of types ndash Long Term Liabilities Current Liabilities Equity capital
a) Long term liabilities are the liabilities maturing beyond a year Eg Term
loans Debentures Bonds
b) Current Liabilities are the liabilities maturing within a year Eg 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 amp Loss Statement ndash 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 amp expenses Revenues are inflows of assets from providing Goods amp 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 ndash Revenue Expenditure Capital Expenditure a) Revenue expenditure Expenditure incurred for manufacturesale of the
products and for carrying out the day to day activities is Revenue expenditure The examples of capital expenditure are ndash 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 ndash Acquisition of assets development of SAP system is capital expenditure
The difference between revenue amp expense is profit (or loss if the expenses are greater than revenues)
Train Doc KBLCICSAP MM12MM-FI Integration Page 7
6) Cash Flow ndash 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 ndash The balance sheet shows an enterprise‟s assets liabilities amp
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 ndash Equity refers to owners‟ interest in business such as Capital Stock
Retained Earning Current year net profit loss
9) Relationship between balance sheet amp profit amp loss account ndash Balance sheet amp Profit amp 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 8
D] Formats for financial documents ndash 1) Cash Flow Statement
1) BALANCE SHEET as on 31st March
LIABILITIES (Rs) ASSETS (Rs)
SHARE CAPITAL
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
RESERVES AND SURPLUS
1 Capital Reserves 2 Capital Redemption
Reserve 3 Share Premium Account 4 Other Reserves
Less Debit balance in
profit and loss account
if any 5 Balance in the profit
and loss accounts after
providing for proposed
FIXED ASSETS
1 Goodwill 2 Land 3 Buildings 4 Leaseholds 5 Railway Sidings 6 Plant and Machinery 7 Furniture and Fittings 8 Development of
Property 9 Patents trademarks
and designs 10 Livestock 11 Vehicles etc
INVESTMENTS
1 Investments in Govt
or Trust Securities 2 Investments in shares
debentures or bonds 3 Immovable properties 4 Investments in the
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
Train Doc KBLCICSAP MM12MM-FI Integration Page 9
allocation namely
Dividend Bonus or
Reserves 6 Proposed additions to
Reserves
SECURED LOANS
1 Debentures 2 Loans and Advances
from Banks 3 Loans and Advances
from Subsidiaries 4 Other Loans and
Advances
UNSECURED LOANS
1 Fixed Deposits 2 Loans and Advances
from Subsidiaries 3 Short-term Loans and
Advances a from Banks b from others
4 Other Loans and
Advances a from Banks b from others
CURRENT LIABILITIES amp PROVISIONS
A Current Liabilities 1 Acceptances 2 Sundry Creditors
i Total
outstanding
dues of small
scale industrial
undertaking(s)
ii Total
outstanding
dues of
creditors other
than small
scale industrial
undertaking(s)
capital of partnership
firms 5 Balance of unutilized
monies raised by Issue
CURRENT ASSETS LOANS amp ADVANCES
A Current Assets 1Interest accrued
on investments 2Stores and spare
parts 3Loose tools
4 Stock-in-trade 5 Works-in-
progress 6 Sundry debtors
a Debts
outstanding
for a period
exceeding 6
months bOther debts
Less
Provision 7
a Cash
balance on
hand b Bank
balances B Loans and Advances
8 Advances and
Loans a To
subsidiaries b To
partnership
firms in
which the
coits
subsidiary is
a partner 9 Bills of Exchange 10 Advances
recoverable in
cash or in kind or
for value to be
Train Doc KBLCICSAP MM12MM-FI Integration Page 10
3 Subsidiary
companies 4 Advance
payments and
unexpired
discounts 5 Unclaimed
Dividends 6 Other Liabilities
(if any) 7 Interest accrued
but not due on
loans B Provisions
8 Provision for
Taxation 9 Proposed
Dividends 10 For
contingencies 11 For Provident
Fund Scheme 12 For Insurance
pension and
similar staff
benefit schemes 13 Other provisions
received eg
Rates Taxes
Insurance etc 11 Balances with
Customs Port
Trust etc (where
payable on demand)
MISCELLANEOUS
EXPENDITURE
(to the extent not written off or adjusted)
1 Preliminary Expenses 2 Expenses including
commission brokerage
on underwriting or
subscription of shares
or debentures 3 Discount allowed on
issue of shares or
debentures 4 Interest paid out of
capital during
construction 5 Development
expenditure not
adjusted 6 Other items (Specifying
nature)
PROFIT AND LOSS
ACCOUNT
(Debit Balance)
Total Total
2) PROFIT amp LOSS ACCOUNT For the period ending 01st April to 31st March
Expenditure Particulars Rs Income Particulars Rs
1 Consumption of stores and
spare parts 2 Power and fuel 3 Rent 4 Repairs to building 5 Repairs to machinery 6 Commission paid 7 Depreciation
1 Sales
2 Income from investments
3 Other income
4 Miscellaneous income
5 Net Loss
Train Doc KBLCICSAP MM12MM-FI Integration Page 11
8 Interest on debentures 9 Income tax 10 Net income
TOTAL
XXX
TOTAL
XXX
Train Doc KBLCICSAP MM12MM-FI Integration Page 12
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 companys 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 amp Inventory Management ndash
1) Chart of Accounts ndash This is a list of all GL accounts used by one or several
company codes For each GL account the chart of accounts contains the account number account name and the information that controls how an account functions and how a GL 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 amp 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 ndash The valuation of the material can be done under one of the following areas ndash 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 amp 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 ndash It is the key for account determination that enables a
differentiation for GL 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 GL 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 amp material type can be established by the account category
Train Doc KBLCICSAP MM12MM-FI Integration Page 13
reference The account category reference is a compilation of valuation classes A material type is assigned to only one account category reference GL account determination can be uniformly defined for all material type belonging to a material type
The valuation class for BEARING can be selected as bdquoDOM_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 bdquoIMP_RM‟ (Imported Raw Material) if the material is imported amp the inventory will be maintained as Imported Raw material Inventory
4) General Ledger (GL) Account ndash The central task of GL accounting is to provide a comprehensive picture for external amp accounts
The General Ledger for Domestic Inventory of Raw material is bdquo230120‟ (Inventory ndash Other Raw Material)
5) Cost Center ndash 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 andor responsibility-related standpoints Cost centers are grouped together into decision control amp responsibility unit The activity types are assigned to the cost center
The Cost Center for Foundry Maintenance department of SBG ndash IP is bdquo11011710‟ The costs incurred for the department Foundry Maintenance will be posted to this cost center
6) Profit Center ndash 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-of-sales 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 ndash
i) Purchasing ndash 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 ndash Goods Issue to Production Order Goods Receipt from Production
Order
iii) Other ndash Transfer material to material Goods Issue to Cost Center Sales Order Asset Scrapping Physical Inventory Difference posting
Train Doc KBLCICSAP MM12MM-FI Integration Page 14
These transactions can change the valuation price of material depending upon price control (For example ndash 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 ndash i) Initial Entry of Stock Balances ndash Receipts are valuated at current material price of
using another material price specified externally ii) Goods Receipt for Purchase Order ndash Receipts are valuated at the Purchase order
price (Goods Receipt before Invoice Receipt) iii) Goods Issue ndash Issues are valuated at current material price 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 ndash i) Moving Average price (V) ndash 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 ldquoExpenses revenue from price differencerdquo 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 bdquoBearings‟ are procured from Vendor Hence the material master data of the bearings will have bdquoMoving Average Price‟ control in accounting view
ii) Standard Price (S) ndash 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 ldquoExpenses revenue from price differencerdquo 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 15
Pumps are in-house manufactured in our company hence the material master data of all pumps will have bdquoStandard Price Control‟ in accounting view
Valuation Area details ndash
Valuation Area
Company
Code
Plant Plant
level
valuation
is set-up
in KBL
Train Doc KBLCICSAP MM12MM-FI Integration Page 16
Overview of transactions involved in Material Valuation
Following are the steps involved in Purchasing which are important from material valuation financial point of view ndash
Sr No
Step Description Effect on Materials Management
point Effect from Finance point
1 Purchase Order is created
Vendor is ordered to supply material provide service as per agreed terms amp conditions
Commitment is done with the vendor to pay if he supplies material provides service as per agreed terms
2 Purchase Order is approved
Management approval is given for agreed terms amp conditions
Management approval is given for the financial commitment
3
Material is supplied by the vendor amp GRN is posted for the same
Stock of material (Inventory) increases if material is Inventoried Consumption to cost object is booked if the purchase order is account assigned
Asset (Inventory) is increased GR IR clearing account is credited (which is ultimately the liability to pay money to the vendor as per agreed terms
Goods Receipt
Master Data
Material Master
Vendor
GL Account
Storage Location
Plant
Goods Issue
Transfer Posting
Requirement determined through Material Requirement
Planning
External Procurement Purchasing
Internal Procurement Production
Invoice Receipt
Invoice Verification
Internal amp External Accounting
Train Doc KBLCICSAP MM12MM-FI Integration Page 17
4
Service is provided by the vendor amp service entry sheet is created
Consumption of service is booked to the respective cost object (For example ndash Cost Center)
GR IR clearing account is credited (which is ultimately the liability to pay money to the vendor as per agreed terms
5 Invoice of the vendor is booked in the system
Vendor‟s invoice is checked against the terms amp conditions of the Purchase Order and booked in system so that the vendor can be paid on right time
Vendor account is credited amp GR IR Clearing account is debited (The effective entry is bdquoCredit Vendor Account ndash Debit Inventory‟)
6 Payment is done to the vendor
Liability of the Purchasing organization ends
Debit Vendor Account Credit Bank Account
Following are the steps involved in material movement which are important from financial point of view ndash
Sr No
Transaction Effect from Materials Management point
Effect from Financial point of view
1 Goods Receipt is posted for standard bought out material
Stock of material (Inventory) increases if material is Inventoried Consumption to cost object is booked if the PO is account assigned
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)
2 Goods Receipt posted for sub-contracting material
Stock of the semi-finished material (which was ordered on vendor) increases Consumption of the BOM material (provided to vendor is booked)
Asset (Inventory) of semi-finished 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
3 Goods Receipt posted for Traded Material
Material delivered to customer directly from Vendor (Third Party Transaction)
Cost of Goods sold to customer is booked
4 Goods Issue is posted to Production Order Cost Center
Stock of the material decreases
Material value is booked against the respective cost object (Production Order or Cost Center) as consumption
5 Components transferred to Sub-Contractor
Material provided to vendor for processing amp supplying back the processed goods
No financial entry The inventory is shown as bdquoStock provided to Vendor‟
6 Material delivered to Customer
Finished Goods Traded Goods delivered to customer Own inventory is reduced
Cost of Goods sold to customer is booked
Train Doc KBLCICSAP MM12MM-FI Integration Page 18
Automatic posting of material for Goods Movement
Goods Receipt at
manufacturing plant
Consumption
Storage
Valuation
Valuated
Inventory
posted in Store
Consumption
of material
posted
directly to
consumption
account
Goods Issue
To Production Order
Cost Center
Goods Receipt of Trading
Material against Third Party
Purchase Order
To SD
Delivery
Cost of
Goods Sold
Material cost
posted to
Cost of
Goods Sold
account
Train Doc KBLCICSAP MM12MM-FI Integration Page 19
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 amp the transaction of material posting (For example ndash 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 ndash Imported
Bearings can be accounted in separate account (IMP_RM ndash Imported Raw material) amp Bearing procured from domestic vendor can be accounted in separate account (DOM_RM ndash Domestic Raw Material) The posting transactions for the transactions in Inventory Management amp Invoice Management that are relevant for accounting are fixed Posting records are assigned to event movement type in Inventory Management amp each transaction in Invoice Posting These postings are generalized in a value string (posting rule) Instead of fixed GL account numbers these contain keys for respective posting transaction (such as BSX for a stock posting) The GL account numbers are determined from these keys amp posting transactions
In brief following are the summarized data for influencing factors for account posting
Organizational
Structure
Company
Code
Plant
Chart of Account
Valuation Grouping
Code
Material
Accounting data
for valuation area
Valuation
Class
Material Type
Value
Quantity update
Business
Transaction Goods Movement
Invoice
Verification
Value
String
Transaction
Key
Account
Grouping
Train Doc KBLCICSAP MM12MM-FI Integration Page 20
Material Price Change ndash 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 (amp not the material master change) in which total stock of the plant is revaluated
Train Doc KBLCICSAP MM12MM-FI Integration Page 21
Automatic FI postings at Goods Receipt Following automatic postings are done in the system when the Goods Receipt against Purchase Order are posted ndash
A] Accounting (FI) Entries posted at the time of GRN ndash
a) Raw Material posted to Inventory after posting of GRN ndash 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 amp raw material procured from domestic vendor is kept separate The process flow is as below ndash
Without account assignment
Purchase Order
Raw Material
GRN Quantity
To Store
To Inventory GRN
Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 22
The FI entries posted at GRN are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Raw material Inventory
Respective Business Area where the material is received
Raw material Inventory
(Quantity of material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the material is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of Accounting Entries for Raw material posted to inventory ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Curr
Curr Text
1 Debit (89)
230120 BA01 Inventory ndash Other Raw
Material 510000 INR
BRG 6305 SKF OR EQ
2 Credit (96)
130100 BA01 GR IR Clearing
500000 - INR BRG 6305 SKF
OR EQ
3 Credit (50)
130110 BA01 Freight
Clearing Inland
10000 - INR BRG 6305 SKF
OR EQ
b) Material posted to consumption account after posting of GRN ndash
Following are main account assignment categories (AAC) ndash
AAC Description Required Account Assignment Data
A Asset Main Asset Number amp Sub-Number
K Cost Center Cost Center amp GL Account Number
Q Project WBS Element Number of the Project
E Sale Order Sale Order Number amp Line Number of the Sale Order
Train Doc KBLCICSAP MM12MM-FI Integration Page 23
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 GL 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 ndash
i) Purchase Order with account assignment A (Asset) ndash 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 GL Account in the company‟s balance sheet The GL account is a reconciliation account that means that it reconciles several asset numbers
With account assignment Purchase
Order
Raw Material Non Valuated Material
GRN Quantity
To Store (Raw Material) or To Consumption (Non-valuated material)
Consumption Account
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 24
For Purchase Order with account assignment A (Asset) the entry in FI GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Asset
Respective Business Area where the Asset is received
Asset Number amp Sub Number
(Quantity of Asset X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the asset is received
GR IR Clearing Account
(Quantity of Asset X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the asset is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entries for asset posted ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (70)
211450 BA05
Asset Number 000021000780 Sub Number 0000
3650000 INR
IM-314318325 MOUNTING CASING
2 Credit (96)
130100 BA05 GR IR Clearing 3605000 - INR
IM-314318325 MOUNTING CASING
3 Credit (50)
130110 BA05 Freight Clearing Inland
45000 - INR IM-314318325 MOUNTING CASING
ii) Purchase Order with account assignment K (Cost Center) ndash 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 amp services With account assignment K we need to determine following two additional data to be entered in the PO ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 25
- General Ledger (GL) Account Number We have to determine the expense GL 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 GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of
cost center
Respective Business Area where the Material Service is received
Cost Center account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of
GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of
Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entry for Account Assignment as Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416340 BA08 Legal Exp amp Consult Fees
4200000 INR Visit Charges
2 Credit (96)
130100 BA08 GR IR Clearing
4200000 - INR Visit Charges
iii) Purchase Order with account assignment as Q (Project) ndash
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 amp budgeted We can procure following type of materials against the Project account assignment ndash Raw Semi Finished material (to be inventoried) Traded Material When we procure a raw material (to be inventoried)
Train Doc KBLCICSAP MM12MM-FI Integration Page 26
against the account assignment as Project (Q) then the accounting entries posted are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of the accounting entries ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233040 BA02 Inventory ndash
Other Resale 61080600 INR
MS Flange Dia 1500 mm
2 Credit (96)
130100 BA02 GR IR Clearing
61080600 - INR 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS)
Respective Business Area where the Material Service is received
COGS account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency
Material master short text
Train Doc KBLCICSAP MM12MM-FI Integration Page 27
service is received
(For Imported material)
Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of the accounting entry is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
410920 BA02 COGS ndash Other Resale Article
18340100 INR LTAL PVC
ArmPVCSH Cable
2 Credit (96)
130100 BA02 GR IR Clearing
18340100 - INR LTAL PVC
ArmPVCSH Cable
iv) Purchase Order with account assignment as E (Sale Order) ndash
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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Train Doc KBLCICSAP MM12MM-FI Integration Page 28
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233070 BA01 Inventory ndash
Traded Electric Motor
2583000 INR Motor Alstom 22
KW 4 Pole
2 Credit (96)
130100 BA01 GR IR Clearing
2583000 - INR Motor Alstom 22
KW 4 Pole
When we post GRN for traded goods following accounting entries are posted ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS) General Expenses
Respective Business Area where the Material Service is received
COGS account General Expenses Account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit
Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit
Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416320 BA01 General Expenses
56258000 INR
KOEL 85 HP 1800 RPM Engine
2 Credit (96)
130100 BA01 GR IR Clearing
56258000 - INR
KOEL 85 HP 1800 RPM Engine
c) Sub-Contracting Purchase Order ndash In the subndashContracting Purchase Order semindash
finished material is ordered on the Sub-Contractor amp the components are given to SubndashContractor 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 ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 29
Semi ndash Finished
Material
BOM of Semindash
Finished
Material
With without
account
assignment
Sub ndash
Contracting
Purchase Order
Components in
BOM provided to
Vendor for
processing
Transfer of
material to Sub
ndash Contractor
No accounting
entry Stock of
material
provided to
vendor is
updated
GRN of
processed
material
(Quantity)
Inventory of Semi-
Finished material
is updated
Stock of material
provided to
Vendor is
consumed
GRN Value
Inventory of Semi-
Finished material
= Processing
Charges + Value
of BOM
Components
Train Doc KBLCICSAP MM12MM-FI Integration Page 30
Following FI entries are posted during above process ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR Currency
Text of Material
10 Debit
Inventory account of
Semi-finished material
Respective Business Area where the Material is received
Inventory ndash Semi-Finished Goods
(Quantity of Semi-finished material X Processing Charges) + (Inventory Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
20 Credit
Change of Stock
from Sub-Contract
Respective Business Area where the Material is received
Change of Stock from Sub-Contract
(Quantity of Semi-finished material X Processing Charges) + (Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
30 Credit
Inventory of
Components with
Sub-Contractor
Respective Business Area where the Material is received
Inventory of Components with Sub-Contractor
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
40 Debit
Inventory of own
Components
Respective Business Area where the Material is received
Inventory of own Components
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
50 Debit Processing Charges
Other
Respective Business Area where the Material is received
Processing Charges Other
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of received material
60 Credit GR IR Clearing
Respective Business Area where the Material is received
GR IR Clearing Charges
Processing Charges to be paid to Vendor (Quantity of Ordered material X Processing Charges Rate)
INR (for domestic
Purchase)
Material master short text of received material
Train Doc KBLCICSAP MM12MM-FI Integration Page 31
Following is the example of the above transaction ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
235010 BA01 Inventory Semi-Finished Goods
315000 INR BRG Housing 25
13
2 Credit (91)
400040 BA01
Change Stock Semi-Finished
from Sub-Contractor
315000 - INR BRG Housing 25
13
3 Credit (99)
235040 BA01 Inventory of
semi-finished CI Castings
285200 - INR Bearing Housing (Kanban 30 Qty
Bin)
4 Debit (81)
400040 BA01 Change Stock Castings for Sub-Contract
285200 INR Bearing Housing (Kanban 30 Qty
Bin)
5 Credit (96)
130100 BA01 GR IR Clearing 29800 - INR BRG Housing 25
13
6 Debit (86)
411450 BA01 Processing
Charges Other 29800 INR
BRG Housing 25 13
Train Doc KBLCICSAP MM12MM-FI Integration Page 32
d) Import Purchase Order ndash 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 amp 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 ndash Mumbai JNPT Port) After material is cleared from port amp received in Plant GRN is posted Then the customs duty is also inventorised along with the basic price of material amp 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 ndash
Raw material
Valuation class ndash Imported Raw Material
With without account assignment
Import Purchase Order on Overseas Vendor
Customs duties Freight Charges etc of Clearing Agent are invoiced
Planned delivery cost invoice of Import PO is booked when the material arrives at Port
Quantity of Imported Material is updated
GRN is posted when material arrives at Plant (Quantity)
Basic Value of Material + Planned Delivery Costs + Customs Duty
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 33
Following are the FI entries posted when the GRN is posted ndash
Item Posting
Key GL Account Business Area Account Text
Amount in INR
Currency
1 Debit (89)
Inventory account of Imported Raw Material
Business Area where the material has been received
Inventory ndash Imported Raw Material
Quantity of Material X Basic Price of material
INR
2 Credit (96)
GR IR Clearing Account
Business Area where the material has been received
GR IR Clearing
Quantity of Material X Basic Price of material
INR
3 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Basic Customs Duty)
Basic Customs Duty Amount
INR
4 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Ecess on Basic Customs Duty)
Ecess amount on Basic Customs Duty
INR
5 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (SampH Ecess on Basic Customs Duty)
SampH Ecess amount on Basic Customs Duty
INR
6 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing CVD Amount INR
7 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing Ecess on CVD INR
8 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing SampH Ecess of CVD INR
Following is the example of the FI entries of imported material ndash
Item Posting
Key GL Account
Business Area
Account Text Amount in
INR Currency
1 Debit (89)
230110 BA01 Inventory ndash Imported Raw Material
1551800 INR
2 Credit (96)
130100 BA01 GR IR Clearing
1151500 - INR
3 Credit (96)
130120 BA01 Freight Clearing ndash Import
174400 - INR
4 Credit (96)
130120 BA01 Freight Clearing ndash Import
3400 - INR
5 Credit 130120 BA01 Freight Clearing ndash Import 1700 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 34
(96)
6 Credit (50)
130130 BA01 CVD Clearing
214500 - INR
7 Credit (50)
130130 BA01 CVD Clearing
4200 - INR
8 Credit (50)
130130 BA01 CVD Clearing
2100 - INR
e) Stock Transport Purchase Order ndash 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 amp 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR
Currency Plant
10 Credit Inventory Account
Business Area from where material is issued
Inventory of Material
Inventory Amount
INR
Plant from where
material is issued
20 Debit Inventory Account
Business Area where material is received
Inventory of material
Inventory Amount
INR Plant where material is received
Example of above transaction is as below ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Plant
10 Credit (99) 232080 BA05 Inventory of Spares 430250 - INR 2530
20 Debit (89) 232080 BA05 Inventory of Spares 430250 INR 9010
f) Service Purchase Order ndash When a Service Purchase Order (Item Category ndash 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 35
automatically posted by the system (which is based on the accepted service entry sheet) Following is the flow chart for Service Purchase Order ndash
Service Required for Project Cost Center Sale Order
Account assignment data such as Project or WBS Definition Cost Center Number Sale Order Number is maintained
Purchase Order with Item Category D (Service) amp required account assignment (Q K E) is raised
Service Entry sheet is created amp 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 36
Following are the FI postings at the time of accepting Service Entry Sheet ndash
Item Posting
Key GL Account
Business Area
Account Text
Amount in INR
Currency Text
10 Debit Consumption
Account
Business Area from where Service is delivered
Process Charges
Service Charges Amount
INR Service Text
20 Credit GR IR Clearing Account
Business Area where service is delivered
GR IR Clearing
Service Charges Amount
INR Service Text
Following is the example of above transaction ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Text
10 Debit (81) 411420 BA02 Process Charges - Foundry
384780 INR
Service Charges
20 Debit (96) 130100 BA02 GR IR Clearing 384780 -
INR Service Charges
Train Doc KBLCICSAP MM12MM-FI Integration Page 37
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 ndash a) Modvatable Excise Item ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40)
Excise Cenvat
Business Area where the material is received
Cenvat Input P F Basic Excise Duty amount
INR
2 Debit (40)
ECS Cenvat Amount
Business Area where the material is received
Cenvat ED Cess ECS Amount INR
3 Debit (40)
SampH ECS Cenvat Account
Business Area where the material is received
Cenvat SampH Ces-1
SampH ECS Amount
INR
4 Credit (50)
Modvat Clearing Account
Business Area where the material is received
Modvat Clearing Account
Amount equivalent to amount in 1 + 2 + 3
INR
Example of Modvatable excise entries is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40) 244030 BA01 Cenvat Input P F 362900 INR
2 Debit (40) 244031 BA01 Cenvat ED Cess 7300 INR
3 Debit (40) 244034 BA01 Cenvat SampH Ces-1
3600 INR
4 Credit (50) 130150 BA01 Modvat Clearing Account
373800 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 38
b) Trading excisable material received against GRN ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81)
COGS ndash Trading Material
Business Area where the material is received COGS ndash Trading
Material
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
2 Credit (96)
ECS Cenvat Amount
Business Area where the material is received
GR IR Clearing
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
Example of Excise duty inventorised -
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81) 410910 BA01 COGS ndash Trading Motor
433108300 INR
2 Credit (96) 130100 BA01 GR IR Clearing 433108300 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 39
FI entries at Material Consumption When a material is issued to a consumption account (For example ndash Consumption to Production Order Cost Center) the inventory reduces amp 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 ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Credit (99)
231020 BA05 Inventory ndash Other Raw material
15500 - INR
2 Debit (81)
400240 BA05 Consumption ndash Other Raw Material
15500 INR
2) Material consumption posted to Production Order ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Production Order ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (99)
235010 BA01 Inventory ndash Semi Finished Goods
334100 - INR
2 Debit (81)
400290 BA01 Consumption ndash Semi Finished Goods
334100 INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 40
3) Consumption of Stock provided to Sub ndash Contractor for processing of finished material when GRN of processed material is posted ndash
In a sub ndash contracting purchase order a semi finished material is ordered on the sub ndash contractor amp components are provided to the sub ndash 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 amp the concerned FI entries are posted
Train Doc KBLCICSAP MM12MM-FI Integration Page 41
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 amp 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 amp 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 ndash Quantity Variance Price Variance Quality Inspection Manual block date variance and Amount variance The process flow is as below ndash
Purchase Order for Material Service
GRN for Material Service Entry Sheet for Services performed
Purchase Order History
Delivery Costs
Material Master
Vendor Master
GL Account
Assets
Cost Center
Project
Sale Order
Invoice Verification FI Invoice
Document
MM Invoice Document
Further Document
Train Doc KBLCICSAP MM12MM-FI Integration Page 42
Following entries are posted when an invoice for vendor is posted in the system
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (31)
Vendor Account
Business Area Vendor Number
Amount to be paid to Vendor
INR
2 Debit (86)
GR IR Clearing
Business Area GR IR Clearing
GR IR Clearing Amount
INR
3 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash B Excise Duty
INR
4 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash ECS Amount
INR
5 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash SampH ECS Amt
INR
6 Debit (40)
VAT RM Deductible Amount
Business Area from where payment is made
VAT RM Deductible
VAT Amount to be paid to Vendor
INR
Example of above is transaction is as below ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (31) 300664 BA02 WalchandNagar Industries 13590000 - INR
2 Debit (86) 130100 BA02 GR IR Clearing 10000000 INR
3 Debit (40) 130150 Modvat Clearing 1600000 INR
4 Debit (40) 130150 Modvat Clearing 320000 INR
5 Debit (40) 130150 Modvat Clearing 160000 INR
6 Debit (40) 245039 BA02 VAT RM Deductible 1510000 INR
The diagrammatic view of above example is as below ndash
Purchase Order 100 PC at INR 1000 GRN for this PO 100 PC Invoice 100 PC at INR 1000
Goods Receipt
Invoice Receipt
100000 +
20800 +
15100 +
135900 ndash
100000 +
100000 ndash
20800 ndash
Stock Account
GR IR Account
Modvat clearing
VAT
Vendor
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 5
Debit ndash Inventory Raw Material INR 1 00000 -
Credit ndash GR IR Clearing Account INR 1 00000 -
3) Nominal Account ndash These are the accounts of income amp expenditure For example ndash Travelling expenses Colony Expenses Rent received from land Rule applied for this type of account is bdquoDebit Expenses amp Credit Incomes‟
For example ndash When Travel expenses for an employee are booked following are the FI postings ndash
Debit ndash Travel expenses INR 250 - Credit ndash 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 ndash
1) Financial Statements ndash
At the end of every period a business entity prepares Balance Sheet and Profit amp Loss Account Balance sheet shows the financial position of the entity on a given date in the terms of its Assets amp Liabilities Balance sheet is prepared as on date (For example ndash Balance sheet as on 31ndashMarchndash2008) Income statement (Profit and Loss Account) shows the results in terms of excess of Income over Expenditure Profit amp Loss statement is for the period bdquoFrom (for example 01042007) To (for example 31032008)‟ It consists accounting for Real amp nominal accounts Funds flow statement (or Cash Flow statement as it is popularly called) shows the movement of funds during a given period ie where FUNDS came from and How they were applied Cash flow statement is for the year ended (For example ndash Year ended on 31ndashMarchndash2008) For example ndash Net cash flows from operating activities investing activities financing activities
2) Assets ndash 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 ndash Fixed Assets amp 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 Eg 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 Eg Inventories Debtors Cash and Bank
Train Doc KBLCICSAP MM12MM-FI Integration Page 6
3) Depreciation ndash 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
ndash Straight Line method
ndash Written down value Method
4) Liabilities ndash Liability is what company owes These are the obligations of the business to convey something of value in the future such as ndash Account Payable Notes Payable Liabilities are of types ndash Long Term Liabilities Current Liabilities Equity capital
a) Long term liabilities are the liabilities maturing beyond a year Eg Term
loans Debentures Bonds
b) Current Liabilities are the liabilities maturing within a year Eg 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 amp Loss Statement ndash 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 amp expenses Revenues are inflows of assets from providing Goods amp 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 ndash Revenue Expenditure Capital Expenditure a) Revenue expenditure Expenditure incurred for manufacturesale of the
products and for carrying out the day to day activities is Revenue expenditure The examples of capital expenditure are ndash 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 ndash Acquisition of assets development of SAP system is capital expenditure
The difference between revenue amp expense is profit (or loss if the expenses are greater than revenues)
Train Doc KBLCICSAP MM12MM-FI Integration Page 7
6) Cash Flow ndash 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 ndash The balance sheet shows an enterprise‟s assets liabilities amp
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 ndash Equity refers to owners‟ interest in business such as Capital Stock
Retained Earning Current year net profit loss
9) Relationship between balance sheet amp profit amp loss account ndash Balance sheet amp Profit amp 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 8
D] Formats for financial documents ndash 1) Cash Flow Statement
1) BALANCE SHEET as on 31st March
LIABILITIES (Rs) ASSETS (Rs)
SHARE CAPITAL
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
RESERVES AND SURPLUS
1 Capital Reserves 2 Capital Redemption
Reserve 3 Share Premium Account 4 Other Reserves
Less Debit balance in
profit and loss account
if any 5 Balance in the profit
and loss accounts after
providing for proposed
FIXED ASSETS
1 Goodwill 2 Land 3 Buildings 4 Leaseholds 5 Railway Sidings 6 Plant and Machinery 7 Furniture and Fittings 8 Development of
Property 9 Patents trademarks
and designs 10 Livestock 11 Vehicles etc
INVESTMENTS
1 Investments in Govt
or Trust Securities 2 Investments in shares
debentures or bonds 3 Immovable properties 4 Investments in the
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
Train Doc KBLCICSAP MM12MM-FI Integration Page 9
allocation namely
Dividend Bonus or
Reserves 6 Proposed additions to
Reserves
SECURED LOANS
1 Debentures 2 Loans and Advances
from Banks 3 Loans and Advances
from Subsidiaries 4 Other Loans and
Advances
UNSECURED LOANS
1 Fixed Deposits 2 Loans and Advances
from Subsidiaries 3 Short-term Loans and
Advances a from Banks b from others
4 Other Loans and
Advances a from Banks b from others
CURRENT LIABILITIES amp PROVISIONS
A Current Liabilities 1 Acceptances 2 Sundry Creditors
i Total
outstanding
dues of small
scale industrial
undertaking(s)
ii Total
outstanding
dues of
creditors other
than small
scale industrial
undertaking(s)
capital of partnership
firms 5 Balance of unutilized
monies raised by Issue
CURRENT ASSETS LOANS amp ADVANCES
A Current Assets 1Interest accrued
on investments 2Stores and spare
parts 3Loose tools
4 Stock-in-trade 5 Works-in-
progress 6 Sundry debtors
a Debts
outstanding
for a period
exceeding 6
months bOther debts
Less
Provision 7
a Cash
balance on
hand b Bank
balances B Loans and Advances
8 Advances and
Loans a To
subsidiaries b To
partnership
firms in
which the
coits
subsidiary is
a partner 9 Bills of Exchange 10 Advances
recoverable in
cash or in kind or
for value to be
Train Doc KBLCICSAP MM12MM-FI Integration Page 10
3 Subsidiary
companies 4 Advance
payments and
unexpired
discounts 5 Unclaimed
Dividends 6 Other Liabilities
(if any) 7 Interest accrued
but not due on
loans B Provisions
8 Provision for
Taxation 9 Proposed
Dividends 10 For
contingencies 11 For Provident
Fund Scheme 12 For Insurance
pension and
similar staff
benefit schemes 13 Other provisions
received eg
Rates Taxes
Insurance etc 11 Balances with
Customs Port
Trust etc (where
payable on demand)
MISCELLANEOUS
EXPENDITURE
(to the extent not written off or adjusted)
1 Preliminary Expenses 2 Expenses including
commission brokerage
on underwriting or
subscription of shares
or debentures 3 Discount allowed on
issue of shares or
debentures 4 Interest paid out of
capital during
construction 5 Development
expenditure not
adjusted 6 Other items (Specifying
nature)
PROFIT AND LOSS
ACCOUNT
(Debit Balance)
Total Total
2) PROFIT amp LOSS ACCOUNT For the period ending 01st April to 31st March
Expenditure Particulars Rs Income Particulars Rs
1 Consumption of stores and
spare parts 2 Power and fuel 3 Rent 4 Repairs to building 5 Repairs to machinery 6 Commission paid 7 Depreciation
1 Sales
2 Income from investments
3 Other income
4 Miscellaneous income
5 Net Loss
Train Doc KBLCICSAP MM12MM-FI Integration Page 11
8 Interest on debentures 9 Income tax 10 Net income
TOTAL
XXX
TOTAL
XXX
Train Doc KBLCICSAP MM12MM-FI Integration Page 12
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 companys 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 amp Inventory Management ndash
1) Chart of Accounts ndash This is a list of all GL accounts used by one or several
company codes For each GL account the chart of accounts contains the account number account name and the information that controls how an account functions and how a GL 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 amp 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 ndash The valuation of the material can be done under one of the following areas ndash 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 amp 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 ndash It is the key for account determination that enables a
differentiation for GL 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 GL 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 amp material type can be established by the account category
Train Doc KBLCICSAP MM12MM-FI Integration Page 13
reference The account category reference is a compilation of valuation classes A material type is assigned to only one account category reference GL account determination can be uniformly defined for all material type belonging to a material type
The valuation class for BEARING can be selected as bdquoDOM_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 bdquoIMP_RM‟ (Imported Raw Material) if the material is imported amp the inventory will be maintained as Imported Raw material Inventory
4) General Ledger (GL) Account ndash The central task of GL accounting is to provide a comprehensive picture for external amp accounts
The General Ledger for Domestic Inventory of Raw material is bdquo230120‟ (Inventory ndash Other Raw Material)
5) Cost Center ndash 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 andor responsibility-related standpoints Cost centers are grouped together into decision control amp responsibility unit The activity types are assigned to the cost center
The Cost Center for Foundry Maintenance department of SBG ndash IP is bdquo11011710‟ The costs incurred for the department Foundry Maintenance will be posted to this cost center
6) Profit Center ndash 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-of-sales 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 ndash
i) Purchasing ndash 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 ndash Goods Issue to Production Order Goods Receipt from Production
Order
iii) Other ndash Transfer material to material Goods Issue to Cost Center Sales Order Asset Scrapping Physical Inventory Difference posting
Train Doc KBLCICSAP MM12MM-FI Integration Page 14
These transactions can change the valuation price of material depending upon price control (For example ndash 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 ndash i) Initial Entry of Stock Balances ndash Receipts are valuated at current material price of
using another material price specified externally ii) Goods Receipt for Purchase Order ndash Receipts are valuated at the Purchase order
price (Goods Receipt before Invoice Receipt) iii) Goods Issue ndash Issues are valuated at current material price 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 ndash i) Moving Average price (V) ndash 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 ldquoExpenses revenue from price differencerdquo 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 bdquoBearings‟ are procured from Vendor Hence the material master data of the bearings will have bdquoMoving Average Price‟ control in accounting view
ii) Standard Price (S) ndash 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 ldquoExpenses revenue from price differencerdquo 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 15
Pumps are in-house manufactured in our company hence the material master data of all pumps will have bdquoStandard Price Control‟ in accounting view
Valuation Area details ndash
Valuation Area
Company
Code
Plant Plant
level
valuation
is set-up
in KBL
Train Doc KBLCICSAP MM12MM-FI Integration Page 16
Overview of transactions involved in Material Valuation
Following are the steps involved in Purchasing which are important from material valuation financial point of view ndash
Sr No
Step Description Effect on Materials Management
point Effect from Finance point
1 Purchase Order is created
Vendor is ordered to supply material provide service as per agreed terms amp conditions
Commitment is done with the vendor to pay if he supplies material provides service as per agreed terms
2 Purchase Order is approved
Management approval is given for agreed terms amp conditions
Management approval is given for the financial commitment
3
Material is supplied by the vendor amp GRN is posted for the same
Stock of material (Inventory) increases if material is Inventoried Consumption to cost object is booked if the purchase order is account assigned
Asset (Inventory) is increased GR IR clearing account is credited (which is ultimately the liability to pay money to the vendor as per agreed terms
Goods Receipt
Master Data
Material Master
Vendor
GL Account
Storage Location
Plant
Goods Issue
Transfer Posting
Requirement determined through Material Requirement
Planning
External Procurement Purchasing
Internal Procurement Production
Invoice Receipt
Invoice Verification
Internal amp External Accounting
Train Doc KBLCICSAP MM12MM-FI Integration Page 17
4
Service is provided by the vendor amp service entry sheet is created
Consumption of service is booked to the respective cost object (For example ndash Cost Center)
GR IR clearing account is credited (which is ultimately the liability to pay money to the vendor as per agreed terms
5 Invoice of the vendor is booked in the system
Vendor‟s invoice is checked against the terms amp conditions of the Purchase Order and booked in system so that the vendor can be paid on right time
Vendor account is credited amp GR IR Clearing account is debited (The effective entry is bdquoCredit Vendor Account ndash Debit Inventory‟)
6 Payment is done to the vendor
Liability of the Purchasing organization ends
Debit Vendor Account Credit Bank Account
Following are the steps involved in material movement which are important from financial point of view ndash
Sr No
Transaction Effect from Materials Management point
Effect from Financial point of view
1 Goods Receipt is posted for standard bought out material
Stock of material (Inventory) increases if material is Inventoried Consumption to cost object is booked if the PO is account assigned
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)
2 Goods Receipt posted for sub-contracting material
Stock of the semi-finished material (which was ordered on vendor) increases Consumption of the BOM material (provided to vendor is booked)
Asset (Inventory) of semi-finished 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
3 Goods Receipt posted for Traded Material
Material delivered to customer directly from Vendor (Third Party Transaction)
Cost of Goods sold to customer is booked
4 Goods Issue is posted to Production Order Cost Center
Stock of the material decreases
Material value is booked against the respective cost object (Production Order or Cost Center) as consumption
5 Components transferred to Sub-Contractor
Material provided to vendor for processing amp supplying back the processed goods
No financial entry The inventory is shown as bdquoStock provided to Vendor‟
6 Material delivered to Customer
Finished Goods Traded Goods delivered to customer Own inventory is reduced
Cost of Goods sold to customer is booked
Train Doc KBLCICSAP MM12MM-FI Integration Page 18
Automatic posting of material for Goods Movement
Goods Receipt at
manufacturing plant
Consumption
Storage
Valuation
Valuated
Inventory
posted in Store
Consumption
of material
posted
directly to
consumption
account
Goods Issue
To Production Order
Cost Center
Goods Receipt of Trading
Material against Third Party
Purchase Order
To SD
Delivery
Cost of
Goods Sold
Material cost
posted to
Cost of
Goods Sold
account
Train Doc KBLCICSAP MM12MM-FI Integration Page 19
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 amp the transaction of material posting (For example ndash 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 ndash Imported
Bearings can be accounted in separate account (IMP_RM ndash Imported Raw material) amp Bearing procured from domestic vendor can be accounted in separate account (DOM_RM ndash Domestic Raw Material) The posting transactions for the transactions in Inventory Management amp Invoice Management that are relevant for accounting are fixed Posting records are assigned to event movement type in Inventory Management amp each transaction in Invoice Posting These postings are generalized in a value string (posting rule) Instead of fixed GL account numbers these contain keys for respective posting transaction (such as BSX for a stock posting) The GL account numbers are determined from these keys amp posting transactions
In brief following are the summarized data for influencing factors for account posting
Organizational
Structure
Company
Code
Plant
Chart of Account
Valuation Grouping
Code
Material
Accounting data
for valuation area
Valuation
Class
Material Type
Value
Quantity update
Business
Transaction Goods Movement
Invoice
Verification
Value
String
Transaction
Key
Account
Grouping
Train Doc KBLCICSAP MM12MM-FI Integration Page 20
Material Price Change ndash 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 (amp not the material master change) in which total stock of the plant is revaluated
Train Doc KBLCICSAP MM12MM-FI Integration Page 21
Automatic FI postings at Goods Receipt Following automatic postings are done in the system when the Goods Receipt against Purchase Order are posted ndash
A] Accounting (FI) Entries posted at the time of GRN ndash
a) Raw Material posted to Inventory after posting of GRN ndash 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 amp raw material procured from domestic vendor is kept separate The process flow is as below ndash
Without account assignment
Purchase Order
Raw Material
GRN Quantity
To Store
To Inventory GRN
Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 22
The FI entries posted at GRN are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Raw material Inventory
Respective Business Area where the material is received
Raw material Inventory
(Quantity of material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the material is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of Accounting Entries for Raw material posted to inventory ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Curr
Curr Text
1 Debit (89)
230120 BA01 Inventory ndash Other Raw
Material 510000 INR
BRG 6305 SKF OR EQ
2 Credit (96)
130100 BA01 GR IR Clearing
500000 - INR BRG 6305 SKF
OR EQ
3 Credit (50)
130110 BA01 Freight
Clearing Inland
10000 - INR BRG 6305 SKF
OR EQ
b) Material posted to consumption account after posting of GRN ndash
Following are main account assignment categories (AAC) ndash
AAC Description Required Account Assignment Data
A Asset Main Asset Number amp Sub-Number
K Cost Center Cost Center amp GL Account Number
Q Project WBS Element Number of the Project
E Sale Order Sale Order Number amp Line Number of the Sale Order
Train Doc KBLCICSAP MM12MM-FI Integration Page 23
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 GL 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 ndash
i) Purchase Order with account assignment A (Asset) ndash 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 GL Account in the company‟s balance sheet The GL account is a reconciliation account that means that it reconciles several asset numbers
With account assignment Purchase
Order
Raw Material Non Valuated Material
GRN Quantity
To Store (Raw Material) or To Consumption (Non-valuated material)
Consumption Account
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 24
For Purchase Order with account assignment A (Asset) the entry in FI GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Asset
Respective Business Area where the Asset is received
Asset Number amp Sub Number
(Quantity of Asset X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the asset is received
GR IR Clearing Account
(Quantity of Asset X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the asset is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entries for asset posted ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (70)
211450 BA05
Asset Number 000021000780 Sub Number 0000
3650000 INR
IM-314318325 MOUNTING CASING
2 Credit (96)
130100 BA05 GR IR Clearing 3605000 - INR
IM-314318325 MOUNTING CASING
3 Credit (50)
130110 BA05 Freight Clearing Inland
45000 - INR IM-314318325 MOUNTING CASING
ii) Purchase Order with account assignment K (Cost Center) ndash 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 amp services With account assignment K we need to determine following two additional data to be entered in the PO ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 25
- General Ledger (GL) Account Number We have to determine the expense GL 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 GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of
cost center
Respective Business Area where the Material Service is received
Cost Center account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of
GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of
Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entry for Account Assignment as Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416340 BA08 Legal Exp amp Consult Fees
4200000 INR Visit Charges
2 Credit (96)
130100 BA08 GR IR Clearing
4200000 - INR Visit Charges
iii) Purchase Order with account assignment as Q (Project) ndash
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 amp budgeted We can procure following type of materials against the Project account assignment ndash Raw Semi Finished material (to be inventoried) Traded Material When we procure a raw material (to be inventoried)
Train Doc KBLCICSAP MM12MM-FI Integration Page 26
against the account assignment as Project (Q) then the accounting entries posted are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of the accounting entries ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233040 BA02 Inventory ndash
Other Resale 61080600 INR
MS Flange Dia 1500 mm
2 Credit (96)
130100 BA02 GR IR Clearing
61080600 - INR 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS)
Respective Business Area where the Material Service is received
COGS account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency
Material master short text
Train Doc KBLCICSAP MM12MM-FI Integration Page 27
service is received
(For Imported material)
Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of the accounting entry is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
410920 BA02 COGS ndash Other Resale Article
18340100 INR LTAL PVC
ArmPVCSH Cable
2 Credit (96)
130100 BA02 GR IR Clearing
18340100 - INR LTAL PVC
ArmPVCSH Cable
iv) Purchase Order with account assignment as E (Sale Order) ndash
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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Train Doc KBLCICSAP MM12MM-FI Integration Page 28
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233070 BA01 Inventory ndash
Traded Electric Motor
2583000 INR Motor Alstom 22
KW 4 Pole
2 Credit (96)
130100 BA01 GR IR Clearing
2583000 - INR Motor Alstom 22
KW 4 Pole
When we post GRN for traded goods following accounting entries are posted ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS) General Expenses
Respective Business Area where the Material Service is received
COGS account General Expenses Account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit
Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit
Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416320 BA01 General Expenses
56258000 INR
KOEL 85 HP 1800 RPM Engine
2 Credit (96)
130100 BA01 GR IR Clearing
56258000 - INR
KOEL 85 HP 1800 RPM Engine
c) Sub-Contracting Purchase Order ndash In the subndashContracting Purchase Order semindash
finished material is ordered on the Sub-Contractor amp the components are given to SubndashContractor 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 ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 29
Semi ndash Finished
Material
BOM of Semindash
Finished
Material
With without
account
assignment
Sub ndash
Contracting
Purchase Order
Components in
BOM provided to
Vendor for
processing
Transfer of
material to Sub
ndash Contractor
No accounting
entry Stock of
material
provided to
vendor is
updated
GRN of
processed
material
(Quantity)
Inventory of Semi-
Finished material
is updated
Stock of material
provided to
Vendor is
consumed
GRN Value
Inventory of Semi-
Finished material
= Processing
Charges + Value
of BOM
Components
Train Doc KBLCICSAP MM12MM-FI Integration Page 30
Following FI entries are posted during above process ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR Currency
Text of Material
10 Debit
Inventory account of
Semi-finished material
Respective Business Area where the Material is received
Inventory ndash Semi-Finished Goods
(Quantity of Semi-finished material X Processing Charges) + (Inventory Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
20 Credit
Change of Stock
from Sub-Contract
Respective Business Area where the Material is received
Change of Stock from Sub-Contract
(Quantity of Semi-finished material X Processing Charges) + (Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
30 Credit
Inventory of
Components with
Sub-Contractor
Respective Business Area where the Material is received
Inventory of Components with Sub-Contractor
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
40 Debit
Inventory of own
Components
Respective Business Area where the Material is received
Inventory of own Components
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
50 Debit Processing Charges
Other
Respective Business Area where the Material is received
Processing Charges Other
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of received material
60 Credit GR IR Clearing
Respective Business Area where the Material is received
GR IR Clearing Charges
Processing Charges to be paid to Vendor (Quantity of Ordered material X Processing Charges Rate)
INR (for domestic
Purchase)
Material master short text of received material
Train Doc KBLCICSAP MM12MM-FI Integration Page 31
Following is the example of the above transaction ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
235010 BA01 Inventory Semi-Finished Goods
315000 INR BRG Housing 25
13
2 Credit (91)
400040 BA01
Change Stock Semi-Finished
from Sub-Contractor
315000 - INR BRG Housing 25
13
3 Credit (99)
235040 BA01 Inventory of
semi-finished CI Castings
285200 - INR Bearing Housing (Kanban 30 Qty
Bin)
4 Debit (81)
400040 BA01 Change Stock Castings for Sub-Contract
285200 INR Bearing Housing (Kanban 30 Qty
Bin)
5 Credit (96)
130100 BA01 GR IR Clearing 29800 - INR BRG Housing 25
13
6 Debit (86)
411450 BA01 Processing
Charges Other 29800 INR
BRG Housing 25 13
Train Doc KBLCICSAP MM12MM-FI Integration Page 32
d) Import Purchase Order ndash 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 amp 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 ndash Mumbai JNPT Port) After material is cleared from port amp received in Plant GRN is posted Then the customs duty is also inventorised along with the basic price of material amp 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 ndash
Raw material
Valuation class ndash Imported Raw Material
With without account assignment
Import Purchase Order on Overseas Vendor
Customs duties Freight Charges etc of Clearing Agent are invoiced
Planned delivery cost invoice of Import PO is booked when the material arrives at Port
Quantity of Imported Material is updated
GRN is posted when material arrives at Plant (Quantity)
Basic Value of Material + Planned Delivery Costs + Customs Duty
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 33
Following are the FI entries posted when the GRN is posted ndash
Item Posting
Key GL Account Business Area Account Text
Amount in INR
Currency
1 Debit (89)
Inventory account of Imported Raw Material
Business Area where the material has been received
Inventory ndash Imported Raw Material
Quantity of Material X Basic Price of material
INR
2 Credit (96)
GR IR Clearing Account
Business Area where the material has been received
GR IR Clearing
Quantity of Material X Basic Price of material
INR
3 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Basic Customs Duty)
Basic Customs Duty Amount
INR
4 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Ecess on Basic Customs Duty)
Ecess amount on Basic Customs Duty
INR
5 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (SampH Ecess on Basic Customs Duty)
SampH Ecess amount on Basic Customs Duty
INR
6 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing CVD Amount INR
7 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing Ecess on CVD INR
8 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing SampH Ecess of CVD INR
Following is the example of the FI entries of imported material ndash
Item Posting
Key GL Account
Business Area
Account Text Amount in
INR Currency
1 Debit (89)
230110 BA01 Inventory ndash Imported Raw Material
1551800 INR
2 Credit (96)
130100 BA01 GR IR Clearing
1151500 - INR
3 Credit (96)
130120 BA01 Freight Clearing ndash Import
174400 - INR
4 Credit (96)
130120 BA01 Freight Clearing ndash Import
3400 - INR
5 Credit 130120 BA01 Freight Clearing ndash Import 1700 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 34
(96)
6 Credit (50)
130130 BA01 CVD Clearing
214500 - INR
7 Credit (50)
130130 BA01 CVD Clearing
4200 - INR
8 Credit (50)
130130 BA01 CVD Clearing
2100 - INR
e) Stock Transport Purchase Order ndash 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 amp 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR
Currency Plant
10 Credit Inventory Account
Business Area from where material is issued
Inventory of Material
Inventory Amount
INR
Plant from where
material is issued
20 Debit Inventory Account
Business Area where material is received
Inventory of material
Inventory Amount
INR Plant where material is received
Example of above transaction is as below ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Plant
10 Credit (99) 232080 BA05 Inventory of Spares 430250 - INR 2530
20 Debit (89) 232080 BA05 Inventory of Spares 430250 INR 9010
f) Service Purchase Order ndash When a Service Purchase Order (Item Category ndash 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 35
automatically posted by the system (which is based on the accepted service entry sheet) Following is the flow chart for Service Purchase Order ndash
Service Required for Project Cost Center Sale Order
Account assignment data such as Project or WBS Definition Cost Center Number Sale Order Number is maintained
Purchase Order with Item Category D (Service) amp required account assignment (Q K E) is raised
Service Entry sheet is created amp 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 36
Following are the FI postings at the time of accepting Service Entry Sheet ndash
Item Posting
Key GL Account
Business Area
Account Text
Amount in INR
Currency Text
10 Debit Consumption
Account
Business Area from where Service is delivered
Process Charges
Service Charges Amount
INR Service Text
20 Credit GR IR Clearing Account
Business Area where service is delivered
GR IR Clearing
Service Charges Amount
INR Service Text
Following is the example of above transaction ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Text
10 Debit (81) 411420 BA02 Process Charges - Foundry
384780 INR
Service Charges
20 Debit (96) 130100 BA02 GR IR Clearing 384780 -
INR Service Charges
Train Doc KBLCICSAP MM12MM-FI Integration Page 37
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 ndash a) Modvatable Excise Item ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40)
Excise Cenvat
Business Area where the material is received
Cenvat Input P F Basic Excise Duty amount
INR
2 Debit (40)
ECS Cenvat Amount
Business Area where the material is received
Cenvat ED Cess ECS Amount INR
3 Debit (40)
SampH ECS Cenvat Account
Business Area where the material is received
Cenvat SampH Ces-1
SampH ECS Amount
INR
4 Credit (50)
Modvat Clearing Account
Business Area where the material is received
Modvat Clearing Account
Amount equivalent to amount in 1 + 2 + 3
INR
Example of Modvatable excise entries is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40) 244030 BA01 Cenvat Input P F 362900 INR
2 Debit (40) 244031 BA01 Cenvat ED Cess 7300 INR
3 Debit (40) 244034 BA01 Cenvat SampH Ces-1
3600 INR
4 Credit (50) 130150 BA01 Modvat Clearing Account
373800 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 38
b) Trading excisable material received against GRN ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81)
COGS ndash Trading Material
Business Area where the material is received COGS ndash Trading
Material
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
2 Credit (96)
ECS Cenvat Amount
Business Area where the material is received
GR IR Clearing
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
Example of Excise duty inventorised -
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81) 410910 BA01 COGS ndash Trading Motor
433108300 INR
2 Credit (96) 130100 BA01 GR IR Clearing 433108300 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 39
FI entries at Material Consumption When a material is issued to a consumption account (For example ndash Consumption to Production Order Cost Center) the inventory reduces amp 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 ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Credit (99)
231020 BA05 Inventory ndash Other Raw material
15500 - INR
2 Debit (81)
400240 BA05 Consumption ndash Other Raw Material
15500 INR
2) Material consumption posted to Production Order ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Production Order ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (99)
235010 BA01 Inventory ndash Semi Finished Goods
334100 - INR
2 Debit (81)
400290 BA01 Consumption ndash Semi Finished Goods
334100 INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 40
3) Consumption of Stock provided to Sub ndash Contractor for processing of finished material when GRN of processed material is posted ndash
In a sub ndash contracting purchase order a semi finished material is ordered on the sub ndash contractor amp components are provided to the sub ndash 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 amp the concerned FI entries are posted
Train Doc KBLCICSAP MM12MM-FI Integration Page 41
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 amp 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 amp 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 ndash Quantity Variance Price Variance Quality Inspection Manual block date variance and Amount variance The process flow is as below ndash
Purchase Order for Material Service
GRN for Material Service Entry Sheet for Services performed
Purchase Order History
Delivery Costs
Material Master
Vendor Master
GL Account
Assets
Cost Center
Project
Sale Order
Invoice Verification FI Invoice
Document
MM Invoice Document
Further Document
Train Doc KBLCICSAP MM12MM-FI Integration Page 42
Following entries are posted when an invoice for vendor is posted in the system
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (31)
Vendor Account
Business Area Vendor Number
Amount to be paid to Vendor
INR
2 Debit (86)
GR IR Clearing
Business Area GR IR Clearing
GR IR Clearing Amount
INR
3 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash B Excise Duty
INR
4 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash ECS Amount
INR
5 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash SampH ECS Amt
INR
6 Debit (40)
VAT RM Deductible Amount
Business Area from where payment is made
VAT RM Deductible
VAT Amount to be paid to Vendor
INR
Example of above is transaction is as below ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (31) 300664 BA02 WalchandNagar Industries 13590000 - INR
2 Debit (86) 130100 BA02 GR IR Clearing 10000000 INR
3 Debit (40) 130150 Modvat Clearing 1600000 INR
4 Debit (40) 130150 Modvat Clearing 320000 INR
5 Debit (40) 130150 Modvat Clearing 160000 INR
6 Debit (40) 245039 BA02 VAT RM Deductible 1510000 INR
The diagrammatic view of above example is as below ndash
Purchase Order 100 PC at INR 1000 GRN for this PO 100 PC Invoice 100 PC at INR 1000
Goods Receipt
Invoice Receipt
100000 +
20800 +
15100 +
135900 ndash
100000 +
100000 ndash
20800 ndash
Stock Account
GR IR Account
Modvat clearing
VAT
Vendor
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 6
3) Depreciation ndash 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
ndash Straight Line method
ndash Written down value Method
4) Liabilities ndash Liability is what company owes These are the obligations of the business to convey something of value in the future such as ndash Account Payable Notes Payable Liabilities are of types ndash Long Term Liabilities Current Liabilities Equity capital
a) Long term liabilities are the liabilities maturing beyond a year Eg Term
loans Debentures Bonds
b) Current Liabilities are the liabilities maturing within a year Eg 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 amp Loss Statement ndash 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 amp expenses Revenues are inflows of assets from providing Goods amp 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 ndash Revenue Expenditure Capital Expenditure a) Revenue expenditure Expenditure incurred for manufacturesale of the
products and for carrying out the day to day activities is Revenue expenditure The examples of capital expenditure are ndash 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 ndash Acquisition of assets development of SAP system is capital expenditure
The difference between revenue amp expense is profit (or loss if the expenses are greater than revenues)
Train Doc KBLCICSAP MM12MM-FI Integration Page 7
6) Cash Flow ndash 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 ndash The balance sheet shows an enterprise‟s assets liabilities amp
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 ndash Equity refers to owners‟ interest in business such as Capital Stock
Retained Earning Current year net profit loss
9) Relationship between balance sheet amp profit amp loss account ndash Balance sheet amp Profit amp 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 8
D] Formats for financial documents ndash 1) Cash Flow Statement
1) BALANCE SHEET as on 31st March
LIABILITIES (Rs) ASSETS (Rs)
SHARE CAPITAL
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
RESERVES AND SURPLUS
1 Capital Reserves 2 Capital Redemption
Reserve 3 Share Premium Account 4 Other Reserves
Less Debit balance in
profit and loss account
if any 5 Balance in the profit
and loss accounts after
providing for proposed
FIXED ASSETS
1 Goodwill 2 Land 3 Buildings 4 Leaseholds 5 Railway Sidings 6 Plant and Machinery 7 Furniture and Fittings 8 Development of
Property 9 Patents trademarks
and designs 10 Livestock 11 Vehicles etc
INVESTMENTS
1 Investments in Govt
or Trust Securities 2 Investments in shares
debentures or bonds 3 Immovable properties 4 Investments in the
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
Train Doc KBLCICSAP MM12MM-FI Integration Page 9
allocation namely
Dividend Bonus or
Reserves 6 Proposed additions to
Reserves
SECURED LOANS
1 Debentures 2 Loans and Advances
from Banks 3 Loans and Advances
from Subsidiaries 4 Other Loans and
Advances
UNSECURED LOANS
1 Fixed Deposits 2 Loans and Advances
from Subsidiaries 3 Short-term Loans and
Advances a from Banks b from others
4 Other Loans and
Advances a from Banks b from others
CURRENT LIABILITIES amp PROVISIONS
A Current Liabilities 1 Acceptances 2 Sundry Creditors
i Total
outstanding
dues of small
scale industrial
undertaking(s)
ii Total
outstanding
dues of
creditors other
than small
scale industrial
undertaking(s)
capital of partnership
firms 5 Balance of unutilized
monies raised by Issue
CURRENT ASSETS LOANS amp ADVANCES
A Current Assets 1Interest accrued
on investments 2Stores and spare
parts 3Loose tools
4 Stock-in-trade 5 Works-in-
progress 6 Sundry debtors
a Debts
outstanding
for a period
exceeding 6
months bOther debts
Less
Provision 7
a Cash
balance on
hand b Bank
balances B Loans and Advances
8 Advances and
Loans a To
subsidiaries b To
partnership
firms in
which the
coits
subsidiary is
a partner 9 Bills of Exchange 10 Advances
recoverable in
cash or in kind or
for value to be
Train Doc KBLCICSAP MM12MM-FI Integration Page 10
3 Subsidiary
companies 4 Advance
payments and
unexpired
discounts 5 Unclaimed
Dividends 6 Other Liabilities
(if any) 7 Interest accrued
but not due on
loans B Provisions
8 Provision for
Taxation 9 Proposed
Dividends 10 For
contingencies 11 For Provident
Fund Scheme 12 For Insurance
pension and
similar staff
benefit schemes 13 Other provisions
received eg
Rates Taxes
Insurance etc 11 Balances with
Customs Port
Trust etc (where
payable on demand)
MISCELLANEOUS
EXPENDITURE
(to the extent not written off or adjusted)
1 Preliminary Expenses 2 Expenses including
commission brokerage
on underwriting or
subscription of shares
or debentures 3 Discount allowed on
issue of shares or
debentures 4 Interest paid out of
capital during
construction 5 Development
expenditure not
adjusted 6 Other items (Specifying
nature)
PROFIT AND LOSS
ACCOUNT
(Debit Balance)
Total Total
2) PROFIT amp LOSS ACCOUNT For the period ending 01st April to 31st March
Expenditure Particulars Rs Income Particulars Rs
1 Consumption of stores and
spare parts 2 Power and fuel 3 Rent 4 Repairs to building 5 Repairs to machinery 6 Commission paid 7 Depreciation
1 Sales
2 Income from investments
3 Other income
4 Miscellaneous income
5 Net Loss
Train Doc KBLCICSAP MM12MM-FI Integration Page 11
8 Interest on debentures 9 Income tax 10 Net income
TOTAL
XXX
TOTAL
XXX
Train Doc KBLCICSAP MM12MM-FI Integration Page 12
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 companys 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 amp Inventory Management ndash
1) Chart of Accounts ndash This is a list of all GL accounts used by one or several
company codes For each GL account the chart of accounts contains the account number account name and the information that controls how an account functions and how a GL 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 amp 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 ndash The valuation of the material can be done under one of the following areas ndash 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 amp 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 ndash It is the key for account determination that enables a
differentiation for GL 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 GL 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 amp material type can be established by the account category
Train Doc KBLCICSAP MM12MM-FI Integration Page 13
reference The account category reference is a compilation of valuation classes A material type is assigned to only one account category reference GL account determination can be uniformly defined for all material type belonging to a material type
The valuation class for BEARING can be selected as bdquoDOM_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 bdquoIMP_RM‟ (Imported Raw Material) if the material is imported amp the inventory will be maintained as Imported Raw material Inventory
4) General Ledger (GL) Account ndash The central task of GL accounting is to provide a comprehensive picture for external amp accounts
The General Ledger for Domestic Inventory of Raw material is bdquo230120‟ (Inventory ndash Other Raw Material)
5) Cost Center ndash 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 andor responsibility-related standpoints Cost centers are grouped together into decision control amp responsibility unit The activity types are assigned to the cost center
The Cost Center for Foundry Maintenance department of SBG ndash IP is bdquo11011710‟ The costs incurred for the department Foundry Maintenance will be posted to this cost center
6) Profit Center ndash 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-of-sales 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 ndash
i) Purchasing ndash 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 ndash Goods Issue to Production Order Goods Receipt from Production
Order
iii) Other ndash Transfer material to material Goods Issue to Cost Center Sales Order Asset Scrapping Physical Inventory Difference posting
Train Doc KBLCICSAP MM12MM-FI Integration Page 14
These transactions can change the valuation price of material depending upon price control (For example ndash 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 ndash i) Initial Entry of Stock Balances ndash Receipts are valuated at current material price of
using another material price specified externally ii) Goods Receipt for Purchase Order ndash Receipts are valuated at the Purchase order
price (Goods Receipt before Invoice Receipt) iii) Goods Issue ndash Issues are valuated at current material price 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 ndash i) Moving Average price (V) ndash 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 ldquoExpenses revenue from price differencerdquo 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 bdquoBearings‟ are procured from Vendor Hence the material master data of the bearings will have bdquoMoving Average Price‟ control in accounting view
ii) Standard Price (S) ndash 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 ldquoExpenses revenue from price differencerdquo 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 15
Pumps are in-house manufactured in our company hence the material master data of all pumps will have bdquoStandard Price Control‟ in accounting view
Valuation Area details ndash
Valuation Area
Company
Code
Plant Plant
level
valuation
is set-up
in KBL
Train Doc KBLCICSAP MM12MM-FI Integration Page 16
Overview of transactions involved in Material Valuation
Following are the steps involved in Purchasing which are important from material valuation financial point of view ndash
Sr No
Step Description Effect on Materials Management
point Effect from Finance point
1 Purchase Order is created
Vendor is ordered to supply material provide service as per agreed terms amp conditions
Commitment is done with the vendor to pay if he supplies material provides service as per agreed terms
2 Purchase Order is approved
Management approval is given for agreed terms amp conditions
Management approval is given for the financial commitment
3
Material is supplied by the vendor amp GRN is posted for the same
Stock of material (Inventory) increases if material is Inventoried Consumption to cost object is booked if the purchase order is account assigned
Asset (Inventory) is increased GR IR clearing account is credited (which is ultimately the liability to pay money to the vendor as per agreed terms
Goods Receipt
Master Data
Material Master
Vendor
GL Account
Storage Location
Plant
Goods Issue
Transfer Posting
Requirement determined through Material Requirement
Planning
External Procurement Purchasing
Internal Procurement Production
Invoice Receipt
Invoice Verification
Internal amp External Accounting
Train Doc KBLCICSAP MM12MM-FI Integration Page 17
4
Service is provided by the vendor amp service entry sheet is created
Consumption of service is booked to the respective cost object (For example ndash Cost Center)
GR IR clearing account is credited (which is ultimately the liability to pay money to the vendor as per agreed terms
5 Invoice of the vendor is booked in the system
Vendor‟s invoice is checked against the terms amp conditions of the Purchase Order and booked in system so that the vendor can be paid on right time
Vendor account is credited amp GR IR Clearing account is debited (The effective entry is bdquoCredit Vendor Account ndash Debit Inventory‟)
6 Payment is done to the vendor
Liability of the Purchasing organization ends
Debit Vendor Account Credit Bank Account
Following are the steps involved in material movement which are important from financial point of view ndash
Sr No
Transaction Effect from Materials Management point
Effect from Financial point of view
1 Goods Receipt is posted for standard bought out material
Stock of material (Inventory) increases if material is Inventoried Consumption to cost object is booked if the PO is account assigned
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)
2 Goods Receipt posted for sub-contracting material
Stock of the semi-finished material (which was ordered on vendor) increases Consumption of the BOM material (provided to vendor is booked)
Asset (Inventory) of semi-finished 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
3 Goods Receipt posted for Traded Material
Material delivered to customer directly from Vendor (Third Party Transaction)
Cost of Goods sold to customer is booked
4 Goods Issue is posted to Production Order Cost Center
Stock of the material decreases
Material value is booked against the respective cost object (Production Order or Cost Center) as consumption
5 Components transferred to Sub-Contractor
Material provided to vendor for processing amp supplying back the processed goods
No financial entry The inventory is shown as bdquoStock provided to Vendor‟
6 Material delivered to Customer
Finished Goods Traded Goods delivered to customer Own inventory is reduced
Cost of Goods sold to customer is booked
Train Doc KBLCICSAP MM12MM-FI Integration Page 18
Automatic posting of material for Goods Movement
Goods Receipt at
manufacturing plant
Consumption
Storage
Valuation
Valuated
Inventory
posted in Store
Consumption
of material
posted
directly to
consumption
account
Goods Issue
To Production Order
Cost Center
Goods Receipt of Trading
Material against Third Party
Purchase Order
To SD
Delivery
Cost of
Goods Sold
Material cost
posted to
Cost of
Goods Sold
account
Train Doc KBLCICSAP MM12MM-FI Integration Page 19
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 amp the transaction of material posting (For example ndash 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 ndash Imported
Bearings can be accounted in separate account (IMP_RM ndash Imported Raw material) amp Bearing procured from domestic vendor can be accounted in separate account (DOM_RM ndash Domestic Raw Material) The posting transactions for the transactions in Inventory Management amp Invoice Management that are relevant for accounting are fixed Posting records are assigned to event movement type in Inventory Management amp each transaction in Invoice Posting These postings are generalized in a value string (posting rule) Instead of fixed GL account numbers these contain keys for respective posting transaction (such as BSX for a stock posting) The GL account numbers are determined from these keys amp posting transactions
In brief following are the summarized data for influencing factors for account posting
Organizational
Structure
Company
Code
Plant
Chart of Account
Valuation Grouping
Code
Material
Accounting data
for valuation area
Valuation
Class
Material Type
Value
Quantity update
Business
Transaction Goods Movement
Invoice
Verification
Value
String
Transaction
Key
Account
Grouping
Train Doc KBLCICSAP MM12MM-FI Integration Page 20
Material Price Change ndash 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 (amp not the material master change) in which total stock of the plant is revaluated
Train Doc KBLCICSAP MM12MM-FI Integration Page 21
Automatic FI postings at Goods Receipt Following automatic postings are done in the system when the Goods Receipt against Purchase Order are posted ndash
A] Accounting (FI) Entries posted at the time of GRN ndash
a) Raw Material posted to Inventory after posting of GRN ndash 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 amp raw material procured from domestic vendor is kept separate The process flow is as below ndash
Without account assignment
Purchase Order
Raw Material
GRN Quantity
To Store
To Inventory GRN
Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 22
The FI entries posted at GRN are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Raw material Inventory
Respective Business Area where the material is received
Raw material Inventory
(Quantity of material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the material is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of Accounting Entries for Raw material posted to inventory ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Curr
Curr Text
1 Debit (89)
230120 BA01 Inventory ndash Other Raw
Material 510000 INR
BRG 6305 SKF OR EQ
2 Credit (96)
130100 BA01 GR IR Clearing
500000 - INR BRG 6305 SKF
OR EQ
3 Credit (50)
130110 BA01 Freight
Clearing Inland
10000 - INR BRG 6305 SKF
OR EQ
b) Material posted to consumption account after posting of GRN ndash
Following are main account assignment categories (AAC) ndash
AAC Description Required Account Assignment Data
A Asset Main Asset Number amp Sub-Number
K Cost Center Cost Center amp GL Account Number
Q Project WBS Element Number of the Project
E Sale Order Sale Order Number amp Line Number of the Sale Order
Train Doc KBLCICSAP MM12MM-FI Integration Page 23
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 GL 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 ndash
i) Purchase Order with account assignment A (Asset) ndash 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 GL Account in the company‟s balance sheet The GL account is a reconciliation account that means that it reconciles several asset numbers
With account assignment Purchase
Order
Raw Material Non Valuated Material
GRN Quantity
To Store (Raw Material) or To Consumption (Non-valuated material)
Consumption Account
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 24
For Purchase Order with account assignment A (Asset) the entry in FI GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Asset
Respective Business Area where the Asset is received
Asset Number amp Sub Number
(Quantity of Asset X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the asset is received
GR IR Clearing Account
(Quantity of Asset X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the asset is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entries for asset posted ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (70)
211450 BA05
Asset Number 000021000780 Sub Number 0000
3650000 INR
IM-314318325 MOUNTING CASING
2 Credit (96)
130100 BA05 GR IR Clearing 3605000 - INR
IM-314318325 MOUNTING CASING
3 Credit (50)
130110 BA05 Freight Clearing Inland
45000 - INR IM-314318325 MOUNTING CASING
ii) Purchase Order with account assignment K (Cost Center) ndash 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 amp services With account assignment K we need to determine following two additional data to be entered in the PO ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 25
- General Ledger (GL) Account Number We have to determine the expense GL 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 GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of
cost center
Respective Business Area where the Material Service is received
Cost Center account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of
GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of
Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entry for Account Assignment as Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416340 BA08 Legal Exp amp Consult Fees
4200000 INR Visit Charges
2 Credit (96)
130100 BA08 GR IR Clearing
4200000 - INR Visit Charges
iii) Purchase Order with account assignment as Q (Project) ndash
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 amp budgeted We can procure following type of materials against the Project account assignment ndash Raw Semi Finished material (to be inventoried) Traded Material When we procure a raw material (to be inventoried)
Train Doc KBLCICSAP MM12MM-FI Integration Page 26
against the account assignment as Project (Q) then the accounting entries posted are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of the accounting entries ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233040 BA02 Inventory ndash
Other Resale 61080600 INR
MS Flange Dia 1500 mm
2 Credit (96)
130100 BA02 GR IR Clearing
61080600 - INR 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS)
Respective Business Area where the Material Service is received
COGS account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency
Material master short text
Train Doc KBLCICSAP MM12MM-FI Integration Page 27
service is received
(For Imported material)
Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of the accounting entry is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
410920 BA02 COGS ndash Other Resale Article
18340100 INR LTAL PVC
ArmPVCSH Cable
2 Credit (96)
130100 BA02 GR IR Clearing
18340100 - INR LTAL PVC
ArmPVCSH Cable
iv) Purchase Order with account assignment as E (Sale Order) ndash
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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Train Doc KBLCICSAP MM12MM-FI Integration Page 28
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233070 BA01 Inventory ndash
Traded Electric Motor
2583000 INR Motor Alstom 22
KW 4 Pole
2 Credit (96)
130100 BA01 GR IR Clearing
2583000 - INR Motor Alstom 22
KW 4 Pole
When we post GRN for traded goods following accounting entries are posted ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS) General Expenses
Respective Business Area where the Material Service is received
COGS account General Expenses Account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit
Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit
Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416320 BA01 General Expenses
56258000 INR
KOEL 85 HP 1800 RPM Engine
2 Credit (96)
130100 BA01 GR IR Clearing
56258000 - INR
KOEL 85 HP 1800 RPM Engine
c) Sub-Contracting Purchase Order ndash In the subndashContracting Purchase Order semindash
finished material is ordered on the Sub-Contractor amp the components are given to SubndashContractor 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 ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 29
Semi ndash Finished
Material
BOM of Semindash
Finished
Material
With without
account
assignment
Sub ndash
Contracting
Purchase Order
Components in
BOM provided to
Vendor for
processing
Transfer of
material to Sub
ndash Contractor
No accounting
entry Stock of
material
provided to
vendor is
updated
GRN of
processed
material
(Quantity)
Inventory of Semi-
Finished material
is updated
Stock of material
provided to
Vendor is
consumed
GRN Value
Inventory of Semi-
Finished material
= Processing
Charges + Value
of BOM
Components
Train Doc KBLCICSAP MM12MM-FI Integration Page 30
Following FI entries are posted during above process ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR Currency
Text of Material
10 Debit
Inventory account of
Semi-finished material
Respective Business Area where the Material is received
Inventory ndash Semi-Finished Goods
(Quantity of Semi-finished material X Processing Charges) + (Inventory Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
20 Credit
Change of Stock
from Sub-Contract
Respective Business Area where the Material is received
Change of Stock from Sub-Contract
(Quantity of Semi-finished material X Processing Charges) + (Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
30 Credit
Inventory of
Components with
Sub-Contractor
Respective Business Area where the Material is received
Inventory of Components with Sub-Contractor
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
40 Debit
Inventory of own
Components
Respective Business Area where the Material is received
Inventory of own Components
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
50 Debit Processing Charges
Other
Respective Business Area where the Material is received
Processing Charges Other
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of received material
60 Credit GR IR Clearing
Respective Business Area where the Material is received
GR IR Clearing Charges
Processing Charges to be paid to Vendor (Quantity of Ordered material X Processing Charges Rate)
INR (for domestic
Purchase)
Material master short text of received material
Train Doc KBLCICSAP MM12MM-FI Integration Page 31
Following is the example of the above transaction ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
235010 BA01 Inventory Semi-Finished Goods
315000 INR BRG Housing 25
13
2 Credit (91)
400040 BA01
Change Stock Semi-Finished
from Sub-Contractor
315000 - INR BRG Housing 25
13
3 Credit (99)
235040 BA01 Inventory of
semi-finished CI Castings
285200 - INR Bearing Housing (Kanban 30 Qty
Bin)
4 Debit (81)
400040 BA01 Change Stock Castings for Sub-Contract
285200 INR Bearing Housing (Kanban 30 Qty
Bin)
5 Credit (96)
130100 BA01 GR IR Clearing 29800 - INR BRG Housing 25
13
6 Debit (86)
411450 BA01 Processing
Charges Other 29800 INR
BRG Housing 25 13
Train Doc KBLCICSAP MM12MM-FI Integration Page 32
d) Import Purchase Order ndash 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 amp 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 ndash Mumbai JNPT Port) After material is cleared from port amp received in Plant GRN is posted Then the customs duty is also inventorised along with the basic price of material amp 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 ndash
Raw material
Valuation class ndash Imported Raw Material
With without account assignment
Import Purchase Order on Overseas Vendor
Customs duties Freight Charges etc of Clearing Agent are invoiced
Planned delivery cost invoice of Import PO is booked when the material arrives at Port
Quantity of Imported Material is updated
GRN is posted when material arrives at Plant (Quantity)
Basic Value of Material + Planned Delivery Costs + Customs Duty
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 33
Following are the FI entries posted when the GRN is posted ndash
Item Posting
Key GL Account Business Area Account Text
Amount in INR
Currency
1 Debit (89)
Inventory account of Imported Raw Material
Business Area where the material has been received
Inventory ndash Imported Raw Material
Quantity of Material X Basic Price of material
INR
2 Credit (96)
GR IR Clearing Account
Business Area where the material has been received
GR IR Clearing
Quantity of Material X Basic Price of material
INR
3 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Basic Customs Duty)
Basic Customs Duty Amount
INR
4 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Ecess on Basic Customs Duty)
Ecess amount on Basic Customs Duty
INR
5 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (SampH Ecess on Basic Customs Duty)
SampH Ecess amount on Basic Customs Duty
INR
6 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing CVD Amount INR
7 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing Ecess on CVD INR
8 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing SampH Ecess of CVD INR
Following is the example of the FI entries of imported material ndash
Item Posting
Key GL Account
Business Area
Account Text Amount in
INR Currency
1 Debit (89)
230110 BA01 Inventory ndash Imported Raw Material
1551800 INR
2 Credit (96)
130100 BA01 GR IR Clearing
1151500 - INR
3 Credit (96)
130120 BA01 Freight Clearing ndash Import
174400 - INR
4 Credit (96)
130120 BA01 Freight Clearing ndash Import
3400 - INR
5 Credit 130120 BA01 Freight Clearing ndash Import 1700 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 34
(96)
6 Credit (50)
130130 BA01 CVD Clearing
214500 - INR
7 Credit (50)
130130 BA01 CVD Clearing
4200 - INR
8 Credit (50)
130130 BA01 CVD Clearing
2100 - INR
e) Stock Transport Purchase Order ndash 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 amp 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR
Currency Plant
10 Credit Inventory Account
Business Area from where material is issued
Inventory of Material
Inventory Amount
INR
Plant from where
material is issued
20 Debit Inventory Account
Business Area where material is received
Inventory of material
Inventory Amount
INR Plant where material is received
Example of above transaction is as below ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Plant
10 Credit (99) 232080 BA05 Inventory of Spares 430250 - INR 2530
20 Debit (89) 232080 BA05 Inventory of Spares 430250 INR 9010
f) Service Purchase Order ndash When a Service Purchase Order (Item Category ndash 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 35
automatically posted by the system (which is based on the accepted service entry sheet) Following is the flow chart for Service Purchase Order ndash
Service Required for Project Cost Center Sale Order
Account assignment data such as Project or WBS Definition Cost Center Number Sale Order Number is maintained
Purchase Order with Item Category D (Service) amp required account assignment (Q K E) is raised
Service Entry sheet is created amp 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 36
Following are the FI postings at the time of accepting Service Entry Sheet ndash
Item Posting
Key GL Account
Business Area
Account Text
Amount in INR
Currency Text
10 Debit Consumption
Account
Business Area from where Service is delivered
Process Charges
Service Charges Amount
INR Service Text
20 Credit GR IR Clearing Account
Business Area where service is delivered
GR IR Clearing
Service Charges Amount
INR Service Text
Following is the example of above transaction ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Text
10 Debit (81) 411420 BA02 Process Charges - Foundry
384780 INR
Service Charges
20 Debit (96) 130100 BA02 GR IR Clearing 384780 -
INR Service Charges
Train Doc KBLCICSAP MM12MM-FI Integration Page 37
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 ndash a) Modvatable Excise Item ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40)
Excise Cenvat
Business Area where the material is received
Cenvat Input P F Basic Excise Duty amount
INR
2 Debit (40)
ECS Cenvat Amount
Business Area where the material is received
Cenvat ED Cess ECS Amount INR
3 Debit (40)
SampH ECS Cenvat Account
Business Area where the material is received
Cenvat SampH Ces-1
SampH ECS Amount
INR
4 Credit (50)
Modvat Clearing Account
Business Area where the material is received
Modvat Clearing Account
Amount equivalent to amount in 1 + 2 + 3
INR
Example of Modvatable excise entries is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40) 244030 BA01 Cenvat Input P F 362900 INR
2 Debit (40) 244031 BA01 Cenvat ED Cess 7300 INR
3 Debit (40) 244034 BA01 Cenvat SampH Ces-1
3600 INR
4 Credit (50) 130150 BA01 Modvat Clearing Account
373800 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 38
b) Trading excisable material received against GRN ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81)
COGS ndash Trading Material
Business Area where the material is received COGS ndash Trading
Material
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
2 Credit (96)
ECS Cenvat Amount
Business Area where the material is received
GR IR Clearing
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
Example of Excise duty inventorised -
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81) 410910 BA01 COGS ndash Trading Motor
433108300 INR
2 Credit (96) 130100 BA01 GR IR Clearing 433108300 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 39
FI entries at Material Consumption When a material is issued to a consumption account (For example ndash Consumption to Production Order Cost Center) the inventory reduces amp 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 ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Credit (99)
231020 BA05 Inventory ndash Other Raw material
15500 - INR
2 Debit (81)
400240 BA05 Consumption ndash Other Raw Material
15500 INR
2) Material consumption posted to Production Order ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Production Order ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (99)
235010 BA01 Inventory ndash Semi Finished Goods
334100 - INR
2 Debit (81)
400290 BA01 Consumption ndash Semi Finished Goods
334100 INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 40
3) Consumption of Stock provided to Sub ndash Contractor for processing of finished material when GRN of processed material is posted ndash
In a sub ndash contracting purchase order a semi finished material is ordered on the sub ndash contractor amp components are provided to the sub ndash 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 amp the concerned FI entries are posted
Train Doc KBLCICSAP MM12MM-FI Integration Page 41
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 amp 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 amp 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 ndash Quantity Variance Price Variance Quality Inspection Manual block date variance and Amount variance The process flow is as below ndash
Purchase Order for Material Service
GRN for Material Service Entry Sheet for Services performed
Purchase Order History
Delivery Costs
Material Master
Vendor Master
GL Account
Assets
Cost Center
Project
Sale Order
Invoice Verification FI Invoice
Document
MM Invoice Document
Further Document
Train Doc KBLCICSAP MM12MM-FI Integration Page 42
Following entries are posted when an invoice for vendor is posted in the system
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (31)
Vendor Account
Business Area Vendor Number
Amount to be paid to Vendor
INR
2 Debit (86)
GR IR Clearing
Business Area GR IR Clearing
GR IR Clearing Amount
INR
3 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash B Excise Duty
INR
4 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash ECS Amount
INR
5 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash SampH ECS Amt
INR
6 Debit (40)
VAT RM Deductible Amount
Business Area from where payment is made
VAT RM Deductible
VAT Amount to be paid to Vendor
INR
Example of above is transaction is as below ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (31) 300664 BA02 WalchandNagar Industries 13590000 - INR
2 Debit (86) 130100 BA02 GR IR Clearing 10000000 INR
3 Debit (40) 130150 Modvat Clearing 1600000 INR
4 Debit (40) 130150 Modvat Clearing 320000 INR
5 Debit (40) 130150 Modvat Clearing 160000 INR
6 Debit (40) 245039 BA02 VAT RM Deductible 1510000 INR
The diagrammatic view of above example is as below ndash
Purchase Order 100 PC at INR 1000 GRN for this PO 100 PC Invoice 100 PC at INR 1000
Goods Receipt
Invoice Receipt
100000 +
20800 +
15100 +
135900 ndash
100000 +
100000 ndash
20800 ndash
Stock Account
GR IR Account
Modvat clearing
VAT
Vendor
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 7
6) Cash Flow ndash 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 ndash The balance sheet shows an enterprise‟s assets liabilities amp
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 ndash Equity refers to owners‟ interest in business such as Capital Stock
Retained Earning Current year net profit loss
9) Relationship between balance sheet amp profit amp loss account ndash Balance sheet amp Profit amp 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 8
D] Formats for financial documents ndash 1) Cash Flow Statement
1) BALANCE SHEET as on 31st March
LIABILITIES (Rs) ASSETS (Rs)
SHARE CAPITAL
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
RESERVES AND SURPLUS
1 Capital Reserves 2 Capital Redemption
Reserve 3 Share Premium Account 4 Other Reserves
Less Debit balance in
profit and loss account
if any 5 Balance in the profit
and loss accounts after
providing for proposed
FIXED ASSETS
1 Goodwill 2 Land 3 Buildings 4 Leaseholds 5 Railway Sidings 6 Plant and Machinery 7 Furniture and Fittings 8 Development of
Property 9 Patents trademarks
and designs 10 Livestock 11 Vehicles etc
INVESTMENTS
1 Investments in Govt
or Trust Securities 2 Investments in shares
debentures or bonds 3 Immovable properties 4 Investments in the
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
Train Doc KBLCICSAP MM12MM-FI Integration Page 9
allocation namely
Dividend Bonus or
Reserves 6 Proposed additions to
Reserves
SECURED LOANS
1 Debentures 2 Loans and Advances
from Banks 3 Loans and Advances
from Subsidiaries 4 Other Loans and
Advances
UNSECURED LOANS
1 Fixed Deposits 2 Loans and Advances
from Subsidiaries 3 Short-term Loans and
Advances a from Banks b from others
4 Other Loans and
Advances a from Banks b from others
CURRENT LIABILITIES amp PROVISIONS
A Current Liabilities 1 Acceptances 2 Sundry Creditors
i Total
outstanding
dues of small
scale industrial
undertaking(s)
ii Total
outstanding
dues of
creditors other
than small
scale industrial
undertaking(s)
capital of partnership
firms 5 Balance of unutilized
monies raised by Issue
CURRENT ASSETS LOANS amp ADVANCES
A Current Assets 1Interest accrued
on investments 2Stores and spare
parts 3Loose tools
4 Stock-in-trade 5 Works-in-
progress 6 Sundry debtors
a Debts
outstanding
for a period
exceeding 6
months bOther debts
Less
Provision 7
a Cash
balance on
hand b Bank
balances B Loans and Advances
8 Advances and
Loans a To
subsidiaries b To
partnership
firms in
which the
coits
subsidiary is
a partner 9 Bills of Exchange 10 Advances
recoverable in
cash or in kind or
for value to be
Train Doc KBLCICSAP MM12MM-FI Integration Page 10
3 Subsidiary
companies 4 Advance
payments and
unexpired
discounts 5 Unclaimed
Dividends 6 Other Liabilities
(if any) 7 Interest accrued
but not due on
loans B Provisions
8 Provision for
Taxation 9 Proposed
Dividends 10 For
contingencies 11 For Provident
Fund Scheme 12 For Insurance
pension and
similar staff
benefit schemes 13 Other provisions
received eg
Rates Taxes
Insurance etc 11 Balances with
Customs Port
Trust etc (where
payable on demand)
MISCELLANEOUS
EXPENDITURE
(to the extent not written off or adjusted)
1 Preliminary Expenses 2 Expenses including
commission brokerage
on underwriting or
subscription of shares
or debentures 3 Discount allowed on
issue of shares or
debentures 4 Interest paid out of
capital during
construction 5 Development
expenditure not
adjusted 6 Other items (Specifying
nature)
PROFIT AND LOSS
ACCOUNT
(Debit Balance)
Total Total
2) PROFIT amp LOSS ACCOUNT For the period ending 01st April to 31st March
Expenditure Particulars Rs Income Particulars Rs
1 Consumption of stores and
spare parts 2 Power and fuel 3 Rent 4 Repairs to building 5 Repairs to machinery 6 Commission paid 7 Depreciation
1 Sales
2 Income from investments
3 Other income
4 Miscellaneous income
5 Net Loss
Train Doc KBLCICSAP MM12MM-FI Integration Page 11
8 Interest on debentures 9 Income tax 10 Net income
TOTAL
XXX
TOTAL
XXX
Train Doc KBLCICSAP MM12MM-FI Integration Page 12
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 companys 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 amp Inventory Management ndash
1) Chart of Accounts ndash This is a list of all GL accounts used by one or several
company codes For each GL account the chart of accounts contains the account number account name and the information that controls how an account functions and how a GL 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 amp 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 ndash The valuation of the material can be done under one of the following areas ndash 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 amp 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 ndash It is the key for account determination that enables a
differentiation for GL 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 GL 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 amp material type can be established by the account category
Train Doc KBLCICSAP MM12MM-FI Integration Page 13
reference The account category reference is a compilation of valuation classes A material type is assigned to only one account category reference GL account determination can be uniformly defined for all material type belonging to a material type
The valuation class for BEARING can be selected as bdquoDOM_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 bdquoIMP_RM‟ (Imported Raw Material) if the material is imported amp the inventory will be maintained as Imported Raw material Inventory
4) General Ledger (GL) Account ndash The central task of GL accounting is to provide a comprehensive picture for external amp accounts
The General Ledger for Domestic Inventory of Raw material is bdquo230120‟ (Inventory ndash Other Raw Material)
5) Cost Center ndash 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 andor responsibility-related standpoints Cost centers are grouped together into decision control amp responsibility unit The activity types are assigned to the cost center
The Cost Center for Foundry Maintenance department of SBG ndash IP is bdquo11011710‟ The costs incurred for the department Foundry Maintenance will be posted to this cost center
6) Profit Center ndash 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-of-sales 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 ndash
i) Purchasing ndash 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 ndash Goods Issue to Production Order Goods Receipt from Production
Order
iii) Other ndash Transfer material to material Goods Issue to Cost Center Sales Order Asset Scrapping Physical Inventory Difference posting
Train Doc KBLCICSAP MM12MM-FI Integration Page 14
These transactions can change the valuation price of material depending upon price control (For example ndash 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 ndash i) Initial Entry of Stock Balances ndash Receipts are valuated at current material price of
using another material price specified externally ii) Goods Receipt for Purchase Order ndash Receipts are valuated at the Purchase order
price (Goods Receipt before Invoice Receipt) iii) Goods Issue ndash Issues are valuated at current material price 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 ndash i) Moving Average price (V) ndash 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 ldquoExpenses revenue from price differencerdquo 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 bdquoBearings‟ are procured from Vendor Hence the material master data of the bearings will have bdquoMoving Average Price‟ control in accounting view
ii) Standard Price (S) ndash 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 ldquoExpenses revenue from price differencerdquo 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 15
Pumps are in-house manufactured in our company hence the material master data of all pumps will have bdquoStandard Price Control‟ in accounting view
Valuation Area details ndash
Valuation Area
Company
Code
Plant Plant
level
valuation
is set-up
in KBL
Train Doc KBLCICSAP MM12MM-FI Integration Page 16
Overview of transactions involved in Material Valuation
Following are the steps involved in Purchasing which are important from material valuation financial point of view ndash
Sr No
Step Description Effect on Materials Management
point Effect from Finance point
1 Purchase Order is created
Vendor is ordered to supply material provide service as per agreed terms amp conditions
Commitment is done with the vendor to pay if he supplies material provides service as per agreed terms
2 Purchase Order is approved
Management approval is given for agreed terms amp conditions
Management approval is given for the financial commitment
3
Material is supplied by the vendor amp GRN is posted for the same
Stock of material (Inventory) increases if material is Inventoried Consumption to cost object is booked if the purchase order is account assigned
Asset (Inventory) is increased GR IR clearing account is credited (which is ultimately the liability to pay money to the vendor as per agreed terms
Goods Receipt
Master Data
Material Master
Vendor
GL Account
Storage Location
Plant
Goods Issue
Transfer Posting
Requirement determined through Material Requirement
Planning
External Procurement Purchasing
Internal Procurement Production
Invoice Receipt
Invoice Verification
Internal amp External Accounting
Train Doc KBLCICSAP MM12MM-FI Integration Page 17
4
Service is provided by the vendor amp service entry sheet is created
Consumption of service is booked to the respective cost object (For example ndash Cost Center)
GR IR clearing account is credited (which is ultimately the liability to pay money to the vendor as per agreed terms
5 Invoice of the vendor is booked in the system
Vendor‟s invoice is checked against the terms amp conditions of the Purchase Order and booked in system so that the vendor can be paid on right time
Vendor account is credited amp GR IR Clearing account is debited (The effective entry is bdquoCredit Vendor Account ndash Debit Inventory‟)
6 Payment is done to the vendor
Liability of the Purchasing organization ends
Debit Vendor Account Credit Bank Account
Following are the steps involved in material movement which are important from financial point of view ndash
Sr No
Transaction Effect from Materials Management point
Effect from Financial point of view
1 Goods Receipt is posted for standard bought out material
Stock of material (Inventory) increases if material is Inventoried Consumption to cost object is booked if the PO is account assigned
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)
2 Goods Receipt posted for sub-contracting material
Stock of the semi-finished material (which was ordered on vendor) increases Consumption of the BOM material (provided to vendor is booked)
Asset (Inventory) of semi-finished 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
3 Goods Receipt posted for Traded Material
Material delivered to customer directly from Vendor (Third Party Transaction)
Cost of Goods sold to customer is booked
4 Goods Issue is posted to Production Order Cost Center
Stock of the material decreases
Material value is booked against the respective cost object (Production Order or Cost Center) as consumption
5 Components transferred to Sub-Contractor
Material provided to vendor for processing amp supplying back the processed goods
No financial entry The inventory is shown as bdquoStock provided to Vendor‟
6 Material delivered to Customer
Finished Goods Traded Goods delivered to customer Own inventory is reduced
Cost of Goods sold to customer is booked
Train Doc KBLCICSAP MM12MM-FI Integration Page 18
Automatic posting of material for Goods Movement
Goods Receipt at
manufacturing plant
Consumption
Storage
Valuation
Valuated
Inventory
posted in Store
Consumption
of material
posted
directly to
consumption
account
Goods Issue
To Production Order
Cost Center
Goods Receipt of Trading
Material against Third Party
Purchase Order
To SD
Delivery
Cost of
Goods Sold
Material cost
posted to
Cost of
Goods Sold
account
Train Doc KBLCICSAP MM12MM-FI Integration Page 19
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 amp the transaction of material posting (For example ndash 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 ndash Imported
Bearings can be accounted in separate account (IMP_RM ndash Imported Raw material) amp Bearing procured from domestic vendor can be accounted in separate account (DOM_RM ndash Domestic Raw Material) The posting transactions for the transactions in Inventory Management amp Invoice Management that are relevant for accounting are fixed Posting records are assigned to event movement type in Inventory Management amp each transaction in Invoice Posting These postings are generalized in a value string (posting rule) Instead of fixed GL account numbers these contain keys for respective posting transaction (such as BSX for a stock posting) The GL account numbers are determined from these keys amp posting transactions
In brief following are the summarized data for influencing factors for account posting
Organizational
Structure
Company
Code
Plant
Chart of Account
Valuation Grouping
Code
Material
Accounting data
for valuation area
Valuation
Class
Material Type
Value
Quantity update
Business
Transaction Goods Movement
Invoice
Verification
Value
String
Transaction
Key
Account
Grouping
Train Doc KBLCICSAP MM12MM-FI Integration Page 20
Material Price Change ndash 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 (amp not the material master change) in which total stock of the plant is revaluated
Train Doc KBLCICSAP MM12MM-FI Integration Page 21
Automatic FI postings at Goods Receipt Following automatic postings are done in the system when the Goods Receipt against Purchase Order are posted ndash
A] Accounting (FI) Entries posted at the time of GRN ndash
a) Raw Material posted to Inventory after posting of GRN ndash 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 amp raw material procured from domestic vendor is kept separate The process flow is as below ndash
Without account assignment
Purchase Order
Raw Material
GRN Quantity
To Store
To Inventory GRN
Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 22
The FI entries posted at GRN are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Raw material Inventory
Respective Business Area where the material is received
Raw material Inventory
(Quantity of material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the material is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of Accounting Entries for Raw material posted to inventory ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Curr
Curr Text
1 Debit (89)
230120 BA01 Inventory ndash Other Raw
Material 510000 INR
BRG 6305 SKF OR EQ
2 Credit (96)
130100 BA01 GR IR Clearing
500000 - INR BRG 6305 SKF
OR EQ
3 Credit (50)
130110 BA01 Freight
Clearing Inland
10000 - INR BRG 6305 SKF
OR EQ
b) Material posted to consumption account after posting of GRN ndash
Following are main account assignment categories (AAC) ndash
AAC Description Required Account Assignment Data
A Asset Main Asset Number amp Sub-Number
K Cost Center Cost Center amp GL Account Number
Q Project WBS Element Number of the Project
E Sale Order Sale Order Number amp Line Number of the Sale Order
Train Doc KBLCICSAP MM12MM-FI Integration Page 23
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 GL 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 ndash
i) Purchase Order with account assignment A (Asset) ndash 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 GL Account in the company‟s balance sheet The GL account is a reconciliation account that means that it reconciles several asset numbers
With account assignment Purchase
Order
Raw Material Non Valuated Material
GRN Quantity
To Store (Raw Material) or To Consumption (Non-valuated material)
Consumption Account
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 24
For Purchase Order with account assignment A (Asset) the entry in FI GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Asset
Respective Business Area where the Asset is received
Asset Number amp Sub Number
(Quantity of Asset X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the asset is received
GR IR Clearing Account
(Quantity of Asset X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the asset is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entries for asset posted ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (70)
211450 BA05
Asset Number 000021000780 Sub Number 0000
3650000 INR
IM-314318325 MOUNTING CASING
2 Credit (96)
130100 BA05 GR IR Clearing 3605000 - INR
IM-314318325 MOUNTING CASING
3 Credit (50)
130110 BA05 Freight Clearing Inland
45000 - INR IM-314318325 MOUNTING CASING
ii) Purchase Order with account assignment K (Cost Center) ndash 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 amp services With account assignment K we need to determine following two additional data to be entered in the PO ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 25
- General Ledger (GL) Account Number We have to determine the expense GL 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 GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of
cost center
Respective Business Area where the Material Service is received
Cost Center account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of
GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of
Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entry for Account Assignment as Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416340 BA08 Legal Exp amp Consult Fees
4200000 INR Visit Charges
2 Credit (96)
130100 BA08 GR IR Clearing
4200000 - INR Visit Charges
iii) Purchase Order with account assignment as Q (Project) ndash
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 amp budgeted We can procure following type of materials against the Project account assignment ndash Raw Semi Finished material (to be inventoried) Traded Material When we procure a raw material (to be inventoried)
Train Doc KBLCICSAP MM12MM-FI Integration Page 26
against the account assignment as Project (Q) then the accounting entries posted are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of the accounting entries ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233040 BA02 Inventory ndash
Other Resale 61080600 INR
MS Flange Dia 1500 mm
2 Credit (96)
130100 BA02 GR IR Clearing
61080600 - INR 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS)
Respective Business Area where the Material Service is received
COGS account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency
Material master short text
Train Doc KBLCICSAP MM12MM-FI Integration Page 27
service is received
(For Imported material)
Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of the accounting entry is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
410920 BA02 COGS ndash Other Resale Article
18340100 INR LTAL PVC
ArmPVCSH Cable
2 Credit (96)
130100 BA02 GR IR Clearing
18340100 - INR LTAL PVC
ArmPVCSH Cable
iv) Purchase Order with account assignment as E (Sale Order) ndash
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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Train Doc KBLCICSAP MM12MM-FI Integration Page 28
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233070 BA01 Inventory ndash
Traded Electric Motor
2583000 INR Motor Alstom 22
KW 4 Pole
2 Credit (96)
130100 BA01 GR IR Clearing
2583000 - INR Motor Alstom 22
KW 4 Pole
When we post GRN for traded goods following accounting entries are posted ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS) General Expenses
Respective Business Area where the Material Service is received
COGS account General Expenses Account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit
Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit
Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416320 BA01 General Expenses
56258000 INR
KOEL 85 HP 1800 RPM Engine
2 Credit (96)
130100 BA01 GR IR Clearing
56258000 - INR
KOEL 85 HP 1800 RPM Engine
c) Sub-Contracting Purchase Order ndash In the subndashContracting Purchase Order semindash
finished material is ordered on the Sub-Contractor amp the components are given to SubndashContractor 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 ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 29
Semi ndash Finished
Material
BOM of Semindash
Finished
Material
With without
account
assignment
Sub ndash
Contracting
Purchase Order
Components in
BOM provided to
Vendor for
processing
Transfer of
material to Sub
ndash Contractor
No accounting
entry Stock of
material
provided to
vendor is
updated
GRN of
processed
material
(Quantity)
Inventory of Semi-
Finished material
is updated
Stock of material
provided to
Vendor is
consumed
GRN Value
Inventory of Semi-
Finished material
= Processing
Charges + Value
of BOM
Components
Train Doc KBLCICSAP MM12MM-FI Integration Page 30
Following FI entries are posted during above process ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR Currency
Text of Material
10 Debit
Inventory account of
Semi-finished material
Respective Business Area where the Material is received
Inventory ndash Semi-Finished Goods
(Quantity of Semi-finished material X Processing Charges) + (Inventory Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
20 Credit
Change of Stock
from Sub-Contract
Respective Business Area where the Material is received
Change of Stock from Sub-Contract
(Quantity of Semi-finished material X Processing Charges) + (Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
30 Credit
Inventory of
Components with
Sub-Contractor
Respective Business Area where the Material is received
Inventory of Components with Sub-Contractor
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
40 Debit
Inventory of own
Components
Respective Business Area where the Material is received
Inventory of own Components
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
50 Debit Processing Charges
Other
Respective Business Area where the Material is received
Processing Charges Other
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of received material
60 Credit GR IR Clearing
Respective Business Area where the Material is received
GR IR Clearing Charges
Processing Charges to be paid to Vendor (Quantity of Ordered material X Processing Charges Rate)
INR (for domestic
Purchase)
Material master short text of received material
Train Doc KBLCICSAP MM12MM-FI Integration Page 31
Following is the example of the above transaction ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
235010 BA01 Inventory Semi-Finished Goods
315000 INR BRG Housing 25
13
2 Credit (91)
400040 BA01
Change Stock Semi-Finished
from Sub-Contractor
315000 - INR BRG Housing 25
13
3 Credit (99)
235040 BA01 Inventory of
semi-finished CI Castings
285200 - INR Bearing Housing (Kanban 30 Qty
Bin)
4 Debit (81)
400040 BA01 Change Stock Castings for Sub-Contract
285200 INR Bearing Housing (Kanban 30 Qty
Bin)
5 Credit (96)
130100 BA01 GR IR Clearing 29800 - INR BRG Housing 25
13
6 Debit (86)
411450 BA01 Processing
Charges Other 29800 INR
BRG Housing 25 13
Train Doc KBLCICSAP MM12MM-FI Integration Page 32
d) Import Purchase Order ndash 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 amp 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 ndash Mumbai JNPT Port) After material is cleared from port amp received in Plant GRN is posted Then the customs duty is also inventorised along with the basic price of material amp 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 ndash
Raw material
Valuation class ndash Imported Raw Material
With without account assignment
Import Purchase Order on Overseas Vendor
Customs duties Freight Charges etc of Clearing Agent are invoiced
Planned delivery cost invoice of Import PO is booked when the material arrives at Port
Quantity of Imported Material is updated
GRN is posted when material arrives at Plant (Quantity)
Basic Value of Material + Planned Delivery Costs + Customs Duty
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 33
Following are the FI entries posted when the GRN is posted ndash
Item Posting
Key GL Account Business Area Account Text
Amount in INR
Currency
1 Debit (89)
Inventory account of Imported Raw Material
Business Area where the material has been received
Inventory ndash Imported Raw Material
Quantity of Material X Basic Price of material
INR
2 Credit (96)
GR IR Clearing Account
Business Area where the material has been received
GR IR Clearing
Quantity of Material X Basic Price of material
INR
3 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Basic Customs Duty)
Basic Customs Duty Amount
INR
4 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Ecess on Basic Customs Duty)
Ecess amount on Basic Customs Duty
INR
5 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (SampH Ecess on Basic Customs Duty)
SampH Ecess amount on Basic Customs Duty
INR
6 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing CVD Amount INR
7 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing Ecess on CVD INR
8 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing SampH Ecess of CVD INR
Following is the example of the FI entries of imported material ndash
Item Posting
Key GL Account
Business Area
Account Text Amount in
INR Currency
1 Debit (89)
230110 BA01 Inventory ndash Imported Raw Material
1551800 INR
2 Credit (96)
130100 BA01 GR IR Clearing
1151500 - INR
3 Credit (96)
130120 BA01 Freight Clearing ndash Import
174400 - INR
4 Credit (96)
130120 BA01 Freight Clearing ndash Import
3400 - INR
5 Credit 130120 BA01 Freight Clearing ndash Import 1700 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 34
(96)
6 Credit (50)
130130 BA01 CVD Clearing
214500 - INR
7 Credit (50)
130130 BA01 CVD Clearing
4200 - INR
8 Credit (50)
130130 BA01 CVD Clearing
2100 - INR
e) Stock Transport Purchase Order ndash 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 amp 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR
Currency Plant
10 Credit Inventory Account
Business Area from where material is issued
Inventory of Material
Inventory Amount
INR
Plant from where
material is issued
20 Debit Inventory Account
Business Area where material is received
Inventory of material
Inventory Amount
INR Plant where material is received
Example of above transaction is as below ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Plant
10 Credit (99) 232080 BA05 Inventory of Spares 430250 - INR 2530
20 Debit (89) 232080 BA05 Inventory of Spares 430250 INR 9010
f) Service Purchase Order ndash When a Service Purchase Order (Item Category ndash 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 35
automatically posted by the system (which is based on the accepted service entry sheet) Following is the flow chart for Service Purchase Order ndash
Service Required for Project Cost Center Sale Order
Account assignment data such as Project or WBS Definition Cost Center Number Sale Order Number is maintained
Purchase Order with Item Category D (Service) amp required account assignment (Q K E) is raised
Service Entry sheet is created amp 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 36
Following are the FI postings at the time of accepting Service Entry Sheet ndash
Item Posting
Key GL Account
Business Area
Account Text
Amount in INR
Currency Text
10 Debit Consumption
Account
Business Area from where Service is delivered
Process Charges
Service Charges Amount
INR Service Text
20 Credit GR IR Clearing Account
Business Area where service is delivered
GR IR Clearing
Service Charges Amount
INR Service Text
Following is the example of above transaction ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Text
10 Debit (81) 411420 BA02 Process Charges - Foundry
384780 INR
Service Charges
20 Debit (96) 130100 BA02 GR IR Clearing 384780 -
INR Service Charges
Train Doc KBLCICSAP MM12MM-FI Integration Page 37
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 ndash a) Modvatable Excise Item ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40)
Excise Cenvat
Business Area where the material is received
Cenvat Input P F Basic Excise Duty amount
INR
2 Debit (40)
ECS Cenvat Amount
Business Area where the material is received
Cenvat ED Cess ECS Amount INR
3 Debit (40)
SampH ECS Cenvat Account
Business Area where the material is received
Cenvat SampH Ces-1
SampH ECS Amount
INR
4 Credit (50)
Modvat Clearing Account
Business Area where the material is received
Modvat Clearing Account
Amount equivalent to amount in 1 + 2 + 3
INR
Example of Modvatable excise entries is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40) 244030 BA01 Cenvat Input P F 362900 INR
2 Debit (40) 244031 BA01 Cenvat ED Cess 7300 INR
3 Debit (40) 244034 BA01 Cenvat SampH Ces-1
3600 INR
4 Credit (50) 130150 BA01 Modvat Clearing Account
373800 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 38
b) Trading excisable material received against GRN ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81)
COGS ndash Trading Material
Business Area where the material is received COGS ndash Trading
Material
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
2 Credit (96)
ECS Cenvat Amount
Business Area where the material is received
GR IR Clearing
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
Example of Excise duty inventorised -
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81) 410910 BA01 COGS ndash Trading Motor
433108300 INR
2 Credit (96) 130100 BA01 GR IR Clearing 433108300 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 39
FI entries at Material Consumption When a material is issued to a consumption account (For example ndash Consumption to Production Order Cost Center) the inventory reduces amp 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 ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Credit (99)
231020 BA05 Inventory ndash Other Raw material
15500 - INR
2 Debit (81)
400240 BA05 Consumption ndash Other Raw Material
15500 INR
2) Material consumption posted to Production Order ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Production Order ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (99)
235010 BA01 Inventory ndash Semi Finished Goods
334100 - INR
2 Debit (81)
400290 BA01 Consumption ndash Semi Finished Goods
334100 INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 40
3) Consumption of Stock provided to Sub ndash Contractor for processing of finished material when GRN of processed material is posted ndash
In a sub ndash contracting purchase order a semi finished material is ordered on the sub ndash contractor amp components are provided to the sub ndash 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 amp the concerned FI entries are posted
Train Doc KBLCICSAP MM12MM-FI Integration Page 41
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 amp 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 amp 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 ndash Quantity Variance Price Variance Quality Inspection Manual block date variance and Amount variance The process flow is as below ndash
Purchase Order for Material Service
GRN for Material Service Entry Sheet for Services performed
Purchase Order History
Delivery Costs
Material Master
Vendor Master
GL Account
Assets
Cost Center
Project
Sale Order
Invoice Verification FI Invoice
Document
MM Invoice Document
Further Document
Train Doc KBLCICSAP MM12MM-FI Integration Page 42
Following entries are posted when an invoice for vendor is posted in the system
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (31)
Vendor Account
Business Area Vendor Number
Amount to be paid to Vendor
INR
2 Debit (86)
GR IR Clearing
Business Area GR IR Clearing
GR IR Clearing Amount
INR
3 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash B Excise Duty
INR
4 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash ECS Amount
INR
5 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash SampH ECS Amt
INR
6 Debit (40)
VAT RM Deductible Amount
Business Area from where payment is made
VAT RM Deductible
VAT Amount to be paid to Vendor
INR
Example of above is transaction is as below ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (31) 300664 BA02 WalchandNagar Industries 13590000 - INR
2 Debit (86) 130100 BA02 GR IR Clearing 10000000 INR
3 Debit (40) 130150 Modvat Clearing 1600000 INR
4 Debit (40) 130150 Modvat Clearing 320000 INR
5 Debit (40) 130150 Modvat Clearing 160000 INR
6 Debit (40) 245039 BA02 VAT RM Deductible 1510000 INR
The diagrammatic view of above example is as below ndash
Purchase Order 100 PC at INR 1000 GRN for this PO 100 PC Invoice 100 PC at INR 1000
Goods Receipt
Invoice Receipt
100000 +
20800 +
15100 +
135900 ndash
100000 +
100000 ndash
20800 ndash
Stock Account
GR IR Account
Modvat clearing
VAT
Vendor
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 8
D] Formats for financial documents ndash 1) Cash Flow Statement
1) BALANCE SHEET as on 31st March
LIABILITIES (Rs) ASSETS (Rs)
SHARE CAPITAL
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
RESERVES AND SURPLUS
1 Capital Reserves 2 Capital Redemption
Reserve 3 Share Premium Account 4 Other Reserves
Less Debit balance in
profit and loss account
if any 5 Balance in the profit
and loss accounts after
providing for proposed
FIXED ASSETS
1 Goodwill 2 Land 3 Buildings 4 Leaseholds 5 Railway Sidings 6 Plant and Machinery 7 Furniture and Fittings 8 Development of
Property 9 Patents trademarks
and designs 10 Livestock 11 Vehicles etc
INVESTMENTS
1 Investments in Govt
or Trust Securities 2 Investments in shares
debentures or bonds 3 Immovable properties 4 Investments in the
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
Train Doc KBLCICSAP MM12MM-FI Integration Page 9
allocation namely
Dividend Bonus or
Reserves 6 Proposed additions to
Reserves
SECURED LOANS
1 Debentures 2 Loans and Advances
from Banks 3 Loans and Advances
from Subsidiaries 4 Other Loans and
Advances
UNSECURED LOANS
1 Fixed Deposits 2 Loans and Advances
from Subsidiaries 3 Short-term Loans and
Advances a from Banks b from others
4 Other Loans and
Advances a from Banks b from others
CURRENT LIABILITIES amp PROVISIONS
A Current Liabilities 1 Acceptances 2 Sundry Creditors
i Total
outstanding
dues of small
scale industrial
undertaking(s)
ii Total
outstanding
dues of
creditors other
than small
scale industrial
undertaking(s)
capital of partnership
firms 5 Balance of unutilized
monies raised by Issue
CURRENT ASSETS LOANS amp ADVANCES
A Current Assets 1Interest accrued
on investments 2Stores and spare
parts 3Loose tools
4 Stock-in-trade 5 Works-in-
progress 6 Sundry debtors
a Debts
outstanding
for a period
exceeding 6
months bOther debts
Less
Provision 7
a Cash
balance on
hand b Bank
balances B Loans and Advances
8 Advances and
Loans a To
subsidiaries b To
partnership
firms in
which the
coits
subsidiary is
a partner 9 Bills of Exchange 10 Advances
recoverable in
cash or in kind or
for value to be
Train Doc KBLCICSAP MM12MM-FI Integration Page 10
3 Subsidiary
companies 4 Advance
payments and
unexpired
discounts 5 Unclaimed
Dividends 6 Other Liabilities
(if any) 7 Interest accrued
but not due on
loans B Provisions
8 Provision for
Taxation 9 Proposed
Dividends 10 For
contingencies 11 For Provident
Fund Scheme 12 For Insurance
pension and
similar staff
benefit schemes 13 Other provisions
received eg
Rates Taxes
Insurance etc 11 Balances with
Customs Port
Trust etc (where
payable on demand)
MISCELLANEOUS
EXPENDITURE
(to the extent not written off or adjusted)
1 Preliminary Expenses 2 Expenses including
commission brokerage
on underwriting or
subscription of shares
or debentures 3 Discount allowed on
issue of shares or
debentures 4 Interest paid out of
capital during
construction 5 Development
expenditure not
adjusted 6 Other items (Specifying
nature)
PROFIT AND LOSS
ACCOUNT
(Debit Balance)
Total Total
2) PROFIT amp LOSS ACCOUNT For the period ending 01st April to 31st March
Expenditure Particulars Rs Income Particulars Rs
1 Consumption of stores and
spare parts 2 Power and fuel 3 Rent 4 Repairs to building 5 Repairs to machinery 6 Commission paid 7 Depreciation
1 Sales
2 Income from investments
3 Other income
4 Miscellaneous income
5 Net Loss
Train Doc KBLCICSAP MM12MM-FI Integration Page 11
8 Interest on debentures 9 Income tax 10 Net income
TOTAL
XXX
TOTAL
XXX
Train Doc KBLCICSAP MM12MM-FI Integration Page 12
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 companys 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 amp Inventory Management ndash
1) Chart of Accounts ndash This is a list of all GL accounts used by one or several
company codes For each GL account the chart of accounts contains the account number account name and the information that controls how an account functions and how a GL 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 amp 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 ndash The valuation of the material can be done under one of the following areas ndash 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 amp 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 ndash It is the key for account determination that enables a
differentiation for GL 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 GL 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 amp material type can be established by the account category
Train Doc KBLCICSAP MM12MM-FI Integration Page 13
reference The account category reference is a compilation of valuation classes A material type is assigned to only one account category reference GL account determination can be uniformly defined for all material type belonging to a material type
The valuation class for BEARING can be selected as bdquoDOM_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 bdquoIMP_RM‟ (Imported Raw Material) if the material is imported amp the inventory will be maintained as Imported Raw material Inventory
4) General Ledger (GL) Account ndash The central task of GL accounting is to provide a comprehensive picture for external amp accounts
The General Ledger for Domestic Inventory of Raw material is bdquo230120‟ (Inventory ndash Other Raw Material)
5) Cost Center ndash 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 andor responsibility-related standpoints Cost centers are grouped together into decision control amp responsibility unit The activity types are assigned to the cost center
The Cost Center for Foundry Maintenance department of SBG ndash IP is bdquo11011710‟ The costs incurred for the department Foundry Maintenance will be posted to this cost center
6) Profit Center ndash 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-of-sales 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 ndash
i) Purchasing ndash 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 ndash Goods Issue to Production Order Goods Receipt from Production
Order
iii) Other ndash Transfer material to material Goods Issue to Cost Center Sales Order Asset Scrapping Physical Inventory Difference posting
Train Doc KBLCICSAP MM12MM-FI Integration Page 14
These transactions can change the valuation price of material depending upon price control (For example ndash 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 ndash i) Initial Entry of Stock Balances ndash Receipts are valuated at current material price of
using another material price specified externally ii) Goods Receipt for Purchase Order ndash Receipts are valuated at the Purchase order
price (Goods Receipt before Invoice Receipt) iii) Goods Issue ndash Issues are valuated at current material price 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 ndash i) Moving Average price (V) ndash 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 ldquoExpenses revenue from price differencerdquo 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 bdquoBearings‟ are procured from Vendor Hence the material master data of the bearings will have bdquoMoving Average Price‟ control in accounting view
ii) Standard Price (S) ndash 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 ldquoExpenses revenue from price differencerdquo 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 15
Pumps are in-house manufactured in our company hence the material master data of all pumps will have bdquoStandard Price Control‟ in accounting view
Valuation Area details ndash
Valuation Area
Company
Code
Plant Plant
level
valuation
is set-up
in KBL
Train Doc KBLCICSAP MM12MM-FI Integration Page 16
Overview of transactions involved in Material Valuation
Following are the steps involved in Purchasing which are important from material valuation financial point of view ndash
Sr No
Step Description Effect on Materials Management
point Effect from Finance point
1 Purchase Order is created
Vendor is ordered to supply material provide service as per agreed terms amp conditions
Commitment is done with the vendor to pay if he supplies material provides service as per agreed terms
2 Purchase Order is approved
Management approval is given for agreed terms amp conditions
Management approval is given for the financial commitment
3
Material is supplied by the vendor amp GRN is posted for the same
Stock of material (Inventory) increases if material is Inventoried Consumption to cost object is booked if the purchase order is account assigned
Asset (Inventory) is increased GR IR clearing account is credited (which is ultimately the liability to pay money to the vendor as per agreed terms
Goods Receipt
Master Data
Material Master
Vendor
GL Account
Storage Location
Plant
Goods Issue
Transfer Posting
Requirement determined through Material Requirement
Planning
External Procurement Purchasing
Internal Procurement Production
Invoice Receipt
Invoice Verification
Internal amp External Accounting
Train Doc KBLCICSAP MM12MM-FI Integration Page 17
4
Service is provided by the vendor amp service entry sheet is created
Consumption of service is booked to the respective cost object (For example ndash Cost Center)
GR IR clearing account is credited (which is ultimately the liability to pay money to the vendor as per agreed terms
5 Invoice of the vendor is booked in the system
Vendor‟s invoice is checked against the terms amp conditions of the Purchase Order and booked in system so that the vendor can be paid on right time
Vendor account is credited amp GR IR Clearing account is debited (The effective entry is bdquoCredit Vendor Account ndash Debit Inventory‟)
6 Payment is done to the vendor
Liability of the Purchasing organization ends
Debit Vendor Account Credit Bank Account
Following are the steps involved in material movement which are important from financial point of view ndash
Sr No
Transaction Effect from Materials Management point
Effect from Financial point of view
1 Goods Receipt is posted for standard bought out material
Stock of material (Inventory) increases if material is Inventoried Consumption to cost object is booked if the PO is account assigned
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)
2 Goods Receipt posted for sub-contracting material
Stock of the semi-finished material (which was ordered on vendor) increases Consumption of the BOM material (provided to vendor is booked)
Asset (Inventory) of semi-finished 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
3 Goods Receipt posted for Traded Material
Material delivered to customer directly from Vendor (Third Party Transaction)
Cost of Goods sold to customer is booked
4 Goods Issue is posted to Production Order Cost Center
Stock of the material decreases
Material value is booked against the respective cost object (Production Order or Cost Center) as consumption
5 Components transferred to Sub-Contractor
Material provided to vendor for processing amp supplying back the processed goods
No financial entry The inventory is shown as bdquoStock provided to Vendor‟
6 Material delivered to Customer
Finished Goods Traded Goods delivered to customer Own inventory is reduced
Cost of Goods sold to customer is booked
Train Doc KBLCICSAP MM12MM-FI Integration Page 18
Automatic posting of material for Goods Movement
Goods Receipt at
manufacturing plant
Consumption
Storage
Valuation
Valuated
Inventory
posted in Store
Consumption
of material
posted
directly to
consumption
account
Goods Issue
To Production Order
Cost Center
Goods Receipt of Trading
Material against Third Party
Purchase Order
To SD
Delivery
Cost of
Goods Sold
Material cost
posted to
Cost of
Goods Sold
account
Train Doc KBLCICSAP MM12MM-FI Integration Page 19
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 amp the transaction of material posting (For example ndash 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 ndash Imported
Bearings can be accounted in separate account (IMP_RM ndash Imported Raw material) amp Bearing procured from domestic vendor can be accounted in separate account (DOM_RM ndash Domestic Raw Material) The posting transactions for the transactions in Inventory Management amp Invoice Management that are relevant for accounting are fixed Posting records are assigned to event movement type in Inventory Management amp each transaction in Invoice Posting These postings are generalized in a value string (posting rule) Instead of fixed GL account numbers these contain keys for respective posting transaction (such as BSX for a stock posting) The GL account numbers are determined from these keys amp posting transactions
In brief following are the summarized data for influencing factors for account posting
Organizational
Structure
Company
Code
Plant
Chart of Account
Valuation Grouping
Code
Material
Accounting data
for valuation area
Valuation
Class
Material Type
Value
Quantity update
Business
Transaction Goods Movement
Invoice
Verification
Value
String
Transaction
Key
Account
Grouping
Train Doc KBLCICSAP MM12MM-FI Integration Page 20
Material Price Change ndash 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 (amp not the material master change) in which total stock of the plant is revaluated
Train Doc KBLCICSAP MM12MM-FI Integration Page 21
Automatic FI postings at Goods Receipt Following automatic postings are done in the system when the Goods Receipt against Purchase Order are posted ndash
A] Accounting (FI) Entries posted at the time of GRN ndash
a) Raw Material posted to Inventory after posting of GRN ndash 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 amp raw material procured from domestic vendor is kept separate The process flow is as below ndash
Without account assignment
Purchase Order
Raw Material
GRN Quantity
To Store
To Inventory GRN
Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 22
The FI entries posted at GRN are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Raw material Inventory
Respective Business Area where the material is received
Raw material Inventory
(Quantity of material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the material is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of Accounting Entries for Raw material posted to inventory ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Curr
Curr Text
1 Debit (89)
230120 BA01 Inventory ndash Other Raw
Material 510000 INR
BRG 6305 SKF OR EQ
2 Credit (96)
130100 BA01 GR IR Clearing
500000 - INR BRG 6305 SKF
OR EQ
3 Credit (50)
130110 BA01 Freight
Clearing Inland
10000 - INR BRG 6305 SKF
OR EQ
b) Material posted to consumption account after posting of GRN ndash
Following are main account assignment categories (AAC) ndash
AAC Description Required Account Assignment Data
A Asset Main Asset Number amp Sub-Number
K Cost Center Cost Center amp GL Account Number
Q Project WBS Element Number of the Project
E Sale Order Sale Order Number amp Line Number of the Sale Order
Train Doc KBLCICSAP MM12MM-FI Integration Page 23
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 GL 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 ndash
i) Purchase Order with account assignment A (Asset) ndash 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 GL Account in the company‟s balance sheet The GL account is a reconciliation account that means that it reconciles several asset numbers
With account assignment Purchase
Order
Raw Material Non Valuated Material
GRN Quantity
To Store (Raw Material) or To Consumption (Non-valuated material)
Consumption Account
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 24
For Purchase Order with account assignment A (Asset) the entry in FI GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Asset
Respective Business Area where the Asset is received
Asset Number amp Sub Number
(Quantity of Asset X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the asset is received
GR IR Clearing Account
(Quantity of Asset X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the asset is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entries for asset posted ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (70)
211450 BA05
Asset Number 000021000780 Sub Number 0000
3650000 INR
IM-314318325 MOUNTING CASING
2 Credit (96)
130100 BA05 GR IR Clearing 3605000 - INR
IM-314318325 MOUNTING CASING
3 Credit (50)
130110 BA05 Freight Clearing Inland
45000 - INR IM-314318325 MOUNTING CASING
ii) Purchase Order with account assignment K (Cost Center) ndash 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 amp services With account assignment K we need to determine following two additional data to be entered in the PO ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 25
- General Ledger (GL) Account Number We have to determine the expense GL 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 GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of
cost center
Respective Business Area where the Material Service is received
Cost Center account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of
GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of
Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entry for Account Assignment as Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416340 BA08 Legal Exp amp Consult Fees
4200000 INR Visit Charges
2 Credit (96)
130100 BA08 GR IR Clearing
4200000 - INR Visit Charges
iii) Purchase Order with account assignment as Q (Project) ndash
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 amp budgeted We can procure following type of materials against the Project account assignment ndash Raw Semi Finished material (to be inventoried) Traded Material When we procure a raw material (to be inventoried)
Train Doc KBLCICSAP MM12MM-FI Integration Page 26
against the account assignment as Project (Q) then the accounting entries posted are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of the accounting entries ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233040 BA02 Inventory ndash
Other Resale 61080600 INR
MS Flange Dia 1500 mm
2 Credit (96)
130100 BA02 GR IR Clearing
61080600 - INR 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS)
Respective Business Area where the Material Service is received
COGS account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency
Material master short text
Train Doc KBLCICSAP MM12MM-FI Integration Page 27
service is received
(For Imported material)
Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of the accounting entry is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
410920 BA02 COGS ndash Other Resale Article
18340100 INR LTAL PVC
ArmPVCSH Cable
2 Credit (96)
130100 BA02 GR IR Clearing
18340100 - INR LTAL PVC
ArmPVCSH Cable
iv) Purchase Order with account assignment as E (Sale Order) ndash
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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Train Doc KBLCICSAP MM12MM-FI Integration Page 28
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233070 BA01 Inventory ndash
Traded Electric Motor
2583000 INR Motor Alstom 22
KW 4 Pole
2 Credit (96)
130100 BA01 GR IR Clearing
2583000 - INR Motor Alstom 22
KW 4 Pole
When we post GRN for traded goods following accounting entries are posted ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS) General Expenses
Respective Business Area where the Material Service is received
COGS account General Expenses Account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit
Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit
Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416320 BA01 General Expenses
56258000 INR
KOEL 85 HP 1800 RPM Engine
2 Credit (96)
130100 BA01 GR IR Clearing
56258000 - INR
KOEL 85 HP 1800 RPM Engine
c) Sub-Contracting Purchase Order ndash In the subndashContracting Purchase Order semindash
finished material is ordered on the Sub-Contractor amp the components are given to SubndashContractor 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 ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 29
Semi ndash Finished
Material
BOM of Semindash
Finished
Material
With without
account
assignment
Sub ndash
Contracting
Purchase Order
Components in
BOM provided to
Vendor for
processing
Transfer of
material to Sub
ndash Contractor
No accounting
entry Stock of
material
provided to
vendor is
updated
GRN of
processed
material
(Quantity)
Inventory of Semi-
Finished material
is updated
Stock of material
provided to
Vendor is
consumed
GRN Value
Inventory of Semi-
Finished material
= Processing
Charges + Value
of BOM
Components
Train Doc KBLCICSAP MM12MM-FI Integration Page 30
Following FI entries are posted during above process ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR Currency
Text of Material
10 Debit
Inventory account of
Semi-finished material
Respective Business Area where the Material is received
Inventory ndash Semi-Finished Goods
(Quantity of Semi-finished material X Processing Charges) + (Inventory Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
20 Credit
Change of Stock
from Sub-Contract
Respective Business Area where the Material is received
Change of Stock from Sub-Contract
(Quantity of Semi-finished material X Processing Charges) + (Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
30 Credit
Inventory of
Components with
Sub-Contractor
Respective Business Area where the Material is received
Inventory of Components with Sub-Contractor
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
40 Debit
Inventory of own
Components
Respective Business Area where the Material is received
Inventory of own Components
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
50 Debit Processing Charges
Other
Respective Business Area where the Material is received
Processing Charges Other
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of received material
60 Credit GR IR Clearing
Respective Business Area where the Material is received
GR IR Clearing Charges
Processing Charges to be paid to Vendor (Quantity of Ordered material X Processing Charges Rate)
INR (for domestic
Purchase)
Material master short text of received material
Train Doc KBLCICSAP MM12MM-FI Integration Page 31
Following is the example of the above transaction ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
235010 BA01 Inventory Semi-Finished Goods
315000 INR BRG Housing 25
13
2 Credit (91)
400040 BA01
Change Stock Semi-Finished
from Sub-Contractor
315000 - INR BRG Housing 25
13
3 Credit (99)
235040 BA01 Inventory of
semi-finished CI Castings
285200 - INR Bearing Housing (Kanban 30 Qty
Bin)
4 Debit (81)
400040 BA01 Change Stock Castings for Sub-Contract
285200 INR Bearing Housing (Kanban 30 Qty
Bin)
5 Credit (96)
130100 BA01 GR IR Clearing 29800 - INR BRG Housing 25
13
6 Debit (86)
411450 BA01 Processing
Charges Other 29800 INR
BRG Housing 25 13
Train Doc KBLCICSAP MM12MM-FI Integration Page 32
d) Import Purchase Order ndash 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 amp 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 ndash Mumbai JNPT Port) After material is cleared from port amp received in Plant GRN is posted Then the customs duty is also inventorised along with the basic price of material amp 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 ndash
Raw material
Valuation class ndash Imported Raw Material
With without account assignment
Import Purchase Order on Overseas Vendor
Customs duties Freight Charges etc of Clearing Agent are invoiced
Planned delivery cost invoice of Import PO is booked when the material arrives at Port
Quantity of Imported Material is updated
GRN is posted when material arrives at Plant (Quantity)
Basic Value of Material + Planned Delivery Costs + Customs Duty
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 33
Following are the FI entries posted when the GRN is posted ndash
Item Posting
Key GL Account Business Area Account Text
Amount in INR
Currency
1 Debit (89)
Inventory account of Imported Raw Material
Business Area where the material has been received
Inventory ndash Imported Raw Material
Quantity of Material X Basic Price of material
INR
2 Credit (96)
GR IR Clearing Account
Business Area where the material has been received
GR IR Clearing
Quantity of Material X Basic Price of material
INR
3 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Basic Customs Duty)
Basic Customs Duty Amount
INR
4 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Ecess on Basic Customs Duty)
Ecess amount on Basic Customs Duty
INR
5 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (SampH Ecess on Basic Customs Duty)
SampH Ecess amount on Basic Customs Duty
INR
6 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing CVD Amount INR
7 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing Ecess on CVD INR
8 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing SampH Ecess of CVD INR
Following is the example of the FI entries of imported material ndash
Item Posting
Key GL Account
Business Area
Account Text Amount in
INR Currency
1 Debit (89)
230110 BA01 Inventory ndash Imported Raw Material
1551800 INR
2 Credit (96)
130100 BA01 GR IR Clearing
1151500 - INR
3 Credit (96)
130120 BA01 Freight Clearing ndash Import
174400 - INR
4 Credit (96)
130120 BA01 Freight Clearing ndash Import
3400 - INR
5 Credit 130120 BA01 Freight Clearing ndash Import 1700 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 34
(96)
6 Credit (50)
130130 BA01 CVD Clearing
214500 - INR
7 Credit (50)
130130 BA01 CVD Clearing
4200 - INR
8 Credit (50)
130130 BA01 CVD Clearing
2100 - INR
e) Stock Transport Purchase Order ndash 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 amp 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR
Currency Plant
10 Credit Inventory Account
Business Area from where material is issued
Inventory of Material
Inventory Amount
INR
Plant from where
material is issued
20 Debit Inventory Account
Business Area where material is received
Inventory of material
Inventory Amount
INR Plant where material is received
Example of above transaction is as below ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Plant
10 Credit (99) 232080 BA05 Inventory of Spares 430250 - INR 2530
20 Debit (89) 232080 BA05 Inventory of Spares 430250 INR 9010
f) Service Purchase Order ndash When a Service Purchase Order (Item Category ndash 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 35
automatically posted by the system (which is based on the accepted service entry sheet) Following is the flow chart for Service Purchase Order ndash
Service Required for Project Cost Center Sale Order
Account assignment data such as Project or WBS Definition Cost Center Number Sale Order Number is maintained
Purchase Order with Item Category D (Service) amp required account assignment (Q K E) is raised
Service Entry sheet is created amp 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 36
Following are the FI postings at the time of accepting Service Entry Sheet ndash
Item Posting
Key GL Account
Business Area
Account Text
Amount in INR
Currency Text
10 Debit Consumption
Account
Business Area from where Service is delivered
Process Charges
Service Charges Amount
INR Service Text
20 Credit GR IR Clearing Account
Business Area where service is delivered
GR IR Clearing
Service Charges Amount
INR Service Text
Following is the example of above transaction ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Text
10 Debit (81) 411420 BA02 Process Charges - Foundry
384780 INR
Service Charges
20 Debit (96) 130100 BA02 GR IR Clearing 384780 -
INR Service Charges
Train Doc KBLCICSAP MM12MM-FI Integration Page 37
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 ndash a) Modvatable Excise Item ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40)
Excise Cenvat
Business Area where the material is received
Cenvat Input P F Basic Excise Duty amount
INR
2 Debit (40)
ECS Cenvat Amount
Business Area where the material is received
Cenvat ED Cess ECS Amount INR
3 Debit (40)
SampH ECS Cenvat Account
Business Area where the material is received
Cenvat SampH Ces-1
SampH ECS Amount
INR
4 Credit (50)
Modvat Clearing Account
Business Area where the material is received
Modvat Clearing Account
Amount equivalent to amount in 1 + 2 + 3
INR
Example of Modvatable excise entries is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40) 244030 BA01 Cenvat Input P F 362900 INR
2 Debit (40) 244031 BA01 Cenvat ED Cess 7300 INR
3 Debit (40) 244034 BA01 Cenvat SampH Ces-1
3600 INR
4 Credit (50) 130150 BA01 Modvat Clearing Account
373800 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 38
b) Trading excisable material received against GRN ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81)
COGS ndash Trading Material
Business Area where the material is received COGS ndash Trading
Material
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
2 Credit (96)
ECS Cenvat Amount
Business Area where the material is received
GR IR Clearing
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
Example of Excise duty inventorised -
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81) 410910 BA01 COGS ndash Trading Motor
433108300 INR
2 Credit (96) 130100 BA01 GR IR Clearing 433108300 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 39
FI entries at Material Consumption When a material is issued to a consumption account (For example ndash Consumption to Production Order Cost Center) the inventory reduces amp 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 ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Credit (99)
231020 BA05 Inventory ndash Other Raw material
15500 - INR
2 Debit (81)
400240 BA05 Consumption ndash Other Raw Material
15500 INR
2) Material consumption posted to Production Order ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Production Order ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (99)
235010 BA01 Inventory ndash Semi Finished Goods
334100 - INR
2 Debit (81)
400290 BA01 Consumption ndash Semi Finished Goods
334100 INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 40
3) Consumption of Stock provided to Sub ndash Contractor for processing of finished material when GRN of processed material is posted ndash
In a sub ndash contracting purchase order a semi finished material is ordered on the sub ndash contractor amp components are provided to the sub ndash 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 amp the concerned FI entries are posted
Train Doc KBLCICSAP MM12MM-FI Integration Page 41
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 amp 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 amp 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 ndash Quantity Variance Price Variance Quality Inspection Manual block date variance and Amount variance The process flow is as below ndash
Purchase Order for Material Service
GRN for Material Service Entry Sheet for Services performed
Purchase Order History
Delivery Costs
Material Master
Vendor Master
GL Account
Assets
Cost Center
Project
Sale Order
Invoice Verification FI Invoice
Document
MM Invoice Document
Further Document
Train Doc KBLCICSAP MM12MM-FI Integration Page 42
Following entries are posted when an invoice for vendor is posted in the system
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (31)
Vendor Account
Business Area Vendor Number
Amount to be paid to Vendor
INR
2 Debit (86)
GR IR Clearing
Business Area GR IR Clearing
GR IR Clearing Amount
INR
3 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash B Excise Duty
INR
4 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash ECS Amount
INR
5 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash SampH ECS Amt
INR
6 Debit (40)
VAT RM Deductible Amount
Business Area from where payment is made
VAT RM Deductible
VAT Amount to be paid to Vendor
INR
Example of above is transaction is as below ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (31) 300664 BA02 WalchandNagar Industries 13590000 - INR
2 Debit (86) 130100 BA02 GR IR Clearing 10000000 INR
3 Debit (40) 130150 Modvat Clearing 1600000 INR
4 Debit (40) 130150 Modvat Clearing 320000 INR
5 Debit (40) 130150 Modvat Clearing 160000 INR
6 Debit (40) 245039 BA02 VAT RM Deductible 1510000 INR
The diagrammatic view of above example is as below ndash
Purchase Order 100 PC at INR 1000 GRN for this PO 100 PC Invoice 100 PC at INR 1000
Goods Receipt
Invoice Receipt
100000 +
20800 +
15100 +
135900 ndash
100000 +
100000 ndash
20800 ndash
Stock Account
GR IR Account
Modvat clearing
VAT
Vendor
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 9
allocation namely
Dividend Bonus or
Reserves 6 Proposed additions to
Reserves
SECURED LOANS
1 Debentures 2 Loans and Advances
from Banks 3 Loans and Advances
from Subsidiaries 4 Other Loans and
Advances
UNSECURED LOANS
1 Fixed Deposits 2 Loans and Advances
from Subsidiaries 3 Short-term Loans and
Advances a from Banks b from others
4 Other Loans and
Advances a from Banks b from others
CURRENT LIABILITIES amp PROVISIONS
A Current Liabilities 1 Acceptances 2 Sundry Creditors
i Total
outstanding
dues of small
scale industrial
undertaking(s)
ii Total
outstanding
dues of
creditors other
than small
scale industrial
undertaking(s)
capital of partnership
firms 5 Balance of unutilized
monies raised by Issue
CURRENT ASSETS LOANS amp ADVANCES
A Current Assets 1Interest accrued
on investments 2Stores and spare
parts 3Loose tools
4 Stock-in-trade 5 Works-in-
progress 6 Sundry debtors
a Debts
outstanding
for a period
exceeding 6
months bOther debts
Less
Provision 7
a Cash
balance on
hand b Bank
balances B Loans and Advances
8 Advances and
Loans a To
subsidiaries b To
partnership
firms in
which the
coits
subsidiary is
a partner 9 Bills of Exchange 10 Advances
recoverable in
cash or in kind or
for value to be
Train Doc KBLCICSAP MM12MM-FI Integration Page 10
3 Subsidiary
companies 4 Advance
payments and
unexpired
discounts 5 Unclaimed
Dividends 6 Other Liabilities
(if any) 7 Interest accrued
but not due on
loans B Provisions
8 Provision for
Taxation 9 Proposed
Dividends 10 For
contingencies 11 For Provident
Fund Scheme 12 For Insurance
pension and
similar staff
benefit schemes 13 Other provisions
received eg
Rates Taxes
Insurance etc 11 Balances with
Customs Port
Trust etc (where
payable on demand)
MISCELLANEOUS
EXPENDITURE
(to the extent not written off or adjusted)
1 Preliminary Expenses 2 Expenses including
commission brokerage
on underwriting or
subscription of shares
or debentures 3 Discount allowed on
issue of shares or
debentures 4 Interest paid out of
capital during
construction 5 Development
expenditure not
adjusted 6 Other items (Specifying
nature)
PROFIT AND LOSS
ACCOUNT
(Debit Balance)
Total Total
2) PROFIT amp LOSS ACCOUNT For the period ending 01st April to 31st March
Expenditure Particulars Rs Income Particulars Rs
1 Consumption of stores and
spare parts 2 Power and fuel 3 Rent 4 Repairs to building 5 Repairs to machinery 6 Commission paid 7 Depreciation
1 Sales
2 Income from investments
3 Other income
4 Miscellaneous income
5 Net Loss
Train Doc KBLCICSAP MM12MM-FI Integration Page 11
8 Interest on debentures 9 Income tax 10 Net income
TOTAL
XXX
TOTAL
XXX
Train Doc KBLCICSAP MM12MM-FI Integration Page 12
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 companys 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 amp Inventory Management ndash
1) Chart of Accounts ndash This is a list of all GL accounts used by one or several
company codes For each GL account the chart of accounts contains the account number account name and the information that controls how an account functions and how a GL 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 amp 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 ndash The valuation of the material can be done under one of the following areas ndash 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 amp 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 ndash It is the key for account determination that enables a
differentiation for GL 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 GL 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 amp material type can be established by the account category
Train Doc KBLCICSAP MM12MM-FI Integration Page 13
reference The account category reference is a compilation of valuation classes A material type is assigned to only one account category reference GL account determination can be uniformly defined for all material type belonging to a material type
The valuation class for BEARING can be selected as bdquoDOM_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 bdquoIMP_RM‟ (Imported Raw Material) if the material is imported amp the inventory will be maintained as Imported Raw material Inventory
4) General Ledger (GL) Account ndash The central task of GL accounting is to provide a comprehensive picture for external amp accounts
The General Ledger for Domestic Inventory of Raw material is bdquo230120‟ (Inventory ndash Other Raw Material)
5) Cost Center ndash 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 andor responsibility-related standpoints Cost centers are grouped together into decision control amp responsibility unit The activity types are assigned to the cost center
The Cost Center for Foundry Maintenance department of SBG ndash IP is bdquo11011710‟ The costs incurred for the department Foundry Maintenance will be posted to this cost center
6) Profit Center ndash 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-of-sales 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 ndash
i) Purchasing ndash 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 ndash Goods Issue to Production Order Goods Receipt from Production
Order
iii) Other ndash Transfer material to material Goods Issue to Cost Center Sales Order Asset Scrapping Physical Inventory Difference posting
Train Doc KBLCICSAP MM12MM-FI Integration Page 14
These transactions can change the valuation price of material depending upon price control (For example ndash 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 ndash i) Initial Entry of Stock Balances ndash Receipts are valuated at current material price of
using another material price specified externally ii) Goods Receipt for Purchase Order ndash Receipts are valuated at the Purchase order
price (Goods Receipt before Invoice Receipt) iii) Goods Issue ndash Issues are valuated at current material price 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 ndash i) Moving Average price (V) ndash 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 ldquoExpenses revenue from price differencerdquo 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 bdquoBearings‟ are procured from Vendor Hence the material master data of the bearings will have bdquoMoving Average Price‟ control in accounting view
ii) Standard Price (S) ndash 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 ldquoExpenses revenue from price differencerdquo 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 15
Pumps are in-house manufactured in our company hence the material master data of all pumps will have bdquoStandard Price Control‟ in accounting view
Valuation Area details ndash
Valuation Area
Company
Code
Plant Plant
level
valuation
is set-up
in KBL
Train Doc KBLCICSAP MM12MM-FI Integration Page 16
Overview of transactions involved in Material Valuation
Following are the steps involved in Purchasing which are important from material valuation financial point of view ndash
Sr No
Step Description Effect on Materials Management
point Effect from Finance point
1 Purchase Order is created
Vendor is ordered to supply material provide service as per agreed terms amp conditions
Commitment is done with the vendor to pay if he supplies material provides service as per agreed terms
2 Purchase Order is approved
Management approval is given for agreed terms amp conditions
Management approval is given for the financial commitment
3
Material is supplied by the vendor amp GRN is posted for the same
Stock of material (Inventory) increases if material is Inventoried Consumption to cost object is booked if the purchase order is account assigned
Asset (Inventory) is increased GR IR clearing account is credited (which is ultimately the liability to pay money to the vendor as per agreed terms
Goods Receipt
Master Data
Material Master
Vendor
GL Account
Storage Location
Plant
Goods Issue
Transfer Posting
Requirement determined through Material Requirement
Planning
External Procurement Purchasing
Internal Procurement Production
Invoice Receipt
Invoice Verification
Internal amp External Accounting
Train Doc KBLCICSAP MM12MM-FI Integration Page 17
4
Service is provided by the vendor amp service entry sheet is created
Consumption of service is booked to the respective cost object (For example ndash Cost Center)
GR IR clearing account is credited (which is ultimately the liability to pay money to the vendor as per agreed terms
5 Invoice of the vendor is booked in the system
Vendor‟s invoice is checked against the terms amp conditions of the Purchase Order and booked in system so that the vendor can be paid on right time
Vendor account is credited amp GR IR Clearing account is debited (The effective entry is bdquoCredit Vendor Account ndash Debit Inventory‟)
6 Payment is done to the vendor
Liability of the Purchasing organization ends
Debit Vendor Account Credit Bank Account
Following are the steps involved in material movement which are important from financial point of view ndash
Sr No
Transaction Effect from Materials Management point
Effect from Financial point of view
1 Goods Receipt is posted for standard bought out material
Stock of material (Inventory) increases if material is Inventoried Consumption to cost object is booked if the PO is account assigned
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)
2 Goods Receipt posted for sub-contracting material
Stock of the semi-finished material (which was ordered on vendor) increases Consumption of the BOM material (provided to vendor is booked)
Asset (Inventory) of semi-finished 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
3 Goods Receipt posted for Traded Material
Material delivered to customer directly from Vendor (Third Party Transaction)
Cost of Goods sold to customer is booked
4 Goods Issue is posted to Production Order Cost Center
Stock of the material decreases
Material value is booked against the respective cost object (Production Order or Cost Center) as consumption
5 Components transferred to Sub-Contractor
Material provided to vendor for processing amp supplying back the processed goods
No financial entry The inventory is shown as bdquoStock provided to Vendor‟
6 Material delivered to Customer
Finished Goods Traded Goods delivered to customer Own inventory is reduced
Cost of Goods sold to customer is booked
Train Doc KBLCICSAP MM12MM-FI Integration Page 18
Automatic posting of material for Goods Movement
Goods Receipt at
manufacturing plant
Consumption
Storage
Valuation
Valuated
Inventory
posted in Store
Consumption
of material
posted
directly to
consumption
account
Goods Issue
To Production Order
Cost Center
Goods Receipt of Trading
Material against Third Party
Purchase Order
To SD
Delivery
Cost of
Goods Sold
Material cost
posted to
Cost of
Goods Sold
account
Train Doc KBLCICSAP MM12MM-FI Integration Page 19
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 amp the transaction of material posting (For example ndash 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 ndash Imported
Bearings can be accounted in separate account (IMP_RM ndash Imported Raw material) amp Bearing procured from domestic vendor can be accounted in separate account (DOM_RM ndash Domestic Raw Material) The posting transactions for the transactions in Inventory Management amp Invoice Management that are relevant for accounting are fixed Posting records are assigned to event movement type in Inventory Management amp each transaction in Invoice Posting These postings are generalized in a value string (posting rule) Instead of fixed GL account numbers these contain keys for respective posting transaction (such as BSX for a stock posting) The GL account numbers are determined from these keys amp posting transactions
In brief following are the summarized data for influencing factors for account posting
Organizational
Structure
Company
Code
Plant
Chart of Account
Valuation Grouping
Code
Material
Accounting data
for valuation area
Valuation
Class
Material Type
Value
Quantity update
Business
Transaction Goods Movement
Invoice
Verification
Value
String
Transaction
Key
Account
Grouping
Train Doc KBLCICSAP MM12MM-FI Integration Page 20
Material Price Change ndash 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 (amp not the material master change) in which total stock of the plant is revaluated
Train Doc KBLCICSAP MM12MM-FI Integration Page 21
Automatic FI postings at Goods Receipt Following automatic postings are done in the system when the Goods Receipt against Purchase Order are posted ndash
A] Accounting (FI) Entries posted at the time of GRN ndash
a) Raw Material posted to Inventory after posting of GRN ndash 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 amp raw material procured from domestic vendor is kept separate The process flow is as below ndash
Without account assignment
Purchase Order
Raw Material
GRN Quantity
To Store
To Inventory GRN
Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 22
The FI entries posted at GRN are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Raw material Inventory
Respective Business Area where the material is received
Raw material Inventory
(Quantity of material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the material is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of Accounting Entries for Raw material posted to inventory ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Curr
Curr Text
1 Debit (89)
230120 BA01 Inventory ndash Other Raw
Material 510000 INR
BRG 6305 SKF OR EQ
2 Credit (96)
130100 BA01 GR IR Clearing
500000 - INR BRG 6305 SKF
OR EQ
3 Credit (50)
130110 BA01 Freight
Clearing Inland
10000 - INR BRG 6305 SKF
OR EQ
b) Material posted to consumption account after posting of GRN ndash
Following are main account assignment categories (AAC) ndash
AAC Description Required Account Assignment Data
A Asset Main Asset Number amp Sub-Number
K Cost Center Cost Center amp GL Account Number
Q Project WBS Element Number of the Project
E Sale Order Sale Order Number amp Line Number of the Sale Order
Train Doc KBLCICSAP MM12MM-FI Integration Page 23
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 GL 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 ndash
i) Purchase Order with account assignment A (Asset) ndash 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 GL Account in the company‟s balance sheet The GL account is a reconciliation account that means that it reconciles several asset numbers
With account assignment Purchase
Order
Raw Material Non Valuated Material
GRN Quantity
To Store (Raw Material) or To Consumption (Non-valuated material)
Consumption Account
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 24
For Purchase Order with account assignment A (Asset) the entry in FI GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Asset
Respective Business Area where the Asset is received
Asset Number amp Sub Number
(Quantity of Asset X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the asset is received
GR IR Clearing Account
(Quantity of Asset X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the asset is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entries for asset posted ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (70)
211450 BA05
Asset Number 000021000780 Sub Number 0000
3650000 INR
IM-314318325 MOUNTING CASING
2 Credit (96)
130100 BA05 GR IR Clearing 3605000 - INR
IM-314318325 MOUNTING CASING
3 Credit (50)
130110 BA05 Freight Clearing Inland
45000 - INR IM-314318325 MOUNTING CASING
ii) Purchase Order with account assignment K (Cost Center) ndash 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 amp services With account assignment K we need to determine following two additional data to be entered in the PO ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 25
- General Ledger (GL) Account Number We have to determine the expense GL 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 GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of
cost center
Respective Business Area where the Material Service is received
Cost Center account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of
GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of
Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entry for Account Assignment as Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416340 BA08 Legal Exp amp Consult Fees
4200000 INR Visit Charges
2 Credit (96)
130100 BA08 GR IR Clearing
4200000 - INR Visit Charges
iii) Purchase Order with account assignment as Q (Project) ndash
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 amp budgeted We can procure following type of materials against the Project account assignment ndash Raw Semi Finished material (to be inventoried) Traded Material When we procure a raw material (to be inventoried)
Train Doc KBLCICSAP MM12MM-FI Integration Page 26
against the account assignment as Project (Q) then the accounting entries posted are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of the accounting entries ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233040 BA02 Inventory ndash
Other Resale 61080600 INR
MS Flange Dia 1500 mm
2 Credit (96)
130100 BA02 GR IR Clearing
61080600 - INR 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS)
Respective Business Area where the Material Service is received
COGS account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency
Material master short text
Train Doc KBLCICSAP MM12MM-FI Integration Page 27
service is received
(For Imported material)
Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of the accounting entry is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
410920 BA02 COGS ndash Other Resale Article
18340100 INR LTAL PVC
ArmPVCSH Cable
2 Credit (96)
130100 BA02 GR IR Clearing
18340100 - INR LTAL PVC
ArmPVCSH Cable
iv) Purchase Order with account assignment as E (Sale Order) ndash
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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Train Doc KBLCICSAP MM12MM-FI Integration Page 28
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233070 BA01 Inventory ndash
Traded Electric Motor
2583000 INR Motor Alstom 22
KW 4 Pole
2 Credit (96)
130100 BA01 GR IR Clearing
2583000 - INR Motor Alstom 22
KW 4 Pole
When we post GRN for traded goods following accounting entries are posted ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS) General Expenses
Respective Business Area where the Material Service is received
COGS account General Expenses Account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit
Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit
Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416320 BA01 General Expenses
56258000 INR
KOEL 85 HP 1800 RPM Engine
2 Credit (96)
130100 BA01 GR IR Clearing
56258000 - INR
KOEL 85 HP 1800 RPM Engine
c) Sub-Contracting Purchase Order ndash In the subndashContracting Purchase Order semindash
finished material is ordered on the Sub-Contractor amp the components are given to SubndashContractor 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 ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 29
Semi ndash Finished
Material
BOM of Semindash
Finished
Material
With without
account
assignment
Sub ndash
Contracting
Purchase Order
Components in
BOM provided to
Vendor for
processing
Transfer of
material to Sub
ndash Contractor
No accounting
entry Stock of
material
provided to
vendor is
updated
GRN of
processed
material
(Quantity)
Inventory of Semi-
Finished material
is updated
Stock of material
provided to
Vendor is
consumed
GRN Value
Inventory of Semi-
Finished material
= Processing
Charges + Value
of BOM
Components
Train Doc KBLCICSAP MM12MM-FI Integration Page 30
Following FI entries are posted during above process ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR Currency
Text of Material
10 Debit
Inventory account of
Semi-finished material
Respective Business Area where the Material is received
Inventory ndash Semi-Finished Goods
(Quantity of Semi-finished material X Processing Charges) + (Inventory Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
20 Credit
Change of Stock
from Sub-Contract
Respective Business Area where the Material is received
Change of Stock from Sub-Contract
(Quantity of Semi-finished material X Processing Charges) + (Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
30 Credit
Inventory of
Components with
Sub-Contractor
Respective Business Area where the Material is received
Inventory of Components with Sub-Contractor
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
40 Debit
Inventory of own
Components
Respective Business Area where the Material is received
Inventory of own Components
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
50 Debit Processing Charges
Other
Respective Business Area where the Material is received
Processing Charges Other
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of received material
60 Credit GR IR Clearing
Respective Business Area where the Material is received
GR IR Clearing Charges
Processing Charges to be paid to Vendor (Quantity of Ordered material X Processing Charges Rate)
INR (for domestic
Purchase)
Material master short text of received material
Train Doc KBLCICSAP MM12MM-FI Integration Page 31
Following is the example of the above transaction ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
235010 BA01 Inventory Semi-Finished Goods
315000 INR BRG Housing 25
13
2 Credit (91)
400040 BA01
Change Stock Semi-Finished
from Sub-Contractor
315000 - INR BRG Housing 25
13
3 Credit (99)
235040 BA01 Inventory of
semi-finished CI Castings
285200 - INR Bearing Housing (Kanban 30 Qty
Bin)
4 Debit (81)
400040 BA01 Change Stock Castings for Sub-Contract
285200 INR Bearing Housing (Kanban 30 Qty
Bin)
5 Credit (96)
130100 BA01 GR IR Clearing 29800 - INR BRG Housing 25
13
6 Debit (86)
411450 BA01 Processing
Charges Other 29800 INR
BRG Housing 25 13
Train Doc KBLCICSAP MM12MM-FI Integration Page 32
d) Import Purchase Order ndash 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 amp 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 ndash Mumbai JNPT Port) After material is cleared from port amp received in Plant GRN is posted Then the customs duty is also inventorised along with the basic price of material amp 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 ndash
Raw material
Valuation class ndash Imported Raw Material
With without account assignment
Import Purchase Order on Overseas Vendor
Customs duties Freight Charges etc of Clearing Agent are invoiced
Planned delivery cost invoice of Import PO is booked when the material arrives at Port
Quantity of Imported Material is updated
GRN is posted when material arrives at Plant (Quantity)
Basic Value of Material + Planned Delivery Costs + Customs Duty
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 33
Following are the FI entries posted when the GRN is posted ndash
Item Posting
Key GL Account Business Area Account Text
Amount in INR
Currency
1 Debit (89)
Inventory account of Imported Raw Material
Business Area where the material has been received
Inventory ndash Imported Raw Material
Quantity of Material X Basic Price of material
INR
2 Credit (96)
GR IR Clearing Account
Business Area where the material has been received
GR IR Clearing
Quantity of Material X Basic Price of material
INR
3 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Basic Customs Duty)
Basic Customs Duty Amount
INR
4 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Ecess on Basic Customs Duty)
Ecess amount on Basic Customs Duty
INR
5 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (SampH Ecess on Basic Customs Duty)
SampH Ecess amount on Basic Customs Duty
INR
6 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing CVD Amount INR
7 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing Ecess on CVD INR
8 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing SampH Ecess of CVD INR
Following is the example of the FI entries of imported material ndash
Item Posting
Key GL Account
Business Area
Account Text Amount in
INR Currency
1 Debit (89)
230110 BA01 Inventory ndash Imported Raw Material
1551800 INR
2 Credit (96)
130100 BA01 GR IR Clearing
1151500 - INR
3 Credit (96)
130120 BA01 Freight Clearing ndash Import
174400 - INR
4 Credit (96)
130120 BA01 Freight Clearing ndash Import
3400 - INR
5 Credit 130120 BA01 Freight Clearing ndash Import 1700 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 34
(96)
6 Credit (50)
130130 BA01 CVD Clearing
214500 - INR
7 Credit (50)
130130 BA01 CVD Clearing
4200 - INR
8 Credit (50)
130130 BA01 CVD Clearing
2100 - INR
e) Stock Transport Purchase Order ndash 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 amp 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR
Currency Plant
10 Credit Inventory Account
Business Area from where material is issued
Inventory of Material
Inventory Amount
INR
Plant from where
material is issued
20 Debit Inventory Account
Business Area where material is received
Inventory of material
Inventory Amount
INR Plant where material is received
Example of above transaction is as below ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Plant
10 Credit (99) 232080 BA05 Inventory of Spares 430250 - INR 2530
20 Debit (89) 232080 BA05 Inventory of Spares 430250 INR 9010
f) Service Purchase Order ndash When a Service Purchase Order (Item Category ndash 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 35
automatically posted by the system (which is based on the accepted service entry sheet) Following is the flow chart for Service Purchase Order ndash
Service Required for Project Cost Center Sale Order
Account assignment data such as Project or WBS Definition Cost Center Number Sale Order Number is maintained
Purchase Order with Item Category D (Service) amp required account assignment (Q K E) is raised
Service Entry sheet is created amp 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 36
Following are the FI postings at the time of accepting Service Entry Sheet ndash
Item Posting
Key GL Account
Business Area
Account Text
Amount in INR
Currency Text
10 Debit Consumption
Account
Business Area from where Service is delivered
Process Charges
Service Charges Amount
INR Service Text
20 Credit GR IR Clearing Account
Business Area where service is delivered
GR IR Clearing
Service Charges Amount
INR Service Text
Following is the example of above transaction ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Text
10 Debit (81) 411420 BA02 Process Charges - Foundry
384780 INR
Service Charges
20 Debit (96) 130100 BA02 GR IR Clearing 384780 -
INR Service Charges
Train Doc KBLCICSAP MM12MM-FI Integration Page 37
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 ndash a) Modvatable Excise Item ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40)
Excise Cenvat
Business Area where the material is received
Cenvat Input P F Basic Excise Duty amount
INR
2 Debit (40)
ECS Cenvat Amount
Business Area where the material is received
Cenvat ED Cess ECS Amount INR
3 Debit (40)
SampH ECS Cenvat Account
Business Area where the material is received
Cenvat SampH Ces-1
SampH ECS Amount
INR
4 Credit (50)
Modvat Clearing Account
Business Area where the material is received
Modvat Clearing Account
Amount equivalent to amount in 1 + 2 + 3
INR
Example of Modvatable excise entries is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40) 244030 BA01 Cenvat Input P F 362900 INR
2 Debit (40) 244031 BA01 Cenvat ED Cess 7300 INR
3 Debit (40) 244034 BA01 Cenvat SampH Ces-1
3600 INR
4 Credit (50) 130150 BA01 Modvat Clearing Account
373800 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 38
b) Trading excisable material received against GRN ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81)
COGS ndash Trading Material
Business Area where the material is received COGS ndash Trading
Material
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
2 Credit (96)
ECS Cenvat Amount
Business Area where the material is received
GR IR Clearing
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
Example of Excise duty inventorised -
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81) 410910 BA01 COGS ndash Trading Motor
433108300 INR
2 Credit (96) 130100 BA01 GR IR Clearing 433108300 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 39
FI entries at Material Consumption When a material is issued to a consumption account (For example ndash Consumption to Production Order Cost Center) the inventory reduces amp 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 ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Credit (99)
231020 BA05 Inventory ndash Other Raw material
15500 - INR
2 Debit (81)
400240 BA05 Consumption ndash Other Raw Material
15500 INR
2) Material consumption posted to Production Order ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Production Order ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (99)
235010 BA01 Inventory ndash Semi Finished Goods
334100 - INR
2 Debit (81)
400290 BA01 Consumption ndash Semi Finished Goods
334100 INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 40
3) Consumption of Stock provided to Sub ndash Contractor for processing of finished material when GRN of processed material is posted ndash
In a sub ndash contracting purchase order a semi finished material is ordered on the sub ndash contractor amp components are provided to the sub ndash 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 amp the concerned FI entries are posted
Train Doc KBLCICSAP MM12MM-FI Integration Page 41
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 amp 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 amp 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 ndash Quantity Variance Price Variance Quality Inspection Manual block date variance and Amount variance The process flow is as below ndash
Purchase Order for Material Service
GRN for Material Service Entry Sheet for Services performed
Purchase Order History
Delivery Costs
Material Master
Vendor Master
GL Account
Assets
Cost Center
Project
Sale Order
Invoice Verification FI Invoice
Document
MM Invoice Document
Further Document
Train Doc KBLCICSAP MM12MM-FI Integration Page 42
Following entries are posted when an invoice for vendor is posted in the system
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (31)
Vendor Account
Business Area Vendor Number
Amount to be paid to Vendor
INR
2 Debit (86)
GR IR Clearing
Business Area GR IR Clearing
GR IR Clearing Amount
INR
3 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash B Excise Duty
INR
4 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash ECS Amount
INR
5 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash SampH ECS Amt
INR
6 Debit (40)
VAT RM Deductible Amount
Business Area from where payment is made
VAT RM Deductible
VAT Amount to be paid to Vendor
INR
Example of above is transaction is as below ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (31) 300664 BA02 WalchandNagar Industries 13590000 - INR
2 Debit (86) 130100 BA02 GR IR Clearing 10000000 INR
3 Debit (40) 130150 Modvat Clearing 1600000 INR
4 Debit (40) 130150 Modvat Clearing 320000 INR
5 Debit (40) 130150 Modvat Clearing 160000 INR
6 Debit (40) 245039 BA02 VAT RM Deductible 1510000 INR
The diagrammatic view of above example is as below ndash
Purchase Order 100 PC at INR 1000 GRN for this PO 100 PC Invoice 100 PC at INR 1000
Goods Receipt
Invoice Receipt
100000 +
20800 +
15100 +
135900 ndash
100000 +
100000 ndash
20800 ndash
Stock Account
GR IR Account
Modvat clearing
VAT
Vendor
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 10
3 Subsidiary
companies 4 Advance
payments and
unexpired
discounts 5 Unclaimed
Dividends 6 Other Liabilities
(if any) 7 Interest accrued
but not due on
loans B Provisions
8 Provision for
Taxation 9 Proposed
Dividends 10 For
contingencies 11 For Provident
Fund Scheme 12 For Insurance
pension and
similar staff
benefit schemes 13 Other provisions
received eg
Rates Taxes
Insurance etc 11 Balances with
Customs Port
Trust etc (where
payable on demand)
MISCELLANEOUS
EXPENDITURE
(to the extent not written off or adjusted)
1 Preliminary Expenses 2 Expenses including
commission brokerage
on underwriting or
subscription of shares
or debentures 3 Discount allowed on
issue of shares or
debentures 4 Interest paid out of
capital during
construction 5 Development
expenditure not
adjusted 6 Other items (Specifying
nature)
PROFIT AND LOSS
ACCOUNT
(Debit Balance)
Total Total
2) PROFIT amp LOSS ACCOUNT For the period ending 01st April to 31st March
Expenditure Particulars Rs Income Particulars Rs
1 Consumption of stores and
spare parts 2 Power and fuel 3 Rent 4 Repairs to building 5 Repairs to machinery 6 Commission paid 7 Depreciation
1 Sales
2 Income from investments
3 Other income
4 Miscellaneous income
5 Net Loss
Train Doc KBLCICSAP MM12MM-FI Integration Page 11
8 Interest on debentures 9 Income tax 10 Net income
TOTAL
XXX
TOTAL
XXX
Train Doc KBLCICSAP MM12MM-FI Integration Page 12
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 companys 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 amp Inventory Management ndash
1) Chart of Accounts ndash This is a list of all GL accounts used by one or several
company codes For each GL account the chart of accounts contains the account number account name and the information that controls how an account functions and how a GL 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 amp 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 ndash The valuation of the material can be done under one of the following areas ndash 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 amp 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 ndash It is the key for account determination that enables a
differentiation for GL 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 GL 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 amp material type can be established by the account category
Train Doc KBLCICSAP MM12MM-FI Integration Page 13
reference The account category reference is a compilation of valuation classes A material type is assigned to only one account category reference GL account determination can be uniformly defined for all material type belonging to a material type
The valuation class for BEARING can be selected as bdquoDOM_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 bdquoIMP_RM‟ (Imported Raw Material) if the material is imported amp the inventory will be maintained as Imported Raw material Inventory
4) General Ledger (GL) Account ndash The central task of GL accounting is to provide a comprehensive picture for external amp accounts
The General Ledger for Domestic Inventory of Raw material is bdquo230120‟ (Inventory ndash Other Raw Material)
5) Cost Center ndash 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 andor responsibility-related standpoints Cost centers are grouped together into decision control amp responsibility unit The activity types are assigned to the cost center
The Cost Center for Foundry Maintenance department of SBG ndash IP is bdquo11011710‟ The costs incurred for the department Foundry Maintenance will be posted to this cost center
6) Profit Center ndash 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-of-sales 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 ndash
i) Purchasing ndash 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 ndash Goods Issue to Production Order Goods Receipt from Production
Order
iii) Other ndash Transfer material to material Goods Issue to Cost Center Sales Order Asset Scrapping Physical Inventory Difference posting
Train Doc KBLCICSAP MM12MM-FI Integration Page 14
These transactions can change the valuation price of material depending upon price control (For example ndash 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 ndash i) Initial Entry of Stock Balances ndash Receipts are valuated at current material price of
using another material price specified externally ii) Goods Receipt for Purchase Order ndash Receipts are valuated at the Purchase order
price (Goods Receipt before Invoice Receipt) iii) Goods Issue ndash Issues are valuated at current material price 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 ndash i) Moving Average price (V) ndash 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 ldquoExpenses revenue from price differencerdquo 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 bdquoBearings‟ are procured from Vendor Hence the material master data of the bearings will have bdquoMoving Average Price‟ control in accounting view
ii) Standard Price (S) ndash 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 ldquoExpenses revenue from price differencerdquo 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 15
Pumps are in-house manufactured in our company hence the material master data of all pumps will have bdquoStandard Price Control‟ in accounting view
Valuation Area details ndash
Valuation Area
Company
Code
Plant Plant
level
valuation
is set-up
in KBL
Train Doc KBLCICSAP MM12MM-FI Integration Page 16
Overview of transactions involved in Material Valuation
Following are the steps involved in Purchasing which are important from material valuation financial point of view ndash
Sr No
Step Description Effect on Materials Management
point Effect from Finance point
1 Purchase Order is created
Vendor is ordered to supply material provide service as per agreed terms amp conditions
Commitment is done with the vendor to pay if he supplies material provides service as per agreed terms
2 Purchase Order is approved
Management approval is given for agreed terms amp conditions
Management approval is given for the financial commitment
3
Material is supplied by the vendor amp GRN is posted for the same
Stock of material (Inventory) increases if material is Inventoried Consumption to cost object is booked if the purchase order is account assigned
Asset (Inventory) is increased GR IR clearing account is credited (which is ultimately the liability to pay money to the vendor as per agreed terms
Goods Receipt
Master Data
Material Master
Vendor
GL Account
Storage Location
Plant
Goods Issue
Transfer Posting
Requirement determined through Material Requirement
Planning
External Procurement Purchasing
Internal Procurement Production
Invoice Receipt
Invoice Verification
Internal amp External Accounting
Train Doc KBLCICSAP MM12MM-FI Integration Page 17
4
Service is provided by the vendor amp service entry sheet is created
Consumption of service is booked to the respective cost object (For example ndash Cost Center)
GR IR clearing account is credited (which is ultimately the liability to pay money to the vendor as per agreed terms
5 Invoice of the vendor is booked in the system
Vendor‟s invoice is checked against the terms amp conditions of the Purchase Order and booked in system so that the vendor can be paid on right time
Vendor account is credited amp GR IR Clearing account is debited (The effective entry is bdquoCredit Vendor Account ndash Debit Inventory‟)
6 Payment is done to the vendor
Liability of the Purchasing organization ends
Debit Vendor Account Credit Bank Account
Following are the steps involved in material movement which are important from financial point of view ndash
Sr No
Transaction Effect from Materials Management point
Effect from Financial point of view
1 Goods Receipt is posted for standard bought out material
Stock of material (Inventory) increases if material is Inventoried Consumption to cost object is booked if the PO is account assigned
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)
2 Goods Receipt posted for sub-contracting material
Stock of the semi-finished material (which was ordered on vendor) increases Consumption of the BOM material (provided to vendor is booked)
Asset (Inventory) of semi-finished 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
3 Goods Receipt posted for Traded Material
Material delivered to customer directly from Vendor (Third Party Transaction)
Cost of Goods sold to customer is booked
4 Goods Issue is posted to Production Order Cost Center
Stock of the material decreases
Material value is booked against the respective cost object (Production Order or Cost Center) as consumption
5 Components transferred to Sub-Contractor
Material provided to vendor for processing amp supplying back the processed goods
No financial entry The inventory is shown as bdquoStock provided to Vendor‟
6 Material delivered to Customer
Finished Goods Traded Goods delivered to customer Own inventory is reduced
Cost of Goods sold to customer is booked
Train Doc KBLCICSAP MM12MM-FI Integration Page 18
Automatic posting of material for Goods Movement
Goods Receipt at
manufacturing plant
Consumption
Storage
Valuation
Valuated
Inventory
posted in Store
Consumption
of material
posted
directly to
consumption
account
Goods Issue
To Production Order
Cost Center
Goods Receipt of Trading
Material against Third Party
Purchase Order
To SD
Delivery
Cost of
Goods Sold
Material cost
posted to
Cost of
Goods Sold
account
Train Doc KBLCICSAP MM12MM-FI Integration Page 19
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 amp the transaction of material posting (For example ndash 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 ndash Imported
Bearings can be accounted in separate account (IMP_RM ndash Imported Raw material) amp Bearing procured from domestic vendor can be accounted in separate account (DOM_RM ndash Domestic Raw Material) The posting transactions for the transactions in Inventory Management amp Invoice Management that are relevant for accounting are fixed Posting records are assigned to event movement type in Inventory Management amp each transaction in Invoice Posting These postings are generalized in a value string (posting rule) Instead of fixed GL account numbers these contain keys for respective posting transaction (such as BSX for a stock posting) The GL account numbers are determined from these keys amp posting transactions
In brief following are the summarized data for influencing factors for account posting
Organizational
Structure
Company
Code
Plant
Chart of Account
Valuation Grouping
Code
Material
Accounting data
for valuation area
Valuation
Class
Material Type
Value
Quantity update
Business
Transaction Goods Movement
Invoice
Verification
Value
String
Transaction
Key
Account
Grouping
Train Doc KBLCICSAP MM12MM-FI Integration Page 20
Material Price Change ndash 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 (amp not the material master change) in which total stock of the plant is revaluated
Train Doc KBLCICSAP MM12MM-FI Integration Page 21
Automatic FI postings at Goods Receipt Following automatic postings are done in the system when the Goods Receipt against Purchase Order are posted ndash
A] Accounting (FI) Entries posted at the time of GRN ndash
a) Raw Material posted to Inventory after posting of GRN ndash 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 amp raw material procured from domestic vendor is kept separate The process flow is as below ndash
Without account assignment
Purchase Order
Raw Material
GRN Quantity
To Store
To Inventory GRN
Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 22
The FI entries posted at GRN are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Raw material Inventory
Respective Business Area where the material is received
Raw material Inventory
(Quantity of material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the material is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of Accounting Entries for Raw material posted to inventory ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Curr
Curr Text
1 Debit (89)
230120 BA01 Inventory ndash Other Raw
Material 510000 INR
BRG 6305 SKF OR EQ
2 Credit (96)
130100 BA01 GR IR Clearing
500000 - INR BRG 6305 SKF
OR EQ
3 Credit (50)
130110 BA01 Freight
Clearing Inland
10000 - INR BRG 6305 SKF
OR EQ
b) Material posted to consumption account after posting of GRN ndash
Following are main account assignment categories (AAC) ndash
AAC Description Required Account Assignment Data
A Asset Main Asset Number amp Sub-Number
K Cost Center Cost Center amp GL Account Number
Q Project WBS Element Number of the Project
E Sale Order Sale Order Number amp Line Number of the Sale Order
Train Doc KBLCICSAP MM12MM-FI Integration Page 23
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 GL 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 ndash
i) Purchase Order with account assignment A (Asset) ndash 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 GL Account in the company‟s balance sheet The GL account is a reconciliation account that means that it reconciles several asset numbers
With account assignment Purchase
Order
Raw Material Non Valuated Material
GRN Quantity
To Store (Raw Material) or To Consumption (Non-valuated material)
Consumption Account
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 24
For Purchase Order with account assignment A (Asset) the entry in FI GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Asset
Respective Business Area where the Asset is received
Asset Number amp Sub Number
(Quantity of Asset X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the asset is received
GR IR Clearing Account
(Quantity of Asset X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the asset is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entries for asset posted ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (70)
211450 BA05
Asset Number 000021000780 Sub Number 0000
3650000 INR
IM-314318325 MOUNTING CASING
2 Credit (96)
130100 BA05 GR IR Clearing 3605000 - INR
IM-314318325 MOUNTING CASING
3 Credit (50)
130110 BA05 Freight Clearing Inland
45000 - INR IM-314318325 MOUNTING CASING
ii) Purchase Order with account assignment K (Cost Center) ndash 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 amp services With account assignment K we need to determine following two additional data to be entered in the PO ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 25
- General Ledger (GL) Account Number We have to determine the expense GL 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 GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of
cost center
Respective Business Area where the Material Service is received
Cost Center account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of
GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of
Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entry for Account Assignment as Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416340 BA08 Legal Exp amp Consult Fees
4200000 INR Visit Charges
2 Credit (96)
130100 BA08 GR IR Clearing
4200000 - INR Visit Charges
iii) Purchase Order with account assignment as Q (Project) ndash
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 amp budgeted We can procure following type of materials against the Project account assignment ndash Raw Semi Finished material (to be inventoried) Traded Material When we procure a raw material (to be inventoried)
Train Doc KBLCICSAP MM12MM-FI Integration Page 26
against the account assignment as Project (Q) then the accounting entries posted are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of the accounting entries ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233040 BA02 Inventory ndash
Other Resale 61080600 INR
MS Flange Dia 1500 mm
2 Credit (96)
130100 BA02 GR IR Clearing
61080600 - INR 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS)
Respective Business Area where the Material Service is received
COGS account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency
Material master short text
Train Doc KBLCICSAP MM12MM-FI Integration Page 27
service is received
(For Imported material)
Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of the accounting entry is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
410920 BA02 COGS ndash Other Resale Article
18340100 INR LTAL PVC
ArmPVCSH Cable
2 Credit (96)
130100 BA02 GR IR Clearing
18340100 - INR LTAL PVC
ArmPVCSH Cable
iv) Purchase Order with account assignment as E (Sale Order) ndash
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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Train Doc KBLCICSAP MM12MM-FI Integration Page 28
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233070 BA01 Inventory ndash
Traded Electric Motor
2583000 INR Motor Alstom 22
KW 4 Pole
2 Credit (96)
130100 BA01 GR IR Clearing
2583000 - INR Motor Alstom 22
KW 4 Pole
When we post GRN for traded goods following accounting entries are posted ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS) General Expenses
Respective Business Area where the Material Service is received
COGS account General Expenses Account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit
Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit
Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416320 BA01 General Expenses
56258000 INR
KOEL 85 HP 1800 RPM Engine
2 Credit (96)
130100 BA01 GR IR Clearing
56258000 - INR
KOEL 85 HP 1800 RPM Engine
c) Sub-Contracting Purchase Order ndash In the subndashContracting Purchase Order semindash
finished material is ordered on the Sub-Contractor amp the components are given to SubndashContractor 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 ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 29
Semi ndash Finished
Material
BOM of Semindash
Finished
Material
With without
account
assignment
Sub ndash
Contracting
Purchase Order
Components in
BOM provided to
Vendor for
processing
Transfer of
material to Sub
ndash Contractor
No accounting
entry Stock of
material
provided to
vendor is
updated
GRN of
processed
material
(Quantity)
Inventory of Semi-
Finished material
is updated
Stock of material
provided to
Vendor is
consumed
GRN Value
Inventory of Semi-
Finished material
= Processing
Charges + Value
of BOM
Components
Train Doc KBLCICSAP MM12MM-FI Integration Page 30
Following FI entries are posted during above process ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR Currency
Text of Material
10 Debit
Inventory account of
Semi-finished material
Respective Business Area where the Material is received
Inventory ndash Semi-Finished Goods
(Quantity of Semi-finished material X Processing Charges) + (Inventory Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
20 Credit
Change of Stock
from Sub-Contract
Respective Business Area where the Material is received
Change of Stock from Sub-Contract
(Quantity of Semi-finished material X Processing Charges) + (Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
30 Credit
Inventory of
Components with
Sub-Contractor
Respective Business Area where the Material is received
Inventory of Components with Sub-Contractor
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
40 Debit
Inventory of own
Components
Respective Business Area where the Material is received
Inventory of own Components
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
50 Debit Processing Charges
Other
Respective Business Area where the Material is received
Processing Charges Other
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of received material
60 Credit GR IR Clearing
Respective Business Area where the Material is received
GR IR Clearing Charges
Processing Charges to be paid to Vendor (Quantity of Ordered material X Processing Charges Rate)
INR (for domestic
Purchase)
Material master short text of received material
Train Doc KBLCICSAP MM12MM-FI Integration Page 31
Following is the example of the above transaction ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
235010 BA01 Inventory Semi-Finished Goods
315000 INR BRG Housing 25
13
2 Credit (91)
400040 BA01
Change Stock Semi-Finished
from Sub-Contractor
315000 - INR BRG Housing 25
13
3 Credit (99)
235040 BA01 Inventory of
semi-finished CI Castings
285200 - INR Bearing Housing (Kanban 30 Qty
Bin)
4 Debit (81)
400040 BA01 Change Stock Castings for Sub-Contract
285200 INR Bearing Housing (Kanban 30 Qty
Bin)
5 Credit (96)
130100 BA01 GR IR Clearing 29800 - INR BRG Housing 25
13
6 Debit (86)
411450 BA01 Processing
Charges Other 29800 INR
BRG Housing 25 13
Train Doc KBLCICSAP MM12MM-FI Integration Page 32
d) Import Purchase Order ndash 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 amp 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 ndash Mumbai JNPT Port) After material is cleared from port amp received in Plant GRN is posted Then the customs duty is also inventorised along with the basic price of material amp 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 ndash
Raw material
Valuation class ndash Imported Raw Material
With without account assignment
Import Purchase Order on Overseas Vendor
Customs duties Freight Charges etc of Clearing Agent are invoiced
Planned delivery cost invoice of Import PO is booked when the material arrives at Port
Quantity of Imported Material is updated
GRN is posted when material arrives at Plant (Quantity)
Basic Value of Material + Planned Delivery Costs + Customs Duty
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 33
Following are the FI entries posted when the GRN is posted ndash
Item Posting
Key GL Account Business Area Account Text
Amount in INR
Currency
1 Debit (89)
Inventory account of Imported Raw Material
Business Area where the material has been received
Inventory ndash Imported Raw Material
Quantity of Material X Basic Price of material
INR
2 Credit (96)
GR IR Clearing Account
Business Area where the material has been received
GR IR Clearing
Quantity of Material X Basic Price of material
INR
3 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Basic Customs Duty)
Basic Customs Duty Amount
INR
4 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Ecess on Basic Customs Duty)
Ecess amount on Basic Customs Duty
INR
5 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (SampH Ecess on Basic Customs Duty)
SampH Ecess amount on Basic Customs Duty
INR
6 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing CVD Amount INR
7 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing Ecess on CVD INR
8 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing SampH Ecess of CVD INR
Following is the example of the FI entries of imported material ndash
Item Posting
Key GL Account
Business Area
Account Text Amount in
INR Currency
1 Debit (89)
230110 BA01 Inventory ndash Imported Raw Material
1551800 INR
2 Credit (96)
130100 BA01 GR IR Clearing
1151500 - INR
3 Credit (96)
130120 BA01 Freight Clearing ndash Import
174400 - INR
4 Credit (96)
130120 BA01 Freight Clearing ndash Import
3400 - INR
5 Credit 130120 BA01 Freight Clearing ndash Import 1700 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 34
(96)
6 Credit (50)
130130 BA01 CVD Clearing
214500 - INR
7 Credit (50)
130130 BA01 CVD Clearing
4200 - INR
8 Credit (50)
130130 BA01 CVD Clearing
2100 - INR
e) Stock Transport Purchase Order ndash 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 amp 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR
Currency Plant
10 Credit Inventory Account
Business Area from where material is issued
Inventory of Material
Inventory Amount
INR
Plant from where
material is issued
20 Debit Inventory Account
Business Area where material is received
Inventory of material
Inventory Amount
INR Plant where material is received
Example of above transaction is as below ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Plant
10 Credit (99) 232080 BA05 Inventory of Spares 430250 - INR 2530
20 Debit (89) 232080 BA05 Inventory of Spares 430250 INR 9010
f) Service Purchase Order ndash When a Service Purchase Order (Item Category ndash 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 35
automatically posted by the system (which is based on the accepted service entry sheet) Following is the flow chart for Service Purchase Order ndash
Service Required for Project Cost Center Sale Order
Account assignment data such as Project or WBS Definition Cost Center Number Sale Order Number is maintained
Purchase Order with Item Category D (Service) amp required account assignment (Q K E) is raised
Service Entry sheet is created amp 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 36
Following are the FI postings at the time of accepting Service Entry Sheet ndash
Item Posting
Key GL Account
Business Area
Account Text
Amount in INR
Currency Text
10 Debit Consumption
Account
Business Area from where Service is delivered
Process Charges
Service Charges Amount
INR Service Text
20 Credit GR IR Clearing Account
Business Area where service is delivered
GR IR Clearing
Service Charges Amount
INR Service Text
Following is the example of above transaction ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Text
10 Debit (81) 411420 BA02 Process Charges - Foundry
384780 INR
Service Charges
20 Debit (96) 130100 BA02 GR IR Clearing 384780 -
INR Service Charges
Train Doc KBLCICSAP MM12MM-FI Integration Page 37
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 ndash a) Modvatable Excise Item ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40)
Excise Cenvat
Business Area where the material is received
Cenvat Input P F Basic Excise Duty amount
INR
2 Debit (40)
ECS Cenvat Amount
Business Area where the material is received
Cenvat ED Cess ECS Amount INR
3 Debit (40)
SampH ECS Cenvat Account
Business Area where the material is received
Cenvat SampH Ces-1
SampH ECS Amount
INR
4 Credit (50)
Modvat Clearing Account
Business Area where the material is received
Modvat Clearing Account
Amount equivalent to amount in 1 + 2 + 3
INR
Example of Modvatable excise entries is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40) 244030 BA01 Cenvat Input P F 362900 INR
2 Debit (40) 244031 BA01 Cenvat ED Cess 7300 INR
3 Debit (40) 244034 BA01 Cenvat SampH Ces-1
3600 INR
4 Credit (50) 130150 BA01 Modvat Clearing Account
373800 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 38
b) Trading excisable material received against GRN ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81)
COGS ndash Trading Material
Business Area where the material is received COGS ndash Trading
Material
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
2 Credit (96)
ECS Cenvat Amount
Business Area where the material is received
GR IR Clearing
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
Example of Excise duty inventorised -
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81) 410910 BA01 COGS ndash Trading Motor
433108300 INR
2 Credit (96) 130100 BA01 GR IR Clearing 433108300 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 39
FI entries at Material Consumption When a material is issued to a consumption account (For example ndash Consumption to Production Order Cost Center) the inventory reduces amp 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 ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Credit (99)
231020 BA05 Inventory ndash Other Raw material
15500 - INR
2 Debit (81)
400240 BA05 Consumption ndash Other Raw Material
15500 INR
2) Material consumption posted to Production Order ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Production Order ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (99)
235010 BA01 Inventory ndash Semi Finished Goods
334100 - INR
2 Debit (81)
400290 BA01 Consumption ndash Semi Finished Goods
334100 INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 40
3) Consumption of Stock provided to Sub ndash Contractor for processing of finished material when GRN of processed material is posted ndash
In a sub ndash contracting purchase order a semi finished material is ordered on the sub ndash contractor amp components are provided to the sub ndash 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 amp the concerned FI entries are posted
Train Doc KBLCICSAP MM12MM-FI Integration Page 41
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 amp 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 amp 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 ndash Quantity Variance Price Variance Quality Inspection Manual block date variance and Amount variance The process flow is as below ndash
Purchase Order for Material Service
GRN for Material Service Entry Sheet for Services performed
Purchase Order History
Delivery Costs
Material Master
Vendor Master
GL Account
Assets
Cost Center
Project
Sale Order
Invoice Verification FI Invoice
Document
MM Invoice Document
Further Document
Train Doc KBLCICSAP MM12MM-FI Integration Page 42
Following entries are posted when an invoice for vendor is posted in the system
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (31)
Vendor Account
Business Area Vendor Number
Amount to be paid to Vendor
INR
2 Debit (86)
GR IR Clearing
Business Area GR IR Clearing
GR IR Clearing Amount
INR
3 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash B Excise Duty
INR
4 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash ECS Amount
INR
5 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash SampH ECS Amt
INR
6 Debit (40)
VAT RM Deductible Amount
Business Area from where payment is made
VAT RM Deductible
VAT Amount to be paid to Vendor
INR
Example of above is transaction is as below ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (31) 300664 BA02 WalchandNagar Industries 13590000 - INR
2 Debit (86) 130100 BA02 GR IR Clearing 10000000 INR
3 Debit (40) 130150 Modvat Clearing 1600000 INR
4 Debit (40) 130150 Modvat Clearing 320000 INR
5 Debit (40) 130150 Modvat Clearing 160000 INR
6 Debit (40) 245039 BA02 VAT RM Deductible 1510000 INR
The diagrammatic view of above example is as below ndash
Purchase Order 100 PC at INR 1000 GRN for this PO 100 PC Invoice 100 PC at INR 1000
Goods Receipt
Invoice Receipt
100000 +
20800 +
15100 +
135900 ndash
100000 +
100000 ndash
20800 ndash
Stock Account
GR IR Account
Modvat clearing
VAT
Vendor
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 11
8 Interest on debentures 9 Income tax 10 Net income
TOTAL
XXX
TOTAL
XXX
Train Doc KBLCICSAP MM12MM-FI Integration Page 12
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 companys 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 amp Inventory Management ndash
1) Chart of Accounts ndash This is a list of all GL accounts used by one or several
company codes For each GL account the chart of accounts contains the account number account name and the information that controls how an account functions and how a GL 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 amp 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 ndash The valuation of the material can be done under one of the following areas ndash 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 amp 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 ndash It is the key for account determination that enables a
differentiation for GL 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 GL 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 amp material type can be established by the account category
Train Doc KBLCICSAP MM12MM-FI Integration Page 13
reference The account category reference is a compilation of valuation classes A material type is assigned to only one account category reference GL account determination can be uniformly defined for all material type belonging to a material type
The valuation class for BEARING can be selected as bdquoDOM_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 bdquoIMP_RM‟ (Imported Raw Material) if the material is imported amp the inventory will be maintained as Imported Raw material Inventory
4) General Ledger (GL) Account ndash The central task of GL accounting is to provide a comprehensive picture for external amp accounts
The General Ledger for Domestic Inventory of Raw material is bdquo230120‟ (Inventory ndash Other Raw Material)
5) Cost Center ndash 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 andor responsibility-related standpoints Cost centers are grouped together into decision control amp responsibility unit The activity types are assigned to the cost center
The Cost Center for Foundry Maintenance department of SBG ndash IP is bdquo11011710‟ The costs incurred for the department Foundry Maintenance will be posted to this cost center
6) Profit Center ndash 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-of-sales 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 ndash
i) Purchasing ndash 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 ndash Goods Issue to Production Order Goods Receipt from Production
Order
iii) Other ndash Transfer material to material Goods Issue to Cost Center Sales Order Asset Scrapping Physical Inventory Difference posting
Train Doc KBLCICSAP MM12MM-FI Integration Page 14
These transactions can change the valuation price of material depending upon price control (For example ndash 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 ndash i) Initial Entry of Stock Balances ndash Receipts are valuated at current material price of
using another material price specified externally ii) Goods Receipt for Purchase Order ndash Receipts are valuated at the Purchase order
price (Goods Receipt before Invoice Receipt) iii) Goods Issue ndash Issues are valuated at current material price 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 ndash i) Moving Average price (V) ndash 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 ldquoExpenses revenue from price differencerdquo 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 bdquoBearings‟ are procured from Vendor Hence the material master data of the bearings will have bdquoMoving Average Price‟ control in accounting view
ii) Standard Price (S) ndash 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 ldquoExpenses revenue from price differencerdquo 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 15
Pumps are in-house manufactured in our company hence the material master data of all pumps will have bdquoStandard Price Control‟ in accounting view
Valuation Area details ndash
Valuation Area
Company
Code
Plant Plant
level
valuation
is set-up
in KBL
Train Doc KBLCICSAP MM12MM-FI Integration Page 16
Overview of transactions involved in Material Valuation
Following are the steps involved in Purchasing which are important from material valuation financial point of view ndash
Sr No
Step Description Effect on Materials Management
point Effect from Finance point
1 Purchase Order is created
Vendor is ordered to supply material provide service as per agreed terms amp conditions
Commitment is done with the vendor to pay if he supplies material provides service as per agreed terms
2 Purchase Order is approved
Management approval is given for agreed terms amp conditions
Management approval is given for the financial commitment
3
Material is supplied by the vendor amp GRN is posted for the same
Stock of material (Inventory) increases if material is Inventoried Consumption to cost object is booked if the purchase order is account assigned
Asset (Inventory) is increased GR IR clearing account is credited (which is ultimately the liability to pay money to the vendor as per agreed terms
Goods Receipt
Master Data
Material Master
Vendor
GL Account
Storage Location
Plant
Goods Issue
Transfer Posting
Requirement determined through Material Requirement
Planning
External Procurement Purchasing
Internal Procurement Production
Invoice Receipt
Invoice Verification
Internal amp External Accounting
Train Doc KBLCICSAP MM12MM-FI Integration Page 17
4
Service is provided by the vendor amp service entry sheet is created
Consumption of service is booked to the respective cost object (For example ndash Cost Center)
GR IR clearing account is credited (which is ultimately the liability to pay money to the vendor as per agreed terms
5 Invoice of the vendor is booked in the system
Vendor‟s invoice is checked against the terms amp conditions of the Purchase Order and booked in system so that the vendor can be paid on right time
Vendor account is credited amp GR IR Clearing account is debited (The effective entry is bdquoCredit Vendor Account ndash Debit Inventory‟)
6 Payment is done to the vendor
Liability of the Purchasing organization ends
Debit Vendor Account Credit Bank Account
Following are the steps involved in material movement which are important from financial point of view ndash
Sr No
Transaction Effect from Materials Management point
Effect from Financial point of view
1 Goods Receipt is posted for standard bought out material
Stock of material (Inventory) increases if material is Inventoried Consumption to cost object is booked if the PO is account assigned
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)
2 Goods Receipt posted for sub-contracting material
Stock of the semi-finished material (which was ordered on vendor) increases Consumption of the BOM material (provided to vendor is booked)
Asset (Inventory) of semi-finished 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
3 Goods Receipt posted for Traded Material
Material delivered to customer directly from Vendor (Third Party Transaction)
Cost of Goods sold to customer is booked
4 Goods Issue is posted to Production Order Cost Center
Stock of the material decreases
Material value is booked against the respective cost object (Production Order or Cost Center) as consumption
5 Components transferred to Sub-Contractor
Material provided to vendor for processing amp supplying back the processed goods
No financial entry The inventory is shown as bdquoStock provided to Vendor‟
6 Material delivered to Customer
Finished Goods Traded Goods delivered to customer Own inventory is reduced
Cost of Goods sold to customer is booked
Train Doc KBLCICSAP MM12MM-FI Integration Page 18
Automatic posting of material for Goods Movement
Goods Receipt at
manufacturing plant
Consumption
Storage
Valuation
Valuated
Inventory
posted in Store
Consumption
of material
posted
directly to
consumption
account
Goods Issue
To Production Order
Cost Center
Goods Receipt of Trading
Material against Third Party
Purchase Order
To SD
Delivery
Cost of
Goods Sold
Material cost
posted to
Cost of
Goods Sold
account
Train Doc KBLCICSAP MM12MM-FI Integration Page 19
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 amp the transaction of material posting (For example ndash 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 ndash Imported
Bearings can be accounted in separate account (IMP_RM ndash Imported Raw material) amp Bearing procured from domestic vendor can be accounted in separate account (DOM_RM ndash Domestic Raw Material) The posting transactions for the transactions in Inventory Management amp Invoice Management that are relevant for accounting are fixed Posting records are assigned to event movement type in Inventory Management amp each transaction in Invoice Posting These postings are generalized in a value string (posting rule) Instead of fixed GL account numbers these contain keys for respective posting transaction (such as BSX for a stock posting) The GL account numbers are determined from these keys amp posting transactions
In brief following are the summarized data for influencing factors for account posting
Organizational
Structure
Company
Code
Plant
Chart of Account
Valuation Grouping
Code
Material
Accounting data
for valuation area
Valuation
Class
Material Type
Value
Quantity update
Business
Transaction Goods Movement
Invoice
Verification
Value
String
Transaction
Key
Account
Grouping
Train Doc KBLCICSAP MM12MM-FI Integration Page 20
Material Price Change ndash 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 (amp not the material master change) in which total stock of the plant is revaluated
Train Doc KBLCICSAP MM12MM-FI Integration Page 21
Automatic FI postings at Goods Receipt Following automatic postings are done in the system when the Goods Receipt against Purchase Order are posted ndash
A] Accounting (FI) Entries posted at the time of GRN ndash
a) Raw Material posted to Inventory after posting of GRN ndash 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 amp raw material procured from domestic vendor is kept separate The process flow is as below ndash
Without account assignment
Purchase Order
Raw Material
GRN Quantity
To Store
To Inventory GRN
Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 22
The FI entries posted at GRN are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Raw material Inventory
Respective Business Area where the material is received
Raw material Inventory
(Quantity of material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the material is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of Accounting Entries for Raw material posted to inventory ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Curr
Curr Text
1 Debit (89)
230120 BA01 Inventory ndash Other Raw
Material 510000 INR
BRG 6305 SKF OR EQ
2 Credit (96)
130100 BA01 GR IR Clearing
500000 - INR BRG 6305 SKF
OR EQ
3 Credit (50)
130110 BA01 Freight
Clearing Inland
10000 - INR BRG 6305 SKF
OR EQ
b) Material posted to consumption account after posting of GRN ndash
Following are main account assignment categories (AAC) ndash
AAC Description Required Account Assignment Data
A Asset Main Asset Number amp Sub-Number
K Cost Center Cost Center amp GL Account Number
Q Project WBS Element Number of the Project
E Sale Order Sale Order Number amp Line Number of the Sale Order
Train Doc KBLCICSAP MM12MM-FI Integration Page 23
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 GL 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 ndash
i) Purchase Order with account assignment A (Asset) ndash 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 GL Account in the company‟s balance sheet The GL account is a reconciliation account that means that it reconciles several asset numbers
With account assignment Purchase
Order
Raw Material Non Valuated Material
GRN Quantity
To Store (Raw Material) or To Consumption (Non-valuated material)
Consumption Account
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 24
For Purchase Order with account assignment A (Asset) the entry in FI GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Asset
Respective Business Area where the Asset is received
Asset Number amp Sub Number
(Quantity of Asset X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the asset is received
GR IR Clearing Account
(Quantity of Asset X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the asset is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entries for asset posted ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (70)
211450 BA05
Asset Number 000021000780 Sub Number 0000
3650000 INR
IM-314318325 MOUNTING CASING
2 Credit (96)
130100 BA05 GR IR Clearing 3605000 - INR
IM-314318325 MOUNTING CASING
3 Credit (50)
130110 BA05 Freight Clearing Inland
45000 - INR IM-314318325 MOUNTING CASING
ii) Purchase Order with account assignment K (Cost Center) ndash 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 amp services With account assignment K we need to determine following two additional data to be entered in the PO ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 25
- General Ledger (GL) Account Number We have to determine the expense GL 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 GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of
cost center
Respective Business Area where the Material Service is received
Cost Center account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of
GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of
Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entry for Account Assignment as Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416340 BA08 Legal Exp amp Consult Fees
4200000 INR Visit Charges
2 Credit (96)
130100 BA08 GR IR Clearing
4200000 - INR Visit Charges
iii) Purchase Order with account assignment as Q (Project) ndash
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 amp budgeted We can procure following type of materials against the Project account assignment ndash Raw Semi Finished material (to be inventoried) Traded Material When we procure a raw material (to be inventoried)
Train Doc KBLCICSAP MM12MM-FI Integration Page 26
against the account assignment as Project (Q) then the accounting entries posted are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of the accounting entries ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233040 BA02 Inventory ndash
Other Resale 61080600 INR
MS Flange Dia 1500 mm
2 Credit (96)
130100 BA02 GR IR Clearing
61080600 - INR 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS)
Respective Business Area where the Material Service is received
COGS account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency
Material master short text
Train Doc KBLCICSAP MM12MM-FI Integration Page 27
service is received
(For Imported material)
Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of the accounting entry is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
410920 BA02 COGS ndash Other Resale Article
18340100 INR LTAL PVC
ArmPVCSH Cable
2 Credit (96)
130100 BA02 GR IR Clearing
18340100 - INR LTAL PVC
ArmPVCSH Cable
iv) Purchase Order with account assignment as E (Sale Order) ndash
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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Train Doc KBLCICSAP MM12MM-FI Integration Page 28
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233070 BA01 Inventory ndash
Traded Electric Motor
2583000 INR Motor Alstom 22
KW 4 Pole
2 Credit (96)
130100 BA01 GR IR Clearing
2583000 - INR Motor Alstom 22
KW 4 Pole
When we post GRN for traded goods following accounting entries are posted ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS) General Expenses
Respective Business Area where the Material Service is received
COGS account General Expenses Account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit
Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit
Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416320 BA01 General Expenses
56258000 INR
KOEL 85 HP 1800 RPM Engine
2 Credit (96)
130100 BA01 GR IR Clearing
56258000 - INR
KOEL 85 HP 1800 RPM Engine
c) Sub-Contracting Purchase Order ndash In the subndashContracting Purchase Order semindash
finished material is ordered on the Sub-Contractor amp the components are given to SubndashContractor 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 ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 29
Semi ndash Finished
Material
BOM of Semindash
Finished
Material
With without
account
assignment
Sub ndash
Contracting
Purchase Order
Components in
BOM provided to
Vendor for
processing
Transfer of
material to Sub
ndash Contractor
No accounting
entry Stock of
material
provided to
vendor is
updated
GRN of
processed
material
(Quantity)
Inventory of Semi-
Finished material
is updated
Stock of material
provided to
Vendor is
consumed
GRN Value
Inventory of Semi-
Finished material
= Processing
Charges + Value
of BOM
Components
Train Doc KBLCICSAP MM12MM-FI Integration Page 30
Following FI entries are posted during above process ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR Currency
Text of Material
10 Debit
Inventory account of
Semi-finished material
Respective Business Area where the Material is received
Inventory ndash Semi-Finished Goods
(Quantity of Semi-finished material X Processing Charges) + (Inventory Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
20 Credit
Change of Stock
from Sub-Contract
Respective Business Area where the Material is received
Change of Stock from Sub-Contract
(Quantity of Semi-finished material X Processing Charges) + (Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
30 Credit
Inventory of
Components with
Sub-Contractor
Respective Business Area where the Material is received
Inventory of Components with Sub-Contractor
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
40 Debit
Inventory of own
Components
Respective Business Area where the Material is received
Inventory of own Components
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
50 Debit Processing Charges
Other
Respective Business Area where the Material is received
Processing Charges Other
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of received material
60 Credit GR IR Clearing
Respective Business Area where the Material is received
GR IR Clearing Charges
Processing Charges to be paid to Vendor (Quantity of Ordered material X Processing Charges Rate)
INR (for domestic
Purchase)
Material master short text of received material
Train Doc KBLCICSAP MM12MM-FI Integration Page 31
Following is the example of the above transaction ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
235010 BA01 Inventory Semi-Finished Goods
315000 INR BRG Housing 25
13
2 Credit (91)
400040 BA01
Change Stock Semi-Finished
from Sub-Contractor
315000 - INR BRG Housing 25
13
3 Credit (99)
235040 BA01 Inventory of
semi-finished CI Castings
285200 - INR Bearing Housing (Kanban 30 Qty
Bin)
4 Debit (81)
400040 BA01 Change Stock Castings for Sub-Contract
285200 INR Bearing Housing (Kanban 30 Qty
Bin)
5 Credit (96)
130100 BA01 GR IR Clearing 29800 - INR BRG Housing 25
13
6 Debit (86)
411450 BA01 Processing
Charges Other 29800 INR
BRG Housing 25 13
Train Doc KBLCICSAP MM12MM-FI Integration Page 32
d) Import Purchase Order ndash 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 amp 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 ndash Mumbai JNPT Port) After material is cleared from port amp received in Plant GRN is posted Then the customs duty is also inventorised along with the basic price of material amp 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 ndash
Raw material
Valuation class ndash Imported Raw Material
With without account assignment
Import Purchase Order on Overseas Vendor
Customs duties Freight Charges etc of Clearing Agent are invoiced
Planned delivery cost invoice of Import PO is booked when the material arrives at Port
Quantity of Imported Material is updated
GRN is posted when material arrives at Plant (Quantity)
Basic Value of Material + Planned Delivery Costs + Customs Duty
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 33
Following are the FI entries posted when the GRN is posted ndash
Item Posting
Key GL Account Business Area Account Text
Amount in INR
Currency
1 Debit (89)
Inventory account of Imported Raw Material
Business Area where the material has been received
Inventory ndash Imported Raw Material
Quantity of Material X Basic Price of material
INR
2 Credit (96)
GR IR Clearing Account
Business Area where the material has been received
GR IR Clearing
Quantity of Material X Basic Price of material
INR
3 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Basic Customs Duty)
Basic Customs Duty Amount
INR
4 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Ecess on Basic Customs Duty)
Ecess amount on Basic Customs Duty
INR
5 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (SampH Ecess on Basic Customs Duty)
SampH Ecess amount on Basic Customs Duty
INR
6 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing CVD Amount INR
7 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing Ecess on CVD INR
8 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing SampH Ecess of CVD INR
Following is the example of the FI entries of imported material ndash
Item Posting
Key GL Account
Business Area
Account Text Amount in
INR Currency
1 Debit (89)
230110 BA01 Inventory ndash Imported Raw Material
1551800 INR
2 Credit (96)
130100 BA01 GR IR Clearing
1151500 - INR
3 Credit (96)
130120 BA01 Freight Clearing ndash Import
174400 - INR
4 Credit (96)
130120 BA01 Freight Clearing ndash Import
3400 - INR
5 Credit 130120 BA01 Freight Clearing ndash Import 1700 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 34
(96)
6 Credit (50)
130130 BA01 CVD Clearing
214500 - INR
7 Credit (50)
130130 BA01 CVD Clearing
4200 - INR
8 Credit (50)
130130 BA01 CVD Clearing
2100 - INR
e) Stock Transport Purchase Order ndash 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 amp 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR
Currency Plant
10 Credit Inventory Account
Business Area from where material is issued
Inventory of Material
Inventory Amount
INR
Plant from where
material is issued
20 Debit Inventory Account
Business Area where material is received
Inventory of material
Inventory Amount
INR Plant where material is received
Example of above transaction is as below ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Plant
10 Credit (99) 232080 BA05 Inventory of Spares 430250 - INR 2530
20 Debit (89) 232080 BA05 Inventory of Spares 430250 INR 9010
f) Service Purchase Order ndash When a Service Purchase Order (Item Category ndash 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 35
automatically posted by the system (which is based on the accepted service entry sheet) Following is the flow chart for Service Purchase Order ndash
Service Required for Project Cost Center Sale Order
Account assignment data such as Project or WBS Definition Cost Center Number Sale Order Number is maintained
Purchase Order with Item Category D (Service) amp required account assignment (Q K E) is raised
Service Entry sheet is created amp 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 36
Following are the FI postings at the time of accepting Service Entry Sheet ndash
Item Posting
Key GL Account
Business Area
Account Text
Amount in INR
Currency Text
10 Debit Consumption
Account
Business Area from where Service is delivered
Process Charges
Service Charges Amount
INR Service Text
20 Credit GR IR Clearing Account
Business Area where service is delivered
GR IR Clearing
Service Charges Amount
INR Service Text
Following is the example of above transaction ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Text
10 Debit (81) 411420 BA02 Process Charges - Foundry
384780 INR
Service Charges
20 Debit (96) 130100 BA02 GR IR Clearing 384780 -
INR Service Charges
Train Doc KBLCICSAP MM12MM-FI Integration Page 37
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 ndash a) Modvatable Excise Item ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40)
Excise Cenvat
Business Area where the material is received
Cenvat Input P F Basic Excise Duty amount
INR
2 Debit (40)
ECS Cenvat Amount
Business Area where the material is received
Cenvat ED Cess ECS Amount INR
3 Debit (40)
SampH ECS Cenvat Account
Business Area where the material is received
Cenvat SampH Ces-1
SampH ECS Amount
INR
4 Credit (50)
Modvat Clearing Account
Business Area where the material is received
Modvat Clearing Account
Amount equivalent to amount in 1 + 2 + 3
INR
Example of Modvatable excise entries is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40) 244030 BA01 Cenvat Input P F 362900 INR
2 Debit (40) 244031 BA01 Cenvat ED Cess 7300 INR
3 Debit (40) 244034 BA01 Cenvat SampH Ces-1
3600 INR
4 Credit (50) 130150 BA01 Modvat Clearing Account
373800 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 38
b) Trading excisable material received against GRN ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81)
COGS ndash Trading Material
Business Area where the material is received COGS ndash Trading
Material
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
2 Credit (96)
ECS Cenvat Amount
Business Area where the material is received
GR IR Clearing
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
Example of Excise duty inventorised -
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81) 410910 BA01 COGS ndash Trading Motor
433108300 INR
2 Credit (96) 130100 BA01 GR IR Clearing 433108300 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 39
FI entries at Material Consumption When a material is issued to a consumption account (For example ndash Consumption to Production Order Cost Center) the inventory reduces amp 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 ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Credit (99)
231020 BA05 Inventory ndash Other Raw material
15500 - INR
2 Debit (81)
400240 BA05 Consumption ndash Other Raw Material
15500 INR
2) Material consumption posted to Production Order ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Production Order ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (99)
235010 BA01 Inventory ndash Semi Finished Goods
334100 - INR
2 Debit (81)
400290 BA01 Consumption ndash Semi Finished Goods
334100 INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 40
3) Consumption of Stock provided to Sub ndash Contractor for processing of finished material when GRN of processed material is posted ndash
In a sub ndash contracting purchase order a semi finished material is ordered on the sub ndash contractor amp components are provided to the sub ndash 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 amp the concerned FI entries are posted
Train Doc KBLCICSAP MM12MM-FI Integration Page 41
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 amp 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 amp 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 ndash Quantity Variance Price Variance Quality Inspection Manual block date variance and Amount variance The process flow is as below ndash
Purchase Order for Material Service
GRN for Material Service Entry Sheet for Services performed
Purchase Order History
Delivery Costs
Material Master
Vendor Master
GL Account
Assets
Cost Center
Project
Sale Order
Invoice Verification FI Invoice
Document
MM Invoice Document
Further Document
Train Doc KBLCICSAP MM12MM-FI Integration Page 42
Following entries are posted when an invoice for vendor is posted in the system
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (31)
Vendor Account
Business Area Vendor Number
Amount to be paid to Vendor
INR
2 Debit (86)
GR IR Clearing
Business Area GR IR Clearing
GR IR Clearing Amount
INR
3 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash B Excise Duty
INR
4 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash ECS Amount
INR
5 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash SampH ECS Amt
INR
6 Debit (40)
VAT RM Deductible Amount
Business Area from where payment is made
VAT RM Deductible
VAT Amount to be paid to Vendor
INR
Example of above is transaction is as below ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (31) 300664 BA02 WalchandNagar Industries 13590000 - INR
2 Debit (86) 130100 BA02 GR IR Clearing 10000000 INR
3 Debit (40) 130150 Modvat Clearing 1600000 INR
4 Debit (40) 130150 Modvat Clearing 320000 INR
5 Debit (40) 130150 Modvat Clearing 160000 INR
6 Debit (40) 245039 BA02 VAT RM Deductible 1510000 INR
The diagrammatic view of above example is as below ndash
Purchase Order 100 PC at INR 1000 GRN for this PO 100 PC Invoice 100 PC at INR 1000
Goods Receipt
Invoice Receipt
100000 +
20800 +
15100 +
135900 ndash
100000 +
100000 ndash
20800 ndash
Stock Account
GR IR Account
Modvat clearing
VAT
Vendor
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 12
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 companys 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 amp Inventory Management ndash
1) Chart of Accounts ndash This is a list of all GL accounts used by one or several
company codes For each GL account the chart of accounts contains the account number account name and the information that controls how an account functions and how a GL 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 amp 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 ndash The valuation of the material can be done under one of the following areas ndash 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 amp 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 ndash It is the key for account determination that enables a
differentiation for GL 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 GL 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 amp material type can be established by the account category
Train Doc KBLCICSAP MM12MM-FI Integration Page 13
reference The account category reference is a compilation of valuation classes A material type is assigned to only one account category reference GL account determination can be uniformly defined for all material type belonging to a material type
The valuation class for BEARING can be selected as bdquoDOM_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 bdquoIMP_RM‟ (Imported Raw Material) if the material is imported amp the inventory will be maintained as Imported Raw material Inventory
4) General Ledger (GL) Account ndash The central task of GL accounting is to provide a comprehensive picture for external amp accounts
The General Ledger for Domestic Inventory of Raw material is bdquo230120‟ (Inventory ndash Other Raw Material)
5) Cost Center ndash 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 andor responsibility-related standpoints Cost centers are grouped together into decision control amp responsibility unit The activity types are assigned to the cost center
The Cost Center for Foundry Maintenance department of SBG ndash IP is bdquo11011710‟ The costs incurred for the department Foundry Maintenance will be posted to this cost center
6) Profit Center ndash 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-of-sales 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 ndash
i) Purchasing ndash 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 ndash Goods Issue to Production Order Goods Receipt from Production
Order
iii) Other ndash Transfer material to material Goods Issue to Cost Center Sales Order Asset Scrapping Physical Inventory Difference posting
Train Doc KBLCICSAP MM12MM-FI Integration Page 14
These transactions can change the valuation price of material depending upon price control (For example ndash 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 ndash i) Initial Entry of Stock Balances ndash Receipts are valuated at current material price of
using another material price specified externally ii) Goods Receipt for Purchase Order ndash Receipts are valuated at the Purchase order
price (Goods Receipt before Invoice Receipt) iii) Goods Issue ndash Issues are valuated at current material price 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 ndash i) Moving Average price (V) ndash 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 ldquoExpenses revenue from price differencerdquo 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 bdquoBearings‟ are procured from Vendor Hence the material master data of the bearings will have bdquoMoving Average Price‟ control in accounting view
ii) Standard Price (S) ndash 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 ldquoExpenses revenue from price differencerdquo 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 15
Pumps are in-house manufactured in our company hence the material master data of all pumps will have bdquoStandard Price Control‟ in accounting view
Valuation Area details ndash
Valuation Area
Company
Code
Plant Plant
level
valuation
is set-up
in KBL
Train Doc KBLCICSAP MM12MM-FI Integration Page 16
Overview of transactions involved in Material Valuation
Following are the steps involved in Purchasing which are important from material valuation financial point of view ndash
Sr No
Step Description Effect on Materials Management
point Effect from Finance point
1 Purchase Order is created
Vendor is ordered to supply material provide service as per agreed terms amp conditions
Commitment is done with the vendor to pay if he supplies material provides service as per agreed terms
2 Purchase Order is approved
Management approval is given for agreed terms amp conditions
Management approval is given for the financial commitment
3
Material is supplied by the vendor amp GRN is posted for the same
Stock of material (Inventory) increases if material is Inventoried Consumption to cost object is booked if the purchase order is account assigned
Asset (Inventory) is increased GR IR clearing account is credited (which is ultimately the liability to pay money to the vendor as per agreed terms
Goods Receipt
Master Data
Material Master
Vendor
GL Account
Storage Location
Plant
Goods Issue
Transfer Posting
Requirement determined through Material Requirement
Planning
External Procurement Purchasing
Internal Procurement Production
Invoice Receipt
Invoice Verification
Internal amp External Accounting
Train Doc KBLCICSAP MM12MM-FI Integration Page 17
4
Service is provided by the vendor amp service entry sheet is created
Consumption of service is booked to the respective cost object (For example ndash Cost Center)
GR IR clearing account is credited (which is ultimately the liability to pay money to the vendor as per agreed terms
5 Invoice of the vendor is booked in the system
Vendor‟s invoice is checked against the terms amp conditions of the Purchase Order and booked in system so that the vendor can be paid on right time
Vendor account is credited amp GR IR Clearing account is debited (The effective entry is bdquoCredit Vendor Account ndash Debit Inventory‟)
6 Payment is done to the vendor
Liability of the Purchasing organization ends
Debit Vendor Account Credit Bank Account
Following are the steps involved in material movement which are important from financial point of view ndash
Sr No
Transaction Effect from Materials Management point
Effect from Financial point of view
1 Goods Receipt is posted for standard bought out material
Stock of material (Inventory) increases if material is Inventoried Consumption to cost object is booked if the PO is account assigned
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)
2 Goods Receipt posted for sub-contracting material
Stock of the semi-finished material (which was ordered on vendor) increases Consumption of the BOM material (provided to vendor is booked)
Asset (Inventory) of semi-finished 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
3 Goods Receipt posted for Traded Material
Material delivered to customer directly from Vendor (Third Party Transaction)
Cost of Goods sold to customer is booked
4 Goods Issue is posted to Production Order Cost Center
Stock of the material decreases
Material value is booked against the respective cost object (Production Order or Cost Center) as consumption
5 Components transferred to Sub-Contractor
Material provided to vendor for processing amp supplying back the processed goods
No financial entry The inventory is shown as bdquoStock provided to Vendor‟
6 Material delivered to Customer
Finished Goods Traded Goods delivered to customer Own inventory is reduced
Cost of Goods sold to customer is booked
Train Doc KBLCICSAP MM12MM-FI Integration Page 18
Automatic posting of material for Goods Movement
Goods Receipt at
manufacturing plant
Consumption
Storage
Valuation
Valuated
Inventory
posted in Store
Consumption
of material
posted
directly to
consumption
account
Goods Issue
To Production Order
Cost Center
Goods Receipt of Trading
Material against Third Party
Purchase Order
To SD
Delivery
Cost of
Goods Sold
Material cost
posted to
Cost of
Goods Sold
account
Train Doc KBLCICSAP MM12MM-FI Integration Page 19
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 amp the transaction of material posting (For example ndash 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 ndash Imported
Bearings can be accounted in separate account (IMP_RM ndash Imported Raw material) amp Bearing procured from domestic vendor can be accounted in separate account (DOM_RM ndash Domestic Raw Material) The posting transactions for the transactions in Inventory Management amp Invoice Management that are relevant for accounting are fixed Posting records are assigned to event movement type in Inventory Management amp each transaction in Invoice Posting These postings are generalized in a value string (posting rule) Instead of fixed GL account numbers these contain keys for respective posting transaction (such as BSX for a stock posting) The GL account numbers are determined from these keys amp posting transactions
In brief following are the summarized data for influencing factors for account posting
Organizational
Structure
Company
Code
Plant
Chart of Account
Valuation Grouping
Code
Material
Accounting data
for valuation area
Valuation
Class
Material Type
Value
Quantity update
Business
Transaction Goods Movement
Invoice
Verification
Value
String
Transaction
Key
Account
Grouping
Train Doc KBLCICSAP MM12MM-FI Integration Page 20
Material Price Change ndash 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 (amp not the material master change) in which total stock of the plant is revaluated
Train Doc KBLCICSAP MM12MM-FI Integration Page 21
Automatic FI postings at Goods Receipt Following automatic postings are done in the system when the Goods Receipt against Purchase Order are posted ndash
A] Accounting (FI) Entries posted at the time of GRN ndash
a) Raw Material posted to Inventory after posting of GRN ndash 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 amp raw material procured from domestic vendor is kept separate The process flow is as below ndash
Without account assignment
Purchase Order
Raw Material
GRN Quantity
To Store
To Inventory GRN
Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 22
The FI entries posted at GRN are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Raw material Inventory
Respective Business Area where the material is received
Raw material Inventory
(Quantity of material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the material is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of Accounting Entries for Raw material posted to inventory ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Curr
Curr Text
1 Debit (89)
230120 BA01 Inventory ndash Other Raw
Material 510000 INR
BRG 6305 SKF OR EQ
2 Credit (96)
130100 BA01 GR IR Clearing
500000 - INR BRG 6305 SKF
OR EQ
3 Credit (50)
130110 BA01 Freight
Clearing Inland
10000 - INR BRG 6305 SKF
OR EQ
b) Material posted to consumption account after posting of GRN ndash
Following are main account assignment categories (AAC) ndash
AAC Description Required Account Assignment Data
A Asset Main Asset Number amp Sub-Number
K Cost Center Cost Center amp GL Account Number
Q Project WBS Element Number of the Project
E Sale Order Sale Order Number amp Line Number of the Sale Order
Train Doc KBLCICSAP MM12MM-FI Integration Page 23
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 GL 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 ndash
i) Purchase Order with account assignment A (Asset) ndash 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 GL Account in the company‟s balance sheet The GL account is a reconciliation account that means that it reconciles several asset numbers
With account assignment Purchase
Order
Raw Material Non Valuated Material
GRN Quantity
To Store (Raw Material) or To Consumption (Non-valuated material)
Consumption Account
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 24
For Purchase Order with account assignment A (Asset) the entry in FI GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Asset
Respective Business Area where the Asset is received
Asset Number amp Sub Number
(Quantity of Asset X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the asset is received
GR IR Clearing Account
(Quantity of Asset X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the asset is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entries for asset posted ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (70)
211450 BA05
Asset Number 000021000780 Sub Number 0000
3650000 INR
IM-314318325 MOUNTING CASING
2 Credit (96)
130100 BA05 GR IR Clearing 3605000 - INR
IM-314318325 MOUNTING CASING
3 Credit (50)
130110 BA05 Freight Clearing Inland
45000 - INR IM-314318325 MOUNTING CASING
ii) Purchase Order with account assignment K (Cost Center) ndash 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 amp services With account assignment K we need to determine following two additional data to be entered in the PO ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 25
- General Ledger (GL) Account Number We have to determine the expense GL 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 GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of
cost center
Respective Business Area where the Material Service is received
Cost Center account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of
GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of
Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entry for Account Assignment as Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416340 BA08 Legal Exp amp Consult Fees
4200000 INR Visit Charges
2 Credit (96)
130100 BA08 GR IR Clearing
4200000 - INR Visit Charges
iii) Purchase Order with account assignment as Q (Project) ndash
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 amp budgeted We can procure following type of materials against the Project account assignment ndash Raw Semi Finished material (to be inventoried) Traded Material When we procure a raw material (to be inventoried)
Train Doc KBLCICSAP MM12MM-FI Integration Page 26
against the account assignment as Project (Q) then the accounting entries posted are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of the accounting entries ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233040 BA02 Inventory ndash
Other Resale 61080600 INR
MS Flange Dia 1500 mm
2 Credit (96)
130100 BA02 GR IR Clearing
61080600 - INR 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS)
Respective Business Area where the Material Service is received
COGS account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency
Material master short text
Train Doc KBLCICSAP MM12MM-FI Integration Page 27
service is received
(For Imported material)
Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of the accounting entry is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
410920 BA02 COGS ndash Other Resale Article
18340100 INR LTAL PVC
ArmPVCSH Cable
2 Credit (96)
130100 BA02 GR IR Clearing
18340100 - INR LTAL PVC
ArmPVCSH Cable
iv) Purchase Order with account assignment as E (Sale Order) ndash
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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Train Doc KBLCICSAP MM12MM-FI Integration Page 28
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233070 BA01 Inventory ndash
Traded Electric Motor
2583000 INR Motor Alstom 22
KW 4 Pole
2 Credit (96)
130100 BA01 GR IR Clearing
2583000 - INR Motor Alstom 22
KW 4 Pole
When we post GRN for traded goods following accounting entries are posted ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS) General Expenses
Respective Business Area where the Material Service is received
COGS account General Expenses Account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit
Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit
Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416320 BA01 General Expenses
56258000 INR
KOEL 85 HP 1800 RPM Engine
2 Credit (96)
130100 BA01 GR IR Clearing
56258000 - INR
KOEL 85 HP 1800 RPM Engine
c) Sub-Contracting Purchase Order ndash In the subndashContracting Purchase Order semindash
finished material is ordered on the Sub-Contractor amp the components are given to SubndashContractor 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 ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 29
Semi ndash Finished
Material
BOM of Semindash
Finished
Material
With without
account
assignment
Sub ndash
Contracting
Purchase Order
Components in
BOM provided to
Vendor for
processing
Transfer of
material to Sub
ndash Contractor
No accounting
entry Stock of
material
provided to
vendor is
updated
GRN of
processed
material
(Quantity)
Inventory of Semi-
Finished material
is updated
Stock of material
provided to
Vendor is
consumed
GRN Value
Inventory of Semi-
Finished material
= Processing
Charges + Value
of BOM
Components
Train Doc KBLCICSAP MM12MM-FI Integration Page 30
Following FI entries are posted during above process ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR Currency
Text of Material
10 Debit
Inventory account of
Semi-finished material
Respective Business Area where the Material is received
Inventory ndash Semi-Finished Goods
(Quantity of Semi-finished material X Processing Charges) + (Inventory Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
20 Credit
Change of Stock
from Sub-Contract
Respective Business Area where the Material is received
Change of Stock from Sub-Contract
(Quantity of Semi-finished material X Processing Charges) + (Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
30 Credit
Inventory of
Components with
Sub-Contractor
Respective Business Area where the Material is received
Inventory of Components with Sub-Contractor
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
40 Debit
Inventory of own
Components
Respective Business Area where the Material is received
Inventory of own Components
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
50 Debit Processing Charges
Other
Respective Business Area where the Material is received
Processing Charges Other
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of received material
60 Credit GR IR Clearing
Respective Business Area where the Material is received
GR IR Clearing Charges
Processing Charges to be paid to Vendor (Quantity of Ordered material X Processing Charges Rate)
INR (for domestic
Purchase)
Material master short text of received material
Train Doc KBLCICSAP MM12MM-FI Integration Page 31
Following is the example of the above transaction ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
235010 BA01 Inventory Semi-Finished Goods
315000 INR BRG Housing 25
13
2 Credit (91)
400040 BA01
Change Stock Semi-Finished
from Sub-Contractor
315000 - INR BRG Housing 25
13
3 Credit (99)
235040 BA01 Inventory of
semi-finished CI Castings
285200 - INR Bearing Housing (Kanban 30 Qty
Bin)
4 Debit (81)
400040 BA01 Change Stock Castings for Sub-Contract
285200 INR Bearing Housing (Kanban 30 Qty
Bin)
5 Credit (96)
130100 BA01 GR IR Clearing 29800 - INR BRG Housing 25
13
6 Debit (86)
411450 BA01 Processing
Charges Other 29800 INR
BRG Housing 25 13
Train Doc KBLCICSAP MM12MM-FI Integration Page 32
d) Import Purchase Order ndash 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 amp 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 ndash Mumbai JNPT Port) After material is cleared from port amp received in Plant GRN is posted Then the customs duty is also inventorised along with the basic price of material amp 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 ndash
Raw material
Valuation class ndash Imported Raw Material
With without account assignment
Import Purchase Order on Overseas Vendor
Customs duties Freight Charges etc of Clearing Agent are invoiced
Planned delivery cost invoice of Import PO is booked when the material arrives at Port
Quantity of Imported Material is updated
GRN is posted when material arrives at Plant (Quantity)
Basic Value of Material + Planned Delivery Costs + Customs Duty
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 33
Following are the FI entries posted when the GRN is posted ndash
Item Posting
Key GL Account Business Area Account Text
Amount in INR
Currency
1 Debit (89)
Inventory account of Imported Raw Material
Business Area where the material has been received
Inventory ndash Imported Raw Material
Quantity of Material X Basic Price of material
INR
2 Credit (96)
GR IR Clearing Account
Business Area where the material has been received
GR IR Clearing
Quantity of Material X Basic Price of material
INR
3 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Basic Customs Duty)
Basic Customs Duty Amount
INR
4 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Ecess on Basic Customs Duty)
Ecess amount on Basic Customs Duty
INR
5 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (SampH Ecess on Basic Customs Duty)
SampH Ecess amount on Basic Customs Duty
INR
6 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing CVD Amount INR
7 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing Ecess on CVD INR
8 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing SampH Ecess of CVD INR
Following is the example of the FI entries of imported material ndash
Item Posting
Key GL Account
Business Area
Account Text Amount in
INR Currency
1 Debit (89)
230110 BA01 Inventory ndash Imported Raw Material
1551800 INR
2 Credit (96)
130100 BA01 GR IR Clearing
1151500 - INR
3 Credit (96)
130120 BA01 Freight Clearing ndash Import
174400 - INR
4 Credit (96)
130120 BA01 Freight Clearing ndash Import
3400 - INR
5 Credit 130120 BA01 Freight Clearing ndash Import 1700 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 34
(96)
6 Credit (50)
130130 BA01 CVD Clearing
214500 - INR
7 Credit (50)
130130 BA01 CVD Clearing
4200 - INR
8 Credit (50)
130130 BA01 CVD Clearing
2100 - INR
e) Stock Transport Purchase Order ndash 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 amp 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR
Currency Plant
10 Credit Inventory Account
Business Area from where material is issued
Inventory of Material
Inventory Amount
INR
Plant from where
material is issued
20 Debit Inventory Account
Business Area where material is received
Inventory of material
Inventory Amount
INR Plant where material is received
Example of above transaction is as below ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Plant
10 Credit (99) 232080 BA05 Inventory of Spares 430250 - INR 2530
20 Debit (89) 232080 BA05 Inventory of Spares 430250 INR 9010
f) Service Purchase Order ndash When a Service Purchase Order (Item Category ndash 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 35
automatically posted by the system (which is based on the accepted service entry sheet) Following is the flow chart for Service Purchase Order ndash
Service Required for Project Cost Center Sale Order
Account assignment data such as Project or WBS Definition Cost Center Number Sale Order Number is maintained
Purchase Order with Item Category D (Service) amp required account assignment (Q K E) is raised
Service Entry sheet is created amp 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 36
Following are the FI postings at the time of accepting Service Entry Sheet ndash
Item Posting
Key GL Account
Business Area
Account Text
Amount in INR
Currency Text
10 Debit Consumption
Account
Business Area from where Service is delivered
Process Charges
Service Charges Amount
INR Service Text
20 Credit GR IR Clearing Account
Business Area where service is delivered
GR IR Clearing
Service Charges Amount
INR Service Text
Following is the example of above transaction ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Text
10 Debit (81) 411420 BA02 Process Charges - Foundry
384780 INR
Service Charges
20 Debit (96) 130100 BA02 GR IR Clearing 384780 -
INR Service Charges
Train Doc KBLCICSAP MM12MM-FI Integration Page 37
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 ndash a) Modvatable Excise Item ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40)
Excise Cenvat
Business Area where the material is received
Cenvat Input P F Basic Excise Duty amount
INR
2 Debit (40)
ECS Cenvat Amount
Business Area where the material is received
Cenvat ED Cess ECS Amount INR
3 Debit (40)
SampH ECS Cenvat Account
Business Area where the material is received
Cenvat SampH Ces-1
SampH ECS Amount
INR
4 Credit (50)
Modvat Clearing Account
Business Area where the material is received
Modvat Clearing Account
Amount equivalent to amount in 1 + 2 + 3
INR
Example of Modvatable excise entries is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40) 244030 BA01 Cenvat Input P F 362900 INR
2 Debit (40) 244031 BA01 Cenvat ED Cess 7300 INR
3 Debit (40) 244034 BA01 Cenvat SampH Ces-1
3600 INR
4 Credit (50) 130150 BA01 Modvat Clearing Account
373800 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 38
b) Trading excisable material received against GRN ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81)
COGS ndash Trading Material
Business Area where the material is received COGS ndash Trading
Material
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
2 Credit (96)
ECS Cenvat Amount
Business Area where the material is received
GR IR Clearing
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
Example of Excise duty inventorised -
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81) 410910 BA01 COGS ndash Trading Motor
433108300 INR
2 Credit (96) 130100 BA01 GR IR Clearing 433108300 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 39
FI entries at Material Consumption When a material is issued to a consumption account (For example ndash Consumption to Production Order Cost Center) the inventory reduces amp 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 ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Credit (99)
231020 BA05 Inventory ndash Other Raw material
15500 - INR
2 Debit (81)
400240 BA05 Consumption ndash Other Raw Material
15500 INR
2) Material consumption posted to Production Order ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Production Order ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (99)
235010 BA01 Inventory ndash Semi Finished Goods
334100 - INR
2 Debit (81)
400290 BA01 Consumption ndash Semi Finished Goods
334100 INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 40
3) Consumption of Stock provided to Sub ndash Contractor for processing of finished material when GRN of processed material is posted ndash
In a sub ndash contracting purchase order a semi finished material is ordered on the sub ndash contractor amp components are provided to the sub ndash 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 amp the concerned FI entries are posted
Train Doc KBLCICSAP MM12MM-FI Integration Page 41
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 amp 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 amp 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 ndash Quantity Variance Price Variance Quality Inspection Manual block date variance and Amount variance The process flow is as below ndash
Purchase Order for Material Service
GRN for Material Service Entry Sheet for Services performed
Purchase Order History
Delivery Costs
Material Master
Vendor Master
GL Account
Assets
Cost Center
Project
Sale Order
Invoice Verification FI Invoice
Document
MM Invoice Document
Further Document
Train Doc KBLCICSAP MM12MM-FI Integration Page 42
Following entries are posted when an invoice for vendor is posted in the system
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (31)
Vendor Account
Business Area Vendor Number
Amount to be paid to Vendor
INR
2 Debit (86)
GR IR Clearing
Business Area GR IR Clearing
GR IR Clearing Amount
INR
3 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash B Excise Duty
INR
4 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash ECS Amount
INR
5 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash SampH ECS Amt
INR
6 Debit (40)
VAT RM Deductible Amount
Business Area from where payment is made
VAT RM Deductible
VAT Amount to be paid to Vendor
INR
Example of above is transaction is as below ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (31) 300664 BA02 WalchandNagar Industries 13590000 - INR
2 Debit (86) 130100 BA02 GR IR Clearing 10000000 INR
3 Debit (40) 130150 Modvat Clearing 1600000 INR
4 Debit (40) 130150 Modvat Clearing 320000 INR
5 Debit (40) 130150 Modvat Clearing 160000 INR
6 Debit (40) 245039 BA02 VAT RM Deductible 1510000 INR
The diagrammatic view of above example is as below ndash
Purchase Order 100 PC at INR 1000 GRN for this PO 100 PC Invoice 100 PC at INR 1000
Goods Receipt
Invoice Receipt
100000 +
20800 +
15100 +
135900 ndash
100000 +
100000 ndash
20800 ndash
Stock Account
GR IR Account
Modvat clearing
VAT
Vendor
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 13
reference The account category reference is a compilation of valuation classes A material type is assigned to only one account category reference GL account determination can be uniformly defined for all material type belonging to a material type
The valuation class for BEARING can be selected as bdquoDOM_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 bdquoIMP_RM‟ (Imported Raw Material) if the material is imported amp the inventory will be maintained as Imported Raw material Inventory
4) General Ledger (GL) Account ndash The central task of GL accounting is to provide a comprehensive picture for external amp accounts
The General Ledger for Domestic Inventory of Raw material is bdquo230120‟ (Inventory ndash Other Raw Material)
5) Cost Center ndash 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 andor responsibility-related standpoints Cost centers are grouped together into decision control amp responsibility unit The activity types are assigned to the cost center
The Cost Center for Foundry Maintenance department of SBG ndash IP is bdquo11011710‟ The costs incurred for the department Foundry Maintenance will be posted to this cost center
6) Profit Center ndash 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-of-sales 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 ndash
i) Purchasing ndash 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 ndash Goods Issue to Production Order Goods Receipt from Production
Order
iii) Other ndash Transfer material to material Goods Issue to Cost Center Sales Order Asset Scrapping Physical Inventory Difference posting
Train Doc KBLCICSAP MM12MM-FI Integration Page 14
These transactions can change the valuation price of material depending upon price control (For example ndash 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 ndash i) Initial Entry of Stock Balances ndash Receipts are valuated at current material price of
using another material price specified externally ii) Goods Receipt for Purchase Order ndash Receipts are valuated at the Purchase order
price (Goods Receipt before Invoice Receipt) iii) Goods Issue ndash Issues are valuated at current material price 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 ndash i) Moving Average price (V) ndash 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 ldquoExpenses revenue from price differencerdquo 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 bdquoBearings‟ are procured from Vendor Hence the material master data of the bearings will have bdquoMoving Average Price‟ control in accounting view
ii) Standard Price (S) ndash 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 ldquoExpenses revenue from price differencerdquo 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 15
Pumps are in-house manufactured in our company hence the material master data of all pumps will have bdquoStandard Price Control‟ in accounting view
Valuation Area details ndash
Valuation Area
Company
Code
Plant Plant
level
valuation
is set-up
in KBL
Train Doc KBLCICSAP MM12MM-FI Integration Page 16
Overview of transactions involved in Material Valuation
Following are the steps involved in Purchasing which are important from material valuation financial point of view ndash
Sr No
Step Description Effect on Materials Management
point Effect from Finance point
1 Purchase Order is created
Vendor is ordered to supply material provide service as per agreed terms amp conditions
Commitment is done with the vendor to pay if he supplies material provides service as per agreed terms
2 Purchase Order is approved
Management approval is given for agreed terms amp conditions
Management approval is given for the financial commitment
3
Material is supplied by the vendor amp GRN is posted for the same
Stock of material (Inventory) increases if material is Inventoried Consumption to cost object is booked if the purchase order is account assigned
Asset (Inventory) is increased GR IR clearing account is credited (which is ultimately the liability to pay money to the vendor as per agreed terms
Goods Receipt
Master Data
Material Master
Vendor
GL Account
Storage Location
Plant
Goods Issue
Transfer Posting
Requirement determined through Material Requirement
Planning
External Procurement Purchasing
Internal Procurement Production
Invoice Receipt
Invoice Verification
Internal amp External Accounting
Train Doc KBLCICSAP MM12MM-FI Integration Page 17
4
Service is provided by the vendor amp service entry sheet is created
Consumption of service is booked to the respective cost object (For example ndash Cost Center)
GR IR clearing account is credited (which is ultimately the liability to pay money to the vendor as per agreed terms
5 Invoice of the vendor is booked in the system
Vendor‟s invoice is checked against the terms amp conditions of the Purchase Order and booked in system so that the vendor can be paid on right time
Vendor account is credited amp GR IR Clearing account is debited (The effective entry is bdquoCredit Vendor Account ndash Debit Inventory‟)
6 Payment is done to the vendor
Liability of the Purchasing organization ends
Debit Vendor Account Credit Bank Account
Following are the steps involved in material movement which are important from financial point of view ndash
Sr No
Transaction Effect from Materials Management point
Effect from Financial point of view
1 Goods Receipt is posted for standard bought out material
Stock of material (Inventory) increases if material is Inventoried Consumption to cost object is booked if the PO is account assigned
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)
2 Goods Receipt posted for sub-contracting material
Stock of the semi-finished material (which was ordered on vendor) increases Consumption of the BOM material (provided to vendor is booked)
Asset (Inventory) of semi-finished 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
3 Goods Receipt posted for Traded Material
Material delivered to customer directly from Vendor (Third Party Transaction)
Cost of Goods sold to customer is booked
4 Goods Issue is posted to Production Order Cost Center
Stock of the material decreases
Material value is booked against the respective cost object (Production Order or Cost Center) as consumption
5 Components transferred to Sub-Contractor
Material provided to vendor for processing amp supplying back the processed goods
No financial entry The inventory is shown as bdquoStock provided to Vendor‟
6 Material delivered to Customer
Finished Goods Traded Goods delivered to customer Own inventory is reduced
Cost of Goods sold to customer is booked
Train Doc KBLCICSAP MM12MM-FI Integration Page 18
Automatic posting of material for Goods Movement
Goods Receipt at
manufacturing plant
Consumption
Storage
Valuation
Valuated
Inventory
posted in Store
Consumption
of material
posted
directly to
consumption
account
Goods Issue
To Production Order
Cost Center
Goods Receipt of Trading
Material against Third Party
Purchase Order
To SD
Delivery
Cost of
Goods Sold
Material cost
posted to
Cost of
Goods Sold
account
Train Doc KBLCICSAP MM12MM-FI Integration Page 19
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 amp the transaction of material posting (For example ndash 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 ndash Imported
Bearings can be accounted in separate account (IMP_RM ndash Imported Raw material) amp Bearing procured from domestic vendor can be accounted in separate account (DOM_RM ndash Domestic Raw Material) The posting transactions for the transactions in Inventory Management amp Invoice Management that are relevant for accounting are fixed Posting records are assigned to event movement type in Inventory Management amp each transaction in Invoice Posting These postings are generalized in a value string (posting rule) Instead of fixed GL account numbers these contain keys for respective posting transaction (such as BSX for a stock posting) The GL account numbers are determined from these keys amp posting transactions
In brief following are the summarized data for influencing factors for account posting
Organizational
Structure
Company
Code
Plant
Chart of Account
Valuation Grouping
Code
Material
Accounting data
for valuation area
Valuation
Class
Material Type
Value
Quantity update
Business
Transaction Goods Movement
Invoice
Verification
Value
String
Transaction
Key
Account
Grouping
Train Doc KBLCICSAP MM12MM-FI Integration Page 20
Material Price Change ndash 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 (amp not the material master change) in which total stock of the plant is revaluated
Train Doc KBLCICSAP MM12MM-FI Integration Page 21
Automatic FI postings at Goods Receipt Following automatic postings are done in the system when the Goods Receipt against Purchase Order are posted ndash
A] Accounting (FI) Entries posted at the time of GRN ndash
a) Raw Material posted to Inventory after posting of GRN ndash 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 amp raw material procured from domestic vendor is kept separate The process flow is as below ndash
Without account assignment
Purchase Order
Raw Material
GRN Quantity
To Store
To Inventory GRN
Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 22
The FI entries posted at GRN are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Raw material Inventory
Respective Business Area where the material is received
Raw material Inventory
(Quantity of material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the material is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of Accounting Entries for Raw material posted to inventory ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Curr
Curr Text
1 Debit (89)
230120 BA01 Inventory ndash Other Raw
Material 510000 INR
BRG 6305 SKF OR EQ
2 Credit (96)
130100 BA01 GR IR Clearing
500000 - INR BRG 6305 SKF
OR EQ
3 Credit (50)
130110 BA01 Freight
Clearing Inland
10000 - INR BRG 6305 SKF
OR EQ
b) Material posted to consumption account after posting of GRN ndash
Following are main account assignment categories (AAC) ndash
AAC Description Required Account Assignment Data
A Asset Main Asset Number amp Sub-Number
K Cost Center Cost Center amp GL Account Number
Q Project WBS Element Number of the Project
E Sale Order Sale Order Number amp Line Number of the Sale Order
Train Doc KBLCICSAP MM12MM-FI Integration Page 23
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 GL 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 ndash
i) Purchase Order with account assignment A (Asset) ndash 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 GL Account in the company‟s balance sheet The GL account is a reconciliation account that means that it reconciles several asset numbers
With account assignment Purchase
Order
Raw Material Non Valuated Material
GRN Quantity
To Store (Raw Material) or To Consumption (Non-valuated material)
Consumption Account
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 24
For Purchase Order with account assignment A (Asset) the entry in FI GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Asset
Respective Business Area where the Asset is received
Asset Number amp Sub Number
(Quantity of Asset X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the asset is received
GR IR Clearing Account
(Quantity of Asset X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the asset is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entries for asset posted ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (70)
211450 BA05
Asset Number 000021000780 Sub Number 0000
3650000 INR
IM-314318325 MOUNTING CASING
2 Credit (96)
130100 BA05 GR IR Clearing 3605000 - INR
IM-314318325 MOUNTING CASING
3 Credit (50)
130110 BA05 Freight Clearing Inland
45000 - INR IM-314318325 MOUNTING CASING
ii) Purchase Order with account assignment K (Cost Center) ndash 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 amp services With account assignment K we need to determine following two additional data to be entered in the PO ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 25
- General Ledger (GL) Account Number We have to determine the expense GL 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 GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of
cost center
Respective Business Area where the Material Service is received
Cost Center account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of
GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of
Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entry for Account Assignment as Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416340 BA08 Legal Exp amp Consult Fees
4200000 INR Visit Charges
2 Credit (96)
130100 BA08 GR IR Clearing
4200000 - INR Visit Charges
iii) Purchase Order with account assignment as Q (Project) ndash
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 amp budgeted We can procure following type of materials against the Project account assignment ndash Raw Semi Finished material (to be inventoried) Traded Material When we procure a raw material (to be inventoried)
Train Doc KBLCICSAP MM12MM-FI Integration Page 26
against the account assignment as Project (Q) then the accounting entries posted are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of the accounting entries ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233040 BA02 Inventory ndash
Other Resale 61080600 INR
MS Flange Dia 1500 mm
2 Credit (96)
130100 BA02 GR IR Clearing
61080600 - INR 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS)
Respective Business Area where the Material Service is received
COGS account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency
Material master short text
Train Doc KBLCICSAP MM12MM-FI Integration Page 27
service is received
(For Imported material)
Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of the accounting entry is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
410920 BA02 COGS ndash Other Resale Article
18340100 INR LTAL PVC
ArmPVCSH Cable
2 Credit (96)
130100 BA02 GR IR Clearing
18340100 - INR LTAL PVC
ArmPVCSH Cable
iv) Purchase Order with account assignment as E (Sale Order) ndash
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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Train Doc KBLCICSAP MM12MM-FI Integration Page 28
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233070 BA01 Inventory ndash
Traded Electric Motor
2583000 INR Motor Alstom 22
KW 4 Pole
2 Credit (96)
130100 BA01 GR IR Clearing
2583000 - INR Motor Alstom 22
KW 4 Pole
When we post GRN for traded goods following accounting entries are posted ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS) General Expenses
Respective Business Area where the Material Service is received
COGS account General Expenses Account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit
Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit
Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416320 BA01 General Expenses
56258000 INR
KOEL 85 HP 1800 RPM Engine
2 Credit (96)
130100 BA01 GR IR Clearing
56258000 - INR
KOEL 85 HP 1800 RPM Engine
c) Sub-Contracting Purchase Order ndash In the subndashContracting Purchase Order semindash
finished material is ordered on the Sub-Contractor amp the components are given to SubndashContractor 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 ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 29
Semi ndash Finished
Material
BOM of Semindash
Finished
Material
With without
account
assignment
Sub ndash
Contracting
Purchase Order
Components in
BOM provided to
Vendor for
processing
Transfer of
material to Sub
ndash Contractor
No accounting
entry Stock of
material
provided to
vendor is
updated
GRN of
processed
material
(Quantity)
Inventory of Semi-
Finished material
is updated
Stock of material
provided to
Vendor is
consumed
GRN Value
Inventory of Semi-
Finished material
= Processing
Charges + Value
of BOM
Components
Train Doc KBLCICSAP MM12MM-FI Integration Page 30
Following FI entries are posted during above process ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR Currency
Text of Material
10 Debit
Inventory account of
Semi-finished material
Respective Business Area where the Material is received
Inventory ndash Semi-Finished Goods
(Quantity of Semi-finished material X Processing Charges) + (Inventory Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
20 Credit
Change of Stock
from Sub-Contract
Respective Business Area where the Material is received
Change of Stock from Sub-Contract
(Quantity of Semi-finished material X Processing Charges) + (Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
30 Credit
Inventory of
Components with
Sub-Contractor
Respective Business Area where the Material is received
Inventory of Components with Sub-Contractor
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
40 Debit
Inventory of own
Components
Respective Business Area where the Material is received
Inventory of own Components
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
50 Debit Processing Charges
Other
Respective Business Area where the Material is received
Processing Charges Other
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of received material
60 Credit GR IR Clearing
Respective Business Area where the Material is received
GR IR Clearing Charges
Processing Charges to be paid to Vendor (Quantity of Ordered material X Processing Charges Rate)
INR (for domestic
Purchase)
Material master short text of received material
Train Doc KBLCICSAP MM12MM-FI Integration Page 31
Following is the example of the above transaction ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
235010 BA01 Inventory Semi-Finished Goods
315000 INR BRG Housing 25
13
2 Credit (91)
400040 BA01
Change Stock Semi-Finished
from Sub-Contractor
315000 - INR BRG Housing 25
13
3 Credit (99)
235040 BA01 Inventory of
semi-finished CI Castings
285200 - INR Bearing Housing (Kanban 30 Qty
Bin)
4 Debit (81)
400040 BA01 Change Stock Castings for Sub-Contract
285200 INR Bearing Housing (Kanban 30 Qty
Bin)
5 Credit (96)
130100 BA01 GR IR Clearing 29800 - INR BRG Housing 25
13
6 Debit (86)
411450 BA01 Processing
Charges Other 29800 INR
BRG Housing 25 13
Train Doc KBLCICSAP MM12MM-FI Integration Page 32
d) Import Purchase Order ndash 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 amp 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 ndash Mumbai JNPT Port) After material is cleared from port amp received in Plant GRN is posted Then the customs duty is also inventorised along with the basic price of material amp 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 ndash
Raw material
Valuation class ndash Imported Raw Material
With without account assignment
Import Purchase Order on Overseas Vendor
Customs duties Freight Charges etc of Clearing Agent are invoiced
Planned delivery cost invoice of Import PO is booked when the material arrives at Port
Quantity of Imported Material is updated
GRN is posted when material arrives at Plant (Quantity)
Basic Value of Material + Planned Delivery Costs + Customs Duty
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 33
Following are the FI entries posted when the GRN is posted ndash
Item Posting
Key GL Account Business Area Account Text
Amount in INR
Currency
1 Debit (89)
Inventory account of Imported Raw Material
Business Area where the material has been received
Inventory ndash Imported Raw Material
Quantity of Material X Basic Price of material
INR
2 Credit (96)
GR IR Clearing Account
Business Area where the material has been received
GR IR Clearing
Quantity of Material X Basic Price of material
INR
3 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Basic Customs Duty)
Basic Customs Duty Amount
INR
4 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Ecess on Basic Customs Duty)
Ecess amount on Basic Customs Duty
INR
5 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (SampH Ecess on Basic Customs Duty)
SampH Ecess amount on Basic Customs Duty
INR
6 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing CVD Amount INR
7 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing Ecess on CVD INR
8 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing SampH Ecess of CVD INR
Following is the example of the FI entries of imported material ndash
Item Posting
Key GL Account
Business Area
Account Text Amount in
INR Currency
1 Debit (89)
230110 BA01 Inventory ndash Imported Raw Material
1551800 INR
2 Credit (96)
130100 BA01 GR IR Clearing
1151500 - INR
3 Credit (96)
130120 BA01 Freight Clearing ndash Import
174400 - INR
4 Credit (96)
130120 BA01 Freight Clearing ndash Import
3400 - INR
5 Credit 130120 BA01 Freight Clearing ndash Import 1700 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 34
(96)
6 Credit (50)
130130 BA01 CVD Clearing
214500 - INR
7 Credit (50)
130130 BA01 CVD Clearing
4200 - INR
8 Credit (50)
130130 BA01 CVD Clearing
2100 - INR
e) Stock Transport Purchase Order ndash 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 amp 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR
Currency Plant
10 Credit Inventory Account
Business Area from where material is issued
Inventory of Material
Inventory Amount
INR
Plant from where
material is issued
20 Debit Inventory Account
Business Area where material is received
Inventory of material
Inventory Amount
INR Plant where material is received
Example of above transaction is as below ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Plant
10 Credit (99) 232080 BA05 Inventory of Spares 430250 - INR 2530
20 Debit (89) 232080 BA05 Inventory of Spares 430250 INR 9010
f) Service Purchase Order ndash When a Service Purchase Order (Item Category ndash 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 35
automatically posted by the system (which is based on the accepted service entry sheet) Following is the flow chart for Service Purchase Order ndash
Service Required for Project Cost Center Sale Order
Account assignment data such as Project or WBS Definition Cost Center Number Sale Order Number is maintained
Purchase Order with Item Category D (Service) amp required account assignment (Q K E) is raised
Service Entry sheet is created amp 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 36
Following are the FI postings at the time of accepting Service Entry Sheet ndash
Item Posting
Key GL Account
Business Area
Account Text
Amount in INR
Currency Text
10 Debit Consumption
Account
Business Area from where Service is delivered
Process Charges
Service Charges Amount
INR Service Text
20 Credit GR IR Clearing Account
Business Area where service is delivered
GR IR Clearing
Service Charges Amount
INR Service Text
Following is the example of above transaction ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Text
10 Debit (81) 411420 BA02 Process Charges - Foundry
384780 INR
Service Charges
20 Debit (96) 130100 BA02 GR IR Clearing 384780 -
INR Service Charges
Train Doc KBLCICSAP MM12MM-FI Integration Page 37
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 ndash a) Modvatable Excise Item ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40)
Excise Cenvat
Business Area where the material is received
Cenvat Input P F Basic Excise Duty amount
INR
2 Debit (40)
ECS Cenvat Amount
Business Area where the material is received
Cenvat ED Cess ECS Amount INR
3 Debit (40)
SampH ECS Cenvat Account
Business Area where the material is received
Cenvat SampH Ces-1
SampH ECS Amount
INR
4 Credit (50)
Modvat Clearing Account
Business Area where the material is received
Modvat Clearing Account
Amount equivalent to amount in 1 + 2 + 3
INR
Example of Modvatable excise entries is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40) 244030 BA01 Cenvat Input P F 362900 INR
2 Debit (40) 244031 BA01 Cenvat ED Cess 7300 INR
3 Debit (40) 244034 BA01 Cenvat SampH Ces-1
3600 INR
4 Credit (50) 130150 BA01 Modvat Clearing Account
373800 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 38
b) Trading excisable material received against GRN ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81)
COGS ndash Trading Material
Business Area where the material is received COGS ndash Trading
Material
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
2 Credit (96)
ECS Cenvat Amount
Business Area where the material is received
GR IR Clearing
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
Example of Excise duty inventorised -
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81) 410910 BA01 COGS ndash Trading Motor
433108300 INR
2 Credit (96) 130100 BA01 GR IR Clearing 433108300 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 39
FI entries at Material Consumption When a material is issued to a consumption account (For example ndash Consumption to Production Order Cost Center) the inventory reduces amp 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 ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Credit (99)
231020 BA05 Inventory ndash Other Raw material
15500 - INR
2 Debit (81)
400240 BA05 Consumption ndash Other Raw Material
15500 INR
2) Material consumption posted to Production Order ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Production Order ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (99)
235010 BA01 Inventory ndash Semi Finished Goods
334100 - INR
2 Debit (81)
400290 BA01 Consumption ndash Semi Finished Goods
334100 INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 40
3) Consumption of Stock provided to Sub ndash Contractor for processing of finished material when GRN of processed material is posted ndash
In a sub ndash contracting purchase order a semi finished material is ordered on the sub ndash contractor amp components are provided to the sub ndash 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 amp the concerned FI entries are posted
Train Doc KBLCICSAP MM12MM-FI Integration Page 41
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 amp 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 amp 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 ndash Quantity Variance Price Variance Quality Inspection Manual block date variance and Amount variance The process flow is as below ndash
Purchase Order for Material Service
GRN for Material Service Entry Sheet for Services performed
Purchase Order History
Delivery Costs
Material Master
Vendor Master
GL Account
Assets
Cost Center
Project
Sale Order
Invoice Verification FI Invoice
Document
MM Invoice Document
Further Document
Train Doc KBLCICSAP MM12MM-FI Integration Page 42
Following entries are posted when an invoice for vendor is posted in the system
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (31)
Vendor Account
Business Area Vendor Number
Amount to be paid to Vendor
INR
2 Debit (86)
GR IR Clearing
Business Area GR IR Clearing
GR IR Clearing Amount
INR
3 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash B Excise Duty
INR
4 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash ECS Amount
INR
5 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash SampH ECS Amt
INR
6 Debit (40)
VAT RM Deductible Amount
Business Area from where payment is made
VAT RM Deductible
VAT Amount to be paid to Vendor
INR
Example of above is transaction is as below ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (31) 300664 BA02 WalchandNagar Industries 13590000 - INR
2 Debit (86) 130100 BA02 GR IR Clearing 10000000 INR
3 Debit (40) 130150 Modvat Clearing 1600000 INR
4 Debit (40) 130150 Modvat Clearing 320000 INR
5 Debit (40) 130150 Modvat Clearing 160000 INR
6 Debit (40) 245039 BA02 VAT RM Deductible 1510000 INR
The diagrammatic view of above example is as below ndash
Purchase Order 100 PC at INR 1000 GRN for this PO 100 PC Invoice 100 PC at INR 1000
Goods Receipt
Invoice Receipt
100000 +
20800 +
15100 +
135900 ndash
100000 +
100000 ndash
20800 ndash
Stock Account
GR IR Account
Modvat clearing
VAT
Vendor
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 14
These transactions can change the valuation price of material depending upon price control (For example ndash 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 ndash i) Initial Entry of Stock Balances ndash Receipts are valuated at current material price of
using another material price specified externally ii) Goods Receipt for Purchase Order ndash Receipts are valuated at the Purchase order
price (Goods Receipt before Invoice Receipt) iii) Goods Issue ndash Issues are valuated at current material price 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 ndash i) Moving Average price (V) ndash 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 ldquoExpenses revenue from price differencerdquo 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 bdquoBearings‟ are procured from Vendor Hence the material master data of the bearings will have bdquoMoving Average Price‟ control in accounting view
ii) Standard Price (S) ndash 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 ldquoExpenses revenue from price differencerdquo 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 15
Pumps are in-house manufactured in our company hence the material master data of all pumps will have bdquoStandard Price Control‟ in accounting view
Valuation Area details ndash
Valuation Area
Company
Code
Plant Plant
level
valuation
is set-up
in KBL
Train Doc KBLCICSAP MM12MM-FI Integration Page 16
Overview of transactions involved in Material Valuation
Following are the steps involved in Purchasing which are important from material valuation financial point of view ndash
Sr No
Step Description Effect on Materials Management
point Effect from Finance point
1 Purchase Order is created
Vendor is ordered to supply material provide service as per agreed terms amp conditions
Commitment is done with the vendor to pay if he supplies material provides service as per agreed terms
2 Purchase Order is approved
Management approval is given for agreed terms amp conditions
Management approval is given for the financial commitment
3
Material is supplied by the vendor amp GRN is posted for the same
Stock of material (Inventory) increases if material is Inventoried Consumption to cost object is booked if the purchase order is account assigned
Asset (Inventory) is increased GR IR clearing account is credited (which is ultimately the liability to pay money to the vendor as per agreed terms
Goods Receipt
Master Data
Material Master
Vendor
GL Account
Storage Location
Plant
Goods Issue
Transfer Posting
Requirement determined through Material Requirement
Planning
External Procurement Purchasing
Internal Procurement Production
Invoice Receipt
Invoice Verification
Internal amp External Accounting
Train Doc KBLCICSAP MM12MM-FI Integration Page 17
4
Service is provided by the vendor amp service entry sheet is created
Consumption of service is booked to the respective cost object (For example ndash Cost Center)
GR IR clearing account is credited (which is ultimately the liability to pay money to the vendor as per agreed terms
5 Invoice of the vendor is booked in the system
Vendor‟s invoice is checked against the terms amp conditions of the Purchase Order and booked in system so that the vendor can be paid on right time
Vendor account is credited amp GR IR Clearing account is debited (The effective entry is bdquoCredit Vendor Account ndash Debit Inventory‟)
6 Payment is done to the vendor
Liability of the Purchasing organization ends
Debit Vendor Account Credit Bank Account
Following are the steps involved in material movement which are important from financial point of view ndash
Sr No
Transaction Effect from Materials Management point
Effect from Financial point of view
1 Goods Receipt is posted for standard bought out material
Stock of material (Inventory) increases if material is Inventoried Consumption to cost object is booked if the PO is account assigned
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)
2 Goods Receipt posted for sub-contracting material
Stock of the semi-finished material (which was ordered on vendor) increases Consumption of the BOM material (provided to vendor is booked)
Asset (Inventory) of semi-finished 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
3 Goods Receipt posted for Traded Material
Material delivered to customer directly from Vendor (Third Party Transaction)
Cost of Goods sold to customer is booked
4 Goods Issue is posted to Production Order Cost Center
Stock of the material decreases
Material value is booked against the respective cost object (Production Order or Cost Center) as consumption
5 Components transferred to Sub-Contractor
Material provided to vendor for processing amp supplying back the processed goods
No financial entry The inventory is shown as bdquoStock provided to Vendor‟
6 Material delivered to Customer
Finished Goods Traded Goods delivered to customer Own inventory is reduced
Cost of Goods sold to customer is booked
Train Doc KBLCICSAP MM12MM-FI Integration Page 18
Automatic posting of material for Goods Movement
Goods Receipt at
manufacturing plant
Consumption
Storage
Valuation
Valuated
Inventory
posted in Store
Consumption
of material
posted
directly to
consumption
account
Goods Issue
To Production Order
Cost Center
Goods Receipt of Trading
Material against Third Party
Purchase Order
To SD
Delivery
Cost of
Goods Sold
Material cost
posted to
Cost of
Goods Sold
account
Train Doc KBLCICSAP MM12MM-FI Integration Page 19
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 amp the transaction of material posting (For example ndash 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 ndash Imported
Bearings can be accounted in separate account (IMP_RM ndash Imported Raw material) amp Bearing procured from domestic vendor can be accounted in separate account (DOM_RM ndash Domestic Raw Material) The posting transactions for the transactions in Inventory Management amp Invoice Management that are relevant for accounting are fixed Posting records are assigned to event movement type in Inventory Management amp each transaction in Invoice Posting These postings are generalized in a value string (posting rule) Instead of fixed GL account numbers these contain keys for respective posting transaction (such as BSX for a stock posting) The GL account numbers are determined from these keys amp posting transactions
In brief following are the summarized data for influencing factors for account posting
Organizational
Structure
Company
Code
Plant
Chart of Account
Valuation Grouping
Code
Material
Accounting data
for valuation area
Valuation
Class
Material Type
Value
Quantity update
Business
Transaction Goods Movement
Invoice
Verification
Value
String
Transaction
Key
Account
Grouping
Train Doc KBLCICSAP MM12MM-FI Integration Page 20
Material Price Change ndash 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 (amp not the material master change) in which total stock of the plant is revaluated
Train Doc KBLCICSAP MM12MM-FI Integration Page 21
Automatic FI postings at Goods Receipt Following automatic postings are done in the system when the Goods Receipt against Purchase Order are posted ndash
A] Accounting (FI) Entries posted at the time of GRN ndash
a) Raw Material posted to Inventory after posting of GRN ndash 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 amp raw material procured from domestic vendor is kept separate The process flow is as below ndash
Without account assignment
Purchase Order
Raw Material
GRN Quantity
To Store
To Inventory GRN
Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 22
The FI entries posted at GRN are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Raw material Inventory
Respective Business Area where the material is received
Raw material Inventory
(Quantity of material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the material is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of Accounting Entries for Raw material posted to inventory ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Curr
Curr Text
1 Debit (89)
230120 BA01 Inventory ndash Other Raw
Material 510000 INR
BRG 6305 SKF OR EQ
2 Credit (96)
130100 BA01 GR IR Clearing
500000 - INR BRG 6305 SKF
OR EQ
3 Credit (50)
130110 BA01 Freight
Clearing Inland
10000 - INR BRG 6305 SKF
OR EQ
b) Material posted to consumption account after posting of GRN ndash
Following are main account assignment categories (AAC) ndash
AAC Description Required Account Assignment Data
A Asset Main Asset Number amp Sub-Number
K Cost Center Cost Center amp GL Account Number
Q Project WBS Element Number of the Project
E Sale Order Sale Order Number amp Line Number of the Sale Order
Train Doc KBLCICSAP MM12MM-FI Integration Page 23
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 GL 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 ndash
i) Purchase Order with account assignment A (Asset) ndash 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 GL Account in the company‟s balance sheet The GL account is a reconciliation account that means that it reconciles several asset numbers
With account assignment Purchase
Order
Raw Material Non Valuated Material
GRN Quantity
To Store (Raw Material) or To Consumption (Non-valuated material)
Consumption Account
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 24
For Purchase Order with account assignment A (Asset) the entry in FI GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Asset
Respective Business Area where the Asset is received
Asset Number amp Sub Number
(Quantity of Asset X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the asset is received
GR IR Clearing Account
(Quantity of Asset X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the asset is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entries for asset posted ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (70)
211450 BA05
Asset Number 000021000780 Sub Number 0000
3650000 INR
IM-314318325 MOUNTING CASING
2 Credit (96)
130100 BA05 GR IR Clearing 3605000 - INR
IM-314318325 MOUNTING CASING
3 Credit (50)
130110 BA05 Freight Clearing Inland
45000 - INR IM-314318325 MOUNTING CASING
ii) Purchase Order with account assignment K (Cost Center) ndash 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 amp services With account assignment K we need to determine following two additional data to be entered in the PO ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 25
- General Ledger (GL) Account Number We have to determine the expense GL 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 GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of
cost center
Respective Business Area where the Material Service is received
Cost Center account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of
GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of
Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entry for Account Assignment as Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416340 BA08 Legal Exp amp Consult Fees
4200000 INR Visit Charges
2 Credit (96)
130100 BA08 GR IR Clearing
4200000 - INR Visit Charges
iii) Purchase Order with account assignment as Q (Project) ndash
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 amp budgeted We can procure following type of materials against the Project account assignment ndash Raw Semi Finished material (to be inventoried) Traded Material When we procure a raw material (to be inventoried)
Train Doc KBLCICSAP MM12MM-FI Integration Page 26
against the account assignment as Project (Q) then the accounting entries posted are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of the accounting entries ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233040 BA02 Inventory ndash
Other Resale 61080600 INR
MS Flange Dia 1500 mm
2 Credit (96)
130100 BA02 GR IR Clearing
61080600 - INR 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS)
Respective Business Area where the Material Service is received
COGS account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency
Material master short text
Train Doc KBLCICSAP MM12MM-FI Integration Page 27
service is received
(For Imported material)
Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of the accounting entry is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
410920 BA02 COGS ndash Other Resale Article
18340100 INR LTAL PVC
ArmPVCSH Cable
2 Credit (96)
130100 BA02 GR IR Clearing
18340100 - INR LTAL PVC
ArmPVCSH Cable
iv) Purchase Order with account assignment as E (Sale Order) ndash
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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Train Doc KBLCICSAP MM12MM-FI Integration Page 28
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233070 BA01 Inventory ndash
Traded Electric Motor
2583000 INR Motor Alstom 22
KW 4 Pole
2 Credit (96)
130100 BA01 GR IR Clearing
2583000 - INR Motor Alstom 22
KW 4 Pole
When we post GRN for traded goods following accounting entries are posted ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS) General Expenses
Respective Business Area where the Material Service is received
COGS account General Expenses Account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit
Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit
Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416320 BA01 General Expenses
56258000 INR
KOEL 85 HP 1800 RPM Engine
2 Credit (96)
130100 BA01 GR IR Clearing
56258000 - INR
KOEL 85 HP 1800 RPM Engine
c) Sub-Contracting Purchase Order ndash In the subndashContracting Purchase Order semindash
finished material is ordered on the Sub-Contractor amp the components are given to SubndashContractor 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 ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 29
Semi ndash Finished
Material
BOM of Semindash
Finished
Material
With without
account
assignment
Sub ndash
Contracting
Purchase Order
Components in
BOM provided to
Vendor for
processing
Transfer of
material to Sub
ndash Contractor
No accounting
entry Stock of
material
provided to
vendor is
updated
GRN of
processed
material
(Quantity)
Inventory of Semi-
Finished material
is updated
Stock of material
provided to
Vendor is
consumed
GRN Value
Inventory of Semi-
Finished material
= Processing
Charges + Value
of BOM
Components
Train Doc KBLCICSAP MM12MM-FI Integration Page 30
Following FI entries are posted during above process ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR Currency
Text of Material
10 Debit
Inventory account of
Semi-finished material
Respective Business Area where the Material is received
Inventory ndash Semi-Finished Goods
(Quantity of Semi-finished material X Processing Charges) + (Inventory Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
20 Credit
Change of Stock
from Sub-Contract
Respective Business Area where the Material is received
Change of Stock from Sub-Contract
(Quantity of Semi-finished material X Processing Charges) + (Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
30 Credit
Inventory of
Components with
Sub-Contractor
Respective Business Area where the Material is received
Inventory of Components with Sub-Contractor
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
40 Debit
Inventory of own
Components
Respective Business Area where the Material is received
Inventory of own Components
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
50 Debit Processing Charges
Other
Respective Business Area where the Material is received
Processing Charges Other
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of received material
60 Credit GR IR Clearing
Respective Business Area where the Material is received
GR IR Clearing Charges
Processing Charges to be paid to Vendor (Quantity of Ordered material X Processing Charges Rate)
INR (for domestic
Purchase)
Material master short text of received material
Train Doc KBLCICSAP MM12MM-FI Integration Page 31
Following is the example of the above transaction ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
235010 BA01 Inventory Semi-Finished Goods
315000 INR BRG Housing 25
13
2 Credit (91)
400040 BA01
Change Stock Semi-Finished
from Sub-Contractor
315000 - INR BRG Housing 25
13
3 Credit (99)
235040 BA01 Inventory of
semi-finished CI Castings
285200 - INR Bearing Housing (Kanban 30 Qty
Bin)
4 Debit (81)
400040 BA01 Change Stock Castings for Sub-Contract
285200 INR Bearing Housing (Kanban 30 Qty
Bin)
5 Credit (96)
130100 BA01 GR IR Clearing 29800 - INR BRG Housing 25
13
6 Debit (86)
411450 BA01 Processing
Charges Other 29800 INR
BRG Housing 25 13
Train Doc KBLCICSAP MM12MM-FI Integration Page 32
d) Import Purchase Order ndash 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 amp 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 ndash Mumbai JNPT Port) After material is cleared from port amp received in Plant GRN is posted Then the customs duty is also inventorised along with the basic price of material amp 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 ndash
Raw material
Valuation class ndash Imported Raw Material
With without account assignment
Import Purchase Order on Overseas Vendor
Customs duties Freight Charges etc of Clearing Agent are invoiced
Planned delivery cost invoice of Import PO is booked when the material arrives at Port
Quantity of Imported Material is updated
GRN is posted when material arrives at Plant (Quantity)
Basic Value of Material + Planned Delivery Costs + Customs Duty
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 33
Following are the FI entries posted when the GRN is posted ndash
Item Posting
Key GL Account Business Area Account Text
Amount in INR
Currency
1 Debit (89)
Inventory account of Imported Raw Material
Business Area where the material has been received
Inventory ndash Imported Raw Material
Quantity of Material X Basic Price of material
INR
2 Credit (96)
GR IR Clearing Account
Business Area where the material has been received
GR IR Clearing
Quantity of Material X Basic Price of material
INR
3 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Basic Customs Duty)
Basic Customs Duty Amount
INR
4 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Ecess on Basic Customs Duty)
Ecess amount on Basic Customs Duty
INR
5 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (SampH Ecess on Basic Customs Duty)
SampH Ecess amount on Basic Customs Duty
INR
6 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing CVD Amount INR
7 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing Ecess on CVD INR
8 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing SampH Ecess of CVD INR
Following is the example of the FI entries of imported material ndash
Item Posting
Key GL Account
Business Area
Account Text Amount in
INR Currency
1 Debit (89)
230110 BA01 Inventory ndash Imported Raw Material
1551800 INR
2 Credit (96)
130100 BA01 GR IR Clearing
1151500 - INR
3 Credit (96)
130120 BA01 Freight Clearing ndash Import
174400 - INR
4 Credit (96)
130120 BA01 Freight Clearing ndash Import
3400 - INR
5 Credit 130120 BA01 Freight Clearing ndash Import 1700 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 34
(96)
6 Credit (50)
130130 BA01 CVD Clearing
214500 - INR
7 Credit (50)
130130 BA01 CVD Clearing
4200 - INR
8 Credit (50)
130130 BA01 CVD Clearing
2100 - INR
e) Stock Transport Purchase Order ndash 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 amp 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR
Currency Plant
10 Credit Inventory Account
Business Area from where material is issued
Inventory of Material
Inventory Amount
INR
Plant from where
material is issued
20 Debit Inventory Account
Business Area where material is received
Inventory of material
Inventory Amount
INR Plant where material is received
Example of above transaction is as below ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Plant
10 Credit (99) 232080 BA05 Inventory of Spares 430250 - INR 2530
20 Debit (89) 232080 BA05 Inventory of Spares 430250 INR 9010
f) Service Purchase Order ndash When a Service Purchase Order (Item Category ndash 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 35
automatically posted by the system (which is based on the accepted service entry sheet) Following is the flow chart for Service Purchase Order ndash
Service Required for Project Cost Center Sale Order
Account assignment data such as Project or WBS Definition Cost Center Number Sale Order Number is maintained
Purchase Order with Item Category D (Service) amp required account assignment (Q K E) is raised
Service Entry sheet is created amp 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 36
Following are the FI postings at the time of accepting Service Entry Sheet ndash
Item Posting
Key GL Account
Business Area
Account Text
Amount in INR
Currency Text
10 Debit Consumption
Account
Business Area from where Service is delivered
Process Charges
Service Charges Amount
INR Service Text
20 Credit GR IR Clearing Account
Business Area where service is delivered
GR IR Clearing
Service Charges Amount
INR Service Text
Following is the example of above transaction ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Text
10 Debit (81) 411420 BA02 Process Charges - Foundry
384780 INR
Service Charges
20 Debit (96) 130100 BA02 GR IR Clearing 384780 -
INR Service Charges
Train Doc KBLCICSAP MM12MM-FI Integration Page 37
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 ndash a) Modvatable Excise Item ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40)
Excise Cenvat
Business Area where the material is received
Cenvat Input P F Basic Excise Duty amount
INR
2 Debit (40)
ECS Cenvat Amount
Business Area where the material is received
Cenvat ED Cess ECS Amount INR
3 Debit (40)
SampH ECS Cenvat Account
Business Area where the material is received
Cenvat SampH Ces-1
SampH ECS Amount
INR
4 Credit (50)
Modvat Clearing Account
Business Area where the material is received
Modvat Clearing Account
Amount equivalent to amount in 1 + 2 + 3
INR
Example of Modvatable excise entries is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40) 244030 BA01 Cenvat Input P F 362900 INR
2 Debit (40) 244031 BA01 Cenvat ED Cess 7300 INR
3 Debit (40) 244034 BA01 Cenvat SampH Ces-1
3600 INR
4 Credit (50) 130150 BA01 Modvat Clearing Account
373800 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 38
b) Trading excisable material received against GRN ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81)
COGS ndash Trading Material
Business Area where the material is received COGS ndash Trading
Material
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
2 Credit (96)
ECS Cenvat Amount
Business Area where the material is received
GR IR Clearing
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
Example of Excise duty inventorised -
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81) 410910 BA01 COGS ndash Trading Motor
433108300 INR
2 Credit (96) 130100 BA01 GR IR Clearing 433108300 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 39
FI entries at Material Consumption When a material is issued to a consumption account (For example ndash Consumption to Production Order Cost Center) the inventory reduces amp 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 ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Credit (99)
231020 BA05 Inventory ndash Other Raw material
15500 - INR
2 Debit (81)
400240 BA05 Consumption ndash Other Raw Material
15500 INR
2) Material consumption posted to Production Order ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Production Order ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (99)
235010 BA01 Inventory ndash Semi Finished Goods
334100 - INR
2 Debit (81)
400290 BA01 Consumption ndash Semi Finished Goods
334100 INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 40
3) Consumption of Stock provided to Sub ndash Contractor for processing of finished material when GRN of processed material is posted ndash
In a sub ndash contracting purchase order a semi finished material is ordered on the sub ndash contractor amp components are provided to the sub ndash 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 amp the concerned FI entries are posted
Train Doc KBLCICSAP MM12MM-FI Integration Page 41
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 amp 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 amp 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 ndash Quantity Variance Price Variance Quality Inspection Manual block date variance and Amount variance The process flow is as below ndash
Purchase Order for Material Service
GRN for Material Service Entry Sheet for Services performed
Purchase Order History
Delivery Costs
Material Master
Vendor Master
GL Account
Assets
Cost Center
Project
Sale Order
Invoice Verification FI Invoice
Document
MM Invoice Document
Further Document
Train Doc KBLCICSAP MM12MM-FI Integration Page 42
Following entries are posted when an invoice for vendor is posted in the system
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (31)
Vendor Account
Business Area Vendor Number
Amount to be paid to Vendor
INR
2 Debit (86)
GR IR Clearing
Business Area GR IR Clearing
GR IR Clearing Amount
INR
3 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash B Excise Duty
INR
4 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash ECS Amount
INR
5 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash SampH ECS Amt
INR
6 Debit (40)
VAT RM Deductible Amount
Business Area from where payment is made
VAT RM Deductible
VAT Amount to be paid to Vendor
INR
Example of above is transaction is as below ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (31) 300664 BA02 WalchandNagar Industries 13590000 - INR
2 Debit (86) 130100 BA02 GR IR Clearing 10000000 INR
3 Debit (40) 130150 Modvat Clearing 1600000 INR
4 Debit (40) 130150 Modvat Clearing 320000 INR
5 Debit (40) 130150 Modvat Clearing 160000 INR
6 Debit (40) 245039 BA02 VAT RM Deductible 1510000 INR
The diagrammatic view of above example is as below ndash
Purchase Order 100 PC at INR 1000 GRN for this PO 100 PC Invoice 100 PC at INR 1000
Goods Receipt
Invoice Receipt
100000 +
20800 +
15100 +
135900 ndash
100000 +
100000 ndash
20800 ndash
Stock Account
GR IR Account
Modvat clearing
VAT
Vendor
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 15
Pumps are in-house manufactured in our company hence the material master data of all pumps will have bdquoStandard Price Control‟ in accounting view
Valuation Area details ndash
Valuation Area
Company
Code
Plant Plant
level
valuation
is set-up
in KBL
Train Doc KBLCICSAP MM12MM-FI Integration Page 16
Overview of transactions involved in Material Valuation
Following are the steps involved in Purchasing which are important from material valuation financial point of view ndash
Sr No
Step Description Effect on Materials Management
point Effect from Finance point
1 Purchase Order is created
Vendor is ordered to supply material provide service as per agreed terms amp conditions
Commitment is done with the vendor to pay if he supplies material provides service as per agreed terms
2 Purchase Order is approved
Management approval is given for agreed terms amp conditions
Management approval is given for the financial commitment
3
Material is supplied by the vendor amp GRN is posted for the same
Stock of material (Inventory) increases if material is Inventoried Consumption to cost object is booked if the purchase order is account assigned
Asset (Inventory) is increased GR IR clearing account is credited (which is ultimately the liability to pay money to the vendor as per agreed terms
Goods Receipt
Master Data
Material Master
Vendor
GL Account
Storage Location
Plant
Goods Issue
Transfer Posting
Requirement determined through Material Requirement
Planning
External Procurement Purchasing
Internal Procurement Production
Invoice Receipt
Invoice Verification
Internal amp External Accounting
Train Doc KBLCICSAP MM12MM-FI Integration Page 17
4
Service is provided by the vendor amp service entry sheet is created
Consumption of service is booked to the respective cost object (For example ndash Cost Center)
GR IR clearing account is credited (which is ultimately the liability to pay money to the vendor as per agreed terms
5 Invoice of the vendor is booked in the system
Vendor‟s invoice is checked against the terms amp conditions of the Purchase Order and booked in system so that the vendor can be paid on right time
Vendor account is credited amp GR IR Clearing account is debited (The effective entry is bdquoCredit Vendor Account ndash Debit Inventory‟)
6 Payment is done to the vendor
Liability of the Purchasing organization ends
Debit Vendor Account Credit Bank Account
Following are the steps involved in material movement which are important from financial point of view ndash
Sr No
Transaction Effect from Materials Management point
Effect from Financial point of view
1 Goods Receipt is posted for standard bought out material
Stock of material (Inventory) increases if material is Inventoried Consumption to cost object is booked if the PO is account assigned
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)
2 Goods Receipt posted for sub-contracting material
Stock of the semi-finished material (which was ordered on vendor) increases Consumption of the BOM material (provided to vendor is booked)
Asset (Inventory) of semi-finished 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
3 Goods Receipt posted for Traded Material
Material delivered to customer directly from Vendor (Third Party Transaction)
Cost of Goods sold to customer is booked
4 Goods Issue is posted to Production Order Cost Center
Stock of the material decreases
Material value is booked against the respective cost object (Production Order or Cost Center) as consumption
5 Components transferred to Sub-Contractor
Material provided to vendor for processing amp supplying back the processed goods
No financial entry The inventory is shown as bdquoStock provided to Vendor‟
6 Material delivered to Customer
Finished Goods Traded Goods delivered to customer Own inventory is reduced
Cost of Goods sold to customer is booked
Train Doc KBLCICSAP MM12MM-FI Integration Page 18
Automatic posting of material for Goods Movement
Goods Receipt at
manufacturing plant
Consumption
Storage
Valuation
Valuated
Inventory
posted in Store
Consumption
of material
posted
directly to
consumption
account
Goods Issue
To Production Order
Cost Center
Goods Receipt of Trading
Material against Third Party
Purchase Order
To SD
Delivery
Cost of
Goods Sold
Material cost
posted to
Cost of
Goods Sold
account
Train Doc KBLCICSAP MM12MM-FI Integration Page 19
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 amp the transaction of material posting (For example ndash 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 ndash Imported
Bearings can be accounted in separate account (IMP_RM ndash Imported Raw material) amp Bearing procured from domestic vendor can be accounted in separate account (DOM_RM ndash Domestic Raw Material) The posting transactions for the transactions in Inventory Management amp Invoice Management that are relevant for accounting are fixed Posting records are assigned to event movement type in Inventory Management amp each transaction in Invoice Posting These postings are generalized in a value string (posting rule) Instead of fixed GL account numbers these contain keys for respective posting transaction (such as BSX for a stock posting) The GL account numbers are determined from these keys amp posting transactions
In brief following are the summarized data for influencing factors for account posting
Organizational
Structure
Company
Code
Plant
Chart of Account
Valuation Grouping
Code
Material
Accounting data
for valuation area
Valuation
Class
Material Type
Value
Quantity update
Business
Transaction Goods Movement
Invoice
Verification
Value
String
Transaction
Key
Account
Grouping
Train Doc KBLCICSAP MM12MM-FI Integration Page 20
Material Price Change ndash 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 (amp not the material master change) in which total stock of the plant is revaluated
Train Doc KBLCICSAP MM12MM-FI Integration Page 21
Automatic FI postings at Goods Receipt Following automatic postings are done in the system when the Goods Receipt against Purchase Order are posted ndash
A] Accounting (FI) Entries posted at the time of GRN ndash
a) Raw Material posted to Inventory after posting of GRN ndash 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 amp raw material procured from domestic vendor is kept separate The process flow is as below ndash
Without account assignment
Purchase Order
Raw Material
GRN Quantity
To Store
To Inventory GRN
Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 22
The FI entries posted at GRN are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Raw material Inventory
Respective Business Area where the material is received
Raw material Inventory
(Quantity of material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the material is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of Accounting Entries for Raw material posted to inventory ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Curr
Curr Text
1 Debit (89)
230120 BA01 Inventory ndash Other Raw
Material 510000 INR
BRG 6305 SKF OR EQ
2 Credit (96)
130100 BA01 GR IR Clearing
500000 - INR BRG 6305 SKF
OR EQ
3 Credit (50)
130110 BA01 Freight
Clearing Inland
10000 - INR BRG 6305 SKF
OR EQ
b) Material posted to consumption account after posting of GRN ndash
Following are main account assignment categories (AAC) ndash
AAC Description Required Account Assignment Data
A Asset Main Asset Number amp Sub-Number
K Cost Center Cost Center amp GL Account Number
Q Project WBS Element Number of the Project
E Sale Order Sale Order Number amp Line Number of the Sale Order
Train Doc KBLCICSAP MM12MM-FI Integration Page 23
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 GL 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 ndash
i) Purchase Order with account assignment A (Asset) ndash 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 GL Account in the company‟s balance sheet The GL account is a reconciliation account that means that it reconciles several asset numbers
With account assignment Purchase
Order
Raw Material Non Valuated Material
GRN Quantity
To Store (Raw Material) or To Consumption (Non-valuated material)
Consumption Account
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 24
For Purchase Order with account assignment A (Asset) the entry in FI GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Asset
Respective Business Area where the Asset is received
Asset Number amp Sub Number
(Quantity of Asset X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the asset is received
GR IR Clearing Account
(Quantity of Asset X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the asset is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entries for asset posted ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (70)
211450 BA05
Asset Number 000021000780 Sub Number 0000
3650000 INR
IM-314318325 MOUNTING CASING
2 Credit (96)
130100 BA05 GR IR Clearing 3605000 - INR
IM-314318325 MOUNTING CASING
3 Credit (50)
130110 BA05 Freight Clearing Inland
45000 - INR IM-314318325 MOUNTING CASING
ii) Purchase Order with account assignment K (Cost Center) ndash 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 amp services With account assignment K we need to determine following two additional data to be entered in the PO ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 25
- General Ledger (GL) Account Number We have to determine the expense GL 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 GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of
cost center
Respective Business Area where the Material Service is received
Cost Center account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of
GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of
Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entry for Account Assignment as Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416340 BA08 Legal Exp amp Consult Fees
4200000 INR Visit Charges
2 Credit (96)
130100 BA08 GR IR Clearing
4200000 - INR Visit Charges
iii) Purchase Order with account assignment as Q (Project) ndash
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 amp budgeted We can procure following type of materials against the Project account assignment ndash Raw Semi Finished material (to be inventoried) Traded Material When we procure a raw material (to be inventoried)
Train Doc KBLCICSAP MM12MM-FI Integration Page 26
against the account assignment as Project (Q) then the accounting entries posted are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of the accounting entries ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233040 BA02 Inventory ndash
Other Resale 61080600 INR
MS Flange Dia 1500 mm
2 Credit (96)
130100 BA02 GR IR Clearing
61080600 - INR 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS)
Respective Business Area where the Material Service is received
COGS account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency
Material master short text
Train Doc KBLCICSAP MM12MM-FI Integration Page 27
service is received
(For Imported material)
Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of the accounting entry is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
410920 BA02 COGS ndash Other Resale Article
18340100 INR LTAL PVC
ArmPVCSH Cable
2 Credit (96)
130100 BA02 GR IR Clearing
18340100 - INR LTAL PVC
ArmPVCSH Cable
iv) Purchase Order with account assignment as E (Sale Order) ndash
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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Train Doc KBLCICSAP MM12MM-FI Integration Page 28
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233070 BA01 Inventory ndash
Traded Electric Motor
2583000 INR Motor Alstom 22
KW 4 Pole
2 Credit (96)
130100 BA01 GR IR Clearing
2583000 - INR Motor Alstom 22
KW 4 Pole
When we post GRN for traded goods following accounting entries are posted ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS) General Expenses
Respective Business Area where the Material Service is received
COGS account General Expenses Account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit
Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit
Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416320 BA01 General Expenses
56258000 INR
KOEL 85 HP 1800 RPM Engine
2 Credit (96)
130100 BA01 GR IR Clearing
56258000 - INR
KOEL 85 HP 1800 RPM Engine
c) Sub-Contracting Purchase Order ndash In the subndashContracting Purchase Order semindash
finished material is ordered on the Sub-Contractor amp the components are given to SubndashContractor 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 ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 29
Semi ndash Finished
Material
BOM of Semindash
Finished
Material
With without
account
assignment
Sub ndash
Contracting
Purchase Order
Components in
BOM provided to
Vendor for
processing
Transfer of
material to Sub
ndash Contractor
No accounting
entry Stock of
material
provided to
vendor is
updated
GRN of
processed
material
(Quantity)
Inventory of Semi-
Finished material
is updated
Stock of material
provided to
Vendor is
consumed
GRN Value
Inventory of Semi-
Finished material
= Processing
Charges + Value
of BOM
Components
Train Doc KBLCICSAP MM12MM-FI Integration Page 30
Following FI entries are posted during above process ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR Currency
Text of Material
10 Debit
Inventory account of
Semi-finished material
Respective Business Area where the Material is received
Inventory ndash Semi-Finished Goods
(Quantity of Semi-finished material X Processing Charges) + (Inventory Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
20 Credit
Change of Stock
from Sub-Contract
Respective Business Area where the Material is received
Change of Stock from Sub-Contract
(Quantity of Semi-finished material X Processing Charges) + (Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
30 Credit
Inventory of
Components with
Sub-Contractor
Respective Business Area where the Material is received
Inventory of Components with Sub-Contractor
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
40 Debit
Inventory of own
Components
Respective Business Area where the Material is received
Inventory of own Components
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
50 Debit Processing Charges
Other
Respective Business Area where the Material is received
Processing Charges Other
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of received material
60 Credit GR IR Clearing
Respective Business Area where the Material is received
GR IR Clearing Charges
Processing Charges to be paid to Vendor (Quantity of Ordered material X Processing Charges Rate)
INR (for domestic
Purchase)
Material master short text of received material
Train Doc KBLCICSAP MM12MM-FI Integration Page 31
Following is the example of the above transaction ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
235010 BA01 Inventory Semi-Finished Goods
315000 INR BRG Housing 25
13
2 Credit (91)
400040 BA01
Change Stock Semi-Finished
from Sub-Contractor
315000 - INR BRG Housing 25
13
3 Credit (99)
235040 BA01 Inventory of
semi-finished CI Castings
285200 - INR Bearing Housing (Kanban 30 Qty
Bin)
4 Debit (81)
400040 BA01 Change Stock Castings for Sub-Contract
285200 INR Bearing Housing (Kanban 30 Qty
Bin)
5 Credit (96)
130100 BA01 GR IR Clearing 29800 - INR BRG Housing 25
13
6 Debit (86)
411450 BA01 Processing
Charges Other 29800 INR
BRG Housing 25 13
Train Doc KBLCICSAP MM12MM-FI Integration Page 32
d) Import Purchase Order ndash 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 amp 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 ndash Mumbai JNPT Port) After material is cleared from port amp received in Plant GRN is posted Then the customs duty is also inventorised along with the basic price of material amp 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 ndash
Raw material
Valuation class ndash Imported Raw Material
With without account assignment
Import Purchase Order on Overseas Vendor
Customs duties Freight Charges etc of Clearing Agent are invoiced
Planned delivery cost invoice of Import PO is booked when the material arrives at Port
Quantity of Imported Material is updated
GRN is posted when material arrives at Plant (Quantity)
Basic Value of Material + Planned Delivery Costs + Customs Duty
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 33
Following are the FI entries posted when the GRN is posted ndash
Item Posting
Key GL Account Business Area Account Text
Amount in INR
Currency
1 Debit (89)
Inventory account of Imported Raw Material
Business Area where the material has been received
Inventory ndash Imported Raw Material
Quantity of Material X Basic Price of material
INR
2 Credit (96)
GR IR Clearing Account
Business Area where the material has been received
GR IR Clearing
Quantity of Material X Basic Price of material
INR
3 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Basic Customs Duty)
Basic Customs Duty Amount
INR
4 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Ecess on Basic Customs Duty)
Ecess amount on Basic Customs Duty
INR
5 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (SampH Ecess on Basic Customs Duty)
SampH Ecess amount on Basic Customs Duty
INR
6 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing CVD Amount INR
7 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing Ecess on CVD INR
8 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing SampH Ecess of CVD INR
Following is the example of the FI entries of imported material ndash
Item Posting
Key GL Account
Business Area
Account Text Amount in
INR Currency
1 Debit (89)
230110 BA01 Inventory ndash Imported Raw Material
1551800 INR
2 Credit (96)
130100 BA01 GR IR Clearing
1151500 - INR
3 Credit (96)
130120 BA01 Freight Clearing ndash Import
174400 - INR
4 Credit (96)
130120 BA01 Freight Clearing ndash Import
3400 - INR
5 Credit 130120 BA01 Freight Clearing ndash Import 1700 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 34
(96)
6 Credit (50)
130130 BA01 CVD Clearing
214500 - INR
7 Credit (50)
130130 BA01 CVD Clearing
4200 - INR
8 Credit (50)
130130 BA01 CVD Clearing
2100 - INR
e) Stock Transport Purchase Order ndash 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 amp 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR
Currency Plant
10 Credit Inventory Account
Business Area from where material is issued
Inventory of Material
Inventory Amount
INR
Plant from where
material is issued
20 Debit Inventory Account
Business Area where material is received
Inventory of material
Inventory Amount
INR Plant where material is received
Example of above transaction is as below ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Plant
10 Credit (99) 232080 BA05 Inventory of Spares 430250 - INR 2530
20 Debit (89) 232080 BA05 Inventory of Spares 430250 INR 9010
f) Service Purchase Order ndash When a Service Purchase Order (Item Category ndash 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 35
automatically posted by the system (which is based on the accepted service entry sheet) Following is the flow chart for Service Purchase Order ndash
Service Required for Project Cost Center Sale Order
Account assignment data such as Project or WBS Definition Cost Center Number Sale Order Number is maintained
Purchase Order with Item Category D (Service) amp required account assignment (Q K E) is raised
Service Entry sheet is created amp 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 36
Following are the FI postings at the time of accepting Service Entry Sheet ndash
Item Posting
Key GL Account
Business Area
Account Text
Amount in INR
Currency Text
10 Debit Consumption
Account
Business Area from where Service is delivered
Process Charges
Service Charges Amount
INR Service Text
20 Credit GR IR Clearing Account
Business Area where service is delivered
GR IR Clearing
Service Charges Amount
INR Service Text
Following is the example of above transaction ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Text
10 Debit (81) 411420 BA02 Process Charges - Foundry
384780 INR
Service Charges
20 Debit (96) 130100 BA02 GR IR Clearing 384780 -
INR Service Charges
Train Doc KBLCICSAP MM12MM-FI Integration Page 37
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 ndash a) Modvatable Excise Item ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40)
Excise Cenvat
Business Area where the material is received
Cenvat Input P F Basic Excise Duty amount
INR
2 Debit (40)
ECS Cenvat Amount
Business Area where the material is received
Cenvat ED Cess ECS Amount INR
3 Debit (40)
SampH ECS Cenvat Account
Business Area where the material is received
Cenvat SampH Ces-1
SampH ECS Amount
INR
4 Credit (50)
Modvat Clearing Account
Business Area where the material is received
Modvat Clearing Account
Amount equivalent to amount in 1 + 2 + 3
INR
Example of Modvatable excise entries is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40) 244030 BA01 Cenvat Input P F 362900 INR
2 Debit (40) 244031 BA01 Cenvat ED Cess 7300 INR
3 Debit (40) 244034 BA01 Cenvat SampH Ces-1
3600 INR
4 Credit (50) 130150 BA01 Modvat Clearing Account
373800 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 38
b) Trading excisable material received against GRN ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81)
COGS ndash Trading Material
Business Area where the material is received COGS ndash Trading
Material
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
2 Credit (96)
ECS Cenvat Amount
Business Area where the material is received
GR IR Clearing
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
Example of Excise duty inventorised -
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81) 410910 BA01 COGS ndash Trading Motor
433108300 INR
2 Credit (96) 130100 BA01 GR IR Clearing 433108300 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 39
FI entries at Material Consumption When a material is issued to a consumption account (For example ndash Consumption to Production Order Cost Center) the inventory reduces amp 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 ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Credit (99)
231020 BA05 Inventory ndash Other Raw material
15500 - INR
2 Debit (81)
400240 BA05 Consumption ndash Other Raw Material
15500 INR
2) Material consumption posted to Production Order ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Production Order ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (99)
235010 BA01 Inventory ndash Semi Finished Goods
334100 - INR
2 Debit (81)
400290 BA01 Consumption ndash Semi Finished Goods
334100 INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 40
3) Consumption of Stock provided to Sub ndash Contractor for processing of finished material when GRN of processed material is posted ndash
In a sub ndash contracting purchase order a semi finished material is ordered on the sub ndash contractor amp components are provided to the sub ndash 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 amp the concerned FI entries are posted
Train Doc KBLCICSAP MM12MM-FI Integration Page 41
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 amp 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 amp 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 ndash Quantity Variance Price Variance Quality Inspection Manual block date variance and Amount variance The process flow is as below ndash
Purchase Order for Material Service
GRN for Material Service Entry Sheet for Services performed
Purchase Order History
Delivery Costs
Material Master
Vendor Master
GL Account
Assets
Cost Center
Project
Sale Order
Invoice Verification FI Invoice
Document
MM Invoice Document
Further Document
Train Doc KBLCICSAP MM12MM-FI Integration Page 42
Following entries are posted when an invoice for vendor is posted in the system
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (31)
Vendor Account
Business Area Vendor Number
Amount to be paid to Vendor
INR
2 Debit (86)
GR IR Clearing
Business Area GR IR Clearing
GR IR Clearing Amount
INR
3 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash B Excise Duty
INR
4 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash ECS Amount
INR
5 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash SampH ECS Amt
INR
6 Debit (40)
VAT RM Deductible Amount
Business Area from where payment is made
VAT RM Deductible
VAT Amount to be paid to Vendor
INR
Example of above is transaction is as below ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (31) 300664 BA02 WalchandNagar Industries 13590000 - INR
2 Debit (86) 130100 BA02 GR IR Clearing 10000000 INR
3 Debit (40) 130150 Modvat Clearing 1600000 INR
4 Debit (40) 130150 Modvat Clearing 320000 INR
5 Debit (40) 130150 Modvat Clearing 160000 INR
6 Debit (40) 245039 BA02 VAT RM Deductible 1510000 INR
The diagrammatic view of above example is as below ndash
Purchase Order 100 PC at INR 1000 GRN for this PO 100 PC Invoice 100 PC at INR 1000
Goods Receipt
Invoice Receipt
100000 +
20800 +
15100 +
135900 ndash
100000 +
100000 ndash
20800 ndash
Stock Account
GR IR Account
Modvat clearing
VAT
Vendor
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 16
Overview of transactions involved in Material Valuation
Following are the steps involved in Purchasing which are important from material valuation financial point of view ndash
Sr No
Step Description Effect on Materials Management
point Effect from Finance point
1 Purchase Order is created
Vendor is ordered to supply material provide service as per agreed terms amp conditions
Commitment is done with the vendor to pay if he supplies material provides service as per agreed terms
2 Purchase Order is approved
Management approval is given for agreed terms amp conditions
Management approval is given for the financial commitment
3
Material is supplied by the vendor amp GRN is posted for the same
Stock of material (Inventory) increases if material is Inventoried Consumption to cost object is booked if the purchase order is account assigned
Asset (Inventory) is increased GR IR clearing account is credited (which is ultimately the liability to pay money to the vendor as per agreed terms
Goods Receipt
Master Data
Material Master
Vendor
GL Account
Storage Location
Plant
Goods Issue
Transfer Posting
Requirement determined through Material Requirement
Planning
External Procurement Purchasing
Internal Procurement Production
Invoice Receipt
Invoice Verification
Internal amp External Accounting
Train Doc KBLCICSAP MM12MM-FI Integration Page 17
4
Service is provided by the vendor amp service entry sheet is created
Consumption of service is booked to the respective cost object (For example ndash Cost Center)
GR IR clearing account is credited (which is ultimately the liability to pay money to the vendor as per agreed terms
5 Invoice of the vendor is booked in the system
Vendor‟s invoice is checked against the terms amp conditions of the Purchase Order and booked in system so that the vendor can be paid on right time
Vendor account is credited amp GR IR Clearing account is debited (The effective entry is bdquoCredit Vendor Account ndash Debit Inventory‟)
6 Payment is done to the vendor
Liability of the Purchasing organization ends
Debit Vendor Account Credit Bank Account
Following are the steps involved in material movement which are important from financial point of view ndash
Sr No
Transaction Effect from Materials Management point
Effect from Financial point of view
1 Goods Receipt is posted for standard bought out material
Stock of material (Inventory) increases if material is Inventoried Consumption to cost object is booked if the PO is account assigned
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)
2 Goods Receipt posted for sub-contracting material
Stock of the semi-finished material (which was ordered on vendor) increases Consumption of the BOM material (provided to vendor is booked)
Asset (Inventory) of semi-finished 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
3 Goods Receipt posted for Traded Material
Material delivered to customer directly from Vendor (Third Party Transaction)
Cost of Goods sold to customer is booked
4 Goods Issue is posted to Production Order Cost Center
Stock of the material decreases
Material value is booked against the respective cost object (Production Order or Cost Center) as consumption
5 Components transferred to Sub-Contractor
Material provided to vendor for processing amp supplying back the processed goods
No financial entry The inventory is shown as bdquoStock provided to Vendor‟
6 Material delivered to Customer
Finished Goods Traded Goods delivered to customer Own inventory is reduced
Cost of Goods sold to customer is booked
Train Doc KBLCICSAP MM12MM-FI Integration Page 18
Automatic posting of material for Goods Movement
Goods Receipt at
manufacturing plant
Consumption
Storage
Valuation
Valuated
Inventory
posted in Store
Consumption
of material
posted
directly to
consumption
account
Goods Issue
To Production Order
Cost Center
Goods Receipt of Trading
Material against Third Party
Purchase Order
To SD
Delivery
Cost of
Goods Sold
Material cost
posted to
Cost of
Goods Sold
account
Train Doc KBLCICSAP MM12MM-FI Integration Page 19
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 amp the transaction of material posting (For example ndash 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 ndash Imported
Bearings can be accounted in separate account (IMP_RM ndash Imported Raw material) amp Bearing procured from domestic vendor can be accounted in separate account (DOM_RM ndash Domestic Raw Material) The posting transactions for the transactions in Inventory Management amp Invoice Management that are relevant for accounting are fixed Posting records are assigned to event movement type in Inventory Management amp each transaction in Invoice Posting These postings are generalized in a value string (posting rule) Instead of fixed GL account numbers these contain keys for respective posting transaction (such as BSX for a stock posting) The GL account numbers are determined from these keys amp posting transactions
In brief following are the summarized data for influencing factors for account posting
Organizational
Structure
Company
Code
Plant
Chart of Account
Valuation Grouping
Code
Material
Accounting data
for valuation area
Valuation
Class
Material Type
Value
Quantity update
Business
Transaction Goods Movement
Invoice
Verification
Value
String
Transaction
Key
Account
Grouping
Train Doc KBLCICSAP MM12MM-FI Integration Page 20
Material Price Change ndash 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 (amp not the material master change) in which total stock of the plant is revaluated
Train Doc KBLCICSAP MM12MM-FI Integration Page 21
Automatic FI postings at Goods Receipt Following automatic postings are done in the system when the Goods Receipt against Purchase Order are posted ndash
A] Accounting (FI) Entries posted at the time of GRN ndash
a) Raw Material posted to Inventory after posting of GRN ndash 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 amp raw material procured from domestic vendor is kept separate The process flow is as below ndash
Without account assignment
Purchase Order
Raw Material
GRN Quantity
To Store
To Inventory GRN
Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 22
The FI entries posted at GRN are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Raw material Inventory
Respective Business Area where the material is received
Raw material Inventory
(Quantity of material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the material is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of Accounting Entries for Raw material posted to inventory ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Curr
Curr Text
1 Debit (89)
230120 BA01 Inventory ndash Other Raw
Material 510000 INR
BRG 6305 SKF OR EQ
2 Credit (96)
130100 BA01 GR IR Clearing
500000 - INR BRG 6305 SKF
OR EQ
3 Credit (50)
130110 BA01 Freight
Clearing Inland
10000 - INR BRG 6305 SKF
OR EQ
b) Material posted to consumption account after posting of GRN ndash
Following are main account assignment categories (AAC) ndash
AAC Description Required Account Assignment Data
A Asset Main Asset Number amp Sub-Number
K Cost Center Cost Center amp GL Account Number
Q Project WBS Element Number of the Project
E Sale Order Sale Order Number amp Line Number of the Sale Order
Train Doc KBLCICSAP MM12MM-FI Integration Page 23
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 GL 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 ndash
i) Purchase Order with account assignment A (Asset) ndash 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 GL Account in the company‟s balance sheet The GL account is a reconciliation account that means that it reconciles several asset numbers
With account assignment Purchase
Order
Raw Material Non Valuated Material
GRN Quantity
To Store (Raw Material) or To Consumption (Non-valuated material)
Consumption Account
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 24
For Purchase Order with account assignment A (Asset) the entry in FI GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Asset
Respective Business Area where the Asset is received
Asset Number amp Sub Number
(Quantity of Asset X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the asset is received
GR IR Clearing Account
(Quantity of Asset X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the asset is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entries for asset posted ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (70)
211450 BA05
Asset Number 000021000780 Sub Number 0000
3650000 INR
IM-314318325 MOUNTING CASING
2 Credit (96)
130100 BA05 GR IR Clearing 3605000 - INR
IM-314318325 MOUNTING CASING
3 Credit (50)
130110 BA05 Freight Clearing Inland
45000 - INR IM-314318325 MOUNTING CASING
ii) Purchase Order with account assignment K (Cost Center) ndash 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 amp services With account assignment K we need to determine following two additional data to be entered in the PO ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 25
- General Ledger (GL) Account Number We have to determine the expense GL 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 GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of
cost center
Respective Business Area where the Material Service is received
Cost Center account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of
GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of
Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entry for Account Assignment as Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416340 BA08 Legal Exp amp Consult Fees
4200000 INR Visit Charges
2 Credit (96)
130100 BA08 GR IR Clearing
4200000 - INR Visit Charges
iii) Purchase Order with account assignment as Q (Project) ndash
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 amp budgeted We can procure following type of materials against the Project account assignment ndash Raw Semi Finished material (to be inventoried) Traded Material When we procure a raw material (to be inventoried)
Train Doc KBLCICSAP MM12MM-FI Integration Page 26
against the account assignment as Project (Q) then the accounting entries posted are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of the accounting entries ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233040 BA02 Inventory ndash
Other Resale 61080600 INR
MS Flange Dia 1500 mm
2 Credit (96)
130100 BA02 GR IR Clearing
61080600 - INR 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS)
Respective Business Area where the Material Service is received
COGS account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency
Material master short text
Train Doc KBLCICSAP MM12MM-FI Integration Page 27
service is received
(For Imported material)
Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of the accounting entry is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
410920 BA02 COGS ndash Other Resale Article
18340100 INR LTAL PVC
ArmPVCSH Cable
2 Credit (96)
130100 BA02 GR IR Clearing
18340100 - INR LTAL PVC
ArmPVCSH Cable
iv) Purchase Order with account assignment as E (Sale Order) ndash
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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Train Doc KBLCICSAP MM12MM-FI Integration Page 28
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233070 BA01 Inventory ndash
Traded Electric Motor
2583000 INR Motor Alstom 22
KW 4 Pole
2 Credit (96)
130100 BA01 GR IR Clearing
2583000 - INR Motor Alstom 22
KW 4 Pole
When we post GRN for traded goods following accounting entries are posted ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS) General Expenses
Respective Business Area where the Material Service is received
COGS account General Expenses Account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit
Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit
Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416320 BA01 General Expenses
56258000 INR
KOEL 85 HP 1800 RPM Engine
2 Credit (96)
130100 BA01 GR IR Clearing
56258000 - INR
KOEL 85 HP 1800 RPM Engine
c) Sub-Contracting Purchase Order ndash In the subndashContracting Purchase Order semindash
finished material is ordered on the Sub-Contractor amp the components are given to SubndashContractor 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 ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 29
Semi ndash Finished
Material
BOM of Semindash
Finished
Material
With without
account
assignment
Sub ndash
Contracting
Purchase Order
Components in
BOM provided to
Vendor for
processing
Transfer of
material to Sub
ndash Contractor
No accounting
entry Stock of
material
provided to
vendor is
updated
GRN of
processed
material
(Quantity)
Inventory of Semi-
Finished material
is updated
Stock of material
provided to
Vendor is
consumed
GRN Value
Inventory of Semi-
Finished material
= Processing
Charges + Value
of BOM
Components
Train Doc KBLCICSAP MM12MM-FI Integration Page 30
Following FI entries are posted during above process ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR Currency
Text of Material
10 Debit
Inventory account of
Semi-finished material
Respective Business Area where the Material is received
Inventory ndash Semi-Finished Goods
(Quantity of Semi-finished material X Processing Charges) + (Inventory Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
20 Credit
Change of Stock
from Sub-Contract
Respective Business Area where the Material is received
Change of Stock from Sub-Contract
(Quantity of Semi-finished material X Processing Charges) + (Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
30 Credit
Inventory of
Components with
Sub-Contractor
Respective Business Area where the Material is received
Inventory of Components with Sub-Contractor
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
40 Debit
Inventory of own
Components
Respective Business Area where the Material is received
Inventory of own Components
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
50 Debit Processing Charges
Other
Respective Business Area where the Material is received
Processing Charges Other
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of received material
60 Credit GR IR Clearing
Respective Business Area where the Material is received
GR IR Clearing Charges
Processing Charges to be paid to Vendor (Quantity of Ordered material X Processing Charges Rate)
INR (for domestic
Purchase)
Material master short text of received material
Train Doc KBLCICSAP MM12MM-FI Integration Page 31
Following is the example of the above transaction ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
235010 BA01 Inventory Semi-Finished Goods
315000 INR BRG Housing 25
13
2 Credit (91)
400040 BA01
Change Stock Semi-Finished
from Sub-Contractor
315000 - INR BRG Housing 25
13
3 Credit (99)
235040 BA01 Inventory of
semi-finished CI Castings
285200 - INR Bearing Housing (Kanban 30 Qty
Bin)
4 Debit (81)
400040 BA01 Change Stock Castings for Sub-Contract
285200 INR Bearing Housing (Kanban 30 Qty
Bin)
5 Credit (96)
130100 BA01 GR IR Clearing 29800 - INR BRG Housing 25
13
6 Debit (86)
411450 BA01 Processing
Charges Other 29800 INR
BRG Housing 25 13
Train Doc KBLCICSAP MM12MM-FI Integration Page 32
d) Import Purchase Order ndash 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 amp 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 ndash Mumbai JNPT Port) After material is cleared from port amp received in Plant GRN is posted Then the customs duty is also inventorised along with the basic price of material amp 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 ndash
Raw material
Valuation class ndash Imported Raw Material
With without account assignment
Import Purchase Order on Overseas Vendor
Customs duties Freight Charges etc of Clearing Agent are invoiced
Planned delivery cost invoice of Import PO is booked when the material arrives at Port
Quantity of Imported Material is updated
GRN is posted when material arrives at Plant (Quantity)
Basic Value of Material + Planned Delivery Costs + Customs Duty
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 33
Following are the FI entries posted when the GRN is posted ndash
Item Posting
Key GL Account Business Area Account Text
Amount in INR
Currency
1 Debit (89)
Inventory account of Imported Raw Material
Business Area where the material has been received
Inventory ndash Imported Raw Material
Quantity of Material X Basic Price of material
INR
2 Credit (96)
GR IR Clearing Account
Business Area where the material has been received
GR IR Clearing
Quantity of Material X Basic Price of material
INR
3 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Basic Customs Duty)
Basic Customs Duty Amount
INR
4 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Ecess on Basic Customs Duty)
Ecess amount on Basic Customs Duty
INR
5 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (SampH Ecess on Basic Customs Duty)
SampH Ecess amount on Basic Customs Duty
INR
6 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing CVD Amount INR
7 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing Ecess on CVD INR
8 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing SampH Ecess of CVD INR
Following is the example of the FI entries of imported material ndash
Item Posting
Key GL Account
Business Area
Account Text Amount in
INR Currency
1 Debit (89)
230110 BA01 Inventory ndash Imported Raw Material
1551800 INR
2 Credit (96)
130100 BA01 GR IR Clearing
1151500 - INR
3 Credit (96)
130120 BA01 Freight Clearing ndash Import
174400 - INR
4 Credit (96)
130120 BA01 Freight Clearing ndash Import
3400 - INR
5 Credit 130120 BA01 Freight Clearing ndash Import 1700 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 34
(96)
6 Credit (50)
130130 BA01 CVD Clearing
214500 - INR
7 Credit (50)
130130 BA01 CVD Clearing
4200 - INR
8 Credit (50)
130130 BA01 CVD Clearing
2100 - INR
e) Stock Transport Purchase Order ndash 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 amp 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR
Currency Plant
10 Credit Inventory Account
Business Area from where material is issued
Inventory of Material
Inventory Amount
INR
Plant from where
material is issued
20 Debit Inventory Account
Business Area where material is received
Inventory of material
Inventory Amount
INR Plant where material is received
Example of above transaction is as below ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Plant
10 Credit (99) 232080 BA05 Inventory of Spares 430250 - INR 2530
20 Debit (89) 232080 BA05 Inventory of Spares 430250 INR 9010
f) Service Purchase Order ndash When a Service Purchase Order (Item Category ndash 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 35
automatically posted by the system (which is based on the accepted service entry sheet) Following is the flow chart for Service Purchase Order ndash
Service Required for Project Cost Center Sale Order
Account assignment data such as Project or WBS Definition Cost Center Number Sale Order Number is maintained
Purchase Order with Item Category D (Service) amp required account assignment (Q K E) is raised
Service Entry sheet is created amp 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 36
Following are the FI postings at the time of accepting Service Entry Sheet ndash
Item Posting
Key GL Account
Business Area
Account Text
Amount in INR
Currency Text
10 Debit Consumption
Account
Business Area from where Service is delivered
Process Charges
Service Charges Amount
INR Service Text
20 Credit GR IR Clearing Account
Business Area where service is delivered
GR IR Clearing
Service Charges Amount
INR Service Text
Following is the example of above transaction ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Text
10 Debit (81) 411420 BA02 Process Charges - Foundry
384780 INR
Service Charges
20 Debit (96) 130100 BA02 GR IR Clearing 384780 -
INR Service Charges
Train Doc KBLCICSAP MM12MM-FI Integration Page 37
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 ndash a) Modvatable Excise Item ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40)
Excise Cenvat
Business Area where the material is received
Cenvat Input P F Basic Excise Duty amount
INR
2 Debit (40)
ECS Cenvat Amount
Business Area where the material is received
Cenvat ED Cess ECS Amount INR
3 Debit (40)
SampH ECS Cenvat Account
Business Area where the material is received
Cenvat SampH Ces-1
SampH ECS Amount
INR
4 Credit (50)
Modvat Clearing Account
Business Area where the material is received
Modvat Clearing Account
Amount equivalent to amount in 1 + 2 + 3
INR
Example of Modvatable excise entries is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40) 244030 BA01 Cenvat Input P F 362900 INR
2 Debit (40) 244031 BA01 Cenvat ED Cess 7300 INR
3 Debit (40) 244034 BA01 Cenvat SampH Ces-1
3600 INR
4 Credit (50) 130150 BA01 Modvat Clearing Account
373800 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 38
b) Trading excisable material received against GRN ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81)
COGS ndash Trading Material
Business Area where the material is received COGS ndash Trading
Material
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
2 Credit (96)
ECS Cenvat Amount
Business Area where the material is received
GR IR Clearing
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
Example of Excise duty inventorised -
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81) 410910 BA01 COGS ndash Trading Motor
433108300 INR
2 Credit (96) 130100 BA01 GR IR Clearing 433108300 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 39
FI entries at Material Consumption When a material is issued to a consumption account (For example ndash Consumption to Production Order Cost Center) the inventory reduces amp 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 ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Credit (99)
231020 BA05 Inventory ndash Other Raw material
15500 - INR
2 Debit (81)
400240 BA05 Consumption ndash Other Raw Material
15500 INR
2) Material consumption posted to Production Order ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Production Order ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (99)
235010 BA01 Inventory ndash Semi Finished Goods
334100 - INR
2 Debit (81)
400290 BA01 Consumption ndash Semi Finished Goods
334100 INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 40
3) Consumption of Stock provided to Sub ndash Contractor for processing of finished material when GRN of processed material is posted ndash
In a sub ndash contracting purchase order a semi finished material is ordered on the sub ndash contractor amp components are provided to the sub ndash 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 amp the concerned FI entries are posted
Train Doc KBLCICSAP MM12MM-FI Integration Page 41
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 amp 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 amp 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 ndash Quantity Variance Price Variance Quality Inspection Manual block date variance and Amount variance The process flow is as below ndash
Purchase Order for Material Service
GRN for Material Service Entry Sheet for Services performed
Purchase Order History
Delivery Costs
Material Master
Vendor Master
GL Account
Assets
Cost Center
Project
Sale Order
Invoice Verification FI Invoice
Document
MM Invoice Document
Further Document
Train Doc KBLCICSAP MM12MM-FI Integration Page 42
Following entries are posted when an invoice for vendor is posted in the system
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (31)
Vendor Account
Business Area Vendor Number
Amount to be paid to Vendor
INR
2 Debit (86)
GR IR Clearing
Business Area GR IR Clearing
GR IR Clearing Amount
INR
3 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash B Excise Duty
INR
4 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash ECS Amount
INR
5 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash SampH ECS Amt
INR
6 Debit (40)
VAT RM Deductible Amount
Business Area from where payment is made
VAT RM Deductible
VAT Amount to be paid to Vendor
INR
Example of above is transaction is as below ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (31) 300664 BA02 WalchandNagar Industries 13590000 - INR
2 Debit (86) 130100 BA02 GR IR Clearing 10000000 INR
3 Debit (40) 130150 Modvat Clearing 1600000 INR
4 Debit (40) 130150 Modvat Clearing 320000 INR
5 Debit (40) 130150 Modvat Clearing 160000 INR
6 Debit (40) 245039 BA02 VAT RM Deductible 1510000 INR
The diagrammatic view of above example is as below ndash
Purchase Order 100 PC at INR 1000 GRN for this PO 100 PC Invoice 100 PC at INR 1000
Goods Receipt
Invoice Receipt
100000 +
20800 +
15100 +
135900 ndash
100000 +
100000 ndash
20800 ndash
Stock Account
GR IR Account
Modvat clearing
VAT
Vendor
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 17
4
Service is provided by the vendor amp service entry sheet is created
Consumption of service is booked to the respective cost object (For example ndash Cost Center)
GR IR clearing account is credited (which is ultimately the liability to pay money to the vendor as per agreed terms
5 Invoice of the vendor is booked in the system
Vendor‟s invoice is checked against the terms amp conditions of the Purchase Order and booked in system so that the vendor can be paid on right time
Vendor account is credited amp GR IR Clearing account is debited (The effective entry is bdquoCredit Vendor Account ndash Debit Inventory‟)
6 Payment is done to the vendor
Liability of the Purchasing organization ends
Debit Vendor Account Credit Bank Account
Following are the steps involved in material movement which are important from financial point of view ndash
Sr No
Transaction Effect from Materials Management point
Effect from Financial point of view
1 Goods Receipt is posted for standard bought out material
Stock of material (Inventory) increases if material is Inventoried Consumption to cost object is booked if the PO is account assigned
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)
2 Goods Receipt posted for sub-contracting material
Stock of the semi-finished material (which was ordered on vendor) increases Consumption of the BOM material (provided to vendor is booked)
Asset (Inventory) of semi-finished 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
3 Goods Receipt posted for Traded Material
Material delivered to customer directly from Vendor (Third Party Transaction)
Cost of Goods sold to customer is booked
4 Goods Issue is posted to Production Order Cost Center
Stock of the material decreases
Material value is booked against the respective cost object (Production Order or Cost Center) as consumption
5 Components transferred to Sub-Contractor
Material provided to vendor for processing amp supplying back the processed goods
No financial entry The inventory is shown as bdquoStock provided to Vendor‟
6 Material delivered to Customer
Finished Goods Traded Goods delivered to customer Own inventory is reduced
Cost of Goods sold to customer is booked
Train Doc KBLCICSAP MM12MM-FI Integration Page 18
Automatic posting of material for Goods Movement
Goods Receipt at
manufacturing plant
Consumption
Storage
Valuation
Valuated
Inventory
posted in Store
Consumption
of material
posted
directly to
consumption
account
Goods Issue
To Production Order
Cost Center
Goods Receipt of Trading
Material against Third Party
Purchase Order
To SD
Delivery
Cost of
Goods Sold
Material cost
posted to
Cost of
Goods Sold
account
Train Doc KBLCICSAP MM12MM-FI Integration Page 19
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 amp the transaction of material posting (For example ndash 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 ndash Imported
Bearings can be accounted in separate account (IMP_RM ndash Imported Raw material) amp Bearing procured from domestic vendor can be accounted in separate account (DOM_RM ndash Domestic Raw Material) The posting transactions for the transactions in Inventory Management amp Invoice Management that are relevant for accounting are fixed Posting records are assigned to event movement type in Inventory Management amp each transaction in Invoice Posting These postings are generalized in a value string (posting rule) Instead of fixed GL account numbers these contain keys for respective posting transaction (such as BSX for a stock posting) The GL account numbers are determined from these keys amp posting transactions
In brief following are the summarized data for influencing factors for account posting
Organizational
Structure
Company
Code
Plant
Chart of Account
Valuation Grouping
Code
Material
Accounting data
for valuation area
Valuation
Class
Material Type
Value
Quantity update
Business
Transaction Goods Movement
Invoice
Verification
Value
String
Transaction
Key
Account
Grouping
Train Doc KBLCICSAP MM12MM-FI Integration Page 20
Material Price Change ndash 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 (amp not the material master change) in which total stock of the plant is revaluated
Train Doc KBLCICSAP MM12MM-FI Integration Page 21
Automatic FI postings at Goods Receipt Following automatic postings are done in the system when the Goods Receipt against Purchase Order are posted ndash
A] Accounting (FI) Entries posted at the time of GRN ndash
a) Raw Material posted to Inventory after posting of GRN ndash 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 amp raw material procured from domestic vendor is kept separate The process flow is as below ndash
Without account assignment
Purchase Order
Raw Material
GRN Quantity
To Store
To Inventory GRN
Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 22
The FI entries posted at GRN are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Raw material Inventory
Respective Business Area where the material is received
Raw material Inventory
(Quantity of material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the material is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of Accounting Entries for Raw material posted to inventory ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Curr
Curr Text
1 Debit (89)
230120 BA01 Inventory ndash Other Raw
Material 510000 INR
BRG 6305 SKF OR EQ
2 Credit (96)
130100 BA01 GR IR Clearing
500000 - INR BRG 6305 SKF
OR EQ
3 Credit (50)
130110 BA01 Freight
Clearing Inland
10000 - INR BRG 6305 SKF
OR EQ
b) Material posted to consumption account after posting of GRN ndash
Following are main account assignment categories (AAC) ndash
AAC Description Required Account Assignment Data
A Asset Main Asset Number amp Sub-Number
K Cost Center Cost Center amp GL Account Number
Q Project WBS Element Number of the Project
E Sale Order Sale Order Number amp Line Number of the Sale Order
Train Doc KBLCICSAP MM12MM-FI Integration Page 23
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 GL 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 ndash
i) Purchase Order with account assignment A (Asset) ndash 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 GL Account in the company‟s balance sheet The GL account is a reconciliation account that means that it reconciles several asset numbers
With account assignment Purchase
Order
Raw Material Non Valuated Material
GRN Quantity
To Store (Raw Material) or To Consumption (Non-valuated material)
Consumption Account
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 24
For Purchase Order with account assignment A (Asset) the entry in FI GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Asset
Respective Business Area where the Asset is received
Asset Number amp Sub Number
(Quantity of Asset X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the asset is received
GR IR Clearing Account
(Quantity of Asset X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the asset is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entries for asset posted ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (70)
211450 BA05
Asset Number 000021000780 Sub Number 0000
3650000 INR
IM-314318325 MOUNTING CASING
2 Credit (96)
130100 BA05 GR IR Clearing 3605000 - INR
IM-314318325 MOUNTING CASING
3 Credit (50)
130110 BA05 Freight Clearing Inland
45000 - INR IM-314318325 MOUNTING CASING
ii) Purchase Order with account assignment K (Cost Center) ndash 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 amp services With account assignment K we need to determine following two additional data to be entered in the PO ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 25
- General Ledger (GL) Account Number We have to determine the expense GL 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 GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of
cost center
Respective Business Area where the Material Service is received
Cost Center account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of
GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of
Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entry for Account Assignment as Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416340 BA08 Legal Exp amp Consult Fees
4200000 INR Visit Charges
2 Credit (96)
130100 BA08 GR IR Clearing
4200000 - INR Visit Charges
iii) Purchase Order with account assignment as Q (Project) ndash
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 amp budgeted We can procure following type of materials against the Project account assignment ndash Raw Semi Finished material (to be inventoried) Traded Material When we procure a raw material (to be inventoried)
Train Doc KBLCICSAP MM12MM-FI Integration Page 26
against the account assignment as Project (Q) then the accounting entries posted are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of the accounting entries ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233040 BA02 Inventory ndash
Other Resale 61080600 INR
MS Flange Dia 1500 mm
2 Credit (96)
130100 BA02 GR IR Clearing
61080600 - INR 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS)
Respective Business Area where the Material Service is received
COGS account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency
Material master short text
Train Doc KBLCICSAP MM12MM-FI Integration Page 27
service is received
(For Imported material)
Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of the accounting entry is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
410920 BA02 COGS ndash Other Resale Article
18340100 INR LTAL PVC
ArmPVCSH Cable
2 Credit (96)
130100 BA02 GR IR Clearing
18340100 - INR LTAL PVC
ArmPVCSH Cable
iv) Purchase Order with account assignment as E (Sale Order) ndash
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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Train Doc KBLCICSAP MM12MM-FI Integration Page 28
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233070 BA01 Inventory ndash
Traded Electric Motor
2583000 INR Motor Alstom 22
KW 4 Pole
2 Credit (96)
130100 BA01 GR IR Clearing
2583000 - INR Motor Alstom 22
KW 4 Pole
When we post GRN for traded goods following accounting entries are posted ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS) General Expenses
Respective Business Area where the Material Service is received
COGS account General Expenses Account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit
Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit
Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416320 BA01 General Expenses
56258000 INR
KOEL 85 HP 1800 RPM Engine
2 Credit (96)
130100 BA01 GR IR Clearing
56258000 - INR
KOEL 85 HP 1800 RPM Engine
c) Sub-Contracting Purchase Order ndash In the subndashContracting Purchase Order semindash
finished material is ordered on the Sub-Contractor amp the components are given to SubndashContractor 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 ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 29
Semi ndash Finished
Material
BOM of Semindash
Finished
Material
With without
account
assignment
Sub ndash
Contracting
Purchase Order
Components in
BOM provided to
Vendor for
processing
Transfer of
material to Sub
ndash Contractor
No accounting
entry Stock of
material
provided to
vendor is
updated
GRN of
processed
material
(Quantity)
Inventory of Semi-
Finished material
is updated
Stock of material
provided to
Vendor is
consumed
GRN Value
Inventory of Semi-
Finished material
= Processing
Charges + Value
of BOM
Components
Train Doc KBLCICSAP MM12MM-FI Integration Page 30
Following FI entries are posted during above process ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR Currency
Text of Material
10 Debit
Inventory account of
Semi-finished material
Respective Business Area where the Material is received
Inventory ndash Semi-Finished Goods
(Quantity of Semi-finished material X Processing Charges) + (Inventory Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
20 Credit
Change of Stock
from Sub-Contract
Respective Business Area where the Material is received
Change of Stock from Sub-Contract
(Quantity of Semi-finished material X Processing Charges) + (Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
30 Credit
Inventory of
Components with
Sub-Contractor
Respective Business Area where the Material is received
Inventory of Components with Sub-Contractor
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
40 Debit
Inventory of own
Components
Respective Business Area where the Material is received
Inventory of own Components
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
50 Debit Processing Charges
Other
Respective Business Area where the Material is received
Processing Charges Other
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of received material
60 Credit GR IR Clearing
Respective Business Area where the Material is received
GR IR Clearing Charges
Processing Charges to be paid to Vendor (Quantity of Ordered material X Processing Charges Rate)
INR (for domestic
Purchase)
Material master short text of received material
Train Doc KBLCICSAP MM12MM-FI Integration Page 31
Following is the example of the above transaction ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
235010 BA01 Inventory Semi-Finished Goods
315000 INR BRG Housing 25
13
2 Credit (91)
400040 BA01
Change Stock Semi-Finished
from Sub-Contractor
315000 - INR BRG Housing 25
13
3 Credit (99)
235040 BA01 Inventory of
semi-finished CI Castings
285200 - INR Bearing Housing (Kanban 30 Qty
Bin)
4 Debit (81)
400040 BA01 Change Stock Castings for Sub-Contract
285200 INR Bearing Housing (Kanban 30 Qty
Bin)
5 Credit (96)
130100 BA01 GR IR Clearing 29800 - INR BRG Housing 25
13
6 Debit (86)
411450 BA01 Processing
Charges Other 29800 INR
BRG Housing 25 13
Train Doc KBLCICSAP MM12MM-FI Integration Page 32
d) Import Purchase Order ndash 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 amp 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 ndash Mumbai JNPT Port) After material is cleared from port amp received in Plant GRN is posted Then the customs duty is also inventorised along with the basic price of material amp 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 ndash
Raw material
Valuation class ndash Imported Raw Material
With without account assignment
Import Purchase Order on Overseas Vendor
Customs duties Freight Charges etc of Clearing Agent are invoiced
Planned delivery cost invoice of Import PO is booked when the material arrives at Port
Quantity of Imported Material is updated
GRN is posted when material arrives at Plant (Quantity)
Basic Value of Material + Planned Delivery Costs + Customs Duty
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 33
Following are the FI entries posted when the GRN is posted ndash
Item Posting
Key GL Account Business Area Account Text
Amount in INR
Currency
1 Debit (89)
Inventory account of Imported Raw Material
Business Area where the material has been received
Inventory ndash Imported Raw Material
Quantity of Material X Basic Price of material
INR
2 Credit (96)
GR IR Clearing Account
Business Area where the material has been received
GR IR Clearing
Quantity of Material X Basic Price of material
INR
3 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Basic Customs Duty)
Basic Customs Duty Amount
INR
4 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Ecess on Basic Customs Duty)
Ecess amount on Basic Customs Duty
INR
5 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (SampH Ecess on Basic Customs Duty)
SampH Ecess amount on Basic Customs Duty
INR
6 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing CVD Amount INR
7 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing Ecess on CVD INR
8 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing SampH Ecess of CVD INR
Following is the example of the FI entries of imported material ndash
Item Posting
Key GL Account
Business Area
Account Text Amount in
INR Currency
1 Debit (89)
230110 BA01 Inventory ndash Imported Raw Material
1551800 INR
2 Credit (96)
130100 BA01 GR IR Clearing
1151500 - INR
3 Credit (96)
130120 BA01 Freight Clearing ndash Import
174400 - INR
4 Credit (96)
130120 BA01 Freight Clearing ndash Import
3400 - INR
5 Credit 130120 BA01 Freight Clearing ndash Import 1700 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 34
(96)
6 Credit (50)
130130 BA01 CVD Clearing
214500 - INR
7 Credit (50)
130130 BA01 CVD Clearing
4200 - INR
8 Credit (50)
130130 BA01 CVD Clearing
2100 - INR
e) Stock Transport Purchase Order ndash 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 amp 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR
Currency Plant
10 Credit Inventory Account
Business Area from where material is issued
Inventory of Material
Inventory Amount
INR
Plant from where
material is issued
20 Debit Inventory Account
Business Area where material is received
Inventory of material
Inventory Amount
INR Plant where material is received
Example of above transaction is as below ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Plant
10 Credit (99) 232080 BA05 Inventory of Spares 430250 - INR 2530
20 Debit (89) 232080 BA05 Inventory of Spares 430250 INR 9010
f) Service Purchase Order ndash When a Service Purchase Order (Item Category ndash 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 35
automatically posted by the system (which is based on the accepted service entry sheet) Following is the flow chart for Service Purchase Order ndash
Service Required for Project Cost Center Sale Order
Account assignment data such as Project or WBS Definition Cost Center Number Sale Order Number is maintained
Purchase Order with Item Category D (Service) amp required account assignment (Q K E) is raised
Service Entry sheet is created amp 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 36
Following are the FI postings at the time of accepting Service Entry Sheet ndash
Item Posting
Key GL Account
Business Area
Account Text
Amount in INR
Currency Text
10 Debit Consumption
Account
Business Area from where Service is delivered
Process Charges
Service Charges Amount
INR Service Text
20 Credit GR IR Clearing Account
Business Area where service is delivered
GR IR Clearing
Service Charges Amount
INR Service Text
Following is the example of above transaction ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Text
10 Debit (81) 411420 BA02 Process Charges - Foundry
384780 INR
Service Charges
20 Debit (96) 130100 BA02 GR IR Clearing 384780 -
INR Service Charges
Train Doc KBLCICSAP MM12MM-FI Integration Page 37
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 ndash a) Modvatable Excise Item ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40)
Excise Cenvat
Business Area where the material is received
Cenvat Input P F Basic Excise Duty amount
INR
2 Debit (40)
ECS Cenvat Amount
Business Area where the material is received
Cenvat ED Cess ECS Amount INR
3 Debit (40)
SampH ECS Cenvat Account
Business Area where the material is received
Cenvat SampH Ces-1
SampH ECS Amount
INR
4 Credit (50)
Modvat Clearing Account
Business Area where the material is received
Modvat Clearing Account
Amount equivalent to amount in 1 + 2 + 3
INR
Example of Modvatable excise entries is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40) 244030 BA01 Cenvat Input P F 362900 INR
2 Debit (40) 244031 BA01 Cenvat ED Cess 7300 INR
3 Debit (40) 244034 BA01 Cenvat SampH Ces-1
3600 INR
4 Credit (50) 130150 BA01 Modvat Clearing Account
373800 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 38
b) Trading excisable material received against GRN ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81)
COGS ndash Trading Material
Business Area where the material is received COGS ndash Trading
Material
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
2 Credit (96)
ECS Cenvat Amount
Business Area where the material is received
GR IR Clearing
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
Example of Excise duty inventorised -
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81) 410910 BA01 COGS ndash Trading Motor
433108300 INR
2 Credit (96) 130100 BA01 GR IR Clearing 433108300 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 39
FI entries at Material Consumption When a material is issued to a consumption account (For example ndash Consumption to Production Order Cost Center) the inventory reduces amp 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 ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Credit (99)
231020 BA05 Inventory ndash Other Raw material
15500 - INR
2 Debit (81)
400240 BA05 Consumption ndash Other Raw Material
15500 INR
2) Material consumption posted to Production Order ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Production Order ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (99)
235010 BA01 Inventory ndash Semi Finished Goods
334100 - INR
2 Debit (81)
400290 BA01 Consumption ndash Semi Finished Goods
334100 INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 40
3) Consumption of Stock provided to Sub ndash Contractor for processing of finished material when GRN of processed material is posted ndash
In a sub ndash contracting purchase order a semi finished material is ordered on the sub ndash contractor amp components are provided to the sub ndash 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 amp the concerned FI entries are posted
Train Doc KBLCICSAP MM12MM-FI Integration Page 41
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 amp 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 amp 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 ndash Quantity Variance Price Variance Quality Inspection Manual block date variance and Amount variance The process flow is as below ndash
Purchase Order for Material Service
GRN for Material Service Entry Sheet for Services performed
Purchase Order History
Delivery Costs
Material Master
Vendor Master
GL Account
Assets
Cost Center
Project
Sale Order
Invoice Verification FI Invoice
Document
MM Invoice Document
Further Document
Train Doc KBLCICSAP MM12MM-FI Integration Page 42
Following entries are posted when an invoice for vendor is posted in the system
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (31)
Vendor Account
Business Area Vendor Number
Amount to be paid to Vendor
INR
2 Debit (86)
GR IR Clearing
Business Area GR IR Clearing
GR IR Clearing Amount
INR
3 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash B Excise Duty
INR
4 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash ECS Amount
INR
5 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash SampH ECS Amt
INR
6 Debit (40)
VAT RM Deductible Amount
Business Area from where payment is made
VAT RM Deductible
VAT Amount to be paid to Vendor
INR
Example of above is transaction is as below ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (31) 300664 BA02 WalchandNagar Industries 13590000 - INR
2 Debit (86) 130100 BA02 GR IR Clearing 10000000 INR
3 Debit (40) 130150 Modvat Clearing 1600000 INR
4 Debit (40) 130150 Modvat Clearing 320000 INR
5 Debit (40) 130150 Modvat Clearing 160000 INR
6 Debit (40) 245039 BA02 VAT RM Deductible 1510000 INR
The diagrammatic view of above example is as below ndash
Purchase Order 100 PC at INR 1000 GRN for this PO 100 PC Invoice 100 PC at INR 1000
Goods Receipt
Invoice Receipt
100000 +
20800 +
15100 +
135900 ndash
100000 +
100000 ndash
20800 ndash
Stock Account
GR IR Account
Modvat clearing
VAT
Vendor
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 18
Automatic posting of material for Goods Movement
Goods Receipt at
manufacturing plant
Consumption
Storage
Valuation
Valuated
Inventory
posted in Store
Consumption
of material
posted
directly to
consumption
account
Goods Issue
To Production Order
Cost Center
Goods Receipt of Trading
Material against Third Party
Purchase Order
To SD
Delivery
Cost of
Goods Sold
Material cost
posted to
Cost of
Goods Sold
account
Train Doc KBLCICSAP MM12MM-FI Integration Page 19
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 amp the transaction of material posting (For example ndash 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 ndash Imported
Bearings can be accounted in separate account (IMP_RM ndash Imported Raw material) amp Bearing procured from domestic vendor can be accounted in separate account (DOM_RM ndash Domestic Raw Material) The posting transactions for the transactions in Inventory Management amp Invoice Management that are relevant for accounting are fixed Posting records are assigned to event movement type in Inventory Management amp each transaction in Invoice Posting These postings are generalized in a value string (posting rule) Instead of fixed GL account numbers these contain keys for respective posting transaction (such as BSX for a stock posting) The GL account numbers are determined from these keys amp posting transactions
In brief following are the summarized data for influencing factors for account posting
Organizational
Structure
Company
Code
Plant
Chart of Account
Valuation Grouping
Code
Material
Accounting data
for valuation area
Valuation
Class
Material Type
Value
Quantity update
Business
Transaction Goods Movement
Invoice
Verification
Value
String
Transaction
Key
Account
Grouping
Train Doc KBLCICSAP MM12MM-FI Integration Page 20
Material Price Change ndash 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 (amp not the material master change) in which total stock of the plant is revaluated
Train Doc KBLCICSAP MM12MM-FI Integration Page 21
Automatic FI postings at Goods Receipt Following automatic postings are done in the system when the Goods Receipt against Purchase Order are posted ndash
A] Accounting (FI) Entries posted at the time of GRN ndash
a) Raw Material posted to Inventory after posting of GRN ndash 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 amp raw material procured from domestic vendor is kept separate The process flow is as below ndash
Without account assignment
Purchase Order
Raw Material
GRN Quantity
To Store
To Inventory GRN
Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 22
The FI entries posted at GRN are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Raw material Inventory
Respective Business Area where the material is received
Raw material Inventory
(Quantity of material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the material is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of Accounting Entries for Raw material posted to inventory ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Curr
Curr Text
1 Debit (89)
230120 BA01 Inventory ndash Other Raw
Material 510000 INR
BRG 6305 SKF OR EQ
2 Credit (96)
130100 BA01 GR IR Clearing
500000 - INR BRG 6305 SKF
OR EQ
3 Credit (50)
130110 BA01 Freight
Clearing Inland
10000 - INR BRG 6305 SKF
OR EQ
b) Material posted to consumption account after posting of GRN ndash
Following are main account assignment categories (AAC) ndash
AAC Description Required Account Assignment Data
A Asset Main Asset Number amp Sub-Number
K Cost Center Cost Center amp GL Account Number
Q Project WBS Element Number of the Project
E Sale Order Sale Order Number amp Line Number of the Sale Order
Train Doc KBLCICSAP MM12MM-FI Integration Page 23
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 GL 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 ndash
i) Purchase Order with account assignment A (Asset) ndash 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 GL Account in the company‟s balance sheet The GL account is a reconciliation account that means that it reconciles several asset numbers
With account assignment Purchase
Order
Raw Material Non Valuated Material
GRN Quantity
To Store (Raw Material) or To Consumption (Non-valuated material)
Consumption Account
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 24
For Purchase Order with account assignment A (Asset) the entry in FI GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Asset
Respective Business Area where the Asset is received
Asset Number amp Sub Number
(Quantity of Asset X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the asset is received
GR IR Clearing Account
(Quantity of Asset X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the asset is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entries for asset posted ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (70)
211450 BA05
Asset Number 000021000780 Sub Number 0000
3650000 INR
IM-314318325 MOUNTING CASING
2 Credit (96)
130100 BA05 GR IR Clearing 3605000 - INR
IM-314318325 MOUNTING CASING
3 Credit (50)
130110 BA05 Freight Clearing Inland
45000 - INR IM-314318325 MOUNTING CASING
ii) Purchase Order with account assignment K (Cost Center) ndash 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 amp services With account assignment K we need to determine following two additional data to be entered in the PO ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 25
- General Ledger (GL) Account Number We have to determine the expense GL 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 GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of
cost center
Respective Business Area where the Material Service is received
Cost Center account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of
GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of
Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entry for Account Assignment as Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416340 BA08 Legal Exp amp Consult Fees
4200000 INR Visit Charges
2 Credit (96)
130100 BA08 GR IR Clearing
4200000 - INR Visit Charges
iii) Purchase Order with account assignment as Q (Project) ndash
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 amp budgeted We can procure following type of materials against the Project account assignment ndash Raw Semi Finished material (to be inventoried) Traded Material When we procure a raw material (to be inventoried)
Train Doc KBLCICSAP MM12MM-FI Integration Page 26
against the account assignment as Project (Q) then the accounting entries posted are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of the accounting entries ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233040 BA02 Inventory ndash
Other Resale 61080600 INR
MS Flange Dia 1500 mm
2 Credit (96)
130100 BA02 GR IR Clearing
61080600 - INR 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS)
Respective Business Area where the Material Service is received
COGS account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency
Material master short text
Train Doc KBLCICSAP MM12MM-FI Integration Page 27
service is received
(For Imported material)
Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of the accounting entry is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
410920 BA02 COGS ndash Other Resale Article
18340100 INR LTAL PVC
ArmPVCSH Cable
2 Credit (96)
130100 BA02 GR IR Clearing
18340100 - INR LTAL PVC
ArmPVCSH Cable
iv) Purchase Order with account assignment as E (Sale Order) ndash
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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Train Doc KBLCICSAP MM12MM-FI Integration Page 28
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233070 BA01 Inventory ndash
Traded Electric Motor
2583000 INR Motor Alstom 22
KW 4 Pole
2 Credit (96)
130100 BA01 GR IR Clearing
2583000 - INR Motor Alstom 22
KW 4 Pole
When we post GRN for traded goods following accounting entries are posted ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS) General Expenses
Respective Business Area where the Material Service is received
COGS account General Expenses Account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit
Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit
Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416320 BA01 General Expenses
56258000 INR
KOEL 85 HP 1800 RPM Engine
2 Credit (96)
130100 BA01 GR IR Clearing
56258000 - INR
KOEL 85 HP 1800 RPM Engine
c) Sub-Contracting Purchase Order ndash In the subndashContracting Purchase Order semindash
finished material is ordered on the Sub-Contractor amp the components are given to SubndashContractor 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 ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 29
Semi ndash Finished
Material
BOM of Semindash
Finished
Material
With without
account
assignment
Sub ndash
Contracting
Purchase Order
Components in
BOM provided to
Vendor for
processing
Transfer of
material to Sub
ndash Contractor
No accounting
entry Stock of
material
provided to
vendor is
updated
GRN of
processed
material
(Quantity)
Inventory of Semi-
Finished material
is updated
Stock of material
provided to
Vendor is
consumed
GRN Value
Inventory of Semi-
Finished material
= Processing
Charges + Value
of BOM
Components
Train Doc KBLCICSAP MM12MM-FI Integration Page 30
Following FI entries are posted during above process ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR Currency
Text of Material
10 Debit
Inventory account of
Semi-finished material
Respective Business Area where the Material is received
Inventory ndash Semi-Finished Goods
(Quantity of Semi-finished material X Processing Charges) + (Inventory Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
20 Credit
Change of Stock
from Sub-Contract
Respective Business Area where the Material is received
Change of Stock from Sub-Contract
(Quantity of Semi-finished material X Processing Charges) + (Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
30 Credit
Inventory of
Components with
Sub-Contractor
Respective Business Area where the Material is received
Inventory of Components with Sub-Contractor
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
40 Debit
Inventory of own
Components
Respective Business Area where the Material is received
Inventory of own Components
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
50 Debit Processing Charges
Other
Respective Business Area where the Material is received
Processing Charges Other
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of received material
60 Credit GR IR Clearing
Respective Business Area where the Material is received
GR IR Clearing Charges
Processing Charges to be paid to Vendor (Quantity of Ordered material X Processing Charges Rate)
INR (for domestic
Purchase)
Material master short text of received material
Train Doc KBLCICSAP MM12MM-FI Integration Page 31
Following is the example of the above transaction ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
235010 BA01 Inventory Semi-Finished Goods
315000 INR BRG Housing 25
13
2 Credit (91)
400040 BA01
Change Stock Semi-Finished
from Sub-Contractor
315000 - INR BRG Housing 25
13
3 Credit (99)
235040 BA01 Inventory of
semi-finished CI Castings
285200 - INR Bearing Housing (Kanban 30 Qty
Bin)
4 Debit (81)
400040 BA01 Change Stock Castings for Sub-Contract
285200 INR Bearing Housing (Kanban 30 Qty
Bin)
5 Credit (96)
130100 BA01 GR IR Clearing 29800 - INR BRG Housing 25
13
6 Debit (86)
411450 BA01 Processing
Charges Other 29800 INR
BRG Housing 25 13
Train Doc KBLCICSAP MM12MM-FI Integration Page 32
d) Import Purchase Order ndash 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 amp 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 ndash Mumbai JNPT Port) After material is cleared from port amp received in Plant GRN is posted Then the customs duty is also inventorised along with the basic price of material amp 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 ndash
Raw material
Valuation class ndash Imported Raw Material
With without account assignment
Import Purchase Order on Overseas Vendor
Customs duties Freight Charges etc of Clearing Agent are invoiced
Planned delivery cost invoice of Import PO is booked when the material arrives at Port
Quantity of Imported Material is updated
GRN is posted when material arrives at Plant (Quantity)
Basic Value of Material + Planned Delivery Costs + Customs Duty
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 33
Following are the FI entries posted when the GRN is posted ndash
Item Posting
Key GL Account Business Area Account Text
Amount in INR
Currency
1 Debit (89)
Inventory account of Imported Raw Material
Business Area where the material has been received
Inventory ndash Imported Raw Material
Quantity of Material X Basic Price of material
INR
2 Credit (96)
GR IR Clearing Account
Business Area where the material has been received
GR IR Clearing
Quantity of Material X Basic Price of material
INR
3 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Basic Customs Duty)
Basic Customs Duty Amount
INR
4 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Ecess on Basic Customs Duty)
Ecess amount on Basic Customs Duty
INR
5 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (SampH Ecess on Basic Customs Duty)
SampH Ecess amount on Basic Customs Duty
INR
6 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing CVD Amount INR
7 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing Ecess on CVD INR
8 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing SampH Ecess of CVD INR
Following is the example of the FI entries of imported material ndash
Item Posting
Key GL Account
Business Area
Account Text Amount in
INR Currency
1 Debit (89)
230110 BA01 Inventory ndash Imported Raw Material
1551800 INR
2 Credit (96)
130100 BA01 GR IR Clearing
1151500 - INR
3 Credit (96)
130120 BA01 Freight Clearing ndash Import
174400 - INR
4 Credit (96)
130120 BA01 Freight Clearing ndash Import
3400 - INR
5 Credit 130120 BA01 Freight Clearing ndash Import 1700 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 34
(96)
6 Credit (50)
130130 BA01 CVD Clearing
214500 - INR
7 Credit (50)
130130 BA01 CVD Clearing
4200 - INR
8 Credit (50)
130130 BA01 CVD Clearing
2100 - INR
e) Stock Transport Purchase Order ndash 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 amp 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR
Currency Plant
10 Credit Inventory Account
Business Area from where material is issued
Inventory of Material
Inventory Amount
INR
Plant from where
material is issued
20 Debit Inventory Account
Business Area where material is received
Inventory of material
Inventory Amount
INR Plant where material is received
Example of above transaction is as below ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Plant
10 Credit (99) 232080 BA05 Inventory of Spares 430250 - INR 2530
20 Debit (89) 232080 BA05 Inventory of Spares 430250 INR 9010
f) Service Purchase Order ndash When a Service Purchase Order (Item Category ndash 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 35
automatically posted by the system (which is based on the accepted service entry sheet) Following is the flow chart for Service Purchase Order ndash
Service Required for Project Cost Center Sale Order
Account assignment data such as Project or WBS Definition Cost Center Number Sale Order Number is maintained
Purchase Order with Item Category D (Service) amp required account assignment (Q K E) is raised
Service Entry sheet is created amp 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 36
Following are the FI postings at the time of accepting Service Entry Sheet ndash
Item Posting
Key GL Account
Business Area
Account Text
Amount in INR
Currency Text
10 Debit Consumption
Account
Business Area from where Service is delivered
Process Charges
Service Charges Amount
INR Service Text
20 Credit GR IR Clearing Account
Business Area where service is delivered
GR IR Clearing
Service Charges Amount
INR Service Text
Following is the example of above transaction ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Text
10 Debit (81) 411420 BA02 Process Charges - Foundry
384780 INR
Service Charges
20 Debit (96) 130100 BA02 GR IR Clearing 384780 -
INR Service Charges
Train Doc KBLCICSAP MM12MM-FI Integration Page 37
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 ndash a) Modvatable Excise Item ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40)
Excise Cenvat
Business Area where the material is received
Cenvat Input P F Basic Excise Duty amount
INR
2 Debit (40)
ECS Cenvat Amount
Business Area where the material is received
Cenvat ED Cess ECS Amount INR
3 Debit (40)
SampH ECS Cenvat Account
Business Area where the material is received
Cenvat SampH Ces-1
SampH ECS Amount
INR
4 Credit (50)
Modvat Clearing Account
Business Area where the material is received
Modvat Clearing Account
Amount equivalent to amount in 1 + 2 + 3
INR
Example of Modvatable excise entries is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40) 244030 BA01 Cenvat Input P F 362900 INR
2 Debit (40) 244031 BA01 Cenvat ED Cess 7300 INR
3 Debit (40) 244034 BA01 Cenvat SampH Ces-1
3600 INR
4 Credit (50) 130150 BA01 Modvat Clearing Account
373800 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 38
b) Trading excisable material received against GRN ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81)
COGS ndash Trading Material
Business Area where the material is received COGS ndash Trading
Material
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
2 Credit (96)
ECS Cenvat Amount
Business Area where the material is received
GR IR Clearing
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
Example of Excise duty inventorised -
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81) 410910 BA01 COGS ndash Trading Motor
433108300 INR
2 Credit (96) 130100 BA01 GR IR Clearing 433108300 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 39
FI entries at Material Consumption When a material is issued to a consumption account (For example ndash Consumption to Production Order Cost Center) the inventory reduces amp 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 ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Credit (99)
231020 BA05 Inventory ndash Other Raw material
15500 - INR
2 Debit (81)
400240 BA05 Consumption ndash Other Raw Material
15500 INR
2) Material consumption posted to Production Order ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Production Order ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (99)
235010 BA01 Inventory ndash Semi Finished Goods
334100 - INR
2 Debit (81)
400290 BA01 Consumption ndash Semi Finished Goods
334100 INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 40
3) Consumption of Stock provided to Sub ndash Contractor for processing of finished material when GRN of processed material is posted ndash
In a sub ndash contracting purchase order a semi finished material is ordered on the sub ndash contractor amp components are provided to the sub ndash 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 amp the concerned FI entries are posted
Train Doc KBLCICSAP MM12MM-FI Integration Page 41
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 amp 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 amp 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 ndash Quantity Variance Price Variance Quality Inspection Manual block date variance and Amount variance The process flow is as below ndash
Purchase Order for Material Service
GRN for Material Service Entry Sheet for Services performed
Purchase Order History
Delivery Costs
Material Master
Vendor Master
GL Account
Assets
Cost Center
Project
Sale Order
Invoice Verification FI Invoice
Document
MM Invoice Document
Further Document
Train Doc KBLCICSAP MM12MM-FI Integration Page 42
Following entries are posted when an invoice for vendor is posted in the system
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (31)
Vendor Account
Business Area Vendor Number
Amount to be paid to Vendor
INR
2 Debit (86)
GR IR Clearing
Business Area GR IR Clearing
GR IR Clearing Amount
INR
3 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash B Excise Duty
INR
4 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash ECS Amount
INR
5 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash SampH ECS Amt
INR
6 Debit (40)
VAT RM Deductible Amount
Business Area from where payment is made
VAT RM Deductible
VAT Amount to be paid to Vendor
INR
Example of above is transaction is as below ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (31) 300664 BA02 WalchandNagar Industries 13590000 - INR
2 Debit (86) 130100 BA02 GR IR Clearing 10000000 INR
3 Debit (40) 130150 Modvat Clearing 1600000 INR
4 Debit (40) 130150 Modvat Clearing 320000 INR
5 Debit (40) 130150 Modvat Clearing 160000 INR
6 Debit (40) 245039 BA02 VAT RM Deductible 1510000 INR
The diagrammatic view of above example is as below ndash
Purchase Order 100 PC at INR 1000 GRN for this PO 100 PC Invoice 100 PC at INR 1000
Goods Receipt
Invoice Receipt
100000 +
20800 +
15100 +
135900 ndash
100000 +
100000 ndash
20800 ndash
Stock Account
GR IR Account
Modvat clearing
VAT
Vendor
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 19
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 amp the transaction of material posting (For example ndash 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 ndash Imported
Bearings can be accounted in separate account (IMP_RM ndash Imported Raw material) amp Bearing procured from domestic vendor can be accounted in separate account (DOM_RM ndash Domestic Raw Material) The posting transactions for the transactions in Inventory Management amp Invoice Management that are relevant for accounting are fixed Posting records are assigned to event movement type in Inventory Management amp each transaction in Invoice Posting These postings are generalized in a value string (posting rule) Instead of fixed GL account numbers these contain keys for respective posting transaction (such as BSX for a stock posting) The GL account numbers are determined from these keys amp posting transactions
In brief following are the summarized data for influencing factors for account posting
Organizational
Structure
Company
Code
Plant
Chart of Account
Valuation Grouping
Code
Material
Accounting data
for valuation area
Valuation
Class
Material Type
Value
Quantity update
Business
Transaction Goods Movement
Invoice
Verification
Value
String
Transaction
Key
Account
Grouping
Train Doc KBLCICSAP MM12MM-FI Integration Page 20
Material Price Change ndash 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 (amp not the material master change) in which total stock of the plant is revaluated
Train Doc KBLCICSAP MM12MM-FI Integration Page 21
Automatic FI postings at Goods Receipt Following automatic postings are done in the system when the Goods Receipt against Purchase Order are posted ndash
A] Accounting (FI) Entries posted at the time of GRN ndash
a) Raw Material posted to Inventory after posting of GRN ndash 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 amp raw material procured from domestic vendor is kept separate The process flow is as below ndash
Without account assignment
Purchase Order
Raw Material
GRN Quantity
To Store
To Inventory GRN
Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 22
The FI entries posted at GRN are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Raw material Inventory
Respective Business Area where the material is received
Raw material Inventory
(Quantity of material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the material is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of Accounting Entries for Raw material posted to inventory ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Curr
Curr Text
1 Debit (89)
230120 BA01 Inventory ndash Other Raw
Material 510000 INR
BRG 6305 SKF OR EQ
2 Credit (96)
130100 BA01 GR IR Clearing
500000 - INR BRG 6305 SKF
OR EQ
3 Credit (50)
130110 BA01 Freight
Clearing Inland
10000 - INR BRG 6305 SKF
OR EQ
b) Material posted to consumption account after posting of GRN ndash
Following are main account assignment categories (AAC) ndash
AAC Description Required Account Assignment Data
A Asset Main Asset Number amp Sub-Number
K Cost Center Cost Center amp GL Account Number
Q Project WBS Element Number of the Project
E Sale Order Sale Order Number amp Line Number of the Sale Order
Train Doc KBLCICSAP MM12MM-FI Integration Page 23
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 GL 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 ndash
i) Purchase Order with account assignment A (Asset) ndash 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 GL Account in the company‟s balance sheet The GL account is a reconciliation account that means that it reconciles several asset numbers
With account assignment Purchase
Order
Raw Material Non Valuated Material
GRN Quantity
To Store (Raw Material) or To Consumption (Non-valuated material)
Consumption Account
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 24
For Purchase Order with account assignment A (Asset) the entry in FI GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Asset
Respective Business Area where the Asset is received
Asset Number amp Sub Number
(Quantity of Asset X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the asset is received
GR IR Clearing Account
(Quantity of Asset X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the asset is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entries for asset posted ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (70)
211450 BA05
Asset Number 000021000780 Sub Number 0000
3650000 INR
IM-314318325 MOUNTING CASING
2 Credit (96)
130100 BA05 GR IR Clearing 3605000 - INR
IM-314318325 MOUNTING CASING
3 Credit (50)
130110 BA05 Freight Clearing Inland
45000 - INR IM-314318325 MOUNTING CASING
ii) Purchase Order with account assignment K (Cost Center) ndash 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 amp services With account assignment K we need to determine following two additional data to be entered in the PO ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 25
- General Ledger (GL) Account Number We have to determine the expense GL 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 GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of
cost center
Respective Business Area where the Material Service is received
Cost Center account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of
GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of
Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entry for Account Assignment as Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416340 BA08 Legal Exp amp Consult Fees
4200000 INR Visit Charges
2 Credit (96)
130100 BA08 GR IR Clearing
4200000 - INR Visit Charges
iii) Purchase Order with account assignment as Q (Project) ndash
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 amp budgeted We can procure following type of materials against the Project account assignment ndash Raw Semi Finished material (to be inventoried) Traded Material When we procure a raw material (to be inventoried)
Train Doc KBLCICSAP MM12MM-FI Integration Page 26
against the account assignment as Project (Q) then the accounting entries posted are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of the accounting entries ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233040 BA02 Inventory ndash
Other Resale 61080600 INR
MS Flange Dia 1500 mm
2 Credit (96)
130100 BA02 GR IR Clearing
61080600 - INR 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS)
Respective Business Area where the Material Service is received
COGS account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency
Material master short text
Train Doc KBLCICSAP MM12MM-FI Integration Page 27
service is received
(For Imported material)
Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of the accounting entry is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
410920 BA02 COGS ndash Other Resale Article
18340100 INR LTAL PVC
ArmPVCSH Cable
2 Credit (96)
130100 BA02 GR IR Clearing
18340100 - INR LTAL PVC
ArmPVCSH Cable
iv) Purchase Order with account assignment as E (Sale Order) ndash
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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Train Doc KBLCICSAP MM12MM-FI Integration Page 28
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233070 BA01 Inventory ndash
Traded Electric Motor
2583000 INR Motor Alstom 22
KW 4 Pole
2 Credit (96)
130100 BA01 GR IR Clearing
2583000 - INR Motor Alstom 22
KW 4 Pole
When we post GRN for traded goods following accounting entries are posted ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS) General Expenses
Respective Business Area where the Material Service is received
COGS account General Expenses Account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit
Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit
Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416320 BA01 General Expenses
56258000 INR
KOEL 85 HP 1800 RPM Engine
2 Credit (96)
130100 BA01 GR IR Clearing
56258000 - INR
KOEL 85 HP 1800 RPM Engine
c) Sub-Contracting Purchase Order ndash In the subndashContracting Purchase Order semindash
finished material is ordered on the Sub-Contractor amp the components are given to SubndashContractor 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 ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 29
Semi ndash Finished
Material
BOM of Semindash
Finished
Material
With without
account
assignment
Sub ndash
Contracting
Purchase Order
Components in
BOM provided to
Vendor for
processing
Transfer of
material to Sub
ndash Contractor
No accounting
entry Stock of
material
provided to
vendor is
updated
GRN of
processed
material
(Quantity)
Inventory of Semi-
Finished material
is updated
Stock of material
provided to
Vendor is
consumed
GRN Value
Inventory of Semi-
Finished material
= Processing
Charges + Value
of BOM
Components
Train Doc KBLCICSAP MM12MM-FI Integration Page 30
Following FI entries are posted during above process ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR Currency
Text of Material
10 Debit
Inventory account of
Semi-finished material
Respective Business Area where the Material is received
Inventory ndash Semi-Finished Goods
(Quantity of Semi-finished material X Processing Charges) + (Inventory Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
20 Credit
Change of Stock
from Sub-Contract
Respective Business Area where the Material is received
Change of Stock from Sub-Contract
(Quantity of Semi-finished material X Processing Charges) + (Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
30 Credit
Inventory of
Components with
Sub-Contractor
Respective Business Area where the Material is received
Inventory of Components with Sub-Contractor
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
40 Debit
Inventory of own
Components
Respective Business Area where the Material is received
Inventory of own Components
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
50 Debit Processing Charges
Other
Respective Business Area where the Material is received
Processing Charges Other
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of received material
60 Credit GR IR Clearing
Respective Business Area where the Material is received
GR IR Clearing Charges
Processing Charges to be paid to Vendor (Quantity of Ordered material X Processing Charges Rate)
INR (for domestic
Purchase)
Material master short text of received material
Train Doc KBLCICSAP MM12MM-FI Integration Page 31
Following is the example of the above transaction ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
235010 BA01 Inventory Semi-Finished Goods
315000 INR BRG Housing 25
13
2 Credit (91)
400040 BA01
Change Stock Semi-Finished
from Sub-Contractor
315000 - INR BRG Housing 25
13
3 Credit (99)
235040 BA01 Inventory of
semi-finished CI Castings
285200 - INR Bearing Housing (Kanban 30 Qty
Bin)
4 Debit (81)
400040 BA01 Change Stock Castings for Sub-Contract
285200 INR Bearing Housing (Kanban 30 Qty
Bin)
5 Credit (96)
130100 BA01 GR IR Clearing 29800 - INR BRG Housing 25
13
6 Debit (86)
411450 BA01 Processing
Charges Other 29800 INR
BRG Housing 25 13
Train Doc KBLCICSAP MM12MM-FI Integration Page 32
d) Import Purchase Order ndash 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 amp 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 ndash Mumbai JNPT Port) After material is cleared from port amp received in Plant GRN is posted Then the customs duty is also inventorised along with the basic price of material amp 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 ndash
Raw material
Valuation class ndash Imported Raw Material
With without account assignment
Import Purchase Order on Overseas Vendor
Customs duties Freight Charges etc of Clearing Agent are invoiced
Planned delivery cost invoice of Import PO is booked when the material arrives at Port
Quantity of Imported Material is updated
GRN is posted when material arrives at Plant (Quantity)
Basic Value of Material + Planned Delivery Costs + Customs Duty
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 33
Following are the FI entries posted when the GRN is posted ndash
Item Posting
Key GL Account Business Area Account Text
Amount in INR
Currency
1 Debit (89)
Inventory account of Imported Raw Material
Business Area where the material has been received
Inventory ndash Imported Raw Material
Quantity of Material X Basic Price of material
INR
2 Credit (96)
GR IR Clearing Account
Business Area where the material has been received
GR IR Clearing
Quantity of Material X Basic Price of material
INR
3 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Basic Customs Duty)
Basic Customs Duty Amount
INR
4 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Ecess on Basic Customs Duty)
Ecess amount on Basic Customs Duty
INR
5 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (SampH Ecess on Basic Customs Duty)
SampH Ecess amount on Basic Customs Duty
INR
6 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing CVD Amount INR
7 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing Ecess on CVD INR
8 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing SampH Ecess of CVD INR
Following is the example of the FI entries of imported material ndash
Item Posting
Key GL Account
Business Area
Account Text Amount in
INR Currency
1 Debit (89)
230110 BA01 Inventory ndash Imported Raw Material
1551800 INR
2 Credit (96)
130100 BA01 GR IR Clearing
1151500 - INR
3 Credit (96)
130120 BA01 Freight Clearing ndash Import
174400 - INR
4 Credit (96)
130120 BA01 Freight Clearing ndash Import
3400 - INR
5 Credit 130120 BA01 Freight Clearing ndash Import 1700 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 34
(96)
6 Credit (50)
130130 BA01 CVD Clearing
214500 - INR
7 Credit (50)
130130 BA01 CVD Clearing
4200 - INR
8 Credit (50)
130130 BA01 CVD Clearing
2100 - INR
e) Stock Transport Purchase Order ndash 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 amp 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR
Currency Plant
10 Credit Inventory Account
Business Area from where material is issued
Inventory of Material
Inventory Amount
INR
Plant from where
material is issued
20 Debit Inventory Account
Business Area where material is received
Inventory of material
Inventory Amount
INR Plant where material is received
Example of above transaction is as below ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Plant
10 Credit (99) 232080 BA05 Inventory of Spares 430250 - INR 2530
20 Debit (89) 232080 BA05 Inventory of Spares 430250 INR 9010
f) Service Purchase Order ndash When a Service Purchase Order (Item Category ndash 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 35
automatically posted by the system (which is based on the accepted service entry sheet) Following is the flow chart for Service Purchase Order ndash
Service Required for Project Cost Center Sale Order
Account assignment data such as Project or WBS Definition Cost Center Number Sale Order Number is maintained
Purchase Order with Item Category D (Service) amp required account assignment (Q K E) is raised
Service Entry sheet is created amp 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 36
Following are the FI postings at the time of accepting Service Entry Sheet ndash
Item Posting
Key GL Account
Business Area
Account Text
Amount in INR
Currency Text
10 Debit Consumption
Account
Business Area from where Service is delivered
Process Charges
Service Charges Amount
INR Service Text
20 Credit GR IR Clearing Account
Business Area where service is delivered
GR IR Clearing
Service Charges Amount
INR Service Text
Following is the example of above transaction ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Text
10 Debit (81) 411420 BA02 Process Charges - Foundry
384780 INR
Service Charges
20 Debit (96) 130100 BA02 GR IR Clearing 384780 -
INR Service Charges
Train Doc KBLCICSAP MM12MM-FI Integration Page 37
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 ndash a) Modvatable Excise Item ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40)
Excise Cenvat
Business Area where the material is received
Cenvat Input P F Basic Excise Duty amount
INR
2 Debit (40)
ECS Cenvat Amount
Business Area where the material is received
Cenvat ED Cess ECS Amount INR
3 Debit (40)
SampH ECS Cenvat Account
Business Area where the material is received
Cenvat SampH Ces-1
SampH ECS Amount
INR
4 Credit (50)
Modvat Clearing Account
Business Area where the material is received
Modvat Clearing Account
Amount equivalent to amount in 1 + 2 + 3
INR
Example of Modvatable excise entries is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40) 244030 BA01 Cenvat Input P F 362900 INR
2 Debit (40) 244031 BA01 Cenvat ED Cess 7300 INR
3 Debit (40) 244034 BA01 Cenvat SampH Ces-1
3600 INR
4 Credit (50) 130150 BA01 Modvat Clearing Account
373800 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 38
b) Trading excisable material received against GRN ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81)
COGS ndash Trading Material
Business Area where the material is received COGS ndash Trading
Material
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
2 Credit (96)
ECS Cenvat Amount
Business Area where the material is received
GR IR Clearing
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
Example of Excise duty inventorised -
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81) 410910 BA01 COGS ndash Trading Motor
433108300 INR
2 Credit (96) 130100 BA01 GR IR Clearing 433108300 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 39
FI entries at Material Consumption When a material is issued to a consumption account (For example ndash Consumption to Production Order Cost Center) the inventory reduces amp 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 ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Credit (99)
231020 BA05 Inventory ndash Other Raw material
15500 - INR
2 Debit (81)
400240 BA05 Consumption ndash Other Raw Material
15500 INR
2) Material consumption posted to Production Order ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Production Order ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (99)
235010 BA01 Inventory ndash Semi Finished Goods
334100 - INR
2 Debit (81)
400290 BA01 Consumption ndash Semi Finished Goods
334100 INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 40
3) Consumption of Stock provided to Sub ndash Contractor for processing of finished material when GRN of processed material is posted ndash
In a sub ndash contracting purchase order a semi finished material is ordered on the sub ndash contractor amp components are provided to the sub ndash 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 amp the concerned FI entries are posted
Train Doc KBLCICSAP MM12MM-FI Integration Page 41
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 amp 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 amp 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 ndash Quantity Variance Price Variance Quality Inspection Manual block date variance and Amount variance The process flow is as below ndash
Purchase Order for Material Service
GRN for Material Service Entry Sheet for Services performed
Purchase Order History
Delivery Costs
Material Master
Vendor Master
GL Account
Assets
Cost Center
Project
Sale Order
Invoice Verification FI Invoice
Document
MM Invoice Document
Further Document
Train Doc KBLCICSAP MM12MM-FI Integration Page 42
Following entries are posted when an invoice for vendor is posted in the system
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (31)
Vendor Account
Business Area Vendor Number
Amount to be paid to Vendor
INR
2 Debit (86)
GR IR Clearing
Business Area GR IR Clearing
GR IR Clearing Amount
INR
3 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash B Excise Duty
INR
4 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash ECS Amount
INR
5 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash SampH ECS Amt
INR
6 Debit (40)
VAT RM Deductible Amount
Business Area from where payment is made
VAT RM Deductible
VAT Amount to be paid to Vendor
INR
Example of above is transaction is as below ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (31) 300664 BA02 WalchandNagar Industries 13590000 - INR
2 Debit (86) 130100 BA02 GR IR Clearing 10000000 INR
3 Debit (40) 130150 Modvat Clearing 1600000 INR
4 Debit (40) 130150 Modvat Clearing 320000 INR
5 Debit (40) 130150 Modvat Clearing 160000 INR
6 Debit (40) 245039 BA02 VAT RM Deductible 1510000 INR
The diagrammatic view of above example is as below ndash
Purchase Order 100 PC at INR 1000 GRN for this PO 100 PC Invoice 100 PC at INR 1000
Goods Receipt
Invoice Receipt
100000 +
20800 +
15100 +
135900 ndash
100000 +
100000 ndash
20800 ndash
Stock Account
GR IR Account
Modvat clearing
VAT
Vendor
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 20
Material Price Change ndash 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 (amp not the material master change) in which total stock of the plant is revaluated
Train Doc KBLCICSAP MM12MM-FI Integration Page 21
Automatic FI postings at Goods Receipt Following automatic postings are done in the system when the Goods Receipt against Purchase Order are posted ndash
A] Accounting (FI) Entries posted at the time of GRN ndash
a) Raw Material posted to Inventory after posting of GRN ndash 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 amp raw material procured from domestic vendor is kept separate The process flow is as below ndash
Without account assignment
Purchase Order
Raw Material
GRN Quantity
To Store
To Inventory GRN
Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 22
The FI entries posted at GRN are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Raw material Inventory
Respective Business Area where the material is received
Raw material Inventory
(Quantity of material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the material is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of Accounting Entries for Raw material posted to inventory ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Curr
Curr Text
1 Debit (89)
230120 BA01 Inventory ndash Other Raw
Material 510000 INR
BRG 6305 SKF OR EQ
2 Credit (96)
130100 BA01 GR IR Clearing
500000 - INR BRG 6305 SKF
OR EQ
3 Credit (50)
130110 BA01 Freight
Clearing Inland
10000 - INR BRG 6305 SKF
OR EQ
b) Material posted to consumption account after posting of GRN ndash
Following are main account assignment categories (AAC) ndash
AAC Description Required Account Assignment Data
A Asset Main Asset Number amp Sub-Number
K Cost Center Cost Center amp GL Account Number
Q Project WBS Element Number of the Project
E Sale Order Sale Order Number amp Line Number of the Sale Order
Train Doc KBLCICSAP MM12MM-FI Integration Page 23
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 GL 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 ndash
i) Purchase Order with account assignment A (Asset) ndash 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 GL Account in the company‟s balance sheet The GL account is a reconciliation account that means that it reconciles several asset numbers
With account assignment Purchase
Order
Raw Material Non Valuated Material
GRN Quantity
To Store (Raw Material) or To Consumption (Non-valuated material)
Consumption Account
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 24
For Purchase Order with account assignment A (Asset) the entry in FI GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Asset
Respective Business Area where the Asset is received
Asset Number amp Sub Number
(Quantity of Asset X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the asset is received
GR IR Clearing Account
(Quantity of Asset X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the asset is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entries for asset posted ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (70)
211450 BA05
Asset Number 000021000780 Sub Number 0000
3650000 INR
IM-314318325 MOUNTING CASING
2 Credit (96)
130100 BA05 GR IR Clearing 3605000 - INR
IM-314318325 MOUNTING CASING
3 Credit (50)
130110 BA05 Freight Clearing Inland
45000 - INR IM-314318325 MOUNTING CASING
ii) Purchase Order with account assignment K (Cost Center) ndash 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 amp services With account assignment K we need to determine following two additional data to be entered in the PO ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 25
- General Ledger (GL) Account Number We have to determine the expense GL 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 GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of
cost center
Respective Business Area where the Material Service is received
Cost Center account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of
GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of
Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entry for Account Assignment as Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416340 BA08 Legal Exp amp Consult Fees
4200000 INR Visit Charges
2 Credit (96)
130100 BA08 GR IR Clearing
4200000 - INR Visit Charges
iii) Purchase Order with account assignment as Q (Project) ndash
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 amp budgeted We can procure following type of materials against the Project account assignment ndash Raw Semi Finished material (to be inventoried) Traded Material When we procure a raw material (to be inventoried)
Train Doc KBLCICSAP MM12MM-FI Integration Page 26
against the account assignment as Project (Q) then the accounting entries posted are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of the accounting entries ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233040 BA02 Inventory ndash
Other Resale 61080600 INR
MS Flange Dia 1500 mm
2 Credit (96)
130100 BA02 GR IR Clearing
61080600 - INR 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS)
Respective Business Area where the Material Service is received
COGS account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency
Material master short text
Train Doc KBLCICSAP MM12MM-FI Integration Page 27
service is received
(For Imported material)
Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of the accounting entry is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
410920 BA02 COGS ndash Other Resale Article
18340100 INR LTAL PVC
ArmPVCSH Cable
2 Credit (96)
130100 BA02 GR IR Clearing
18340100 - INR LTAL PVC
ArmPVCSH Cable
iv) Purchase Order with account assignment as E (Sale Order) ndash
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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Train Doc KBLCICSAP MM12MM-FI Integration Page 28
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233070 BA01 Inventory ndash
Traded Electric Motor
2583000 INR Motor Alstom 22
KW 4 Pole
2 Credit (96)
130100 BA01 GR IR Clearing
2583000 - INR Motor Alstom 22
KW 4 Pole
When we post GRN for traded goods following accounting entries are posted ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS) General Expenses
Respective Business Area where the Material Service is received
COGS account General Expenses Account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit
Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit
Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416320 BA01 General Expenses
56258000 INR
KOEL 85 HP 1800 RPM Engine
2 Credit (96)
130100 BA01 GR IR Clearing
56258000 - INR
KOEL 85 HP 1800 RPM Engine
c) Sub-Contracting Purchase Order ndash In the subndashContracting Purchase Order semindash
finished material is ordered on the Sub-Contractor amp the components are given to SubndashContractor 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 ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 29
Semi ndash Finished
Material
BOM of Semindash
Finished
Material
With without
account
assignment
Sub ndash
Contracting
Purchase Order
Components in
BOM provided to
Vendor for
processing
Transfer of
material to Sub
ndash Contractor
No accounting
entry Stock of
material
provided to
vendor is
updated
GRN of
processed
material
(Quantity)
Inventory of Semi-
Finished material
is updated
Stock of material
provided to
Vendor is
consumed
GRN Value
Inventory of Semi-
Finished material
= Processing
Charges + Value
of BOM
Components
Train Doc KBLCICSAP MM12MM-FI Integration Page 30
Following FI entries are posted during above process ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR Currency
Text of Material
10 Debit
Inventory account of
Semi-finished material
Respective Business Area where the Material is received
Inventory ndash Semi-Finished Goods
(Quantity of Semi-finished material X Processing Charges) + (Inventory Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
20 Credit
Change of Stock
from Sub-Contract
Respective Business Area where the Material is received
Change of Stock from Sub-Contract
(Quantity of Semi-finished material X Processing Charges) + (Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
30 Credit
Inventory of
Components with
Sub-Contractor
Respective Business Area where the Material is received
Inventory of Components with Sub-Contractor
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
40 Debit
Inventory of own
Components
Respective Business Area where the Material is received
Inventory of own Components
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
50 Debit Processing Charges
Other
Respective Business Area where the Material is received
Processing Charges Other
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of received material
60 Credit GR IR Clearing
Respective Business Area where the Material is received
GR IR Clearing Charges
Processing Charges to be paid to Vendor (Quantity of Ordered material X Processing Charges Rate)
INR (for domestic
Purchase)
Material master short text of received material
Train Doc KBLCICSAP MM12MM-FI Integration Page 31
Following is the example of the above transaction ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
235010 BA01 Inventory Semi-Finished Goods
315000 INR BRG Housing 25
13
2 Credit (91)
400040 BA01
Change Stock Semi-Finished
from Sub-Contractor
315000 - INR BRG Housing 25
13
3 Credit (99)
235040 BA01 Inventory of
semi-finished CI Castings
285200 - INR Bearing Housing (Kanban 30 Qty
Bin)
4 Debit (81)
400040 BA01 Change Stock Castings for Sub-Contract
285200 INR Bearing Housing (Kanban 30 Qty
Bin)
5 Credit (96)
130100 BA01 GR IR Clearing 29800 - INR BRG Housing 25
13
6 Debit (86)
411450 BA01 Processing
Charges Other 29800 INR
BRG Housing 25 13
Train Doc KBLCICSAP MM12MM-FI Integration Page 32
d) Import Purchase Order ndash 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 amp 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 ndash Mumbai JNPT Port) After material is cleared from port amp received in Plant GRN is posted Then the customs duty is also inventorised along with the basic price of material amp 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 ndash
Raw material
Valuation class ndash Imported Raw Material
With without account assignment
Import Purchase Order on Overseas Vendor
Customs duties Freight Charges etc of Clearing Agent are invoiced
Planned delivery cost invoice of Import PO is booked when the material arrives at Port
Quantity of Imported Material is updated
GRN is posted when material arrives at Plant (Quantity)
Basic Value of Material + Planned Delivery Costs + Customs Duty
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 33
Following are the FI entries posted when the GRN is posted ndash
Item Posting
Key GL Account Business Area Account Text
Amount in INR
Currency
1 Debit (89)
Inventory account of Imported Raw Material
Business Area where the material has been received
Inventory ndash Imported Raw Material
Quantity of Material X Basic Price of material
INR
2 Credit (96)
GR IR Clearing Account
Business Area where the material has been received
GR IR Clearing
Quantity of Material X Basic Price of material
INR
3 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Basic Customs Duty)
Basic Customs Duty Amount
INR
4 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Ecess on Basic Customs Duty)
Ecess amount on Basic Customs Duty
INR
5 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (SampH Ecess on Basic Customs Duty)
SampH Ecess amount on Basic Customs Duty
INR
6 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing CVD Amount INR
7 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing Ecess on CVD INR
8 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing SampH Ecess of CVD INR
Following is the example of the FI entries of imported material ndash
Item Posting
Key GL Account
Business Area
Account Text Amount in
INR Currency
1 Debit (89)
230110 BA01 Inventory ndash Imported Raw Material
1551800 INR
2 Credit (96)
130100 BA01 GR IR Clearing
1151500 - INR
3 Credit (96)
130120 BA01 Freight Clearing ndash Import
174400 - INR
4 Credit (96)
130120 BA01 Freight Clearing ndash Import
3400 - INR
5 Credit 130120 BA01 Freight Clearing ndash Import 1700 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 34
(96)
6 Credit (50)
130130 BA01 CVD Clearing
214500 - INR
7 Credit (50)
130130 BA01 CVD Clearing
4200 - INR
8 Credit (50)
130130 BA01 CVD Clearing
2100 - INR
e) Stock Transport Purchase Order ndash 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 amp 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR
Currency Plant
10 Credit Inventory Account
Business Area from where material is issued
Inventory of Material
Inventory Amount
INR
Plant from where
material is issued
20 Debit Inventory Account
Business Area where material is received
Inventory of material
Inventory Amount
INR Plant where material is received
Example of above transaction is as below ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Plant
10 Credit (99) 232080 BA05 Inventory of Spares 430250 - INR 2530
20 Debit (89) 232080 BA05 Inventory of Spares 430250 INR 9010
f) Service Purchase Order ndash When a Service Purchase Order (Item Category ndash 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 35
automatically posted by the system (which is based on the accepted service entry sheet) Following is the flow chart for Service Purchase Order ndash
Service Required for Project Cost Center Sale Order
Account assignment data such as Project or WBS Definition Cost Center Number Sale Order Number is maintained
Purchase Order with Item Category D (Service) amp required account assignment (Q K E) is raised
Service Entry sheet is created amp 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 36
Following are the FI postings at the time of accepting Service Entry Sheet ndash
Item Posting
Key GL Account
Business Area
Account Text
Amount in INR
Currency Text
10 Debit Consumption
Account
Business Area from where Service is delivered
Process Charges
Service Charges Amount
INR Service Text
20 Credit GR IR Clearing Account
Business Area where service is delivered
GR IR Clearing
Service Charges Amount
INR Service Text
Following is the example of above transaction ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Text
10 Debit (81) 411420 BA02 Process Charges - Foundry
384780 INR
Service Charges
20 Debit (96) 130100 BA02 GR IR Clearing 384780 -
INR Service Charges
Train Doc KBLCICSAP MM12MM-FI Integration Page 37
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 ndash a) Modvatable Excise Item ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40)
Excise Cenvat
Business Area where the material is received
Cenvat Input P F Basic Excise Duty amount
INR
2 Debit (40)
ECS Cenvat Amount
Business Area where the material is received
Cenvat ED Cess ECS Amount INR
3 Debit (40)
SampH ECS Cenvat Account
Business Area where the material is received
Cenvat SampH Ces-1
SampH ECS Amount
INR
4 Credit (50)
Modvat Clearing Account
Business Area where the material is received
Modvat Clearing Account
Amount equivalent to amount in 1 + 2 + 3
INR
Example of Modvatable excise entries is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40) 244030 BA01 Cenvat Input P F 362900 INR
2 Debit (40) 244031 BA01 Cenvat ED Cess 7300 INR
3 Debit (40) 244034 BA01 Cenvat SampH Ces-1
3600 INR
4 Credit (50) 130150 BA01 Modvat Clearing Account
373800 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 38
b) Trading excisable material received against GRN ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81)
COGS ndash Trading Material
Business Area where the material is received COGS ndash Trading
Material
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
2 Credit (96)
ECS Cenvat Amount
Business Area where the material is received
GR IR Clearing
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
Example of Excise duty inventorised -
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81) 410910 BA01 COGS ndash Trading Motor
433108300 INR
2 Credit (96) 130100 BA01 GR IR Clearing 433108300 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 39
FI entries at Material Consumption When a material is issued to a consumption account (For example ndash Consumption to Production Order Cost Center) the inventory reduces amp 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 ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Credit (99)
231020 BA05 Inventory ndash Other Raw material
15500 - INR
2 Debit (81)
400240 BA05 Consumption ndash Other Raw Material
15500 INR
2) Material consumption posted to Production Order ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Production Order ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (99)
235010 BA01 Inventory ndash Semi Finished Goods
334100 - INR
2 Debit (81)
400290 BA01 Consumption ndash Semi Finished Goods
334100 INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 40
3) Consumption of Stock provided to Sub ndash Contractor for processing of finished material when GRN of processed material is posted ndash
In a sub ndash contracting purchase order a semi finished material is ordered on the sub ndash contractor amp components are provided to the sub ndash 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 amp the concerned FI entries are posted
Train Doc KBLCICSAP MM12MM-FI Integration Page 41
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 amp 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 amp 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 ndash Quantity Variance Price Variance Quality Inspection Manual block date variance and Amount variance The process flow is as below ndash
Purchase Order for Material Service
GRN for Material Service Entry Sheet for Services performed
Purchase Order History
Delivery Costs
Material Master
Vendor Master
GL Account
Assets
Cost Center
Project
Sale Order
Invoice Verification FI Invoice
Document
MM Invoice Document
Further Document
Train Doc KBLCICSAP MM12MM-FI Integration Page 42
Following entries are posted when an invoice for vendor is posted in the system
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (31)
Vendor Account
Business Area Vendor Number
Amount to be paid to Vendor
INR
2 Debit (86)
GR IR Clearing
Business Area GR IR Clearing
GR IR Clearing Amount
INR
3 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash B Excise Duty
INR
4 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash ECS Amount
INR
5 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash SampH ECS Amt
INR
6 Debit (40)
VAT RM Deductible Amount
Business Area from where payment is made
VAT RM Deductible
VAT Amount to be paid to Vendor
INR
Example of above is transaction is as below ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (31) 300664 BA02 WalchandNagar Industries 13590000 - INR
2 Debit (86) 130100 BA02 GR IR Clearing 10000000 INR
3 Debit (40) 130150 Modvat Clearing 1600000 INR
4 Debit (40) 130150 Modvat Clearing 320000 INR
5 Debit (40) 130150 Modvat Clearing 160000 INR
6 Debit (40) 245039 BA02 VAT RM Deductible 1510000 INR
The diagrammatic view of above example is as below ndash
Purchase Order 100 PC at INR 1000 GRN for this PO 100 PC Invoice 100 PC at INR 1000
Goods Receipt
Invoice Receipt
100000 +
20800 +
15100 +
135900 ndash
100000 +
100000 ndash
20800 ndash
Stock Account
GR IR Account
Modvat clearing
VAT
Vendor
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 21
Automatic FI postings at Goods Receipt Following automatic postings are done in the system when the Goods Receipt against Purchase Order are posted ndash
A] Accounting (FI) Entries posted at the time of GRN ndash
a) Raw Material posted to Inventory after posting of GRN ndash 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 amp raw material procured from domestic vendor is kept separate The process flow is as below ndash
Without account assignment
Purchase Order
Raw Material
GRN Quantity
To Store
To Inventory GRN
Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 22
The FI entries posted at GRN are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Raw material Inventory
Respective Business Area where the material is received
Raw material Inventory
(Quantity of material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the material is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of Accounting Entries for Raw material posted to inventory ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Curr
Curr Text
1 Debit (89)
230120 BA01 Inventory ndash Other Raw
Material 510000 INR
BRG 6305 SKF OR EQ
2 Credit (96)
130100 BA01 GR IR Clearing
500000 - INR BRG 6305 SKF
OR EQ
3 Credit (50)
130110 BA01 Freight
Clearing Inland
10000 - INR BRG 6305 SKF
OR EQ
b) Material posted to consumption account after posting of GRN ndash
Following are main account assignment categories (AAC) ndash
AAC Description Required Account Assignment Data
A Asset Main Asset Number amp Sub-Number
K Cost Center Cost Center amp GL Account Number
Q Project WBS Element Number of the Project
E Sale Order Sale Order Number amp Line Number of the Sale Order
Train Doc KBLCICSAP MM12MM-FI Integration Page 23
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 GL 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 ndash
i) Purchase Order with account assignment A (Asset) ndash 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 GL Account in the company‟s balance sheet The GL account is a reconciliation account that means that it reconciles several asset numbers
With account assignment Purchase
Order
Raw Material Non Valuated Material
GRN Quantity
To Store (Raw Material) or To Consumption (Non-valuated material)
Consumption Account
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 24
For Purchase Order with account assignment A (Asset) the entry in FI GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Asset
Respective Business Area where the Asset is received
Asset Number amp Sub Number
(Quantity of Asset X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the asset is received
GR IR Clearing Account
(Quantity of Asset X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the asset is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entries for asset posted ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (70)
211450 BA05
Asset Number 000021000780 Sub Number 0000
3650000 INR
IM-314318325 MOUNTING CASING
2 Credit (96)
130100 BA05 GR IR Clearing 3605000 - INR
IM-314318325 MOUNTING CASING
3 Credit (50)
130110 BA05 Freight Clearing Inland
45000 - INR IM-314318325 MOUNTING CASING
ii) Purchase Order with account assignment K (Cost Center) ndash 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 amp services With account assignment K we need to determine following two additional data to be entered in the PO ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 25
- General Ledger (GL) Account Number We have to determine the expense GL 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 GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of
cost center
Respective Business Area where the Material Service is received
Cost Center account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of
GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of
Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entry for Account Assignment as Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416340 BA08 Legal Exp amp Consult Fees
4200000 INR Visit Charges
2 Credit (96)
130100 BA08 GR IR Clearing
4200000 - INR Visit Charges
iii) Purchase Order with account assignment as Q (Project) ndash
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 amp budgeted We can procure following type of materials against the Project account assignment ndash Raw Semi Finished material (to be inventoried) Traded Material When we procure a raw material (to be inventoried)
Train Doc KBLCICSAP MM12MM-FI Integration Page 26
against the account assignment as Project (Q) then the accounting entries posted are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of the accounting entries ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233040 BA02 Inventory ndash
Other Resale 61080600 INR
MS Flange Dia 1500 mm
2 Credit (96)
130100 BA02 GR IR Clearing
61080600 - INR 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS)
Respective Business Area where the Material Service is received
COGS account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency
Material master short text
Train Doc KBLCICSAP MM12MM-FI Integration Page 27
service is received
(For Imported material)
Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of the accounting entry is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
410920 BA02 COGS ndash Other Resale Article
18340100 INR LTAL PVC
ArmPVCSH Cable
2 Credit (96)
130100 BA02 GR IR Clearing
18340100 - INR LTAL PVC
ArmPVCSH Cable
iv) Purchase Order with account assignment as E (Sale Order) ndash
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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Train Doc KBLCICSAP MM12MM-FI Integration Page 28
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233070 BA01 Inventory ndash
Traded Electric Motor
2583000 INR Motor Alstom 22
KW 4 Pole
2 Credit (96)
130100 BA01 GR IR Clearing
2583000 - INR Motor Alstom 22
KW 4 Pole
When we post GRN for traded goods following accounting entries are posted ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS) General Expenses
Respective Business Area where the Material Service is received
COGS account General Expenses Account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit
Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit
Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416320 BA01 General Expenses
56258000 INR
KOEL 85 HP 1800 RPM Engine
2 Credit (96)
130100 BA01 GR IR Clearing
56258000 - INR
KOEL 85 HP 1800 RPM Engine
c) Sub-Contracting Purchase Order ndash In the subndashContracting Purchase Order semindash
finished material is ordered on the Sub-Contractor amp the components are given to SubndashContractor 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 ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 29
Semi ndash Finished
Material
BOM of Semindash
Finished
Material
With without
account
assignment
Sub ndash
Contracting
Purchase Order
Components in
BOM provided to
Vendor for
processing
Transfer of
material to Sub
ndash Contractor
No accounting
entry Stock of
material
provided to
vendor is
updated
GRN of
processed
material
(Quantity)
Inventory of Semi-
Finished material
is updated
Stock of material
provided to
Vendor is
consumed
GRN Value
Inventory of Semi-
Finished material
= Processing
Charges + Value
of BOM
Components
Train Doc KBLCICSAP MM12MM-FI Integration Page 30
Following FI entries are posted during above process ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR Currency
Text of Material
10 Debit
Inventory account of
Semi-finished material
Respective Business Area where the Material is received
Inventory ndash Semi-Finished Goods
(Quantity of Semi-finished material X Processing Charges) + (Inventory Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
20 Credit
Change of Stock
from Sub-Contract
Respective Business Area where the Material is received
Change of Stock from Sub-Contract
(Quantity of Semi-finished material X Processing Charges) + (Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
30 Credit
Inventory of
Components with
Sub-Contractor
Respective Business Area where the Material is received
Inventory of Components with Sub-Contractor
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
40 Debit
Inventory of own
Components
Respective Business Area where the Material is received
Inventory of own Components
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
50 Debit Processing Charges
Other
Respective Business Area where the Material is received
Processing Charges Other
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of received material
60 Credit GR IR Clearing
Respective Business Area where the Material is received
GR IR Clearing Charges
Processing Charges to be paid to Vendor (Quantity of Ordered material X Processing Charges Rate)
INR (for domestic
Purchase)
Material master short text of received material
Train Doc KBLCICSAP MM12MM-FI Integration Page 31
Following is the example of the above transaction ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
235010 BA01 Inventory Semi-Finished Goods
315000 INR BRG Housing 25
13
2 Credit (91)
400040 BA01
Change Stock Semi-Finished
from Sub-Contractor
315000 - INR BRG Housing 25
13
3 Credit (99)
235040 BA01 Inventory of
semi-finished CI Castings
285200 - INR Bearing Housing (Kanban 30 Qty
Bin)
4 Debit (81)
400040 BA01 Change Stock Castings for Sub-Contract
285200 INR Bearing Housing (Kanban 30 Qty
Bin)
5 Credit (96)
130100 BA01 GR IR Clearing 29800 - INR BRG Housing 25
13
6 Debit (86)
411450 BA01 Processing
Charges Other 29800 INR
BRG Housing 25 13
Train Doc KBLCICSAP MM12MM-FI Integration Page 32
d) Import Purchase Order ndash 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 amp 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 ndash Mumbai JNPT Port) After material is cleared from port amp received in Plant GRN is posted Then the customs duty is also inventorised along with the basic price of material amp 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 ndash
Raw material
Valuation class ndash Imported Raw Material
With without account assignment
Import Purchase Order on Overseas Vendor
Customs duties Freight Charges etc of Clearing Agent are invoiced
Planned delivery cost invoice of Import PO is booked when the material arrives at Port
Quantity of Imported Material is updated
GRN is posted when material arrives at Plant (Quantity)
Basic Value of Material + Planned Delivery Costs + Customs Duty
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 33
Following are the FI entries posted when the GRN is posted ndash
Item Posting
Key GL Account Business Area Account Text
Amount in INR
Currency
1 Debit (89)
Inventory account of Imported Raw Material
Business Area where the material has been received
Inventory ndash Imported Raw Material
Quantity of Material X Basic Price of material
INR
2 Credit (96)
GR IR Clearing Account
Business Area where the material has been received
GR IR Clearing
Quantity of Material X Basic Price of material
INR
3 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Basic Customs Duty)
Basic Customs Duty Amount
INR
4 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Ecess on Basic Customs Duty)
Ecess amount on Basic Customs Duty
INR
5 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (SampH Ecess on Basic Customs Duty)
SampH Ecess amount on Basic Customs Duty
INR
6 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing CVD Amount INR
7 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing Ecess on CVD INR
8 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing SampH Ecess of CVD INR
Following is the example of the FI entries of imported material ndash
Item Posting
Key GL Account
Business Area
Account Text Amount in
INR Currency
1 Debit (89)
230110 BA01 Inventory ndash Imported Raw Material
1551800 INR
2 Credit (96)
130100 BA01 GR IR Clearing
1151500 - INR
3 Credit (96)
130120 BA01 Freight Clearing ndash Import
174400 - INR
4 Credit (96)
130120 BA01 Freight Clearing ndash Import
3400 - INR
5 Credit 130120 BA01 Freight Clearing ndash Import 1700 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 34
(96)
6 Credit (50)
130130 BA01 CVD Clearing
214500 - INR
7 Credit (50)
130130 BA01 CVD Clearing
4200 - INR
8 Credit (50)
130130 BA01 CVD Clearing
2100 - INR
e) Stock Transport Purchase Order ndash 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 amp 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR
Currency Plant
10 Credit Inventory Account
Business Area from where material is issued
Inventory of Material
Inventory Amount
INR
Plant from where
material is issued
20 Debit Inventory Account
Business Area where material is received
Inventory of material
Inventory Amount
INR Plant where material is received
Example of above transaction is as below ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Plant
10 Credit (99) 232080 BA05 Inventory of Spares 430250 - INR 2530
20 Debit (89) 232080 BA05 Inventory of Spares 430250 INR 9010
f) Service Purchase Order ndash When a Service Purchase Order (Item Category ndash 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 35
automatically posted by the system (which is based on the accepted service entry sheet) Following is the flow chart for Service Purchase Order ndash
Service Required for Project Cost Center Sale Order
Account assignment data such as Project or WBS Definition Cost Center Number Sale Order Number is maintained
Purchase Order with Item Category D (Service) amp required account assignment (Q K E) is raised
Service Entry sheet is created amp 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 36
Following are the FI postings at the time of accepting Service Entry Sheet ndash
Item Posting
Key GL Account
Business Area
Account Text
Amount in INR
Currency Text
10 Debit Consumption
Account
Business Area from where Service is delivered
Process Charges
Service Charges Amount
INR Service Text
20 Credit GR IR Clearing Account
Business Area where service is delivered
GR IR Clearing
Service Charges Amount
INR Service Text
Following is the example of above transaction ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Text
10 Debit (81) 411420 BA02 Process Charges - Foundry
384780 INR
Service Charges
20 Debit (96) 130100 BA02 GR IR Clearing 384780 -
INR Service Charges
Train Doc KBLCICSAP MM12MM-FI Integration Page 37
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 ndash a) Modvatable Excise Item ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40)
Excise Cenvat
Business Area where the material is received
Cenvat Input P F Basic Excise Duty amount
INR
2 Debit (40)
ECS Cenvat Amount
Business Area where the material is received
Cenvat ED Cess ECS Amount INR
3 Debit (40)
SampH ECS Cenvat Account
Business Area where the material is received
Cenvat SampH Ces-1
SampH ECS Amount
INR
4 Credit (50)
Modvat Clearing Account
Business Area where the material is received
Modvat Clearing Account
Amount equivalent to amount in 1 + 2 + 3
INR
Example of Modvatable excise entries is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40) 244030 BA01 Cenvat Input P F 362900 INR
2 Debit (40) 244031 BA01 Cenvat ED Cess 7300 INR
3 Debit (40) 244034 BA01 Cenvat SampH Ces-1
3600 INR
4 Credit (50) 130150 BA01 Modvat Clearing Account
373800 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 38
b) Trading excisable material received against GRN ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81)
COGS ndash Trading Material
Business Area where the material is received COGS ndash Trading
Material
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
2 Credit (96)
ECS Cenvat Amount
Business Area where the material is received
GR IR Clearing
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
Example of Excise duty inventorised -
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81) 410910 BA01 COGS ndash Trading Motor
433108300 INR
2 Credit (96) 130100 BA01 GR IR Clearing 433108300 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 39
FI entries at Material Consumption When a material is issued to a consumption account (For example ndash Consumption to Production Order Cost Center) the inventory reduces amp 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 ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Credit (99)
231020 BA05 Inventory ndash Other Raw material
15500 - INR
2 Debit (81)
400240 BA05 Consumption ndash Other Raw Material
15500 INR
2) Material consumption posted to Production Order ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Production Order ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (99)
235010 BA01 Inventory ndash Semi Finished Goods
334100 - INR
2 Debit (81)
400290 BA01 Consumption ndash Semi Finished Goods
334100 INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 40
3) Consumption of Stock provided to Sub ndash Contractor for processing of finished material when GRN of processed material is posted ndash
In a sub ndash contracting purchase order a semi finished material is ordered on the sub ndash contractor amp components are provided to the sub ndash 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 amp the concerned FI entries are posted
Train Doc KBLCICSAP MM12MM-FI Integration Page 41
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 amp 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 amp 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 ndash Quantity Variance Price Variance Quality Inspection Manual block date variance and Amount variance The process flow is as below ndash
Purchase Order for Material Service
GRN for Material Service Entry Sheet for Services performed
Purchase Order History
Delivery Costs
Material Master
Vendor Master
GL Account
Assets
Cost Center
Project
Sale Order
Invoice Verification FI Invoice
Document
MM Invoice Document
Further Document
Train Doc KBLCICSAP MM12MM-FI Integration Page 42
Following entries are posted when an invoice for vendor is posted in the system
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (31)
Vendor Account
Business Area Vendor Number
Amount to be paid to Vendor
INR
2 Debit (86)
GR IR Clearing
Business Area GR IR Clearing
GR IR Clearing Amount
INR
3 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash B Excise Duty
INR
4 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash ECS Amount
INR
5 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash SampH ECS Amt
INR
6 Debit (40)
VAT RM Deductible Amount
Business Area from where payment is made
VAT RM Deductible
VAT Amount to be paid to Vendor
INR
Example of above is transaction is as below ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (31) 300664 BA02 WalchandNagar Industries 13590000 - INR
2 Debit (86) 130100 BA02 GR IR Clearing 10000000 INR
3 Debit (40) 130150 Modvat Clearing 1600000 INR
4 Debit (40) 130150 Modvat Clearing 320000 INR
5 Debit (40) 130150 Modvat Clearing 160000 INR
6 Debit (40) 245039 BA02 VAT RM Deductible 1510000 INR
The diagrammatic view of above example is as below ndash
Purchase Order 100 PC at INR 1000 GRN for this PO 100 PC Invoice 100 PC at INR 1000
Goods Receipt
Invoice Receipt
100000 +
20800 +
15100 +
135900 ndash
100000 +
100000 ndash
20800 ndash
Stock Account
GR IR Account
Modvat clearing
VAT
Vendor
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 22
The FI entries posted at GRN are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Raw material Inventory
Respective Business Area where the material is received
Raw material Inventory
(Quantity of material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the material is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of Accounting Entries for Raw material posted to inventory ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Curr
Curr Text
1 Debit (89)
230120 BA01 Inventory ndash Other Raw
Material 510000 INR
BRG 6305 SKF OR EQ
2 Credit (96)
130100 BA01 GR IR Clearing
500000 - INR BRG 6305 SKF
OR EQ
3 Credit (50)
130110 BA01 Freight
Clearing Inland
10000 - INR BRG 6305 SKF
OR EQ
b) Material posted to consumption account after posting of GRN ndash
Following are main account assignment categories (AAC) ndash
AAC Description Required Account Assignment Data
A Asset Main Asset Number amp Sub-Number
K Cost Center Cost Center amp GL Account Number
Q Project WBS Element Number of the Project
E Sale Order Sale Order Number amp Line Number of the Sale Order
Train Doc KBLCICSAP MM12MM-FI Integration Page 23
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 GL 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 ndash
i) Purchase Order with account assignment A (Asset) ndash 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 GL Account in the company‟s balance sheet The GL account is a reconciliation account that means that it reconciles several asset numbers
With account assignment Purchase
Order
Raw Material Non Valuated Material
GRN Quantity
To Store (Raw Material) or To Consumption (Non-valuated material)
Consumption Account
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 24
For Purchase Order with account assignment A (Asset) the entry in FI GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Asset
Respective Business Area where the Asset is received
Asset Number amp Sub Number
(Quantity of Asset X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the asset is received
GR IR Clearing Account
(Quantity of Asset X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the asset is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entries for asset posted ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (70)
211450 BA05
Asset Number 000021000780 Sub Number 0000
3650000 INR
IM-314318325 MOUNTING CASING
2 Credit (96)
130100 BA05 GR IR Clearing 3605000 - INR
IM-314318325 MOUNTING CASING
3 Credit (50)
130110 BA05 Freight Clearing Inland
45000 - INR IM-314318325 MOUNTING CASING
ii) Purchase Order with account assignment K (Cost Center) ndash 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 amp services With account assignment K we need to determine following two additional data to be entered in the PO ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 25
- General Ledger (GL) Account Number We have to determine the expense GL 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 GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of
cost center
Respective Business Area where the Material Service is received
Cost Center account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of
GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of
Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entry for Account Assignment as Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416340 BA08 Legal Exp amp Consult Fees
4200000 INR Visit Charges
2 Credit (96)
130100 BA08 GR IR Clearing
4200000 - INR Visit Charges
iii) Purchase Order with account assignment as Q (Project) ndash
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 amp budgeted We can procure following type of materials against the Project account assignment ndash Raw Semi Finished material (to be inventoried) Traded Material When we procure a raw material (to be inventoried)
Train Doc KBLCICSAP MM12MM-FI Integration Page 26
against the account assignment as Project (Q) then the accounting entries posted are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of the accounting entries ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233040 BA02 Inventory ndash
Other Resale 61080600 INR
MS Flange Dia 1500 mm
2 Credit (96)
130100 BA02 GR IR Clearing
61080600 - INR 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS)
Respective Business Area where the Material Service is received
COGS account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency
Material master short text
Train Doc KBLCICSAP MM12MM-FI Integration Page 27
service is received
(For Imported material)
Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of the accounting entry is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
410920 BA02 COGS ndash Other Resale Article
18340100 INR LTAL PVC
ArmPVCSH Cable
2 Credit (96)
130100 BA02 GR IR Clearing
18340100 - INR LTAL PVC
ArmPVCSH Cable
iv) Purchase Order with account assignment as E (Sale Order) ndash
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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Train Doc KBLCICSAP MM12MM-FI Integration Page 28
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233070 BA01 Inventory ndash
Traded Electric Motor
2583000 INR Motor Alstom 22
KW 4 Pole
2 Credit (96)
130100 BA01 GR IR Clearing
2583000 - INR Motor Alstom 22
KW 4 Pole
When we post GRN for traded goods following accounting entries are posted ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS) General Expenses
Respective Business Area where the Material Service is received
COGS account General Expenses Account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit
Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit
Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416320 BA01 General Expenses
56258000 INR
KOEL 85 HP 1800 RPM Engine
2 Credit (96)
130100 BA01 GR IR Clearing
56258000 - INR
KOEL 85 HP 1800 RPM Engine
c) Sub-Contracting Purchase Order ndash In the subndashContracting Purchase Order semindash
finished material is ordered on the Sub-Contractor amp the components are given to SubndashContractor 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 ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 29
Semi ndash Finished
Material
BOM of Semindash
Finished
Material
With without
account
assignment
Sub ndash
Contracting
Purchase Order
Components in
BOM provided to
Vendor for
processing
Transfer of
material to Sub
ndash Contractor
No accounting
entry Stock of
material
provided to
vendor is
updated
GRN of
processed
material
(Quantity)
Inventory of Semi-
Finished material
is updated
Stock of material
provided to
Vendor is
consumed
GRN Value
Inventory of Semi-
Finished material
= Processing
Charges + Value
of BOM
Components
Train Doc KBLCICSAP MM12MM-FI Integration Page 30
Following FI entries are posted during above process ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR Currency
Text of Material
10 Debit
Inventory account of
Semi-finished material
Respective Business Area where the Material is received
Inventory ndash Semi-Finished Goods
(Quantity of Semi-finished material X Processing Charges) + (Inventory Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
20 Credit
Change of Stock
from Sub-Contract
Respective Business Area where the Material is received
Change of Stock from Sub-Contract
(Quantity of Semi-finished material X Processing Charges) + (Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
30 Credit
Inventory of
Components with
Sub-Contractor
Respective Business Area where the Material is received
Inventory of Components with Sub-Contractor
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
40 Debit
Inventory of own
Components
Respective Business Area where the Material is received
Inventory of own Components
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
50 Debit Processing Charges
Other
Respective Business Area where the Material is received
Processing Charges Other
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of received material
60 Credit GR IR Clearing
Respective Business Area where the Material is received
GR IR Clearing Charges
Processing Charges to be paid to Vendor (Quantity of Ordered material X Processing Charges Rate)
INR (for domestic
Purchase)
Material master short text of received material
Train Doc KBLCICSAP MM12MM-FI Integration Page 31
Following is the example of the above transaction ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
235010 BA01 Inventory Semi-Finished Goods
315000 INR BRG Housing 25
13
2 Credit (91)
400040 BA01
Change Stock Semi-Finished
from Sub-Contractor
315000 - INR BRG Housing 25
13
3 Credit (99)
235040 BA01 Inventory of
semi-finished CI Castings
285200 - INR Bearing Housing (Kanban 30 Qty
Bin)
4 Debit (81)
400040 BA01 Change Stock Castings for Sub-Contract
285200 INR Bearing Housing (Kanban 30 Qty
Bin)
5 Credit (96)
130100 BA01 GR IR Clearing 29800 - INR BRG Housing 25
13
6 Debit (86)
411450 BA01 Processing
Charges Other 29800 INR
BRG Housing 25 13
Train Doc KBLCICSAP MM12MM-FI Integration Page 32
d) Import Purchase Order ndash 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 amp 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 ndash Mumbai JNPT Port) After material is cleared from port amp received in Plant GRN is posted Then the customs duty is also inventorised along with the basic price of material amp 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 ndash
Raw material
Valuation class ndash Imported Raw Material
With without account assignment
Import Purchase Order on Overseas Vendor
Customs duties Freight Charges etc of Clearing Agent are invoiced
Planned delivery cost invoice of Import PO is booked when the material arrives at Port
Quantity of Imported Material is updated
GRN is posted when material arrives at Plant (Quantity)
Basic Value of Material + Planned Delivery Costs + Customs Duty
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 33
Following are the FI entries posted when the GRN is posted ndash
Item Posting
Key GL Account Business Area Account Text
Amount in INR
Currency
1 Debit (89)
Inventory account of Imported Raw Material
Business Area where the material has been received
Inventory ndash Imported Raw Material
Quantity of Material X Basic Price of material
INR
2 Credit (96)
GR IR Clearing Account
Business Area where the material has been received
GR IR Clearing
Quantity of Material X Basic Price of material
INR
3 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Basic Customs Duty)
Basic Customs Duty Amount
INR
4 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Ecess on Basic Customs Duty)
Ecess amount on Basic Customs Duty
INR
5 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (SampH Ecess on Basic Customs Duty)
SampH Ecess amount on Basic Customs Duty
INR
6 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing CVD Amount INR
7 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing Ecess on CVD INR
8 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing SampH Ecess of CVD INR
Following is the example of the FI entries of imported material ndash
Item Posting
Key GL Account
Business Area
Account Text Amount in
INR Currency
1 Debit (89)
230110 BA01 Inventory ndash Imported Raw Material
1551800 INR
2 Credit (96)
130100 BA01 GR IR Clearing
1151500 - INR
3 Credit (96)
130120 BA01 Freight Clearing ndash Import
174400 - INR
4 Credit (96)
130120 BA01 Freight Clearing ndash Import
3400 - INR
5 Credit 130120 BA01 Freight Clearing ndash Import 1700 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 34
(96)
6 Credit (50)
130130 BA01 CVD Clearing
214500 - INR
7 Credit (50)
130130 BA01 CVD Clearing
4200 - INR
8 Credit (50)
130130 BA01 CVD Clearing
2100 - INR
e) Stock Transport Purchase Order ndash 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 amp 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR
Currency Plant
10 Credit Inventory Account
Business Area from where material is issued
Inventory of Material
Inventory Amount
INR
Plant from where
material is issued
20 Debit Inventory Account
Business Area where material is received
Inventory of material
Inventory Amount
INR Plant where material is received
Example of above transaction is as below ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Plant
10 Credit (99) 232080 BA05 Inventory of Spares 430250 - INR 2530
20 Debit (89) 232080 BA05 Inventory of Spares 430250 INR 9010
f) Service Purchase Order ndash When a Service Purchase Order (Item Category ndash 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 35
automatically posted by the system (which is based on the accepted service entry sheet) Following is the flow chart for Service Purchase Order ndash
Service Required for Project Cost Center Sale Order
Account assignment data such as Project or WBS Definition Cost Center Number Sale Order Number is maintained
Purchase Order with Item Category D (Service) amp required account assignment (Q K E) is raised
Service Entry sheet is created amp 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 36
Following are the FI postings at the time of accepting Service Entry Sheet ndash
Item Posting
Key GL Account
Business Area
Account Text
Amount in INR
Currency Text
10 Debit Consumption
Account
Business Area from where Service is delivered
Process Charges
Service Charges Amount
INR Service Text
20 Credit GR IR Clearing Account
Business Area where service is delivered
GR IR Clearing
Service Charges Amount
INR Service Text
Following is the example of above transaction ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Text
10 Debit (81) 411420 BA02 Process Charges - Foundry
384780 INR
Service Charges
20 Debit (96) 130100 BA02 GR IR Clearing 384780 -
INR Service Charges
Train Doc KBLCICSAP MM12MM-FI Integration Page 37
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 ndash a) Modvatable Excise Item ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40)
Excise Cenvat
Business Area where the material is received
Cenvat Input P F Basic Excise Duty amount
INR
2 Debit (40)
ECS Cenvat Amount
Business Area where the material is received
Cenvat ED Cess ECS Amount INR
3 Debit (40)
SampH ECS Cenvat Account
Business Area where the material is received
Cenvat SampH Ces-1
SampH ECS Amount
INR
4 Credit (50)
Modvat Clearing Account
Business Area where the material is received
Modvat Clearing Account
Amount equivalent to amount in 1 + 2 + 3
INR
Example of Modvatable excise entries is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40) 244030 BA01 Cenvat Input P F 362900 INR
2 Debit (40) 244031 BA01 Cenvat ED Cess 7300 INR
3 Debit (40) 244034 BA01 Cenvat SampH Ces-1
3600 INR
4 Credit (50) 130150 BA01 Modvat Clearing Account
373800 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 38
b) Trading excisable material received against GRN ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81)
COGS ndash Trading Material
Business Area where the material is received COGS ndash Trading
Material
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
2 Credit (96)
ECS Cenvat Amount
Business Area where the material is received
GR IR Clearing
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
Example of Excise duty inventorised -
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81) 410910 BA01 COGS ndash Trading Motor
433108300 INR
2 Credit (96) 130100 BA01 GR IR Clearing 433108300 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 39
FI entries at Material Consumption When a material is issued to a consumption account (For example ndash Consumption to Production Order Cost Center) the inventory reduces amp 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 ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Credit (99)
231020 BA05 Inventory ndash Other Raw material
15500 - INR
2 Debit (81)
400240 BA05 Consumption ndash Other Raw Material
15500 INR
2) Material consumption posted to Production Order ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Production Order ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (99)
235010 BA01 Inventory ndash Semi Finished Goods
334100 - INR
2 Debit (81)
400290 BA01 Consumption ndash Semi Finished Goods
334100 INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 40
3) Consumption of Stock provided to Sub ndash Contractor for processing of finished material when GRN of processed material is posted ndash
In a sub ndash contracting purchase order a semi finished material is ordered on the sub ndash contractor amp components are provided to the sub ndash 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 amp the concerned FI entries are posted
Train Doc KBLCICSAP MM12MM-FI Integration Page 41
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 amp 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 amp 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 ndash Quantity Variance Price Variance Quality Inspection Manual block date variance and Amount variance The process flow is as below ndash
Purchase Order for Material Service
GRN for Material Service Entry Sheet for Services performed
Purchase Order History
Delivery Costs
Material Master
Vendor Master
GL Account
Assets
Cost Center
Project
Sale Order
Invoice Verification FI Invoice
Document
MM Invoice Document
Further Document
Train Doc KBLCICSAP MM12MM-FI Integration Page 42
Following entries are posted when an invoice for vendor is posted in the system
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (31)
Vendor Account
Business Area Vendor Number
Amount to be paid to Vendor
INR
2 Debit (86)
GR IR Clearing
Business Area GR IR Clearing
GR IR Clearing Amount
INR
3 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash B Excise Duty
INR
4 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash ECS Amount
INR
5 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash SampH ECS Amt
INR
6 Debit (40)
VAT RM Deductible Amount
Business Area from where payment is made
VAT RM Deductible
VAT Amount to be paid to Vendor
INR
Example of above is transaction is as below ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (31) 300664 BA02 WalchandNagar Industries 13590000 - INR
2 Debit (86) 130100 BA02 GR IR Clearing 10000000 INR
3 Debit (40) 130150 Modvat Clearing 1600000 INR
4 Debit (40) 130150 Modvat Clearing 320000 INR
5 Debit (40) 130150 Modvat Clearing 160000 INR
6 Debit (40) 245039 BA02 VAT RM Deductible 1510000 INR
The diagrammatic view of above example is as below ndash
Purchase Order 100 PC at INR 1000 GRN for this PO 100 PC Invoice 100 PC at INR 1000
Goods Receipt
Invoice Receipt
100000 +
20800 +
15100 +
135900 ndash
100000 +
100000 ndash
20800 ndash
Stock Account
GR IR Account
Modvat clearing
VAT
Vendor
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 23
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 GL 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 ndash
i) Purchase Order with account assignment A (Asset) ndash 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 GL Account in the company‟s balance sheet The GL account is a reconciliation account that means that it reconciles several asset numbers
With account assignment Purchase
Order
Raw Material Non Valuated Material
GRN Quantity
To Store (Raw Material) or To Consumption (Non-valuated material)
Consumption Account
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 24
For Purchase Order with account assignment A (Asset) the entry in FI GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Asset
Respective Business Area where the Asset is received
Asset Number amp Sub Number
(Quantity of Asset X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the asset is received
GR IR Clearing Account
(Quantity of Asset X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the asset is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entries for asset posted ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (70)
211450 BA05
Asset Number 000021000780 Sub Number 0000
3650000 INR
IM-314318325 MOUNTING CASING
2 Credit (96)
130100 BA05 GR IR Clearing 3605000 - INR
IM-314318325 MOUNTING CASING
3 Credit (50)
130110 BA05 Freight Clearing Inland
45000 - INR IM-314318325 MOUNTING CASING
ii) Purchase Order with account assignment K (Cost Center) ndash 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 amp services With account assignment K we need to determine following two additional data to be entered in the PO ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 25
- General Ledger (GL) Account Number We have to determine the expense GL 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 GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of
cost center
Respective Business Area where the Material Service is received
Cost Center account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of
GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of
Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entry for Account Assignment as Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416340 BA08 Legal Exp amp Consult Fees
4200000 INR Visit Charges
2 Credit (96)
130100 BA08 GR IR Clearing
4200000 - INR Visit Charges
iii) Purchase Order with account assignment as Q (Project) ndash
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 amp budgeted We can procure following type of materials against the Project account assignment ndash Raw Semi Finished material (to be inventoried) Traded Material When we procure a raw material (to be inventoried)
Train Doc KBLCICSAP MM12MM-FI Integration Page 26
against the account assignment as Project (Q) then the accounting entries posted are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of the accounting entries ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233040 BA02 Inventory ndash
Other Resale 61080600 INR
MS Flange Dia 1500 mm
2 Credit (96)
130100 BA02 GR IR Clearing
61080600 - INR 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS)
Respective Business Area where the Material Service is received
COGS account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency
Material master short text
Train Doc KBLCICSAP MM12MM-FI Integration Page 27
service is received
(For Imported material)
Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of the accounting entry is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
410920 BA02 COGS ndash Other Resale Article
18340100 INR LTAL PVC
ArmPVCSH Cable
2 Credit (96)
130100 BA02 GR IR Clearing
18340100 - INR LTAL PVC
ArmPVCSH Cable
iv) Purchase Order with account assignment as E (Sale Order) ndash
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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Train Doc KBLCICSAP MM12MM-FI Integration Page 28
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233070 BA01 Inventory ndash
Traded Electric Motor
2583000 INR Motor Alstom 22
KW 4 Pole
2 Credit (96)
130100 BA01 GR IR Clearing
2583000 - INR Motor Alstom 22
KW 4 Pole
When we post GRN for traded goods following accounting entries are posted ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS) General Expenses
Respective Business Area where the Material Service is received
COGS account General Expenses Account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit
Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit
Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416320 BA01 General Expenses
56258000 INR
KOEL 85 HP 1800 RPM Engine
2 Credit (96)
130100 BA01 GR IR Clearing
56258000 - INR
KOEL 85 HP 1800 RPM Engine
c) Sub-Contracting Purchase Order ndash In the subndashContracting Purchase Order semindash
finished material is ordered on the Sub-Contractor amp the components are given to SubndashContractor 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 ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 29
Semi ndash Finished
Material
BOM of Semindash
Finished
Material
With without
account
assignment
Sub ndash
Contracting
Purchase Order
Components in
BOM provided to
Vendor for
processing
Transfer of
material to Sub
ndash Contractor
No accounting
entry Stock of
material
provided to
vendor is
updated
GRN of
processed
material
(Quantity)
Inventory of Semi-
Finished material
is updated
Stock of material
provided to
Vendor is
consumed
GRN Value
Inventory of Semi-
Finished material
= Processing
Charges + Value
of BOM
Components
Train Doc KBLCICSAP MM12MM-FI Integration Page 30
Following FI entries are posted during above process ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR Currency
Text of Material
10 Debit
Inventory account of
Semi-finished material
Respective Business Area where the Material is received
Inventory ndash Semi-Finished Goods
(Quantity of Semi-finished material X Processing Charges) + (Inventory Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
20 Credit
Change of Stock
from Sub-Contract
Respective Business Area where the Material is received
Change of Stock from Sub-Contract
(Quantity of Semi-finished material X Processing Charges) + (Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
30 Credit
Inventory of
Components with
Sub-Contractor
Respective Business Area where the Material is received
Inventory of Components with Sub-Contractor
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
40 Debit
Inventory of own
Components
Respective Business Area where the Material is received
Inventory of own Components
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
50 Debit Processing Charges
Other
Respective Business Area where the Material is received
Processing Charges Other
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of received material
60 Credit GR IR Clearing
Respective Business Area where the Material is received
GR IR Clearing Charges
Processing Charges to be paid to Vendor (Quantity of Ordered material X Processing Charges Rate)
INR (for domestic
Purchase)
Material master short text of received material
Train Doc KBLCICSAP MM12MM-FI Integration Page 31
Following is the example of the above transaction ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
235010 BA01 Inventory Semi-Finished Goods
315000 INR BRG Housing 25
13
2 Credit (91)
400040 BA01
Change Stock Semi-Finished
from Sub-Contractor
315000 - INR BRG Housing 25
13
3 Credit (99)
235040 BA01 Inventory of
semi-finished CI Castings
285200 - INR Bearing Housing (Kanban 30 Qty
Bin)
4 Debit (81)
400040 BA01 Change Stock Castings for Sub-Contract
285200 INR Bearing Housing (Kanban 30 Qty
Bin)
5 Credit (96)
130100 BA01 GR IR Clearing 29800 - INR BRG Housing 25
13
6 Debit (86)
411450 BA01 Processing
Charges Other 29800 INR
BRG Housing 25 13
Train Doc KBLCICSAP MM12MM-FI Integration Page 32
d) Import Purchase Order ndash 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 amp 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 ndash Mumbai JNPT Port) After material is cleared from port amp received in Plant GRN is posted Then the customs duty is also inventorised along with the basic price of material amp 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 ndash
Raw material
Valuation class ndash Imported Raw Material
With without account assignment
Import Purchase Order on Overseas Vendor
Customs duties Freight Charges etc of Clearing Agent are invoiced
Planned delivery cost invoice of Import PO is booked when the material arrives at Port
Quantity of Imported Material is updated
GRN is posted when material arrives at Plant (Quantity)
Basic Value of Material + Planned Delivery Costs + Customs Duty
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 33
Following are the FI entries posted when the GRN is posted ndash
Item Posting
Key GL Account Business Area Account Text
Amount in INR
Currency
1 Debit (89)
Inventory account of Imported Raw Material
Business Area where the material has been received
Inventory ndash Imported Raw Material
Quantity of Material X Basic Price of material
INR
2 Credit (96)
GR IR Clearing Account
Business Area where the material has been received
GR IR Clearing
Quantity of Material X Basic Price of material
INR
3 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Basic Customs Duty)
Basic Customs Duty Amount
INR
4 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Ecess on Basic Customs Duty)
Ecess amount on Basic Customs Duty
INR
5 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (SampH Ecess on Basic Customs Duty)
SampH Ecess amount on Basic Customs Duty
INR
6 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing CVD Amount INR
7 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing Ecess on CVD INR
8 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing SampH Ecess of CVD INR
Following is the example of the FI entries of imported material ndash
Item Posting
Key GL Account
Business Area
Account Text Amount in
INR Currency
1 Debit (89)
230110 BA01 Inventory ndash Imported Raw Material
1551800 INR
2 Credit (96)
130100 BA01 GR IR Clearing
1151500 - INR
3 Credit (96)
130120 BA01 Freight Clearing ndash Import
174400 - INR
4 Credit (96)
130120 BA01 Freight Clearing ndash Import
3400 - INR
5 Credit 130120 BA01 Freight Clearing ndash Import 1700 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 34
(96)
6 Credit (50)
130130 BA01 CVD Clearing
214500 - INR
7 Credit (50)
130130 BA01 CVD Clearing
4200 - INR
8 Credit (50)
130130 BA01 CVD Clearing
2100 - INR
e) Stock Transport Purchase Order ndash 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 amp 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR
Currency Plant
10 Credit Inventory Account
Business Area from where material is issued
Inventory of Material
Inventory Amount
INR
Plant from where
material is issued
20 Debit Inventory Account
Business Area where material is received
Inventory of material
Inventory Amount
INR Plant where material is received
Example of above transaction is as below ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Plant
10 Credit (99) 232080 BA05 Inventory of Spares 430250 - INR 2530
20 Debit (89) 232080 BA05 Inventory of Spares 430250 INR 9010
f) Service Purchase Order ndash When a Service Purchase Order (Item Category ndash 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 35
automatically posted by the system (which is based on the accepted service entry sheet) Following is the flow chart for Service Purchase Order ndash
Service Required for Project Cost Center Sale Order
Account assignment data such as Project or WBS Definition Cost Center Number Sale Order Number is maintained
Purchase Order with Item Category D (Service) amp required account assignment (Q K E) is raised
Service Entry sheet is created amp 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 36
Following are the FI postings at the time of accepting Service Entry Sheet ndash
Item Posting
Key GL Account
Business Area
Account Text
Amount in INR
Currency Text
10 Debit Consumption
Account
Business Area from where Service is delivered
Process Charges
Service Charges Amount
INR Service Text
20 Credit GR IR Clearing Account
Business Area where service is delivered
GR IR Clearing
Service Charges Amount
INR Service Text
Following is the example of above transaction ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Text
10 Debit (81) 411420 BA02 Process Charges - Foundry
384780 INR
Service Charges
20 Debit (96) 130100 BA02 GR IR Clearing 384780 -
INR Service Charges
Train Doc KBLCICSAP MM12MM-FI Integration Page 37
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 ndash a) Modvatable Excise Item ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40)
Excise Cenvat
Business Area where the material is received
Cenvat Input P F Basic Excise Duty amount
INR
2 Debit (40)
ECS Cenvat Amount
Business Area where the material is received
Cenvat ED Cess ECS Amount INR
3 Debit (40)
SampH ECS Cenvat Account
Business Area where the material is received
Cenvat SampH Ces-1
SampH ECS Amount
INR
4 Credit (50)
Modvat Clearing Account
Business Area where the material is received
Modvat Clearing Account
Amount equivalent to amount in 1 + 2 + 3
INR
Example of Modvatable excise entries is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40) 244030 BA01 Cenvat Input P F 362900 INR
2 Debit (40) 244031 BA01 Cenvat ED Cess 7300 INR
3 Debit (40) 244034 BA01 Cenvat SampH Ces-1
3600 INR
4 Credit (50) 130150 BA01 Modvat Clearing Account
373800 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 38
b) Trading excisable material received against GRN ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81)
COGS ndash Trading Material
Business Area where the material is received COGS ndash Trading
Material
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
2 Credit (96)
ECS Cenvat Amount
Business Area where the material is received
GR IR Clearing
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
Example of Excise duty inventorised -
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81) 410910 BA01 COGS ndash Trading Motor
433108300 INR
2 Credit (96) 130100 BA01 GR IR Clearing 433108300 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 39
FI entries at Material Consumption When a material is issued to a consumption account (For example ndash Consumption to Production Order Cost Center) the inventory reduces amp 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 ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Credit (99)
231020 BA05 Inventory ndash Other Raw material
15500 - INR
2 Debit (81)
400240 BA05 Consumption ndash Other Raw Material
15500 INR
2) Material consumption posted to Production Order ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Production Order ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (99)
235010 BA01 Inventory ndash Semi Finished Goods
334100 - INR
2 Debit (81)
400290 BA01 Consumption ndash Semi Finished Goods
334100 INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 40
3) Consumption of Stock provided to Sub ndash Contractor for processing of finished material when GRN of processed material is posted ndash
In a sub ndash contracting purchase order a semi finished material is ordered on the sub ndash contractor amp components are provided to the sub ndash 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 amp the concerned FI entries are posted
Train Doc KBLCICSAP MM12MM-FI Integration Page 41
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 amp 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 amp 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 ndash Quantity Variance Price Variance Quality Inspection Manual block date variance and Amount variance The process flow is as below ndash
Purchase Order for Material Service
GRN for Material Service Entry Sheet for Services performed
Purchase Order History
Delivery Costs
Material Master
Vendor Master
GL Account
Assets
Cost Center
Project
Sale Order
Invoice Verification FI Invoice
Document
MM Invoice Document
Further Document
Train Doc KBLCICSAP MM12MM-FI Integration Page 42
Following entries are posted when an invoice for vendor is posted in the system
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (31)
Vendor Account
Business Area Vendor Number
Amount to be paid to Vendor
INR
2 Debit (86)
GR IR Clearing
Business Area GR IR Clearing
GR IR Clearing Amount
INR
3 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash B Excise Duty
INR
4 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash ECS Amount
INR
5 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash SampH ECS Amt
INR
6 Debit (40)
VAT RM Deductible Amount
Business Area from where payment is made
VAT RM Deductible
VAT Amount to be paid to Vendor
INR
Example of above is transaction is as below ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (31) 300664 BA02 WalchandNagar Industries 13590000 - INR
2 Debit (86) 130100 BA02 GR IR Clearing 10000000 INR
3 Debit (40) 130150 Modvat Clearing 1600000 INR
4 Debit (40) 130150 Modvat Clearing 320000 INR
5 Debit (40) 130150 Modvat Clearing 160000 INR
6 Debit (40) 245039 BA02 VAT RM Deductible 1510000 INR
The diagrammatic view of above example is as below ndash
Purchase Order 100 PC at INR 1000 GRN for this PO 100 PC Invoice 100 PC at INR 1000
Goods Receipt
Invoice Receipt
100000 +
20800 +
15100 +
135900 ndash
100000 +
100000 ndash
20800 ndash
Stock Account
GR IR Account
Modvat clearing
VAT
Vendor
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 24
For Purchase Order with account assignment A (Asset) the entry in FI GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Asset
Respective Business Area where the Asset is received
Asset Number amp Sub Number
(Quantity of Asset X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
20 Credit Account of GR IR Clearing
Respective Business Area where the asset is received
GR IR Clearing Account
(Quantity of Asset X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text
30 Credit Account of Freight Clearing
Respective Business Area where the asset is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entries for asset posted ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (70)
211450 BA05
Asset Number 000021000780 Sub Number 0000
3650000 INR
IM-314318325 MOUNTING CASING
2 Credit (96)
130100 BA05 GR IR Clearing 3605000 - INR
IM-314318325 MOUNTING CASING
3 Credit (50)
130110 BA05 Freight Clearing Inland
45000 - INR IM-314318325 MOUNTING CASING
ii) Purchase Order with account assignment K (Cost Center) ndash 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 amp services With account assignment K we need to determine following two additional data to be entered in the PO ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 25
- General Ledger (GL) Account Number We have to determine the expense GL 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 GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of
cost center
Respective Business Area where the Material Service is received
Cost Center account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of
GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of
Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entry for Account Assignment as Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416340 BA08 Legal Exp amp Consult Fees
4200000 INR Visit Charges
2 Credit (96)
130100 BA08 GR IR Clearing
4200000 - INR Visit Charges
iii) Purchase Order with account assignment as Q (Project) ndash
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 amp budgeted We can procure following type of materials against the Project account assignment ndash Raw Semi Finished material (to be inventoried) Traded Material When we procure a raw material (to be inventoried)
Train Doc KBLCICSAP MM12MM-FI Integration Page 26
against the account assignment as Project (Q) then the accounting entries posted are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of the accounting entries ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233040 BA02 Inventory ndash
Other Resale 61080600 INR
MS Flange Dia 1500 mm
2 Credit (96)
130100 BA02 GR IR Clearing
61080600 - INR 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS)
Respective Business Area where the Material Service is received
COGS account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency
Material master short text
Train Doc KBLCICSAP MM12MM-FI Integration Page 27
service is received
(For Imported material)
Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of the accounting entry is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
410920 BA02 COGS ndash Other Resale Article
18340100 INR LTAL PVC
ArmPVCSH Cable
2 Credit (96)
130100 BA02 GR IR Clearing
18340100 - INR LTAL PVC
ArmPVCSH Cable
iv) Purchase Order with account assignment as E (Sale Order) ndash
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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Train Doc KBLCICSAP MM12MM-FI Integration Page 28
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233070 BA01 Inventory ndash
Traded Electric Motor
2583000 INR Motor Alstom 22
KW 4 Pole
2 Credit (96)
130100 BA01 GR IR Clearing
2583000 - INR Motor Alstom 22
KW 4 Pole
When we post GRN for traded goods following accounting entries are posted ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS) General Expenses
Respective Business Area where the Material Service is received
COGS account General Expenses Account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit
Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit
Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416320 BA01 General Expenses
56258000 INR
KOEL 85 HP 1800 RPM Engine
2 Credit (96)
130100 BA01 GR IR Clearing
56258000 - INR
KOEL 85 HP 1800 RPM Engine
c) Sub-Contracting Purchase Order ndash In the subndashContracting Purchase Order semindash
finished material is ordered on the Sub-Contractor amp the components are given to SubndashContractor 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 ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 29
Semi ndash Finished
Material
BOM of Semindash
Finished
Material
With without
account
assignment
Sub ndash
Contracting
Purchase Order
Components in
BOM provided to
Vendor for
processing
Transfer of
material to Sub
ndash Contractor
No accounting
entry Stock of
material
provided to
vendor is
updated
GRN of
processed
material
(Quantity)
Inventory of Semi-
Finished material
is updated
Stock of material
provided to
Vendor is
consumed
GRN Value
Inventory of Semi-
Finished material
= Processing
Charges + Value
of BOM
Components
Train Doc KBLCICSAP MM12MM-FI Integration Page 30
Following FI entries are posted during above process ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR Currency
Text of Material
10 Debit
Inventory account of
Semi-finished material
Respective Business Area where the Material is received
Inventory ndash Semi-Finished Goods
(Quantity of Semi-finished material X Processing Charges) + (Inventory Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
20 Credit
Change of Stock
from Sub-Contract
Respective Business Area where the Material is received
Change of Stock from Sub-Contract
(Quantity of Semi-finished material X Processing Charges) + (Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
30 Credit
Inventory of
Components with
Sub-Contractor
Respective Business Area where the Material is received
Inventory of Components with Sub-Contractor
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
40 Debit
Inventory of own
Components
Respective Business Area where the Material is received
Inventory of own Components
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
50 Debit Processing Charges
Other
Respective Business Area where the Material is received
Processing Charges Other
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of received material
60 Credit GR IR Clearing
Respective Business Area where the Material is received
GR IR Clearing Charges
Processing Charges to be paid to Vendor (Quantity of Ordered material X Processing Charges Rate)
INR (for domestic
Purchase)
Material master short text of received material
Train Doc KBLCICSAP MM12MM-FI Integration Page 31
Following is the example of the above transaction ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
235010 BA01 Inventory Semi-Finished Goods
315000 INR BRG Housing 25
13
2 Credit (91)
400040 BA01
Change Stock Semi-Finished
from Sub-Contractor
315000 - INR BRG Housing 25
13
3 Credit (99)
235040 BA01 Inventory of
semi-finished CI Castings
285200 - INR Bearing Housing (Kanban 30 Qty
Bin)
4 Debit (81)
400040 BA01 Change Stock Castings for Sub-Contract
285200 INR Bearing Housing (Kanban 30 Qty
Bin)
5 Credit (96)
130100 BA01 GR IR Clearing 29800 - INR BRG Housing 25
13
6 Debit (86)
411450 BA01 Processing
Charges Other 29800 INR
BRG Housing 25 13
Train Doc KBLCICSAP MM12MM-FI Integration Page 32
d) Import Purchase Order ndash 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 amp 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 ndash Mumbai JNPT Port) After material is cleared from port amp received in Plant GRN is posted Then the customs duty is also inventorised along with the basic price of material amp 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 ndash
Raw material
Valuation class ndash Imported Raw Material
With without account assignment
Import Purchase Order on Overseas Vendor
Customs duties Freight Charges etc of Clearing Agent are invoiced
Planned delivery cost invoice of Import PO is booked when the material arrives at Port
Quantity of Imported Material is updated
GRN is posted when material arrives at Plant (Quantity)
Basic Value of Material + Planned Delivery Costs + Customs Duty
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 33
Following are the FI entries posted when the GRN is posted ndash
Item Posting
Key GL Account Business Area Account Text
Amount in INR
Currency
1 Debit (89)
Inventory account of Imported Raw Material
Business Area where the material has been received
Inventory ndash Imported Raw Material
Quantity of Material X Basic Price of material
INR
2 Credit (96)
GR IR Clearing Account
Business Area where the material has been received
GR IR Clearing
Quantity of Material X Basic Price of material
INR
3 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Basic Customs Duty)
Basic Customs Duty Amount
INR
4 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Ecess on Basic Customs Duty)
Ecess amount on Basic Customs Duty
INR
5 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (SampH Ecess on Basic Customs Duty)
SampH Ecess amount on Basic Customs Duty
INR
6 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing CVD Amount INR
7 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing Ecess on CVD INR
8 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing SampH Ecess of CVD INR
Following is the example of the FI entries of imported material ndash
Item Posting
Key GL Account
Business Area
Account Text Amount in
INR Currency
1 Debit (89)
230110 BA01 Inventory ndash Imported Raw Material
1551800 INR
2 Credit (96)
130100 BA01 GR IR Clearing
1151500 - INR
3 Credit (96)
130120 BA01 Freight Clearing ndash Import
174400 - INR
4 Credit (96)
130120 BA01 Freight Clearing ndash Import
3400 - INR
5 Credit 130120 BA01 Freight Clearing ndash Import 1700 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 34
(96)
6 Credit (50)
130130 BA01 CVD Clearing
214500 - INR
7 Credit (50)
130130 BA01 CVD Clearing
4200 - INR
8 Credit (50)
130130 BA01 CVD Clearing
2100 - INR
e) Stock Transport Purchase Order ndash 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 amp 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR
Currency Plant
10 Credit Inventory Account
Business Area from where material is issued
Inventory of Material
Inventory Amount
INR
Plant from where
material is issued
20 Debit Inventory Account
Business Area where material is received
Inventory of material
Inventory Amount
INR Plant where material is received
Example of above transaction is as below ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Plant
10 Credit (99) 232080 BA05 Inventory of Spares 430250 - INR 2530
20 Debit (89) 232080 BA05 Inventory of Spares 430250 INR 9010
f) Service Purchase Order ndash When a Service Purchase Order (Item Category ndash 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 35
automatically posted by the system (which is based on the accepted service entry sheet) Following is the flow chart for Service Purchase Order ndash
Service Required for Project Cost Center Sale Order
Account assignment data such as Project or WBS Definition Cost Center Number Sale Order Number is maintained
Purchase Order with Item Category D (Service) amp required account assignment (Q K E) is raised
Service Entry sheet is created amp 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 36
Following are the FI postings at the time of accepting Service Entry Sheet ndash
Item Posting
Key GL Account
Business Area
Account Text
Amount in INR
Currency Text
10 Debit Consumption
Account
Business Area from where Service is delivered
Process Charges
Service Charges Amount
INR Service Text
20 Credit GR IR Clearing Account
Business Area where service is delivered
GR IR Clearing
Service Charges Amount
INR Service Text
Following is the example of above transaction ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Text
10 Debit (81) 411420 BA02 Process Charges - Foundry
384780 INR
Service Charges
20 Debit (96) 130100 BA02 GR IR Clearing 384780 -
INR Service Charges
Train Doc KBLCICSAP MM12MM-FI Integration Page 37
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 ndash a) Modvatable Excise Item ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40)
Excise Cenvat
Business Area where the material is received
Cenvat Input P F Basic Excise Duty amount
INR
2 Debit (40)
ECS Cenvat Amount
Business Area where the material is received
Cenvat ED Cess ECS Amount INR
3 Debit (40)
SampH ECS Cenvat Account
Business Area where the material is received
Cenvat SampH Ces-1
SampH ECS Amount
INR
4 Credit (50)
Modvat Clearing Account
Business Area where the material is received
Modvat Clearing Account
Amount equivalent to amount in 1 + 2 + 3
INR
Example of Modvatable excise entries is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40) 244030 BA01 Cenvat Input P F 362900 INR
2 Debit (40) 244031 BA01 Cenvat ED Cess 7300 INR
3 Debit (40) 244034 BA01 Cenvat SampH Ces-1
3600 INR
4 Credit (50) 130150 BA01 Modvat Clearing Account
373800 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 38
b) Trading excisable material received against GRN ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81)
COGS ndash Trading Material
Business Area where the material is received COGS ndash Trading
Material
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
2 Credit (96)
ECS Cenvat Amount
Business Area where the material is received
GR IR Clearing
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
Example of Excise duty inventorised -
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81) 410910 BA01 COGS ndash Trading Motor
433108300 INR
2 Credit (96) 130100 BA01 GR IR Clearing 433108300 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 39
FI entries at Material Consumption When a material is issued to a consumption account (For example ndash Consumption to Production Order Cost Center) the inventory reduces amp 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 ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Credit (99)
231020 BA05 Inventory ndash Other Raw material
15500 - INR
2 Debit (81)
400240 BA05 Consumption ndash Other Raw Material
15500 INR
2) Material consumption posted to Production Order ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Production Order ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (99)
235010 BA01 Inventory ndash Semi Finished Goods
334100 - INR
2 Debit (81)
400290 BA01 Consumption ndash Semi Finished Goods
334100 INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 40
3) Consumption of Stock provided to Sub ndash Contractor for processing of finished material when GRN of processed material is posted ndash
In a sub ndash contracting purchase order a semi finished material is ordered on the sub ndash contractor amp components are provided to the sub ndash 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 amp the concerned FI entries are posted
Train Doc KBLCICSAP MM12MM-FI Integration Page 41
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 amp 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 amp 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 ndash Quantity Variance Price Variance Quality Inspection Manual block date variance and Amount variance The process flow is as below ndash
Purchase Order for Material Service
GRN for Material Service Entry Sheet for Services performed
Purchase Order History
Delivery Costs
Material Master
Vendor Master
GL Account
Assets
Cost Center
Project
Sale Order
Invoice Verification FI Invoice
Document
MM Invoice Document
Further Document
Train Doc KBLCICSAP MM12MM-FI Integration Page 42
Following entries are posted when an invoice for vendor is posted in the system
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (31)
Vendor Account
Business Area Vendor Number
Amount to be paid to Vendor
INR
2 Debit (86)
GR IR Clearing
Business Area GR IR Clearing
GR IR Clearing Amount
INR
3 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash B Excise Duty
INR
4 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash ECS Amount
INR
5 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash SampH ECS Amt
INR
6 Debit (40)
VAT RM Deductible Amount
Business Area from where payment is made
VAT RM Deductible
VAT Amount to be paid to Vendor
INR
Example of above is transaction is as below ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (31) 300664 BA02 WalchandNagar Industries 13590000 - INR
2 Debit (86) 130100 BA02 GR IR Clearing 10000000 INR
3 Debit (40) 130150 Modvat Clearing 1600000 INR
4 Debit (40) 130150 Modvat Clearing 320000 INR
5 Debit (40) 130150 Modvat Clearing 160000 INR
6 Debit (40) 245039 BA02 VAT RM Deductible 1510000 INR
The diagrammatic view of above example is as below ndash
Purchase Order 100 PC at INR 1000 GRN for this PO 100 PC Invoice 100 PC at INR 1000
Goods Receipt
Invoice Receipt
100000 +
20800 +
15100 +
135900 ndash
100000 +
100000 ndash
20800 ndash
Stock Account
GR IR Account
Modvat clearing
VAT
Vendor
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 25
- General Ledger (GL) Account Number We have to determine the expense GL 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 GL Account at the time of posting GRN is as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of
cost center
Respective Business Area where the Material Service is received
Cost Center account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of
GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of
Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of accounting entry for Account Assignment as Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416340 BA08 Legal Exp amp Consult Fees
4200000 INR Visit Charges
2 Credit (96)
130100 BA08 GR IR Clearing
4200000 - INR Visit Charges
iii) Purchase Order with account assignment as Q (Project) ndash
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 amp budgeted We can procure following type of materials against the Project account assignment ndash Raw Semi Finished material (to be inventoried) Traded Material When we procure a raw material (to be inventoried)
Train Doc KBLCICSAP MM12MM-FI Integration Page 26
against the account assignment as Project (Q) then the accounting entries posted are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of the accounting entries ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233040 BA02 Inventory ndash
Other Resale 61080600 INR
MS Flange Dia 1500 mm
2 Credit (96)
130100 BA02 GR IR Clearing
61080600 - INR 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS)
Respective Business Area where the Material Service is received
COGS account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency
Material master short text
Train Doc KBLCICSAP MM12MM-FI Integration Page 27
service is received
(For Imported material)
Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of the accounting entry is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
410920 BA02 COGS ndash Other Resale Article
18340100 INR LTAL PVC
ArmPVCSH Cable
2 Credit (96)
130100 BA02 GR IR Clearing
18340100 - INR LTAL PVC
ArmPVCSH Cable
iv) Purchase Order with account assignment as E (Sale Order) ndash
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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Train Doc KBLCICSAP MM12MM-FI Integration Page 28
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233070 BA01 Inventory ndash
Traded Electric Motor
2583000 INR Motor Alstom 22
KW 4 Pole
2 Credit (96)
130100 BA01 GR IR Clearing
2583000 - INR Motor Alstom 22
KW 4 Pole
When we post GRN for traded goods following accounting entries are posted ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS) General Expenses
Respective Business Area where the Material Service is received
COGS account General Expenses Account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit
Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit
Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416320 BA01 General Expenses
56258000 INR
KOEL 85 HP 1800 RPM Engine
2 Credit (96)
130100 BA01 GR IR Clearing
56258000 - INR
KOEL 85 HP 1800 RPM Engine
c) Sub-Contracting Purchase Order ndash In the subndashContracting Purchase Order semindash
finished material is ordered on the Sub-Contractor amp the components are given to SubndashContractor 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 ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 29
Semi ndash Finished
Material
BOM of Semindash
Finished
Material
With without
account
assignment
Sub ndash
Contracting
Purchase Order
Components in
BOM provided to
Vendor for
processing
Transfer of
material to Sub
ndash Contractor
No accounting
entry Stock of
material
provided to
vendor is
updated
GRN of
processed
material
(Quantity)
Inventory of Semi-
Finished material
is updated
Stock of material
provided to
Vendor is
consumed
GRN Value
Inventory of Semi-
Finished material
= Processing
Charges + Value
of BOM
Components
Train Doc KBLCICSAP MM12MM-FI Integration Page 30
Following FI entries are posted during above process ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR Currency
Text of Material
10 Debit
Inventory account of
Semi-finished material
Respective Business Area where the Material is received
Inventory ndash Semi-Finished Goods
(Quantity of Semi-finished material X Processing Charges) + (Inventory Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
20 Credit
Change of Stock
from Sub-Contract
Respective Business Area where the Material is received
Change of Stock from Sub-Contract
(Quantity of Semi-finished material X Processing Charges) + (Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
30 Credit
Inventory of
Components with
Sub-Contractor
Respective Business Area where the Material is received
Inventory of Components with Sub-Contractor
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
40 Debit
Inventory of own
Components
Respective Business Area where the Material is received
Inventory of own Components
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
50 Debit Processing Charges
Other
Respective Business Area where the Material is received
Processing Charges Other
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of received material
60 Credit GR IR Clearing
Respective Business Area where the Material is received
GR IR Clearing Charges
Processing Charges to be paid to Vendor (Quantity of Ordered material X Processing Charges Rate)
INR (for domestic
Purchase)
Material master short text of received material
Train Doc KBLCICSAP MM12MM-FI Integration Page 31
Following is the example of the above transaction ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
235010 BA01 Inventory Semi-Finished Goods
315000 INR BRG Housing 25
13
2 Credit (91)
400040 BA01
Change Stock Semi-Finished
from Sub-Contractor
315000 - INR BRG Housing 25
13
3 Credit (99)
235040 BA01 Inventory of
semi-finished CI Castings
285200 - INR Bearing Housing (Kanban 30 Qty
Bin)
4 Debit (81)
400040 BA01 Change Stock Castings for Sub-Contract
285200 INR Bearing Housing (Kanban 30 Qty
Bin)
5 Credit (96)
130100 BA01 GR IR Clearing 29800 - INR BRG Housing 25
13
6 Debit (86)
411450 BA01 Processing
Charges Other 29800 INR
BRG Housing 25 13
Train Doc KBLCICSAP MM12MM-FI Integration Page 32
d) Import Purchase Order ndash 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 amp 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 ndash Mumbai JNPT Port) After material is cleared from port amp received in Plant GRN is posted Then the customs duty is also inventorised along with the basic price of material amp 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 ndash
Raw material
Valuation class ndash Imported Raw Material
With without account assignment
Import Purchase Order on Overseas Vendor
Customs duties Freight Charges etc of Clearing Agent are invoiced
Planned delivery cost invoice of Import PO is booked when the material arrives at Port
Quantity of Imported Material is updated
GRN is posted when material arrives at Plant (Quantity)
Basic Value of Material + Planned Delivery Costs + Customs Duty
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 33
Following are the FI entries posted when the GRN is posted ndash
Item Posting
Key GL Account Business Area Account Text
Amount in INR
Currency
1 Debit (89)
Inventory account of Imported Raw Material
Business Area where the material has been received
Inventory ndash Imported Raw Material
Quantity of Material X Basic Price of material
INR
2 Credit (96)
GR IR Clearing Account
Business Area where the material has been received
GR IR Clearing
Quantity of Material X Basic Price of material
INR
3 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Basic Customs Duty)
Basic Customs Duty Amount
INR
4 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Ecess on Basic Customs Duty)
Ecess amount on Basic Customs Duty
INR
5 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (SampH Ecess on Basic Customs Duty)
SampH Ecess amount on Basic Customs Duty
INR
6 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing CVD Amount INR
7 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing Ecess on CVD INR
8 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing SampH Ecess of CVD INR
Following is the example of the FI entries of imported material ndash
Item Posting
Key GL Account
Business Area
Account Text Amount in
INR Currency
1 Debit (89)
230110 BA01 Inventory ndash Imported Raw Material
1551800 INR
2 Credit (96)
130100 BA01 GR IR Clearing
1151500 - INR
3 Credit (96)
130120 BA01 Freight Clearing ndash Import
174400 - INR
4 Credit (96)
130120 BA01 Freight Clearing ndash Import
3400 - INR
5 Credit 130120 BA01 Freight Clearing ndash Import 1700 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 34
(96)
6 Credit (50)
130130 BA01 CVD Clearing
214500 - INR
7 Credit (50)
130130 BA01 CVD Clearing
4200 - INR
8 Credit (50)
130130 BA01 CVD Clearing
2100 - INR
e) Stock Transport Purchase Order ndash 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 amp 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR
Currency Plant
10 Credit Inventory Account
Business Area from where material is issued
Inventory of Material
Inventory Amount
INR
Plant from where
material is issued
20 Debit Inventory Account
Business Area where material is received
Inventory of material
Inventory Amount
INR Plant where material is received
Example of above transaction is as below ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Plant
10 Credit (99) 232080 BA05 Inventory of Spares 430250 - INR 2530
20 Debit (89) 232080 BA05 Inventory of Spares 430250 INR 9010
f) Service Purchase Order ndash When a Service Purchase Order (Item Category ndash 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 35
automatically posted by the system (which is based on the accepted service entry sheet) Following is the flow chart for Service Purchase Order ndash
Service Required for Project Cost Center Sale Order
Account assignment data such as Project or WBS Definition Cost Center Number Sale Order Number is maintained
Purchase Order with Item Category D (Service) amp required account assignment (Q K E) is raised
Service Entry sheet is created amp 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 36
Following are the FI postings at the time of accepting Service Entry Sheet ndash
Item Posting
Key GL Account
Business Area
Account Text
Amount in INR
Currency Text
10 Debit Consumption
Account
Business Area from where Service is delivered
Process Charges
Service Charges Amount
INR Service Text
20 Credit GR IR Clearing Account
Business Area where service is delivered
GR IR Clearing
Service Charges Amount
INR Service Text
Following is the example of above transaction ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Text
10 Debit (81) 411420 BA02 Process Charges - Foundry
384780 INR
Service Charges
20 Debit (96) 130100 BA02 GR IR Clearing 384780 -
INR Service Charges
Train Doc KBLCICSAP MM12MM-FI Integration Page 37
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 ndash a) Modvatable Excise Item ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40)
Excise Cenvat
Business Area where the material is received
Cenvat Input P F Basic Excise Duty amount
INR
2 Debit (40)
ECS Cenvat Amount
Business Area where the material is received
Cenvat ED Cess ECS Amount INR
3 Debit (40)
SampH ECS Cenvat Account
Business Area where the material is received
Cenvat SampH Ces-1
SampH ECS Amount
INR
4 Credit (50)
Modvat Clearing Account
Business Area where the material is received
Modvat Clearing Account
Amount equivalent to amount in 1 + 2 + 3
INR
Example of Modvatable excise entries is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40) 244030 BA01 Cenvat Input P F 362900 INR
2 Debit (40) 244031 BA01 Cenvat ED Cess 7300 INR
3 Debit (40) 244034 BA01 Cenvat SampH Ces-1
3600 INR
4 Credit (50) 130150 BA01 Modvat Clearing Account
373800 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 38
b) Trading excisable material received against GRN ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81)
COGS ndash Trading Material
Business Area where the material is received COGS ndash Trading
Material
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
2 Credit (96)
ECS Cenvat Amount
Business Area where the material is received
GR IR Clearing
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
Example of Excise duty inventorised -
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81) 410910 BA01 COGS ndash Trading Motor
433108300 INR
2 Credit (96) 130100 BA01 GR IR Clearing 433108300 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 39
FI entries at Material Consumption When a material is issued to a consumption account (For example ndash Consumption to Production Order Cost Center) the inventory reduces amp 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 ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Credit (99)
231020 BA05 Inventory ndash Other Raw material
15500 - INR
2 Debit (81)
400240 BA05 Consumption ndash Other Raw Material
15500 INR
2) Material consumption posted to Production Order ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Production Order ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (99)
235010 BA01 Inventory ndash Semi Finished Goods
334100 - INR
2 Debit (81)
400290 BA01 Consumption ndash Semi Finished Goods
334100 INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 40
3) Consumption of Stock provided to Sub ndash Contractor for processing of finished material when GRN of processed material is posted ndash
In a sub ndash contracting purchase order a semi finished material is ordered on the sub ndash contractor amp components are provided to the sub ndash 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 amp the concerned FI entries are posted
Train Doc KBLCICSAP MM12MM-FI Integration Page 41
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 amp 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 amp 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 ndash Quantity Variance Price Variance Quality Inspection Manual block date variance and Amount variance The process flow is as below ndash
Purchase Order for Material Service
GRN for Material Service Entry Sheet for Services performed
Purchase Order History
Delivery Costs
Material Master
Vendor Master
GL Account
Assets
Cost Center
Project
Sale Order
Invoice Verification FI Invoice
Document
MM Invoice Document
Further Document
Train Doc KBLCICSAP MM12MM-FI Integration Page 42
Following entries are posted when an invoice for vendor is posted in the system
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (31)
Vendor Account
Business Area Vendor Number
Amount to be paid to Vendor
INR
2 Debit (86)
GR IR Clearing
Business Area GR IR Clearing
GR IR Clearing Amount
INR
3 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash B Excise Duty
INR
4 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash ECS Amount
INR
5 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash SampH ECS Amt
INR
6 Debit (40)
VAT RM Deductible Amount
Business Area from where payment is made
VAT RM Deductible
VAT Amount to be paid to Vendor
INR
Example of above is transaction is as below ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (31) 300664 BA02 WalchandNagar Industries 13590000 - INR
2 Debit (86) 130100 BA02 GR IR Clearing 10000000 INR
3 Debit (40) 130150 Modvat Clearing 1600000 INR
4 Debit (40) 130150 Modvat Clearing 320000 INR
5 Debit (40) 130150 Modvat Clearing 160000 INR
6 Debit (40) 245039 BA02 VAT RM Deductible 1510000 INR
The diagrammatic view of above example is as below ndash
Purchase Order 100 PC at INR 1000 GRN for this PO 100 PC Invoice 100 PC at INR 1000
Goods Receipt
Invoice Receipt
100000 +
20800 +
15100 +
135900 ndash
100000 +
100000 ndash
20800 ndash
Stock Account
GR IR Account
Modvat clearing
VAT
Vendor
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 26
against the account assignment as Project (Q) then the accounting entries posted are as below ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of the accounting entries ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233040 BA02 Inventory ndash
Other Resale 61080600 INR
MS Flange Dia 1500 mm
2 Credit (96)
130100 BA02 GR IR Clearing
61080600 - INR 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS)
Respective Business Area where the Material Service is received
COGS account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency
Material master short text
Train Doc KBLCICSAP MM12MM-FI Integration Page 27
service is received
(For Imported material)
Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of the accounting entry is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
410920 BA02 COGS ndash Other Resale Article
18340100 INR LTAL PVC
ArmPVCSH Cable
2 Credit (96)
130100 BA02 GR IR Clearing
18340100 - INR LTAL PVC
ArmPVCSH Cable
iv) Purchase Order with account assignment as E (Sale Order) ndash
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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Train Doc KBLCICSAP MM12MM-FI Integration Page 28
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233070 BA01 Inventory ndash
Traded Electric Motor
2583000 INR Motor Alstom 22
KW 4 Pole
2 Credit (96)
130100 BA01 GR IR Clearing
2583000 - INR Motor Alstom 22
KW 4 Pole
When we post GRN for traded goods following accounting entries are posted ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS) General Expenses
Respective Business Area where the Material Service is received
COGS account General Expenses Account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit
Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit
Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416320 BA01 General Expenses
56258000 INR
KOEL 85 HP 1800 RPM Engine
2 Credit (96)
130100 BA01 GR IR Clearing
56258000 - INR
KOEL 85 HP 1800 RPM Engine
c) Sub-Contracting Purchase Order ndash In the subndashContracting Purchase Order semindash
finished material is ordered on the Sub-Contractor amp the components are given to SubndashContractor 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 ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 29
Semi ndash Finished
Material
BOM of Semindash
Finished
Material
With without
account
assignment
Sub ndash
Contracting
Purchase Order
Components in
BOM provided to
Vendor for
processing
Transfer of
material to Sub
ndash Contractor
No accounting
entry Stock of
material
provided to
vendor is
updated
GRN of
processed
material
(Quantity)
Inventory of Semi-
Finished material
is updated
Stock of material
provided to
Vendor is
consumed
GRN Value
Inventory of Semi-
Finished material
= Processing
Charges + Value
of BOM
Components
Train Doc KBLCICSAP MM12MM-FI Integration Page 30
Following FI entries are posted during above process ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR Currency
Text of Material
10 Debit
Inventory account of
Semi-finished material
Respective Business Area where the Material is received
Inventory ndash Semi-Finished Goods
(Quantity of Semi-finished material X Processing Charges) + (Inventory Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
20 Credit
Change of Stock
from Sub-Contract
Respective Business Area where the Material is received
Change of Stock from Sub-Contract
(Quantity of Semi-finished material X Processing Charges) + (Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
30 Credit
Inventory of
Components with
Sub-Contractor
Respective Business Area where the Material is received
Inventory of Components with Sub-Contractor
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
40 Debit
Inventory of own
Components
Respective Business Area where the Material is received
Inventory of own Components
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
50 Debit Processing Charges
Other
Respective Business Area where the Material is received
Processing Charges Other
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of received material
60 Credit GR IR Clearing
Respective Business Area where the Material is received
GR IR Clearing Charges
Processing Charges to be paid to Vendor (Quantity of Ordered material X Processing Charges Rate)
INR (for domestic
Purchase)
Material master short text of received material
Train Doc KBLCICSAP MM12MM-FI Integration Page 31
Following is the example of the above transaction ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
235010 BA01 Inventory Semi-Finished Goods
315000 INR BRG Housing 25
13
2 Credit (91)
400040 BA01
Change Stock Semi-Finished
from Sub-Contractor
315000 - INR BRG Housing 25
13
3 Credit (99)
235040 BA01 Inventory of
semi-finished CI Castings
285200 - INR Bearing Housing (Kanban 30 Qty
Bin)
4 Debit (81)
400040 BA01 Change Stock Castings for Sub-Contract
285200 INR Bearing Housing (Kanban 30 Qty
Bin)
5 Credit (96)
130100 BA01 GR IR Clearing 29800 - INR BRG Housing 25
13
6 Debit (86)
411450 BA01 Processing
Charges Other 29800 INR
BRG Housing 25 13
Train Doc KBLCICSAP MM12MM-FI Integration Page 32
d) Import Purchase Order ndash 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 amp 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 ndash Mumbai JNPT Port) After material is cleared from port amp received in Plant GRN is posted Then the customs duty is also inventorised along with the basic price of material amp 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 ndash
Raw material
Valuation class ndash Imported Raw Material
With without account assignment
Import Purchase Order on Overseas Vendor
Customs duties Freight Charges etc of Clearing Agent are invoiced
Planned delivery cost invoice of Import PO is booked when the material arrives at Port
Quantity of Imported Material is updated
GRN is posted when material arrives at Plant (Quantity)
Basic Value of Material + Planned Delivery Costs + Customs Duty
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 33
Following are the FI entries posted when the GRN is posted ndash
Item Posting
Key GL Account Business Area Account Text
Amount in INR
Currency
1 Debit (89)
Inventory account of Imported Raw Material
Business Area where the material has been received
Inventory ndash Imported Raw Material
Quantity of Material X Basic Price of material
INR
2 Credit (96)
GR IR Clearing Account
Business Area where the material has been received
GR IR Clearing
Quantity of Material X Basic Price of material
INR
3 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Basic Customs Duty)
Basic Customs Duty Amount
INR
4 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Ecess on Basic Customs Duty)
Ecess amount on Basic Customs Duty
INR
5 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (SampH Ecess on Basic Customs Duty)
SampH Ecess amount on Basic Customs Duty
INR
6 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing CVD Amount INR
7 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing Ecess on CVD INR
8 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing SampH Ecess of CVD INR
Following is the example of the FI entries of imported material ndash
Item Posting
Key GL Account
Business Area
Account Text Amount in
INR Currency
1 Debit (89)
230110 BA01 Inventory ndash Imported Raw Material
1551800 INR
2 Credit (96)
130100 BA01 GR IR Clearing
1151500 - INR
3 Credit (96)
130120 BA01 Freight Clearing ndash Import
174400 - INR
4 Credit (96)
130120 BA01 Freight Clearing ndash Import
3400 - INR
5 Credit 130120 BA01 Freight Clearing ndash Import 1700 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 34
(96)
6 Credit (50)
130130 BA01 CVD Clearing
214500 - INR
7 Credit (50)
130130 BA01 CVD Clearing
4200 - INR
8 Credit (50)
130130 BA01 CVD Clearing
2100 - INR
e) Stock Transport Purchase Order ndash 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 amp 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR
Currency Plant
10 Credit Inventory Account
Business Area from where material is issued
Inventory of Material
Inventory Amount
INR
Plant from where
material is issued
20 Debit Inventory Account
Business Area where material is received
Inventory of material
Inventory Amount
INR Plant where material is received
Example of above transaction is as below ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Plant
10 Credit (99) 232080 BA05 Inventory of Spares 430250 - INR 2530
20 Debit (89) 232080 BA05 Inventory of Spares 430250 INR 9010
f) Service Purchase Order ndash When a Service Purchase Order (Item Category ndash 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 35
automatically posted by the system (which is based on the accepted service entry sheet) Following is the flow chart for Service Purchase Order ndash
Service Required for Project Cost Center Sale Order
Account assignment data such as Project or WBS Definition Cost Center Number Sale Order Number is maintained
Purchase Order with Item Category D (Service) amp required account assignment (Q K E) is raised
Service Entry sheet is created amp 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 36
Following are the FI postings at the time of accepting Service Entry Sheet ndash
Item Posting
Key GL Account
Business Area
Account Text
Amount in INR
Currency Text
10 Debit Consumption
Account
Business Area from where Service is delivered
Process Charges
Service Charges Amount
INR Service Text
20 Credit GR IR Clearing Account
Business Area where service is delivered
GR IR Clearing
Service Charges Amount
INR Service Text
Following is the example of above transaction ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Text
10 Debit (81) 411420 BA02 Process Charges - Foundry
384780 INR
Service Charges
20 Debit (96) 130100 BA02 GR IR Clearing 384780 -
INR Service Charges
Train Doc KBLCICSAP MM12MM-FI Integration Page 37
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 ndash a) Modvatable Excise Item ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40)
Excise Cenvat
Business Area where the material is received
Cenvat Input P F Basic Excise Duty amount
INR
2 Debit (40)
ECS Cenvat Amount
Business Area where the material is received
Cenvat ED Cess ECS Amount INR
3 Debit (40)
SampH ECS Cenvat Account
Business Area where the material is received
Cenvat SampH Ces-1
SampH ECS Amount
INR
4 Credit (50)
Modvat Clearing Account
Business Area where the material is received
Modvat Clearing Account
Amount equivalent to amount in 1 + 2 + 3
INR
Example of Modvatable excise entries is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40) 244030 BA01 Cenvat Input P F 362900 INR
2 Debit (40) 244031 BA01 Cenvat ED Cess 7300 INR
3 Debit (40) 244034 BA01 Cenvat SampH Ces-1
3600 INR
4 Credit (50) 130150 BA01 Modvat Clearing Account
373800 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 38
b) Trading excisable material received against GRN ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81)
COGS ndash Trading Material
Business Area where the material is received COGS ndash Trading
Material
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
2 Credit (96)
ECS Cenvat Amount
Business Area where the material is received
GR IR Clearing
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
Example of Excise duty inventorised -
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81) 410910 BA01 COGS ndash Trading Motor
433108300 INR
2 Credit (96) 130100 BA01 GR IR Clearing 433108300 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 39
FI entries at Material Consumption When a material is issued to a consumption account (For example ndash Consumption to Production Order Cost Center) the inventory reduces amp 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 ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Credit (99)
231020 BA05 Inventory ndash Other Raw material
15500 - INR
2 Debit (81)
400240 BA05 Consumption ndash Other Raw Material
15500 INR
2) Material consumption posted to Production Order ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Production Order ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (99)
235010 BA01 Inventory ndash Semi Finished Goods
334100 - INR
2 Debit (81)
400290 BA01 Consumption ndash Semi Finished Goods
334100 INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 40
3) Consumption of Stock provided to Sub ndash Contractor for processing of finished material when GRN of processed material is posted ndash
In a sub ndash contracting purchase order a semi finished material is ordered on the sub ndash contractor amp components are provided to the sub ndash 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 amp the concerned FI entries are posted
Train Doc KBLCICSAP MM12MM-FI Integration Page 41
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 amp 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 amp 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 ndash Quantity Variance Price Variance Quality Inspection Manual block date variance and Amount variance The process flow is as below ndash
Purchase Order for Material Service
GRN for Material Service Entry Sheet for Services performed
Purchase Order History
Delivery Costs
Material Master
Vendor Master
GL Account
Assets
Cost Center
Project
Sale Order
Invoice Verification FI Invoice
Document
MM Invoice Document
Further Document
Train Doc KBLCICSAP MM12MM-FI Integration Page 42
Following entries are posted when an invoice for vendor is posted in the system
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (31)
Vendor Account
Business Area Vendor Number
Amount to be paid to Vendor
INR
2 Debit (86)
GR IR Clearing
Business Area GR IR Clearing
GR IR Clearing Amount
INR
3 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash B Excise Duty
INR
4 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash ECS Amount
INR
5 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash SampH ECS Amt
INR
6 Debit (40)
VAT RM Deductible Amount
Business Area from where payment is made
VAT RM Deductible
VAT Amount to be paid to Vendor
INR
Example of above is transaction is as below ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (31) 300664 BA02 WalchandNagar Industries 13590000 - INR
2 Debit (86) 130100 BA02 GR IR Clearing 10000000 INR
3 Debit (40) 130150 Modvat Clearing 1600000 INR
4 Debit (40) 130150 Modvat Clearing 320000 INR
5 Debit (40) 130150 Modvat Clearing 160000 INR
6 Debit (40) 245039 BA02 VAT RM Deductible 1510000 INR
The diagrammatic view of above example is as below ndash
Purchase Order 100 PC at INR 1000 GRN for this PO 100 PC Invoice 100 PC at INR 1000
Goods Receipt
Invoice Receipt
100000 +
20800 +
15100 +
135900 ndash
100000 +
100000 ndash
20800 ndash
Stock Account
GR IR Account
Modvat clearing
VAT
Vendor
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 27
service is received
(For Imported material)
Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Example of the accounting entry is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
410920 BA02 COGS ndash Other Resale Article
18340100 INR LTAL PVC
ArmPVCSH Cable
2 Credit (96)
130100 BA02 GR IR Clearing
18340100 - INR LTAL PVC
ArmPVCSH Cable
iv) Purchase Order with account assignment as E (Sale Order) ndash
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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit Account of Inventory
Respective Business Area where the Material Service is received
Inventory account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Train Doc KBLCICSAP MM12MM-FI Integration Page 28
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233070 BA01 Inventory ndash
Traded Electric Motor
2583000 INR Motor Alstom 22
KW 4 Pole
2 Credit (96)
130100 BA01 GR IR Clearing
2583000 - INR Motor Alstom 22
KW 4 Pole
When we post GRN for traded goods following accounting entries are posted ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS) General Expenses
Respective Business Area where the Material Service is received
COGS account General Expenses Account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit
Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit
Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416320 BA01 General Expenses
56258000 INR
KOEL 85 HP 1800 RPM Engine
2 Credit (96)
130100 BA01 GR IR Clearing
56258000 - INR
KOEL 85 HP 1800 RPM Engine
c) Sub-Contracting Purchase Order ndash In the subndashContracting Purchase Order semindash
finished material is ordered on the Sub-Contractor amp the components are given to SubndashContractor 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 ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 29
Semi ndash Finished
Material
BOM of Semindash
Finished
Material
With without
account
assignment
Sub ndash
Contracting
Purchase Order
Components in
BOM provided to
Vendor for
processing
Transfer of
material to Sub
ndash Contractor
No accounting
entry Stock of
material
provided to
vendor is
updated
GRN of
processed
material
(Quantity)
Inventory of Semi-
Finished material
is updated
Stock of material
provided to
Vendor is
consumed
GRN Value
Inventory of Semi-
Finished material
= Processing
Charges + Value
of BOM
Components
Train Doc KBLCICSAP MM12MM-FI Integration Page 30
Following FI entries are posted during above process ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR Currency
Text of Material
10 Debit
Inventory account of
Semi-finished material
Respective Business Area where the Material is received
Inventory ndash Semi-Finished Goods
(Quantity of Semi-finished material X Processing Charges) + (Inventory Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
20 Credit
Change of Stock
from Sub-Contract
Respective Business Area where the Material is received
Change of Stock from Sub-Contract
(Quantity of Semi-finished material X Processing Charges) + (Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
30 Credit
Inventory of
Components with
Sub-Contractor
Respective Business Area where the Material is received
Inventory of Components with Sub-Contractor
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
40 Debit
Inventory of own
Components
Respective Business Area where the Material is received
Inventory of own Components
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
50 Debit Processing Charges
Other
Respective Business Area where the Material is received
Processing Charges Other
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of received material
60 Credit GR IR Clearing
Respective Business Area where the Material is received
GR IR Clearing Charges
Processing Charges to be paid to Vendor (Quantity of Ordered material X Processing Charges Rate)
INR (for domestic
Purchase)
Material master short text of received material
Train Doc KBLCICSAP MM12MM-FI Integration Page 31
Following is the example of the above transaction ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
235010 BA01 Inventory Semi-Finished Goods
315000 INR BRG Housing 25
13
2 Credit (91)
400040 BA01
Change Stock Semi-Finished
from Sub-Contractor
315000 - INR BRG Housing 25
13
3 Credit (99)
235040 BA01 Inventory of
semi-finished CI Castings
285200 - INR Bearing Housing (Kanban 30 Qty
Bin)
4 Debit (81)
400040 BA01 Change Stock Castings for Sub-Contract
285200 INR Bearing Housing (Kanban 30 Qty
Bin)
5 Credit (96)
130100 BA01 GR IR Clearing 29800 - INR BRG Housing 25
13
6 Debit (86)
411450 BA01 Processing
Charges Other 29800 INR
BRG Housing 25 13
Train Doc KBLCICSAP MM12MM-FI Integration Page 32
d) Import Purchase Order ndash 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 amp 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 ndash Mumbai JNPT Port) After material is cleared from port amp received in Plant GRN is posted Then the customs duty is also inventorised along with the basic price of material amp 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 ndash
Raw material
Valuation class ndash Imported Raw Material
With without account assignment
Import Purchase Order on Overseas Vendor
Customs duties Freight Charges etc of Clearing Agent are invoiced
Planned delivery cost invoice of Import PO is booked when the material arrives at Port
Quantity of Imported Material is updated
GRN is posted when material arrives at Plant (Quantity)
Basic Value of Material + Planned Delivery Costs + Customs Duty
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 33
Following are the FI entries posted when the GRN is posted ndash
Item Posting
Key GL Account Business Area Account Text
Amount in INR
Currency
1 Debit (89)
Inventory account of Imported Raw Material
Business Area where the material has been received
Inventory ndash Imported Raw Material
Quantity of Material X Basic Price of material
INR
2 Credit (96)
GR IR Clearing Account
Business Area where the material has been received
GR IR Clearing
Quantity of Material X Basic Price of material
INR
3 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Basic Customs Duty)
Basic Customs Duty Amount
INR
4 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Ecess on Basic Customs Duty)
Ecess amount on Basic Customs Duty
INR
5 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (SampH Ecess on Basic Customs Duty)
SampH Ecess amount on Basic Customs Duty
INR
6 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing CVD Amount INR
7 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing Ecess on CVD INR
8 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing SampH Ecess of CVD INR
Following is the example of the FI entries of imported material ndash
Item Posting
Key GL Account
Business Area
Account Text Amount in
INR Currency
1 Debit (89)
230110 BA01 Inventory ndash Imported Raw Material
1551800 INR
2 Credit (96)
130100 BA01 GR IR Clearing
1151500 - INR
3 Credit (96)
130120 BA01 Freight Clearing ndash Import
174400 - INR
4 Credit (96)
130120 BA01 Freight Clearing ndash Import
3400 - INR
5 Credit 130120 BA01 Freight Clearing ndash Import 1700 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 34
(96)
6 Credit (50)
130130 BA01 CVD Clearing
214500 - INR
7 Credit (50)
130130 BA01 CVD Clearing
4200 - INR
8 Credit (50)
130130 BA01 CVD Clearing
2100 - INR
e) Stock Transport Purchase Order ndash 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 amp 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR
Currency Plant
10 Credit Inventory Account
Business Area from where material is issued
Inventory of Material
Inventory Amount
INR
Plant from where
material is issued
20 Debit Inventory Account
Business Area where material is received
Inventory of material
Inventory Amount
INR Plant where material is received
Example of above transaction is as below ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Plant
10 Credit (99) 232080 BA05 Inventory of Spares 430250 - INR 2530
20 Debit (89) 232080 BA05 Inventory of Spares 430250 INR 9010
f) Service Purchase Order ndash When a Service Purchase Order (Item Category ndash 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 35
automatically posted by the system (which is based on the accepted service entry sheet) Following is the flow chart for Service Purchase Order ndash
Service Required for Project Cost Center Sale Order
Account assignment data such as Project or WBS Definition Cost Center Number Sale Order Number is maintained
Purchase Order with Item Category D (Service) amp required account assignment (Q K E) is raised
Service Entry sheet is created amp 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 36
Following are the FI postings at the time of accepting Service Entry Sheet ndash
Item Posting
Key GL Account
Business Area
Account Text
Amount in INR
Currency Text
10 Debit Consumption
Account
Business Area from where Service is delivered
Process Charges
Service Charges Amount
INR Service Text
20 Credit GR IR Clearing Account
Business Area where service is delivered
GR IR Clearing
Service Charges Amount
INR Service Text
Following is the example of above transaction ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Text
10 Debit (81) 411420 BA02 Process Charges - Foundry
384780 INR
Service Charges
20 Debit (96) 130100 BA02 GR IR Clearing 384780 -
INR Service Charges
Train Doc KBLCICSAP MM12MM-FI Integration Page 37
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 ndash a) Modvatable Excise Item ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40)
Excise Cenvat
Business Area where the material is received
Cenvat Input P F Basic Excise Duty amount
INR
2 Debit (40)
ECS Cenvat Amount
Business Area where the material is received
Cenvat ED Cess ECS Amount INR
3 Debit (40)
SampH ECS Cenvat Account
Business Area where the material is received
Cenvat SampH Ces-1
SampH ECS Amount
INR
4 Credit (50)
Modvat Clearing Account
Business Area where the material is received
Modvat Clearing Account
Amount equivalent to amount in 1 + 2 + 3
INR
Example of Modvatable excise entries is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40) 244030 BA01 Cenvat Input P F 362900 INR
2 Debit (40) 244031 BA01 Cenvat ED Cess 7300 INR
3 Debit (40) 244034 BA01 Cenvat SampH Ces-1
3600 INR
4 Credit (50) 130150 BA01 Modvat Clearing Account
373800 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 38
b) Trading excisable material received against GRN ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81)
COGS ndash Trading Material
Business Area where the material is received COGS ndash Trading
Material
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
2 Credit (96)
ECS Cenvat Amount
Business Area where the material is received
GR IR Clearing
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
Example of Excise duty inventorised -
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81) 410910 BA01 COGS ndash Trading Motor
433108300 INR
2 Credit (96) 130100 BA01 GR IR Clearing 433108300 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 39
FI entries at Material Consumption When a material is issued to a consumption account (For example ndash Consumption to Production Order Cost Center) the inventory reduces amp 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 ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Credit (99)
231020 BA05 Inventory ndash Other Raw material
15500 - INR
2 Debit (81)
400240 BA05 Consumption ndash Other Raw Material
15500 INR
2) Material consumption posted to Production Order ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Production Order ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (99)
235010 BA01 Inventory ndash Semi Finished Goods
334100 - INR
2 Debit (81)
400290 BA01 Consumption ndash Semi Finished Goods
334100 INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 40
3) Consumption of Stock provided to Sub ndash Contractor for processing of finished material when GRN of processed material is posted ndash
In a sub ndash contracting purchase order a semi finished material is ordered on the sub ndash contractor amp components are provided to the sub ndash 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 amp the concerned FI entries are posted
Train Doc KBLCICSAP MM12MM-FI Integration Page 41
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 amp 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 amp 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 ndash Quantity Variance Price Variance Quality Inspection Manual block date variance and Amount variance The process flow is as below ndash
Purchase Order for Material Service
GRN for Material Service Entry Sheet for Services performed
Purchase Order History
Delivery Costs
Material Master
Vendor Master
GL Account
Assets
Cost Center
Project
Sale Order
Invoice Verification FI Invoice
Document
MM Invoice Document
Further Document
Train Doc KBLCICSAP MM12MM-FI Integration Page 42
Following entries are posted when an invoice for vendor is posted in the system
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (31)
Vendor Account
Business Area Vendor Number
Amount to be paid to Vendor
INR
2 Debit (86)
GR IR Clearing
Business Area GR IR Clearing
GR IR Clearing Amount
INR
3 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash B Excise Duty
INR
4 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash ECS Amount
INR
5 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash SampH ECS Amt
INR
6 Debit (40)
VAT RM Deductible Amount
Business Area from where payment is made
VAT RM Deductible
VAT Amount to be paid to Vendor
INR
Example of above is transaction is as below ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (31) 300664 BA02 WalchandNagar Industries 13590000 - INR
2 Debit (86) 130100 BA02 GR IR Clearing 10000000 INR
3 Debit (40) 130150 Modvat Clearing 1600000 INR
4 Debit (40) 130150 Modvat Clearing 320000 INR
5 Debit (40) 130150 Modvat Clearing 160000 INR
6 Debit (40) 245039 BA02 VAT RM Deductible 1510000 INR
The diagrammatic view of above example is as below ndash
Purchase Order 100 PC at INR 1000 GRN for this PO 100 PC Invoice 100 PC at INR 1000
Goods Receipt
Invoice Receipt
100000 +
20800 +
15100 +
135900 ndash
100000 +
100000 ndash
20800 ndash
Stock Account
GR IR Account
Modvat clearing
VAT
Vendor
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 28
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
233070 BA01 Inventory ndash
Traded Electric Motor
2583000 INR Motor Alstom 22
KW 4 Pole
2 Credit (96)
130100 BA01 GR IR Clearing
2583000 - INR Motor Alstom 22
KW 4 Pole
When we post GRN for traded goods following accounting entries are posted ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in
INR Currency
Text of Material
10 Debit
Account of Cost of Goods Sold (COGS) General Expenses
Respective Business Area where the Material Service is received
COGS account General Expenses Account
(Quantity of Material X Purchase Order Price) + Freight Charges
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
20 Credit
Account of GR IR Clearing
Respective Business Area where the material service is received
GR IR Clearing Account
(Quantity of Material X Purchase Order Price)
INR (for domestic Purchase) Other Currency (For Imported material)
Material master short text Service Text
30 Credit
Account of Freight Clearing
Respective Business Area where the material is received
Freight Clearing
Freight amount to be paid to vendor
INR (for domestic Purchase) Other Currency (For Imported material)
Following is the example of above point ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
416320 BA01 General Expenses
56258000 INR
KOEL 85 HP 1800 RPM Engine
2 Credit (96)
130100 BA01 GR IR Clearing
56258000 - INR
KOEL 85 HP 1800 RPM Engine
c) Sub-Contracting Purchase Order ndash In the subndashContracting Purchase Order semindash
finished material is ordered on the Sub-Contractor amp the components are given to SubndashContractor 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 ndash
Train Doc KBLCICSAP MM12MM-FI Integration Page 29
Semi ndash Finished
Material
BOM of Semindash
Finished
Material
With without
account
assignment
Sub ndash
Contracting
Purchase Order
Components in
BOM provided to
Vendor for
processing
Transfer of
material to Sub
ndash Contractor
No accounting
entry Stock of
material
provided to
vendor is
updated
GRN of
processed
material
(Quantity)
Inventory of Semi-
Finished material
is updated
Stock of material
provided to
Vendor is
consumed
GRN Value
Inventory of Semi-
Finished material
= Processing
Charges + Value
of BOM
Components
Train Doc KBLCICSAP MM12MM-FI Integration Page 30
Following FI entries are posted during above process ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR Currency
Text of Material
10 Debit
Inventory account of
Semi-finished material
Respective Business Area where the Material is received
Inventory ndash Semi-Finished Goods
(Quantity of Semi-finished material X Processing Charges) + (Inventory Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
20 Credit
Change of Stock
from Sub-Contract
Respective Business Area where the Material is received
Change of Stock from Sub-Contract
(Quantity of Semi-finished material X Processing Charges) + (Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
30 Credit
Inventory of
Components with
Sub-Contractor
Respective Business Area where the Material is received
Inventory of Components with Sub-Contractor
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
40 Debit
Inventory of own
Components
Respective Business Area where the Material is received
Inventory of own Components
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
50 Debit Processing Charges
Other
Respective Business Area where the Material is received
Processing Charges Other
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of received material
60 Credit GR IR Clearing
Respective Business Area where the Material is received
GR IR Clearing Charges
Processing Charges to be paid to Vendor (Quantity of Ordered material X Processing Charges Rate)
INR (for domestic
Purchase)
Material master short text of received material
Train Doc KBLCICSAP MM12MM-FI Integration Page 31
Following is the example of the above transaction ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
235010 BA01 Inventory Semi-Finished Goods
315000 INR BRG Housing 25
13
2 Credit (91)
400040 BA01
Change Stock Semi-Finished
from Sub-Contractor
315000 - INR BRG Housing 25
13
3 Credit (99)
235040 BA01 Inventory of
semi-finished CI Castings
285200 - INR Bearing Housing (Kanban 30 Qty
Bin)
4 Debit (81)
400040 BA01 Change Stock Castings for Sub-Contract
285200 INR Bearing Housing (Kanban 30 Qty
Bin)
5 Credit (96)
130100 BA01 GR IR Clearing 29800 - INR BRG Housing 25
13
6 Debit (86)
411450 BA01 Processing
Charges Other 29800 INR
BRG Housing 25 13
Train Doc KBLCICSAP MM12MM-FI Integration Page 32
d) Import Purchase Order ndash 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 amp 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 ndash Mumbai JNPT Port) After material is cleared from port amp received in Plant GRN is posted Then the customs duty is also inventorised along with the basic price of material amp 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 ndash
Raw material
Valuation class ndash Imported Raw Material
With without account assignment
Import Purchase Order on Overseas Vendor
Customs duties Freight Charges etc of Clearing Agent are invoiced
Planned delivery cost invoice of Import PO is booked when the material arrives at Port
Quantity of Imported Material is updated
GRN is posted when material arrives at Plant (Quantity)
Basic Value of Material + Planned Delivery Costs + Customs Duty
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 33
Following are the FI entries posted when the GRN is posted ndash
Item Posting
Key GL Account Business Area Account Text
Amount in INR
Currency
1 Debit (89)
Inventory account of Imported Raw Material
Business Area where the material has been received
Inventory ndash Imported Raw Material
Quantity of Material X Basic Price of material
INR
2 Credit (96)
GR IR Clearing Account
Business Area where the material has been received
GR IR Clearing
Quantity of Material X Basic Price of material
INR
3 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Basic Customs Duty)
Basic Customs Duty Amount
INR
4 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Ecess on Basic Customs Duty)
Ecess amount on Basic Customs Duty
INR
5 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (SampH Ecess on Basic Customs Duty)
SampH Ecess amount on Basic Customs Duty
INR
6 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing CVD Amount INR
7 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing Ecess on CVD INR
8 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing SampH Ecess of CVD INR
Following is the example of the FI entries of imported material ndash
Item Posting
Key GL Account
Business Area
Account Text Amount in
INR Currency
1 Debit (89)
230110 BA01 Inventory ndash Imported Raw Material
1551800 INR
2 Credit (96)
130100 BA01 GR IR Clearing
1151500 - INR
3 Credit (96)
130120 BA01 Freight Clearing ndash Import
174400 - INR
4 Credit (96)
130120 BA01 Freight Clearing ndash Import
3400 - INR
5 Credit 130120 BA01 Freight Clearing ndash Import 1700 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 34
(96)
6 Credit (50)
130130 BA01 CVD Clearing
214500 - INR
7 Credit (50)
130130 BA01 CVD Clearing
4200 - INR
8 Credit (50)
130130 BA01 CVD Clearing
2100 - INR
e) Stock Transport Purchase Order ndash 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 amp 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR
Currency Plant
10 Credit Inventory Account
Business Area from where material is issued
Inventory of Material
Inventory Amount
INR
Plant from where
material is issued
20 Debit Inventory Account
Business Area where material is received
Inventory of material
Inventory Amount
INR Plant where material is received
Example of above transaction is as below ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Plant
10 Credit (99) 232080 BA05 Inventory of Spares 430250 - INR 2530
20 Debit (89) 232080 BA05 Inventory of Spares 430250 INR 9010
f) Service Purchase Order ndash When a Service Purchase Order (Item Category ndash 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 35
automatically posted by the system (which is based on the accepted service entry sheet) Following is the flow chart for Service Purchase Order ndash
Service Required for Project Cost Center Sale Order
Account assignment data such as Project or WBS Definition Cost Center Number Sale Order Number is maintained
Purchase Order with Item Category D (Service) amp required account assignment (Q K E) is raised
Service Entry sheet is created amp 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 36
Following are the FI postings at the time of accepting Service Entry Sheet ndash
Item Posting
Key GL Account
Business Area
Account Text
Amount in INR
Currency Text
10 Debit Consumption
Account
Business Area from where Service is delivered
Process Charges
Service Charges Amount
INR Service Text
20 Credit GR IR Clearing Account
Business Area where service is delivered
GR IR Clearing
Service Charges Amount
INR Service Text
Following is the example of above transaction ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Text
10 Debit (81) 411420 BA02 Process Charges - Foundry
384780 INR
Service Charges
20 Debit (96) 130100 BA02 GR IR Clearing 384780 -
INR Service Charges
Train Doc KBLCICSAP MM12MM-FI Integration Page 37
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 ndash a) Modvatable Excise Item ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40)
Excise Cenvat
Business Area where the material is received
Cenvat Input P F Basic Excise Duty amount
INR
2 Debit (40)
ECS Cenvat Amount
Business Area where the material is received
Cenvat ED Cess ECS Amount INR
3 Debit (40)
SampH ECS Cenvat Account
Business Area where the material is received
Cenvat SampH Ces-1
SampH ECS Amount
INR
4 Credit (50)
Modvat Clearing Account
Business Area where the material is received
Modvat Clearing Account
Amount equivalent to amount in 1 + 2 + 3
INR
Example of Modvatable excise entries is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40) 244030 BA01 Cenvat Input P F 362900 INR
2 Debit (40) 244031 BA01 Cenvat ED Cess 7300 INR
3 Debit (40) 244034 BA01 Cenvat SampH Ces-1
3600 INR
4 Credit (50) 130150 BA01 Modvat Clearing Account
373800 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 38
b) Trading excisable material received against GRN ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81)
COGS ndash Trading Material
Business Area where the material is received COGS ndash Trading
Material
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
2 Credit (96)
ECS Cenvat Amount
Business Area where the material is received
GR IR Clearing
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
Example of Excise duty inventorised -
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81) 410910 BA01 COGS ndash Trading Motor
433108300 INR
2 Credit (96) 130100 BA01 GR IR Clearing 433108300 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 39
FI entries at Material Consumption When a material is issued to a consumption account (For example ndash Consumption to Production Order Cost Center) the inventory reduces amp 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 ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Credit (99)
231020 BA05 Inventory ndash Other Raw material
15500 - INR
2 Debit (81)
400240 BA05 Consumption ndash Other Raw Material
15500 INR
2) Material consumption posted to Production Order ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Production Order ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (99)
235010 BA01 Inventory ndash Semi Finished Goods
334100 - INR
2 Debit (81)
400290 BA01 Consumption ndash Semi Finished Goods
334100 INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 40
3) Consumption of Stock provided to Sub ndash Contractor for processing of finished material when GRN of processed material is posted ndash
In a sub ndash contracting purchase order a semi finished material is ordered on the sub ndash contractor amp components are provided to the sub ndash 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 amp the concerned FI entries are posted
Train Doc KBLCICSAP MM12MM-FI Integration Page 41
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 amp 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 amp 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 ndash Quantity Variance Price Variance Quality Inspection Manual block date variance and Amount variance The process flow is as below ndash
Purchase Order for Material Service
GRN for Material Service Entry Sheet for Services performed
Purchase Order History
Delivery Costs
Material Master
Vendor Master
GL Account
Assets
Cost Center
Project
Sale Order
Invoice Verification FI Invoice
Document
MM Invoice Document
Further Document
Train Doc KBLCICSAP MM12MM-FI Integration Page 42
Following entries are posted when an invoice for vendor is posted in the system
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (31)
Vendor Account
Business Area Vendor Number
Amount to be paid to Vendor
INR
2 Debit (86)
GR IR Clearing
Business Area GR IR Clearing
GR IR Clearing Amount
INR
3 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash B Excise Duty
INR
4 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash ECS Amount
INR
5 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash SampH ECS Amt
INR
6 Debit (40)
VAT RM Deductible Amount
Business Area from where payment is made
VAT RM Deductible
VAT Amount to be paid to Vendor
INR
Example of above is transaction is as below ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (31) 300664 BA02 WalchandNagar Industries 13590000 - INR
2 Debit (86) 130100 BA02 GR IR Clearing 10000000 INR
3 Debit (40) 130150 Modvat Clearing 1600000 INR
4 Debit (40) 130150 Modvat Clearing 320000 INR
5 Debit (40) 130150 Modvat Clearing 160000 INR
6 Debit (40) 245039 BA02 VAT RM Deductible 1510000 INR
The diagrammatic view of above example is as below ndash
Purchase Order 100 PC at INR 1000 GRN for this PO 100 PC Invoice 100 PC at INR 1000
Goods Receipt
Invoice Receipt
100000 +
20800 +
15100 +
135900 ndash
100000 +
100000 ndash
20800 ndash
Stock Account
GR IR Account
Modvat clearing
VAT
Vendor
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 29
Semi ndash Finished
Material
BOM of Semindash
Finished
Material
With without
account
assignment
Sub ndash
Contracting
Purchase Order
Components in
BOM provided to
Vendor for
processing
Transfer of
material to Sub
ndash Contractor
No accounting
entry Stock of
material
provided to
vendor is
updated
GRN of
processed
material
(Quantity)
Inventory of Semi-
Finished material
is updated
Stock of material
provided to
Vendor is
consumed
GRN Value
Inventory of Semi-
Finished material
= Processing
Charges + Value
of BOM
Components
Train Doc KBLCICSAP MM12MM-FI Integration Page 30
Following FI entries are posted during above process ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR Currency
Text of Material
10 Debit
Inventory account of
Semi-finished material
Respective Business Area where the Material is received
Inventory ndash Semi-Finished Goods
(Quantity of Semi-finished material X Processing Charges) + (Inventory Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
20 Credit
Change of Stock
from Sub-Contract
Respective Business Area where the Material is received
Change of Stock from Sub-Contract
(Quantity of Semi-finished material X Processing Charges) + (Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
30 Credit
Inventory of
Components with
Sub-Contractor
Respective Business Area where the Material is received
Inventory of Components with Sub-Contractor
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
40 Debit
Inventory of own
Components
Respective Business Area where the Material is received
Inventory of own Components
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
50 Debit Processing Charges
Other
Respective Business Area where the Material is received
Processing Charges Other
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of received material
60 Credit GR IR Clearing
Respective Business Area where the Material is received
GR IR Clearing Charges
Processing Charges to be paid to Vendor (Quantity of Ordered material X Processing Charges Rate)
INR (for domestic
Purchase)
Material master short text of received material
Train Doc KBLCICSAP MM12MM-FI Integration Page 31
Following is the example of the above transaction ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
235010 BA01 Inventory Semi-Finished Goods
315000 INR BRG Housing 25
13
2 Credit (91)
400040 BA01
Change Stock Semi-Finished
from Sub-Contractor
315000 - INR BRG Housing 25
13
3 Credit (99)
235040 BA01 Inventory of
semi-finished CI Castings
285200 - INR Bearing Housing (Kanban 30 Qty
Bin)
4 Debit (81)
400040 BA01 Change Stock Castings for Sub-Contract
285200 INR Bearing Housing (Kanban 30 Qty
Bin)
5 Credit (96)
130100 BA01 GR IR Clearing 29800 - INR BRG Housing 25
13
6 Debit (86)
411450 BA01 Processing
Charges Other 29800 INR
BRG Housing 25 13
Train Doc KBLCICSAP MM12MM-FI Integration Page 32
d) Import Purchase Order ndash 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 amp 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 ndash Mumbai JNPT Port) After material is cleared from port amp received in Plant GRN is posted Then the customs duty is also inventorised along with the basic price of material amp 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 ndash
Raw material
Valuation class ndash Imported Raw Material
With without account assignment
Import Purchase Order on Overseas Vendor
Customs duties Freight Charges etc of Clearing Agent are invoiced
Planned delivery cost invoice of Import PO is booked when the material arrives at Port
Quantity of Imported Material is updated
GRN is posted when material arrives at Plant (Quantity)
Basic Value of Material + Planned Delivery Costs + Customs Duty
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 33
Following are the FI entries posted when the GRN is posted ndash
Item Posting
Key GL Account Business Area Account Text
Amount in INR
Currency
1 Debit (89)
Inventory account of Imported Raw Material
Business Area where the material has been received
Inventory ndash Imported Raw Material
Quantity of Material X Basic Price of material
INR
2 Credit (96)
GR IR Clearing Account
Business Area where the material has been received
GR IR Clearing
Quantity of Material X Basic Price of material
INR
3 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Basic Customs Duty)
Basic Customs Duty Amount
INR
4 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Ecess on Basic Customs Duty)
Ecess amount on Basic Customs Duty
INR
5 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (SampH Ecess on Basic Customs Duty)
SampH Ecess amount on Basic Customs Duty
INR
6 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing CVD Amount INR
7 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing Ecess on CVD INR
8 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing SampH Ecess of CVD INR
Following is the example of the FI entries of imported material ndash
Item Posting
Key GL Account
Business Area
Account Text Amount in
INR Currency
1 Debit (89)
230110 BA01 Inventory ndash Imported Raw Material
1551800 INR
2 Credit (96)
130100 BA01 GR IR Clearing
1151500 - INR
3 Credit (96)
130120 BA01 Freight Clearing ndash Import
174400 - INR
4 Credit (96)
130120 BA01 Freight Clearing ndash Import
3400 - INR
5 Credit 130120 BA01 Freight Clearing ndash Import 1700 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 34
(96)
6 Credit (50)
130130 BA01 CVD Clearing
214500 - INR
7 Credit (50)
130130 BA01 CVD Clearing
4200 - INR
8 Credit (50)
130130 BA01 CVD Clearing
2100 - INR
e) Stock Transport Purchase Order ndash 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 amp 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR
Currency Plant
10 Credit Inventory Account
Business Area from where material is issued
Inventory of Material
Inventory Amount
INR
Plant from where
material is issued
20 Debit Inventory Account
Business Area where material is received
Inventory of material
Inventory Amount
INR Plant where material is received
Example of above transaction is as below ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Plant
10 Credit (99) 232080 BA05 Inventory of Spares 430250 - INR 2530
20 Debit (89) 232080 BA05 Inventory of Spares 430250 INR 9010
f) Service Purchase Order ndash When a Service Purchase Order (Item Category ndash 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 35
automatically posted by the system (which is based on the accepted service entry sheet) Following is the flow chart for Service Purchase Order ndash
Service Required for Project Cost Center Sale Order
Account assignment data such as Project or WBS Definition Cost Center Number Sale Order Number is maintained
Purchase Order with Item Category D (Service) amp required account assignment (Q K E) is raised
Service Entry sheet is created amp 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 36
Following are the FI postings at the time of accepting Service Entry Sheet ndash
Item Posting
Key GL Account
Business Area
Account Text
Amount in INR
Currency Text
10 Debit Consumption
Account
Business Area from where Service is delivered
Process Charges
Service Charges Amount
INR Service Text
20 Credit GR IR Clearing Account
Business Area where service is delivered
GR IR Clearing
Service Charges Amount
INR Service Text
Following is the example of above transaction ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Text
10 Debit (81) 411420 BA02 Process Charges - Foundry
384780 INR
Service Charges
20 Debit (96) 130100 BA02 GR IR Clearing 384780 -
INR Service Charges
Train Doc KBLCICSAP MM12MM-FI Integration Page 37
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 ndash a) Modvatable Excise Item ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40)
Excise Cenvat
Business Area where the material is received
Cenvat Input P F Basic Excise Duty amount
INR
2 Debit (40)
ECS Cenvat Amount
Business Area where the material is received
Cenvat ED Cess ECS Amount INR
3 Debit (40)
SampH ECS Cenvat Account
Business Area where the material is received
Cenvat SampH Ces-1
SampH ECS Amount
INR
4 Credit (50)
Modvat Clearing Account
Business Area where the material is received
Modvat Clearing Account
Amount equivalent to amount in 1 + 2 + 3
INR
Example of Modvatable excise entries is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40) 244030 BA01 Cenvat Input P F 362900 INR
2 Debit (40) 244031 BA01 Cenvat ED Cess 7300 INR
3 Debit (40) 244034 BA01 Cenvat SampH Ces-1
3600 INR
4 Credit (50) 130150 BA01 Modvat Clearing Account
373800 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 38
b) Trading excisable material received against GRN ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81)
COGS ndash Trading Material
Business Area where the material is received COGS ndash Trading
Material
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
2 Credit (96)
ECS Cenvat Amount
Business Area where the material is received
GR IR Clearing
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
Example of Excise duty inventorised -
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81) 410910 BA01 COGS ndash Trading Motor
433108300 INR
2 Credit (96) 130100 BA01 GR IR Clearing 433108300 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 39
FI entries at Material Consumption When a material is issued to a consumption account (For example ndash Consumption to Production Order Cost Center) the inventory reduces amp 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 ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Credit (99)
231020 BA05 Inventory ndash Other Raw material
15500 - INR
2 Debit (81)
400240 BA05 Consumption ndash Other Raw Material
15500 INR
2) Material consumption posted to Production Order ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Production Order ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (99)
235010 BA01 Inventory ndash Semi Finished Goods
334100 - INR
2 Debit (81)
400290 BA01 Consumption ndash Semi Finished Goods
334100 INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 40
3) Consumption of Stock provided to Sub ndash Contractor for processing of finished material when GRN of processed material is posted ndash
In a sub ndash contracting purchase order a semi finished material is ordered on the sub ndash contractor amp components are provided to the sub ndash 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 amp the concerned FI entries are posted
Train Doc KBLCICSAP MM12MM-FI Integration Page 41
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 amp 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 amp 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 ndash Quantity Variance Price Variance Quality Inspection Manual block date variance and Amount variance The process flow is as below ndash
Purchase Order for Material Service
GRN for Material Service Entry Sheet for Services performed
Purchase Order History
Delivery Costs
Material Master
Vendor Master
GL Account
Assets
Cost Center
Project
Sale Order
Invoice Verification FI Invoice
Document
MM Invoice Document
Further Document
Train Doc KBLCICSAP MM12MM-FI Integration Page 42
Following entries are posted when an invoice for vendor is posted in the system
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (31)
Vendor Account
Business Area Vendor Number
Amount to be paid to Vendor
INR
2 Debit (86)
GR IR Clearing
Business Area GR IR Clearing
GR IR Clearing Amount
INR
3 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash B Excise Duty
INR
4 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash ECS Amount
INR
5 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash SampH ECS Amt
INR
6 Debit (40)
VAT RM Deductible Amount
Business Area from where payment is made
VAT RM Deductible
VAT Amount to be paid to Vendor
INR
Example of above is transaction is as below ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (31) 300664 BA02 WalchandNagar Industries 13590000 - INR
2 Debit (86) 130100 BA02 GR IR Clearing 10000000 INR
3 Debit (40) 130150 Modvat Clearing 1600000 INR
4 Debit (40) 130150 Modvat Clearing 320000 INR
5 Debit (40) 130150 Modvat Clearing 160000 INR
6 Debit (40) 245039 BA02 VAT RM Deductible 1510000 INR
The diagrammatic view of above example is as below ndash
Purchase Order 100 PC at INR 1000 GRN for this PO 100 PC Invoice 100 PC at INR 1000
Goods Receipt
Invoice Receipt
100000 +
20800 +
15100 +
135900 ndash
100000 +
100000 ndash
20800 ndash
Stock Account
GR IR Account
Modvat clearing
VAT
Vendor
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 30
Following FI entries are posted during above process ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR Currency
Text of Material
10 Debit
Inventory account of
Semi-finished material
Respective Business Area where the Material is received
Inventory ndash Semi-Finished Goods
(Quantity of Semi-finished material X Processing Charges) + (Inventory Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
20 Credit
Change of Stock
from Sub-Contract
Respective Business Area where the Material is received
Change of Stock from Sub-Contract
(Quantity of Semi-finished material X Processing Charges) + (Value of Components provided)
INR (for domestic
Purchase)
Material master short text of received material
30 Credit
Inventory of
Components with
Sub-Contractor
Respective Business Area where the Material is received
Inventory of Components with Sub-Contractor
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
40 Debit
Inventory of own
Components
Respective Business Area where the Material is received
Inventory of own Components
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of components
50 Debit Processing Charges
Other
Respective Business Area where the Material is received
Processing Charges Other
Inventory Value of Components
INR (for domestic
Purchase)
Material master short text of received material
60 Credit GR IR Clearing
Respective Business Area where the Material is received
GR IR Clearing Charges
Processing Charges to be paid to Vendor (Quantity of Ordered material X Processing Charges Rate)
INR (for domestic
Purchase)
Material master short text of received material
Train Doc KBLCICSAP MM12MM-FI Integration Page 31
Following is the example of the above transaction ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
235010 BA01 Inventory Semi-Finished Goods
315000 INR BRG Housing 25
13
2 Credit (91)
400040 BA01
Change Stock Semi-Finished
from Sub-Contractor
315000 - INR BRG Housing 25
13
3 Credit (99)
235040 BA01 Inventory of
semi-finished CI Castings
285200 - INR Bearing Housing (Kanban 30 Qty
Bin)
4 Debit (81)
400040 BA01 Change Stock Castings for Sub-Contract
285200 INR Bearing Housing (Kanban 30 Qty
Bin)
5 Credit (96)
130100 BA01 GR IR Clearing 29800 - INR BRG Housing 25
13
6 Debit (86)
411450 BA01 Processing
Charges Other 29800 INR
BRG Housing 25 13
Train Doc KBLCICSAP MM12MM-FI Integration Page 32
d) Import Purchase Order ndash 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 amp 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 ndash Mumbai JNPT Port) After material is cleared from port amp received in Plant GRN is posted Then the customs duty is also inventorised along with the basic price of material amp 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 ndash
Raw material
Valuation class ndash Imported Raw Material
With without account assignment
Import Purchase Order on Overseas Vendor
Customs duties Freight Charges etc of Clearing Agent are invoiced
Planned delivery cost invoice of Import PO is booked when the material arrives at Port
Quantity of Imported Material is updated
GRN is posted when material arrives at Plant (Quantity)
Basic Value of Material + Planned Delivery Costs + Customs Duty
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 33
Following are the FI entries posted when the GRN is posted ndash
Item Posting
Key GL Account Business Area Account Text
Amount in INR
Currency
1 Debit (89)
Inventory account of Imported Raw Material
Business Area where the material has been received
Inventory ndash Imported Raw Material
Quantity of Material X Basic Price of material
INR
2 Credit (96)
GR IR Clearing Account
Business Area where the material has been received
GR IR Clearing
Quantity of Material X Basic Price of material
INR
3 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Basic Customs Duty)
Basic Customs Duty Amount
INR
4 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Ecess on Basic Customs Duty)
Ecess amount on Basic Customs Duty
INR
5 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (SampH Ecess on Basic Customs Duty)
SampH Ecess amount on Basic Customs Duty
INR
6 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing CVD Amount INR
7 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing Ecess on CVD INR
8 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing SampH Ecess of CVD INR
Following is the example of the FI entries of imported material ndash
Item Posting
Key GL Account
Business Area
Account Text Amount in
INR Currency
1 Debit (89)
230110 BA01 Inventory ndash Imported Raw Material
1551800 INR
2 Credit (96)
130100 BA01 GR IR Clearing
1151500 - INR
3 Credit (96)
130120 BA01 Freight Clearing ndash Import
174400 - INR
4 Credit (96)
130120 BA01 Freight Clearing ndash Import
3400 - INR
5 Credit 130120 BA01 Freight Clearing ndash Import 1700 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 34
(96)
6 Credit (50)
130130 BA01 CVD Clearing
214500 - INR
7 Credit (50)
130130 BA01 CVD Clearing
4200 - INR
8 Credit (50)
130130 BA01 CVD Clearing
2100 - INR
e) Stock Transport Purchase Order ndash 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 amp 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR
Currency Plant
10 Credit Inventory Account
Business Area from where material is issued
Inventory of Material
Inventory Amount
INR
Plant from where
material is issued
20 Debit Inventory Account
Business Area where material is received
Inventory of material
Inventory Amount
INR Plant where material is received
Example of above transaction is as below ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Plant
10 Credit (99) 232080 BA05 Inventory of Spares 430250 - INR 2530
20 Debit (89) 232080 BA05 Inventory of Spares 430250 INR 9010
f) Service Purchase Order ndash When a Service Purchase Order (Item Category ndash 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 35
automatically posted by the system (which is based on the accepted service entry sheet) Following is the flow chart for Service Purchase Order ndash
Service Required for Project Cost Center Sale Order
Account assignment data such as Project or WBS Definition Cost Center Number Sale Order Number is maintained
Purchase Order with Item Category D (Service) amp required account assignment (Q K E) is raised
Service Entry sheet is created amp 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 36
Following are the FI postings at the time of accepting Service Entry Sheet ndash
Item Posting
Key GL Account
Business Area
Account Text
Amount in INR
Currency Text
10 Debit Consumption
Account
Business Area from where Service is delivered
Process Charges
Service Charges Amount
INR Service Text
20 Credit GR IR Clearing Account
Business Area where service is delivered
GR IR Clearing
Service Charges Amount
INR Service Text
Following is the example of above transaction ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Text
10 Debit (81) 411420 BA02 Process Charges - Foundry
384780 INR
Service Charges
20 Debit (96) 130100 BA02 GR IR Clearing 384780 -
INR Service Charges
Train Doc KBLCICSAP MM12MM-FI Integration Page 37
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 ndash a) Modvatable Excise Item ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40)
Excise Cenvat
Business Area where the material is received
Cenvat Input P F Basic Excise Duty amount
INR
2 Debit (40)
ECS Cenvat Amount
Business Area where the material is received
Cenvat ED Cess ECS Amount INR
3 Debit (40)
SampH ECS Cenvat Account
Business Area where the material is received
Cenvat SampH Ces-1
SampH ECS Amount
INR
4 Credit (50)
Modvat Clearing Account
Business Area where the material is received
Modvat Clearing Account
Amount equivalent to amount in 1 + 2 + 3
INR
Example of Modvatable excise entries is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40) 244030 BA01 Cenvat Input P F 362900 INR
2 Debit (40) 244031 BA01 Cenvat ED Cess 7300 INR
3 Debit (40) 244034 BA01 Cenvat SampH Ces-1
3600 INR
4 Credit (50) 130150 BA01 Modvat Clearing Account
373800 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 38
b) Trading excisable material received against GRN ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81)
COGS ndash Trading Material
Business Area where the material is received COGS ndash Trading
Material
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
2 Credit (96)
ECS Cenvat Amount
Business Area where the material is received
GR IR Clearing
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
Example of Excise duty inventorised -
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81) 410910 BA01 COGS ndash Trading Motor
433108300 INR
2 Credit (96) 130100 BA01 GR IR Clearing 433108300 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 39
FI entries at Material Consumption When a material is issued to a consumption account (For example ndash Consumption to Production Order Cost Center) the inventory reduces amp 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 ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Credit (99)
231020 BA05 Inventory ndash Other Raw material
15500 - INR
2 Debit (81)
400240 BA05 Consumption ndash Other Raw Material
15500 INR
2) Material consumption posted to Production Order ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Production Order ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (99)
235010 BA01 Inventory ndash Semi Finished Goods
334100 - INR
2 Debit (81)
400290 BA01 Consumption ndash Semi Finished Goods
334100 INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 40
3) Consumption of Stock provided to Sub ndash Contractor for processing of finished material when GRN of processed material is posted ndash
In a sub ndash contracting purchase order a semi finished material is ordered on the sub ndash contractor amp components are provided to the sub ndash 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 amp the concerned FI entries are posted
Train Doc KBLCICSAP MM12MM-FI Integration Page 41
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 amp 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 amp 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 ndash Quantity Variance Price Variance Quality Inspection Manual block date variance and Amount variance The process flow is as below ndash
Purchase Order for Material Service
GRN for Material Service Entry Sheet for Services performed
Purchase Order History
Delivery Costs
Material Master
Vendor Master
GL Account
Assets
Cost Center
Project
Sale Order
Invoice Verification FI Invoice
Document
MM Invoice Document
Further Document
Train Doc KBLCICSAP MM12MM-FI Integration Page 42
Following entries are posted when an invoice for vendor is posted in the system
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (31)
Vendor Account
Business Area Vendor Number
Amount to be paid to Vendor
INR
2 Debit (86)
GR IR Clearing
Business Area GR IR Clearing
GR IR Clearing Amount
INR
3 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash B Excise Duty
INR
4 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash ECS Amount
INR
5 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash SampH ECS Amt
INR
6 Debit (40)
VAT RM Deductible Amount
Business Area from where payment is made
VAT RM Deductible
VAT Amount to be paid to Vendor
INR
Example of above is transaction is as below ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (31) 300664 BA02 WalchandNagar Industries 13590000 - INR
2 Debit (86) 130100 BA02 GR IR Clearing 10000000 INR
3 Debit (40) 130150 Modvat Clearing 1600000 INR
4 Debit (40) 130150 Modvat Clearing 320000 INR
5 Debit (40) 130150 Modvat Clearing 160000 INR
6 Debit (40) 245039 BA02 VAT RM Deductible 1510000 INR
The diagrammatic view of above example is as below ndash
Purchase Order 100 PC at INR 1000 GRN for this PO 100 PC Invoice 100 PC at INR 1000
Goods Receipt
Invoice Receipt
100000 +
20800 +
15100 +
135900 ndash
100000 +
100000 ndash
20800 ndash
Stock Account
GR IR Account
Modvat clearing
VAT
Vendor
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 31
Following is the example of the above transaction ndash
Item Posting
Key Account
Business Area
Account Short Text
Amt in Local Cur
Cur Text
1 Debit (81)
235010 BA01 Inventory Semi-Finished Goods
315000 INR BRG Housing 25
13
2 Credit (91)
400040 BA01
Change Stock Semi-Finished
from Sub-Contractor
315000 - INR BRG Housing 25
13
3 Credit (99)
235040 BA01 Inventory of
semi-finished CI Castings
285200 - INR Bearing Housing (Kanban 30 Qty
Bin)
4 Debit (81)
400040 BA01 Change Stock Castings for Sub-Contract
285200 INR Bearing Housing (Kanban 30 Qty
Bin)
5 Credit (96)
130100 BA01 GR IR Clearing 29800 - INR BRG Housing 25
13
6 Debit (86)
411450 BA01 Processing
Charges Other 29800 INR
BRG Housing 25 13
Train Doc KBLCICSAP MM12MM-FI Integration Page 32
d) Import Purchase Order ndash 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 amp 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 ndash Mumbai JNPT Port) After material is cleared from port amp received in Plant GRN is posted Then the customs duty is also inventorised along with the basic price of material amp 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 ndash
Raw material
Valuation class ndash Imported Raw Material
With without account assignment
Import Purchase Order on Overseas Vendor
Customs duties Freight Charges etc of Clearing Agent are invoiced
Planned delivery cost invoice of Import PO is booked when the material arrives at Port
Quantity of Imported Material is updated
GRN is posted when material arrives at Plant (Quantity)
Basic Value of Material + Planned Delivery Costs + Customs Duty
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 33
Following are the FI entries posted when the GRN is posted ndash
Item Posting
Key GL Account Business Area Account Text
Amount in INR
Currency
1 Debit (89)
Inventory account of Imported Raw Material
Business Area where the material has been received
Inventory ndash Imported Raw Material
Quantity of Material X Basic Price of material
INR
2 Credit (96)
GR IR Clearing Account
Business Area where the material has been received
GR IR Clearing
Quantity of Material X Basic Price of material
INR
3 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Basic Customs Duty)
Basic Customs Duty Amount
INR
4 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Ecess on Basic Customs Duty)
Ecess amount on Basic Customs Duty
INR
5 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (SampH Ecess on Basic Customs Duty)
SampH Ecess amount on Basic Customs Duty
INR
6 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing CVD Amount INR
7 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing Ecess on CVD INR
8 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing SampH Ecess of CVD INR
Following is the example of the FI entries of imported material ndash
Item Posting
Key GL Account
Business Area
Account Text Amount in
INR Currency
1 Debit (89)
230110 BA01 Inventory ndash Imported Raw Material
1551800 INR
2 Credit (96)
130100 BA01 GR IR Clearing
1151500 - INR
3 Credit (96)
130120 BA01 Freight Clearing ndash Import
174400 - INR
4 Credit (96)
130120 BA01 Freight Clearing ndash Import
3400 - INR
5 Credit 130120 BA01 Freight Clearing ndash Import 1700 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 34
(96)
6 Credit (50)
130130 BA01 CVD Clearing
214500 - INR
7 Credit (50)
130130 BA01 CVD Clearing
4200 - INR
8 Credit (50)
130130 BA01 CVD Clearing
2100 - INR
e) Stock Transport Purchase Order ndash 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 amp 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR
Currency Plant
10 Credit Inventory Account
Business Area from where material is issued
Inventory of Material
Inventory Amount
INR
Plant from where
material is issued
20 Debit Inventory Account
Business Area where material is received
Inventory of material
Inventory Amount
INR Plant where material is received
Example of above transaction is as below ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Plant
10 Credit (99) 232080 BA05 Inventory of Spares 430250 - INR 2530
20 Debit (89) 232080 BA05 Inventory of Spares 430250 INR 9010
f) Service Purchase Order ndash When a Service Purchase Order (Item Category ndash 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 35
automatically posted by the system (which is based on the accepted service entry sheet) Following is the flow chart for Service Purchase Order ndash
Service Required for Project Cost Center Sale Order
Account assignment data such as Project or WBS Definition Cost Center Number Sale Order Number is maintained
Purchase Order with Item Category D (Service) amp required account assignment (Q K E) is raised
Service Entry sheet is created amp 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 36
Following are the FI postings at the time of accepting Service Entry Sheet ndash
Item Posting
Key GL Account
Business Area
Account Text
Amount in INR
Currency Text
10 Debit Consumption
Account
Business Area from where Service is delivered
Process Charges
Service Charges Amount
INR Service Text
20 Credit GR IR Clearing Account
Business Area where service is delivered
GR IR Clearing
Service Charges Amount
INR Service Text
Following is the example of above transaction ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Text
10 Debit (81) 411420 BA02 Process Charges - Foundry
384780 INR
Service Charges
20 Debit (96) 130100 BA02 GR IR Clearing 384780 -
INR Service Charges
Train Doc KBLCICSAP MM12MM-FI Integration Page 37
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 ndash a) Modvatable Excise Item ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40)
Excise Cenvat
Business Area where the material is received
Cenvat Input P F Basic Excise Duty amount
INR
2 Debit (40)
ECS Cenvat Amount
Business Area where the material is received
Cenvat ED Cess ECS Amount INR
3 Debit (40)
SampH ECS Cenvat Account
Business Area where the material is received
Cenvat SampH Ces-1
SampH ECS Amount
INR
4 Credit (50)
Modvat Clearing Account
Business Area where the material is received
Modvat Clearing Account
Amount equivalent to amount in 1 + 2 + 3
INR
Example of Modvatable excise entries is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40) 244030 BA01 Cenvat Input P F 362900 INR
2 Debit (40) 244031 BA01 Cenvat ED Cess 7300 INR
3 Debit (40) 244034 BA01 Cenvat SampH Ces-1
3600 INR
4 Credit (50) 130150 BA01 Modvat Clearing Account
373800 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 38
b) Trading excisable material received against GRN ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81)
COGS ndash Trading Material
Business Area where the material is received COGS ndash Trading
Material
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
2 Credit (96)
ECS Cenvat Amount
Business Area where the material is received
GR IR Clearing
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
Example of Excise duty inventorised -
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81) 410910 BA01 COGS ndash Trading Motor
433108300 INR
2 Credit (96) 130100 BA01 GR IR Clearing 433108300 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 39
FI entries at Material Consumption When a material is issued to a consumption account (For example ndash Consumption to Production Order Cost Center) the inventory reduces amp 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 ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Credit (99)
231020 BA05 Inventory ndash Other Raw material
15500 - INR
2 Debit (81)
400240 BA05 Consumption ndash Other Raw Material
15500 INR
2) Material consumption posted to Production Order ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Production Order ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (99)
235010 BA01 Inventory ndash Semi Finished Goods
334100 - INR
2 Debit (81)
400290 BA01 Consumption ndash Semi Finished Goods
334100 INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 40
3) Consumption of Stock provided to Sub ndash Contractor for processing of finished material when GRN of processed material is posted ndash
In a sub ndash contracting purchase order a semi finished material is ordered on the sub ndash contractor amp components are provided to the sub ndash 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 amp the concerned FI entries are posted
Train Doc KBLCICSAP MM12MM-FI Integration Page 41
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 amp 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 amp 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 ndash Quantity Variance Price Variance Quality Inspection Manual block date variance and Amount variance The process flow is as below ndash
Purchase Order for Material Service
GRN for Material Service Entry Sheet for Services performed
Purchase Order History
Delivery Costs
Material Master
Vendor Master
GL Account
Assets
Cost Center
Project
Sale Order
Invoice Verification FI Invoice
Document
MM Invoice Document
Further Document
Train Doc KBLCICSAP MM12MM-FI Integration Page 42
Following entries are posted when an invoice for vendor is posted in the system
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (31)
Vendor Account
Business Area Vendor Number
Amount to be paid to Vendor
INR
2 Debit (86)
GR IR Clearing
Business Area GR IR Clearing
GR IR Clearing Amount
INR
3 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash B Excise Duty
INR
4 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash ECS Amount
INR
5 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash SampH ECS Amt
INR
6 Debit (40)
VAT RM Deductible Amount
Business Area from where payment is made
VAT RM Deductible
VAT Amount to be paid to Vendor
INR
Example of above is transaction is as below ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (31) 300664 BA02 WalchandNagar Industries 13590000 - INR
2 Debit (86) 130100 BA02 GR IR Clearing 10000000 INR
3 Debit (40) 130150 Modvat Clearing 1600000 INR
4 Debit (40) 130150 Modvat Clearing 320000 INR
5 Debit (40) 130150 Modvat Clearing 160000 INR
6 Debit (40) 245039 BA02 VAT RM Deductible 1510000 INR
The diagrammatic view of above example is as below ndash
Purchase Order 100 PC at INR 1000 GRN for this PO 100 PC Invoice 100 PC at INR 1000
Goods Receipt
Invoice Receipt
100000 +
20800 +
15100 +
135900 ndash
100000 +
100000 ndash
20800 ndash
Stock Account
GR IR Account
Modvat clearing
VAT
Vendor
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 32
d) Import Purchase Order ndash 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 amp 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 ndash Mumbai JNPT Port) After material is cleared from port amp received in Plant GRN is posted Then the customs duty is also inventorised along with the basic price of material amp 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 ndash
Raw material
Valuation class ndash Imported Raw Material
With without account assignment
Import Purchase Order on Overseas Vendor
Customs duties Freight Charges etc of Clearing Agent are invoiced
Planned delivery cost invoice of Import PO is booked when the material arrives at Port
Quantity of Imported Material is updated
GRN is posted when material arrives at Plant (Quantity)
Basic Value of Material + Planned Delivery Costs + Customs Duty
GRN Value
Train Doc KBLCICSAP MM12MM-FI Integration Page 33
Following are the FI entries posted when the GRN is posted ndash
Item Posting
Key GL Account Business Area Account Text
Amount in INR
Currency
1 Debit (89)
Inventory account of Imported Raw Material
Business Area where the material has been received
Inventory ndash Imported Raw Material
Quantity of Material X Basic Price of material
INR
2 Credit (96)
GR IR Clearing Account
Business Area where the material has been received
GR IR Clearing
Quantity of Material X Basic Price of material
INR
3 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Basic Customs Duty)
Basic Customs Duty Amount
INR
4 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Ecess on Basic Customs Duty)
Ecess amount on Basic Customs Duty
INR
5 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (SampH Ecess on Basic Customs Duty)
SampH Ecess amount on Basic Customs Duty
INR
6 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing CVD Amount INR
7 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing Ecess on CVD INR
8 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing SampH Ecess of CVD INR
Following is the example of the FI entries of imported material ndash
Item Posting
Key GL Account
Business Area
Account Text Amount in
INR Currency
1 Debit (89)
230110 BA01 Inventory ndash Imported Raw Material
1551800 INR
2 Credit (96)
130100 BA01 GR IR Clearing
1151500 - INR
3 Credit (96)
130120 BA01 Freight Clearing ndash Import
174400 - INR
4 Credit (96)
130120 BA01 Freight Clearing ndash Import
3400 - INR
5 Credit 130120 BA01 Freight Clearing ndash Import 1700 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 34
(96)
6 Credit (50)
130130 BA01 CVD Clearing
214500 - INR
7 Credit (50)
130130 BA01 CVD Clearing
4200 - INR
8 Credit (50)
130130 BA01 CVD Clearing
2100 - INR
e) Stock Transport Purchase Order ndash 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 amp 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR
Currency Plant
10 Credit Inventory Account
Business Area from where material is issued
Inventory of Material
Inventory Amount
INR
Plant from where
material is issued
20 Debit Inventory Account
Business Area where material is received
Inventory of material
Inventory Amount
INR Plant where material is received
Example of above transaction is as below ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Plant
10 Credit (99) 232080 BA05 Inventory of Spares 430250 - INR 2530
20 Debit (89) 232080 BA05 Inventory of Spares 430250 INR 9010
f) Service Purchase Order ndash When a Service Purchase Order (Item Category ndash 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 35
automatically posted by the system (which is based on the accepted service entry sheet) Following is the flow chart for Service Purchase Order ndash
Service Required for Project Cost Center Sale Order
Account assignment data such as Project or WBS Definition Cost Center Number Sale Order Number is maintained
Purchase Order with Item Category D (Service) amp required account assignment (Q K E) is raised
Service Entry sheet is created amp 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 36
Following are the FI postings at the time of accepting Service Entry Sheet ndash
Item Posting
Key GL Account
Business Area
Account Text
Amount in INR
Currency Text
10 Debit Consumption
Account
Business Area from where Service is delivered
Process Charges
Service Charges Amount
INR Service Text
20 Credit GR IR Clearing Account
Business Area where service is delivered
GR IR Clearing
Service Charges Amount
INR Service Text
Following is the example of above transaction ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Text
10 Debit (81) 411420 BA02 Process Charges - Foundry
384780 INR
Service Charges
20 Debit (96) 130100 BA02 GR IR Clearing 384780 -
INR Service Charges
Train Doc KBLCICSAP MM12MM-FI Integration Page 37
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 ndash a) Modvatable Excise Item ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40)
Excise Cenvat
Business Area where the material is received
Cenvat Input P F Basic Excise Duty amount
INR
2 Debit (40)
ECS Cenvat Amount
Business Area where the material is received
Cenvat ED Cess ECS Amount INR
3 Debit (40)
SampH ECS Cenvat Account
Business Area where the material is received
Cenvat SampH Ces-1
SampH ECS Amount
INR
4 Credit (50)
Modvat Clearing Account
Business Area where the material is received
Modvat Clearing Account
Amount equivalent to amount in 1 + 2 + 3
INR
Example of Modvatable excise entries is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40) 244030 BA01 Cenvat Input P F 362900 INR
2 Debit (40) 244031 BA01 Cenvat ED Cess 7300 INR
3 Debit (40) 244034 BA01 Cenvat SampH Ces-1
3600 INR
4 Credit (50) 130150 BA01 Modvat Clearing Account
373800 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 38
b) Trading excisable material received against GRN ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81)
COGS ndash Trading Material
Business Area where the material is received COGS ndash Trading
Material
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
2 Credit (96)
ECS Cenvat Amount
Business Area where the material is received
GR IR Clearing
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
Example of Excise duty inventorised -
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81) 410910 BA01 COGS ndash Trading Motor
433108300 INR
2 Credit (96) 130100 BA01 GR IR Clearing 433108300 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 39
FI entries at Material Consumption When a material is issued to a consumption account (For example ndash Consumption to Production Order Cost Center) the inventory reduces amp 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 ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Credit (99)
231020 BA05 Inventory ndash Other Raw material
15500 - INR
2 Debit (81)
400240 BA05 Consumption ndash Other Raw Material
15500 INR
2) Material consumption posted to Production Order ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Production Order ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (99)
235010 BA01 Inventory ndash Semi Finished Goods
334100 - INR
2 Debit (81)
400290 BA01 Consumption ndash Semi Finished Goods
334100 INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 40
3) Consumption of Stock provided to Sub ndash Contractor for processing of finished material when GRN of processed material is posted ndash
In a sub ndash contracting purchase order a semi finished material is ordered on the sub ndash contractor amp components are provided to the sub ndash 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 amp the concerned FI entries are posted
Train Doc KBLCICSAP MM12MM-FI Integration Page 41
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 amp 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 amp 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 ndash Quantity Variance Price Variance Quality Inspection Manual block date variance and Amount variance The process flow is as below ndash
Purchase Order for Material Service
GRN for Material Service Entry Sheet for Services performed
Purchase Order History
Delivery Costs
Material Master
Vendor Master
GL Account
Assets
Cost Center
Project
Sale Order
Invoice Verification FI Invoice
Document
MM Invoice Document
Further Document
Train Doc KBLCICSAP MM12MM-FI Integration Page 42
Following entries are posted when an invoice for vendor is posted in the system
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (31)
Vendor Account
Business Area Vendor Number
Amount to be paid to Vendor
INR
2 Debit (86)
GR IR Clearing
Business Area GR IR Clearing
GR IR Clearing Amount
INR
3 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash B Excise Duty
INR
4 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash ECS Amount
INR
5 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash SampH ECS Amt
INR
6 Debit (40)
VAT RM Deductible Amount
Business Area from where payment is made
VAT RM Deductible
VAT Amount to be paid to Vendor
INR
Example of above is transaction is as below ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (31) 300664 BA02 WalchandNagar Industries 13590000 - INR
2 Debit (86) 130100 BA02 GR IR Clearing 10000000 INR
3 Debit (40) 130150 Modvat Clearing 1600000 INR
4 Debit (40) 130150 Modvat Clearing 320000 INR
5 Debit (40) 130150 Modvat Clearing 160000 INR
6 Debit (40) 245039 BA02 VAT RM Deductible 1510000 INR
The diagrammatic view of above example is as below ndash
Purchase Order 100 PC at INR 1000 GRN for this PO 100 PC Invoice 100 PC at INR 1000
Goods Receipt
Invoice Receipt
100000 +
20800 +
15100 +
135900 ndash
100000 +
100000 ndash
20800 ndash
Stock Account
GR IR Account
Modvat clearing
VAT
Vendor
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 33
Following are the FI entries posted when the GRN is posted ndash
Item Posting
Key GL Account Business Area Account Text
Amount in INR
Currency
1 Debit (89)
Inventory account of Imported Raw Material
Business Area where the material has been received
Inventory ndash Imported Raw Material
Quantity of Material X Basic Price of material
INR
2 Credit (96)
GR IR Clearing Account
Business Area where the material has been received
GR IR Clearing
Quantity of Material X Basic Price of material
INR
3 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Basic Customs Duty)
Basic Customs Duty Amount
INR
4 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (Ecess on Basic Customs Duty)
Ecess amount on Basic Customs Duty
INR
5 Credit (96)
Freight Clearing (Imported) Account
Business Area where the material has been received
Freight Clearing ndash Import (SampH Ecess on Basic Customs Duty)
SampH Ecess amount on Basic Customs Duty
INR
6 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing CVD Amount INR
7 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing Ecess on CVD INR
8 Credit (50)
CVD Clearing Account
Business Area where the material has been received
CVD Clearing SampH Ecess of CVD INR
Following is the example of the FI entries of imported material ndash
Item Posting
Key GL Account
Business Area
Account Text Amount in
INR Currency
1 Debit (89)
230110 BA01 Inventory ndash Imported Raw Material
1551800 INR
2 Credit (96)
130100 BA01 GR IR Clearing
1151500 - INR
3 Credit (96)
130120 BA01 Freight Clearing ndash Import
174400 - INR
4 Credit (96)
130120 BA01 Freight Clearing ndash Import
3400 - INR
5 Credit 130120 BA01 Freight Clearing ndash Import 1700 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 34
(96)
6 Credit (50)
130130 BA01 CVD Clearing
214500 - INR
7 Credit (50)
130130 BA01 CVD Clearing
4200 - INR
8 Credit (50)
130130 BA01 CVD Clearing
2100 - INR
e) Stock Transport Purchase Order ndash 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 amp 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR
Currency Plant
10 Credit Inventory Account
Business Area from where material is issued
Inventory of Material
Inventory Amount
INR
Plant from where
material is issued
20 Debit Inventory Account
Business Area where material is received
Inventory of material
Inventory Amount
INR Plant where material is received
Example of above transaction is as below ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Plant
10 Credit (99) 232080 BA05 Inventory of Spares 430250 - INR 2530
20 Debit (89) 232080 BA05 Inventory of Spares 430250 INR 9010
f) Service Purchase Order ndash When a Service Purchase Order (Item Category ndash 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 35
automatically posted by the system (which is based on the accepted service entry sheet) Following is the flow chart for Service Purchase Order ndash
Service Required for Project Cost Center Sale Order
Account assignment data such as Project or WBS Definition Cost Center Number Sale Order Number is maintained
Purchase Order with Item Category D (Service) amp required account assignment (Q K E) is raised
Service Entry sheet is created amp 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 36
Following are the FI postings at the time of accepting Service Entry Sheet ndash
Item Posting
Key GL Account
Business Area
Account Text
Amount in INR
Currency Text
10 Debit Consumption
Account
Business Area from where Service is delivered
Process Charges
Service Charges Amount
INR Service Text
20 Credit GR IR Clearing Account
Business Area where service is delivered
GR IR Clearing
Service Charges Amount
INR Service Text
Following is the example of above transaction ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Text
10 Debit (81) 411420 BA02 Process Charges - Foundry
384780 INR
Service Charges
20 Debit (96) 130100 BA02 GR IR Clearing 384780 -
INR Service Charges
Train Doc KBLCICSAP MM12MM-FI Integration Page 37
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 ndash a) Modvatable Excise Item ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40)
Excise Cenvat
Business Area where the material is received
Cenvat Input P F Basic Excise Duty amount
INR
2 Debit (40)
ECS Cenvat Amount
Business Area where the material is received
Cenvat ED Cess ECS Amount INR
3 Debit (40)
SampH ECS Cenvat Account
Business Area where the material is received
Cenvat SampH Ces-1
SampH ECS Amount
INR
4 Credit (50)
Modvat Clearing Account
Business Area where the material is received
Modvat Clearing Account
Amount equivalent to amount in 1 + 2 + 3
INR
Example of Modvatable excise entries is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40) 244030 BA01 Cenvat Input P F 362900 INR
2 Debit (40) 244031 BA01 Cenvat ED Cess 7300 INR
3 Debit (40) 244034 BA01 Cenvat SampH Ces-1
3600 INR
4 Credit (50) 130150 BA01 Modvat Clearing Account
373800 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 38
b) Trading excisable material received against GRN ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81)
COGS ndash Trading Material
Business Area where the material is received COGS ndash Trading
Material
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
2 Credit (96)
ECS Cenvat Amount
Business Area where the material is received
GR IR Clearing
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
Example of Excise duty inventorised -
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81) 410910 BA01 COGS ndash Trading Motor
433108300 INR
2 Credit (96) 130100 BA01 GR IR Clearing 433108300 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 39
FI entries at Material Consumption When a material is issued to a consumption account (For example ndash Consumption to Production Order Cost Center) the inventory reduces amp 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 ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Credit (99)
231020 BA05 Inventory ndash Other Raw material
15500 - INR
2 Debit (81)
400240 BA05 Consumption ndash Other Raw Material
15500 INR
2) Material consumption posted to Production Order ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Production Order ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (99)
235010 BA01 Inventory ndash Semi Finished Goods
334100 - INR
2 Debit (81)
400290 BA01 Consumption ndash Semi Finished Goods
334100 INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 40
3) Consumption of Stock provided to Sub ndash Contractor for processing of finished material when GRN of processed material is posted ndash
In a sub ndash contracting purchase order a semi finished material is ordered on the sub ndash contractor amp components are provided to the sub ndash 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 amp the concerned FI entries are posted
Train Doc KBLCICSAP MM12MM-FI Integration Page 41
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 amp 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 amp 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 ndash Quantity Variance Price Variance Quality Inspection Manual block date variance and Amount variance The process flow is as below ndash
Purchase Order for Material Service
GRN for Material Service Entry Sheet for Services performed
Purchase Order History
Delivery Costs
Material Master
Vendor Master
GL Account
Assets
Cost Center
Project
Sale Order
Invoice Verification FI Invoice
Document
MM Invoice Document
Further Document
Train Doc KBLCICSAP MM12MM-FI Integration Page 42
Following entries are posted when an invoice for vendor is posted in the system
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (31)
Vendor Account
Business Area Vendor Number
Amount to be paid to Vendor
INR
2 Debit (86)
GR IR Clearing
Business Area GR IR Clearing
GR IR Clearing Amount
INR
3 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash B Excise Duty
INR
4 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash ECS Amount
INR
5 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash SampH ECS Amt
INR
6 Debit (40)
VAT RM Deductible Amount
Business Area from where payment is made
VAT RM Deductible
VAT Amount to be paid to Vendor
INR
Example of above is transaction is as below ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (31) 300664 BA02 WalchandNagar Industries 13590000 - INR
2 Debit (86) 130100 BA02 GR IR Clearing 10000000 INR
3 Debit (40) 130150 Modvat Clearing 1600000 INR
4 Debit (40) 130150 Modvat Clearing 320000 INR
5 Debit (40) 130150 Modvat Clearing 160000 INR
6 Debit (40) 245039 BA02 VAT RM Deductible 1510000 INR
The diagrammatic view of above example is as below ndash
Purchase Order 100 PC at INR 1000 GRN for this PO 100 PC Invoice 100 PC at INR 1000
Goods Receipt
Invoice Receipt
100000 +
20800 +
15100 +
135900 ndash
100000 +
100000 ndash
20800 ndash
Stock Account
GR IR Account
Modvat clearing
VAT
Vendor
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 34
(96)
6 Credit (50)
130130 BA01 CVD Clearing
214500 - INR
7 Credit (50)
130130 BA01 CVD Clearing
4200 - INR
8 Credit (50)
130130 BA01 CVD Clearing
2100 - INR
e) Stock Transport Purchase Order ndash 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 amp 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 ndash
Item Posting
Key GL
Account Business
Area Account
Text Amount in INR
Currency Plant
10 Credit Inventory Account
Business Area from where material is issued
Inventory of Material
Inventory Amount
INR
Plant from where
material is issued
20 Debit Inventory Account
Business Area where material is received
Inventory of material
Inventory Amount
INR Plant where material is received
Example of above transaction is as below ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Plant
10 Credit (99) 232080 BA05 Inventory of Spares 430250 - INR 2530
20 Debit (89) 232080 BA05 Inventory of Spares 430250 INR 9010
f) Service Purchase Order ndash When a Service Purchase Order (Item Category ndash 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 35
automatically posted by the system (which is based on the accepted service entry sheet) Following is the flow chart for Service Purchase Order ndash
Service Required for Project Cost Center Sale Order
Account assignment data such as Project or WBS Definition Cost Center Number Sale Order Number is maintained
Purchase Order with Item Category D (Service) amp required account assignment (Q K E) is raised
Service Entry sheet is created amp 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 36
Following are the FI postings at the time of accepting Service Entry Sheet ndash
Item Posting
Key GL Account
Business Area
Account Text
Amount in INR
Currency Text
10 Debit Consumption
Account
Business Area from where Service is delivered
Process Charges
Service Charges Amount
INR Service Text
20 Credit GR IR Clearing Account
Business Area where service is delivered
GR IR Clearing
Service Charges Amount
INR Service Text
Following is the example of above transaction ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Text
10 Debit (81) 411420 BA02 Process Charges - Foundry
384780 INR
Service Charges
20 Debit (96) 130100 BA02 GR IR Clearing 384780 -
INR Service Charges
Train Doc KBLCICSAP MM12MM-FI Integration Page 37
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 ndash a) Modvatable Excise Item ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40)
Excise Cenvat
Business Area where the material is received
Cenvat Input P F Basic Excise Duty amount
INR
2 Debit (40)
ECS Cenvat Amount
Business Area where the material is received
Cenvat ED Cess ECS Amount INR
3 Debit (40)
SampH ECS Cenvat Account
Business Area where the material is received
Cenvat SampH Ces-1
SampH ECS Amount
INR
4 Credit (50)
Modvat Clearing Account
Business Area where the material is received
Modvat Clearing Account
Amount equivalent to amount in 1 + 2 + 3
INR
Example of Modvatable excise entries is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40) 244030 BA01 Cenvat Input P F 362900 INR
2 Debit (40) 244031 BA01 Cenvat ED Cess 7300 INR
3 Debit (40) 244034 BA01 Cenvat SampH Ces-1
3600 INR
4 Credit (50) 130150 BA01 Modvat Clearing Account
373800 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 38
b) Trading excisable material received against GRN ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81)
COGS ndash Trading Material
Business Area where the material is received COGS ndash Trading
Material
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
2 Credit (96)
ECS Cenvat Amount
Business Area where the material is received
GR IR Clearing
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
Example of Excise duty inventorised -
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81) 410910 BA01 COGS ndash Trading Motor
433108300 INR
2 Credit (96) 130100 BA01 GR IR Clearing 433108300 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 39
FI entries at Material Consumption When a material is issued to a consumption account (For example ndash Consumption to Production Order Cost Center) the inventory reduces amp 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 ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Credit (99)
231020 BA05 Inventory ndash Other Raw material
15500 - INR
2 Debit (81)
400240 BA05 Consumption ndash Other Raw Material
15500 INR
2) Material consumption posted to Production Order ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Production Order ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (99)
235010 BA01 Inventory ndash Semi Finished Goods
334100 - INR
2 Debit (81)
400290 BA01 Consumption ndash Semi Finished Goods
334100 INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 40
3) Consumption of Stock provided to Sub ndash Contractor for processing of finished material when GRN of processed material is posted ndash
In a sub ndash contracting purchase order a semi finished material is ordered on the sub ndash contractor amp components are provided to the sub ndash 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 amp the concerned FI entries are posted
Train Doc KBLCICSAP MM12MM-FI Integration Page 41
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 amp 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 amp 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 ndash Quantity Variance Price Variance Quality Inspection Manual block date variance and Amount variance The process flow is as below ndash
Purchase Order for Material Service
GRN for Material Service Entry Sheet for Services performed
Purchase Order History
Delivery Costs
Material Master
Vendor Master
GL Account
Assets
Cost Center
Project
Sale Order
Invoice Verification FI Invoice
Document
MM Invoice Document
Further Document
Train Doc KBLCICSAP MM12MM-FI Integration Page 42
Following entries are posted when an invoice for vendor is posted in the system
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (31)
Vendor Account
Business Area Vendor Number
Amount to be paid to Vendor
INR
2 Debit (86)
GR IR Clearing
Business Area GR IR Clearing
GR IR Clearing Amount
INR
3 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash B Excise Duty
INR
4 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash ECS Amount
INR
5 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash SampH ECS Amt
INR
6 Debit (40)
VAT RM Deductible Amount
Business Area from where payment is made
VAT RM Deductible
VAT Amount to be paid to Vendor
INR
Example of above is transaction is as below ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (31) 300664 BA02 WalchandNagar Industries 13590000 - INR
2 Debit (86) 130100 BA02 GR IR Clearing 10000000 INR
3 Debit (40) 130150 Modvat Clearing 1600000 INR
4 Debit (40) 130150 Modvat Clearing 320000 INR
5 Debit (40) 130150 Modvat Clearing 160000 INR
6 Debit (40) 245039 BA02 VAT RM Deductible 1510000 INR
The diagrammatic view of above example is as below ndash
Purchase Order 100 PC at INR 1000 GRN for this PO 100 PC Invoice 100 PC at INR 1000
Goods Receipt
Invoice Receipt
100000 +
20800 +
15100 +
135900 ndash
100000 +
100000 ndash
20800 ndash
Stock Account
GR IR Account
Modvat clearing
VAT
Vendor
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 35
automatically posted by the system (which is based on the accepted service entry sheet) Following is the flow chart for Service Purchase Order ndash
Service Required for Project Cost Center Sale Order
Account assignment data such as Project or WBS Definition Cost Center Number Sale Order Number is maintained
Purchase Order with Item Category D (Service) amp required account assignment (Q K E) is raised
Service Entry sheet is created amp 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
Train Doc KBLCICSAP MM12MM-FI Integration Page 36
Following are the FI postings at the time of accepting Service Entry Sheet ndash
Item Posting
Key GL Account
Business Area
Account Text
Amount in INR
Currency Text
10 Debit Consumption
Account
Business Area from where Service is delivered
Process Charges
Service Charges Amount
INR Service Text
20 Credit GR IR Clearing Account
Business Area where service is delivered
GR IR Clearing
Service Charges Amount
INR Service Text
Following is the example of above transaction ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Text
10 Debit (81) 411420 BA02 Process Charges - Foundry
384780 INR
Service Charges
20 Debit (96) 130100 BA02 GR IR Clearing 384780 -
INR Service Charges
Train Doc KBLCICSAP MM12MM-FI Integration Page 37
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 ndash a) Modvatable Excise Item ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40)
Excise Cenvat
Business Area where the material is received
Cenvat Input P F Basic Excise Duty amount
INR
2 Debit (40)
ECS Cenvat Amount
Business Area where the material is received
Cenvat ED Cess ECS Amount INR
3 Debit (40)
SampH ECS Cenvat Account
Business Area where the material is received
Cenvat SampH Ces-1
SampH ECS Amount
INR
4 Credit (50)
Modvat Clearing Account
Business Area where the material is received
Modvat Clearing Account
Amount equivalent to amount in 1 + 2 + 3
INR
Example of Modvatable excise entries is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40) 244030 BA01 Cenvat Input P F 362900 INR
2 Debit (40) 244031 BA01 Cenvat ED Cess 7300 INR
3 Debit (40) 244034 BA01 Cenvat SampH Ces-1
3600 INR
4 Credit (50) 130150 BA01 Modvat Clearing Account
373800 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 38
b) Trading excisable material received against GRN ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81)
COGS ndash Trading Material
Business Area where the material is received COGS ndash Trading
Material
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
2 Credit (96)
ECS Cenvat Amount
Business Area where the material is received
GR IR Clearing
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
Example of Excise duty inventorised -
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81) 410910 BA01 COGS ndash Trading Motor
433108300 INR
2 Credit (96) 130100 BA01 GR IR Clearing 433108300 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 39
FI entries at Material Consumption When a material is issued to a consumption account (For example ndash Consumption to Production Order Cost Center) the inventory reduces amp 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 ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Credit (99)
231020 BA05 Inventory ndash Other Raw material
15500 - INR
2 Debit (81)
400240 BA05 Consumption ndash Other Raw Material
15500 INR
2) Material consumption posted to Production Order ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Production Order ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (99)
235010 BA01 Inventory ndash Semi Finished Goods
334100 - INR
2 Debit (81)
400290 BA01 Consumption ndash Semi Finished Goods
334100 INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 40
3) Consumption of Stock provided to Sub ndash Contractor for processing of finished material when GRN of processed material is posted ndash
In a sub ndash contracting purchase order a semi finished material is ordered on the sub ndash contractor amp components are provided to the sub ndash 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 amp the concerned FI entries are posted
Train Doc KBLCICSAP MM12MM-FI Integration Page 41
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 amp 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 amp 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 ndash Quantity Variance Price Variance Quality Inspection Manual block date variance and Amount variance The process flow is as below ndash
Purchase Order for Material Service
GRN for Material Service Entry Sheet for Services performed
Purchase Order History
Delivery Costs
Material Master
Vendor Master
GL Account
Assets
Cost Center
Project
Sale Order
Invoice Verification FI Invoice
Document
MM Invoice Document
Further Document
Train Doc KBLCICSAP MM12MM-FI Integration Page 42
Following entries are posted when an invoice for vendor is posted in the system
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (31)
Vendor Account
Business Area Vendor Number
Amount to be paid to Vendor
INR
2 Debit (86)
GR IR Clearing
Business Area GR IR Clearing
GR IR Clearing Amount
INR
3 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash B Excise Duty
INR
4 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash ECS Amount
INR
5 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash SampH ECS Amt
INR
6 Debit (40)
VAT RM Deductible Amount
Business Area from where payment is made
VAT RM Deductible
VAT Amount to be paid to Vendor
INR
Example of above is transaction is as below ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (31) 300664 BA02 WalchandNagar Industries 13590000 - INR
2 Debit (86) 130100 BA02 GR IR Clearing 10000000 INR
3 Debit (40) 130150 Modvat Clearing 1600000 INR
4 Debit (40) 130150 Modvat Clearing 320000 INR
5 Debit (40) 130150 Modvat Clearing 160000 INR
6 Debit (40) 245039 BA02 VAT RM Deductible 1510000 INR
The diagrammatic view of above example is as below ndash
Purchase Order 100 PC at INR 1000 GRN for this PO 100 PC Invoice 100 PC at INR 1000
Goods Receipt
Invoice Receipt
100000 +
20800 +
15100 +
135900 ndash
100000 +
100000 ndash
20800 ndash
Stock Account
GR IR Account
Modvat clearing
VAT
Vendor
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 36
Following are the FI postings at the time of accepting Service Entry Sheet ndash
Item Posting
Key GL Account
Business Area
Account Text
Amount in INR
Currency Text
10 Debit Consumption
Account
Business Area from where Service is delivered
Process Charges
Service Charges Amount
INR Service Text
20 Credit GR IR Clearing Account
Business Area where service is delivered
GR IR Clearing
Service Charges Amount
INR Service Text
Following is the example of above transaction ndash
Item Posting
Key GL
Account Business
Area Account Text
Amount in INR
Curr Text
10 Debit (81) 411420 BA02 Process Charges - Foundry
384780 INR
Service Charges
20 Debit (96) 130100 BA02 GR IR Clearing 384780 -
INR Service Charges
Train Doc KBLCICSAP MM12MM-FI Integration Page 37
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 ndash a) Modvatable Excise Item ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40)
Excise Cenvat
Business Area where the material is received
Cenvat Input P F Basic Excise Duty amount
INR
2 Debit (40)
ECS Cenvat Amount
Business Area where the material is received
Cenvat ED Cess ECS Amount INR
3 Debit (40)
SampH ECS Cenvat Account
Business Area where the material is received
Cenvat SampH Ces-1
SampH ECS Amount
INR
4 Credit (50)
Modvat Clearing Account
Business Area where the material is received
Modvat Clearing Account
Amount equivalent to amount in 1 + 2 + 3
INR
Example of Modvatable excise entries is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40) 244030 BA01 Cenvat Input P F 362900 INR
2 Debit (40) 244031 BA01 Cenvat ED Cess 7300 INR
3 Debit (40) 244034 BA01 Cenvat SampH Ces-1
3600 INR
4 Credit (50) 130150 BA01 Modvat Clearing Account
373800 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 38
b) Trading excisable material received against GRN ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81)
COGS ndash Trading Material
Business Area where the material is received COGS ndash Trading
Material
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
2 Credit (96)
ECS Cenvat Amount
Business Area where the material is received
GR IR Clearing
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
Example of Excise duty inventorised -
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81) 410910 BA01 COGS ndash Trading Motor
433108300 INR
2 Credit (96) 130100 BA01 GR IR Clearing 433108300 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 39
FI entries at Material Consumption When a material is issued to a consumption account (For example ndash Consumption to Production Order Cost Center) the inventory reduces amp 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 ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Credit (99)
231020 BA05 Inventory ndash Other Raw material
15500 - INR
2 Debit (81)
400240 BA05 Consumption ndash Other Raw Material
15500 INR
2) Material consumption posted to Production Order ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Production Order ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (99)
235010 BA01 Inventory ndash Semi Finished Goods
334100 - INR
2 Debit (81)
400290 BA01 Consumption ndash Semi Finished Goods
334100 INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 40
3) Consumption of Stock provided to Sub ndash Contractor for processing of finished material when GRN of processed material is posted ndash
In a sub ndash contracting purchase order a semi finished material is ordered on the sub ndash contractor amp components are provided to the sub ndash 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 amp the concerned FI entries are posted
Train Doc KBLCICSAP MM12MM-FI Integration Page 41
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 amp 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 amp 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 ndash Quantity Variance Price Variance Quality Inspection Manual block date variance and Amount variance The process flow is as below ndash
Purchase Order for Material Service
GRN for Material Service Entry Sheet for Services performed
Purchase Order History
Delivery Costs
Material Master
Vendor Master
GL Account
Assets
Cost Center
Project
Sale Order
Invoice Verification FI Invoice
Document
MM Invoice Document
Further Document
Train Doc KBLCICSAP MM12MM-FI Integration Page 42
Following entries are posted when an invoice for vendor is posted in the system
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (31)
Vendor Account
Business Area Vendor Number
Amount to be paid to Vendor
INR
2 Debit (86)
GR IR Clearing
Business Area GR IR Clearing
GR IR Clearing Amount
INR
3 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash B Excise Duty
INR
4 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash ECS Amount
INR
5 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash SampH ECS Amt
INR
6 Debit (40)
VAT RM Deductible Amount
Business Area from where payment is made
VAT RM Deductible
VAT Amount to be paid to Vendor
INR
Example of above is transaction is as below ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (31) 300664 BA02 WalchandNagar Industries 13590000 - INR
2 Debit (86) 130100 BA02 GR IR Clearing 10000000 INR
3 Debit (40) 130150 Modvat Clearing 1600000 INR
4 Debit (40) 130150 Modvat Clearing 320000 INR
5 Debit (40) 130150 Modvat Clearing 160000 INR
6 Debit (40) 245039 BA02 VAT RM Deductible 1510000 INR
The diagrammatic view of above example is as below ndash
Purchase Order 100 PC at INR 1000 GRN for this PO 100 PC Invoice 100 PC at INR 1000
Goods Receipt
Invoice Receipt
100000 +
20800 +
15100 +
135900 ndash
100000 +
100000 ndash
20800 ndash
Stock Account
GR IR Account
Modvat clearing
VAT
Vendor
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 37
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 ndash a) Modvatable Excise Item ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40)
Excise Cenvat
Business Area where the material is received
Cenvat Input P F Basic Excise Duty amount
INR
2 Debit (40)
ECS Cenvat Amount
Business Area where the material is received
Cenvat ED Cess ECS Amount INR
3 Debit (40)
SampH ECS Cenvat Account
Business Area where the material is received
Cenvat SampH Ces-1
SampH ECS Amount
INR
4 Credit (50)
Modvat Clearing Account
Business Area where the material is received
Modvat Clearing Account
Amount equivalent to amount in 1 + 2 + 3
INR
Example of Modvatable excise entries is as below ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (40) 244030 BA01 Cenvat Input P F 362900 INR
2 Debit (40) 244031 BA01 Cenvat ED Cess 7300 INR
3 Debit (40) 244034 BA01 Cenvat SampH Ces-1
3600 INR
4 Credit (50) 130150 BA01 Modvat Clearing Account
373800 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 38
b) Trading excisable material received against GRN ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81)
COGS ndash Trading Material
Business Area where the material is received COGS ndash Trading
Material
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
2 Credit (96)
ECS Cenvat Amount
Business Area where the material is received
GR IR Clearing
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
Example of Excise duty inventorised -
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81) 410910 BA01 COGS ndash Trading Motor
433108300 INR
2 Credit (96) 130100 BA01 GR IR Clearing 433108300 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 39
FI entries at Material Consumption When a material is issued to a consumption account (For example ndash Consumption to Production Order Cost Center) the inventory reduces amp 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 ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Credit (99)
231020 BA05 Inventory ndash Other Raw material
15500 - INR
2 Debit (81)
400240 BA05 Consumption ndash Other Raw Material
15500 INR
2) Material consumption posted to Production Order ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Production Order ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (99)
235010 BA01 Inventory ndash Semi Finished Goods
334100 - INR
2 Debit (81)
400290 BA01 Consumption ndash Semi Finished Goods
334100 INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 40
3) Consumption of Stock provided to Sub ndash Contractor for processing of finished material when GRN of processed material is posted ndash
In a sub ndash contracting purchase order a semi finished material is ordered on the sub ndash contractor amp components are provided to the sub ndash 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 amp the concerned FI entries are posted
Train Doc KBLCICSAP MM12MM-FI Integration Page 41
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 amp 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 amp 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 ndash Quantity Variance Price Variance Quality Inspection Manual block date variance and Amount variance The process flow is as below ndash
Purchase Order for Material Service
GRN for Material Service Entry Sheet for Services performed
Purchase Order History
Delivery Costs
Material Master
Vendor Master
GL Account
Assets
Cost Center
Project
Sale Order
Invoice Verification FI Invoice
Document
MM Invoice Document
Further Document
Train Doc KBLCICSAP MM12MM-FI Integration Page 42
Following entries are posted when an invoice for vendor is posted in the system
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (31)
Vendor Account
Business Area Vendor Number
Amount to be paid to Vendor
INR
2 Debit (86)
GR IR Clearing
Business Area GR IR Clearing
GR IR Clearing Amount
INR
3 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash B Excise Duty
INR
4 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash ECS Amount
INR
5 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash SampH ECS Amt
INR
6 Debit (40)
VAT RM Deductible Amount
Business Area from where payment is made
VAT RM Deductible
VAT Amount to be paid to Vendor
INR
Example of above is transaction is as below ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (31) 300664 BA02 WalchandNagar Industries 13590000 - INR
2 Debit (86) 130100 BA02 GR IR Clearing 10000000 INR
3 Debit (40) 130150 Modvat Clearing 1600000 INR
4 Debit (40) 130150 Modvat Clearing 320000 INR
5 Debit (40) 130150 Modvat Clearing 160000 INR
6 Debit (40) 245039 BA02 VAT RM Deductible 1510000 INR
The diagrammatic view of above example is as below ndash
Purchase Order 100 PC at INR 1000 GRN for this PO 100 PC Invoice 100 PC at INR 1000
Goods Receipt
Invoice Receipt
100000 +
20800 +
15100 +
135900 ndash
100000 +
100000 ndash
20800 ndash
Stock Account
GR IR Account
Modvat clearing
VAT
Vendor
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 38
b) Trading excisable material received against GRN ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81)
COGS ndash Trading Material
Business Area where the material is received COGS ndash Trading
Material
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
2 Credit (96)
ECS Cenvat Amount
Business Area where the material is received
GR IR Clearing
Basic Value of material + Basic Excise Duty + Ecess Value + SampH Ecess Value + VAT CST (as applicable)
INR
Example of Excise duty inventorised -
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Debit (81) 410910 BA01 COGS ndash Trading Motor
433108300 INR
2 Credit (96) 130100 BA01 GR IR Clearing 433108300 - INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 39
FI entries at Material Consumption When a material is issued to a consumption account (For example ndash Consumption to Production Order Cost Center) the inventory reduces amp 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 ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Credit (99)
231020 BA05 Inventory ndash Other Raw material
15500 - INR
2 Debit (81)
400240 BA05 Consumption ndash Other Raw Material
15500 INR
2) Material consumption posted to Production Order ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Production Order ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (99)
235010 BA01 Inventory ndash Semi Finished Goods
334100 - INR
2 Debit (81)
400290 BA01 Consumption ndash Semi Finished Goods
334100 INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 40
3) Consumption of Stock provided to Sub ndash Contractor for processing of finished material when GRN of processed material is posted ndash
In a sub ndash contracting purchase order a semi finished material is ordered on the sub ndash contractor amp components are provided to the sub ndash 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 amp the concerned FI entries are posted
Train Doc KBLCICSAP MM12MM-FI Integration Page 41
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 amp 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 amp 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 ndash Quantity Variance Price Variance Quality Inspection Manual block date variance and Amount variance The process flow is as below ndash
Purchase Order for Material Service
GRN for Material Service Entry Sheet for Services performed
Purchase Order History
Delivery Costs
Material Master
Vendor Master
GL Account
Assets
Cost Center
Project
Sale Order
Invoice Verification FI Invoice
Document
MM Invoice Document
Further Document
Train Doc KBLCICSAP MM12MM-FI Integration Page 42
Following entries are posted when an invoice for vendor is posted in the system
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (31)
Vendor Account
Business Area Vendor Number
Amount to be paid to Vendor
INR
2 Debit (86)
GR IR Clearing
Business Area GR IR Clearing
GR IR Clearing Amount
INR
3 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash B Excise Duty
INR
4 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash ECS Amount
INR
5 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash SampH ECS Amt
INR
6 Debit (40)
VAT RM Deductible Amount
Business Area from where payment is made
VAT RM Deductible
VAT Amount to be paid to Vendor
INR
Example of above is transaction is as below ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (31) 300664 BA02 WalchandNagar Industries 13590000 - INR
2 Debit (86) 130100 BA02 GR IR Clearing 10000000 INR
3 Debit (40) 130150 Modvat Clearing 1600000 INR
4 Debit (40) 130150 Modvat Clearing 320000 INR
5 Debit (40) 130150 Modvat Clearing 160000 INR
6 Debit (40) 245039 BA02 VAT RM Deductible 1510000 INR
The diagrammatic view of above example is as below ndash
Purchase Order 100 PC at INR 1000 GRN for this PO 100 PC Invoice 100 PC at INR 1000
Goods Receipt
Invoice Receipt
100000 +
20800 +
15100 +
135900 ndash
100000 +
100000 ndash
20800 ndash
Stock Account
GR IR Account
Modvat clearing
VAT
Vendor
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 39
FI entries at Material Consumption When a material is issued to a consumption account (For example ndash Consumption to Production Order Cost Center) the inventory reduces amp 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 ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Cost Center ndash
Item Posting
Key Account
Business Area
Account Short Text
Amount in Loc Curr
Currency
1 Credit (99)
231020 BA05 Inventory ndash Other Raw material
15500 - INR
2 Debit (81)
400240 BA05 Consumption ndash Other Raw Material
15500 INR
2) Material consumption posted to Production Order ndash
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (99)
Inventory Account
Business Area where the material is stocked
Inventory of Material
Price of Material X Quantity posted
INR
2 Debit (81)
Consumption of Material
Business Area where the material is consumed
Inventory Consumption
Price of Material X Quantity posted
INR
Following is the example of material consumed to Production Order ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (99)
235010 BA01 Inventory ndash Semi Finished Goods
334100 - INR
2 Debit (81)
400290 BA01 Consumption ndash Semi Finished Goods
334100 INR
Train Doc KBLCICSAP MM12MM-FI Integration Page 40
3) Consumption of Stock provided to Sub ndash Contractor for processing of finished material when GRN of processed material is posted ndash
In a sub ndash contracting purchase order a semi finished material is ordered on the sub ndash contractor amp components are provided to the sub ndash 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 amp the concerned FI entries are posted
Train Doc KBLCICSAP MM12MM-FI Integration Page 41
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 amp 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 amp 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 ndash Quantity Variance Price Variance Quality Inspection Manual block date variance and Amount variance The process flow is as below ndash
Purchase Order for Material Service
GRN for Material Service Entry Sheet for Services performed
Purchase Order History
Delivery Costs
Material Master
Vendor Master
GL Account
Assets
Cost Center
Project
Sale Order
Invoice Verification FI Invoice
Document
MM Invoice Document
Further Document
Train Doc KBLCICSAP MM12MM-FI Integration Page 42
Following entries are posted when an invoice for vendor is posted in the system
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (31)
Vendor Account
Business Area Vendor Number
Amount to be paid to Vendor
INR
2 Debit (86)
GR IR Clearing
Business Area GR IR Clearing
GR IR Clearing Amount
INR
3 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash B Excise Duty
INR
4 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash ECS Amount
INR
5 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash SampH ECS Amt
INR
6 Debit (40)
VAT RM Deductible Amount
Business Area from where payment is made
VAT RM Deductible
VAT Amount to be paid to Vendor
INR
Example of above is transaction is as below ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (31) 300664 BA02 WalchandNagar Industries 13590000 - INR
2 Debit (86) 130100 BA02 GR IR Clearing 10000000 INR
3 Debit (40) 130150 Modvat Clearing 1600000 INR
4 Debit (40) 130150 Modvat Clearing 320000 INR
5 Debit (40) 130150 Modvat Clearing 160000 INR
6 Debit (40) 245039 BA02 VAT RM Deductible 1510000 INR
The diagrammatic view of above example is as below ndash
Purchase Order 100 PC at INR 1000 GRN for this PO 100 PC Invoice 100 PC at INR 1000
Goods Receipt
Invoice Receipt
100000 +
20800 +
15100 +
135900 ndash
100000 +
100000 ndash
20800 ndash
Stock Account
GR IR Account
Modvat clearing
VAT
Vendor
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 40
3) Consumption of Stock provided to Sub ndash Contractor for processing of finished material when GRN of processed material is posted ndash
In a sub ndash contracting purchase order a semi finished material is ordered on the sub ndash contractor amp components are provided to the sub ndash 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 amp the concerned FI entries are posted
Train Doc KBLCICSAP MM12MM-FI Integration Page 41
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 amp 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 amp 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 ndash Quantity Variance Price Variance Quality Inspection Manual block date variance and Amount variance The process flow is as below ndash
Purchase Order for Material Service
GRN for Material Service Entry Sheet for Services performed
Purchase Order History
Delivery Costs
Material Master
Vendor Master
GL Account
Assets
Cost Center
Project
Sale Order
Invoice Verification FI Invoice
Document
MM Invoice Document
Further Document
Train Doc KBLCICSAP MM12MM-FI Integration Page 42
Following entries are posted when an invoice for vendor is posted in the system
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (31)
Vendor Account
Business Area Vendor Number
Amount to be paid to Vendor
INR
2 Debit (86)
GR IR Clearing
Business Area GR IR Clearing
GR IR Clearing Amount
INR
3 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash B Excise Duty
INR
4 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash ECS Amount
INR
5 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash SampH ECS Amt
INR
6 Debit (40)
VAT RM Deductible Amount
Business Area from where payment is made
VAT RM Deductible
VAT Amount to be paid to Vendor
INR
Example of above is transaction is as below ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (31) 300664 BA02 WalchandNagar Industries 13590000 - INR
2 Debit (86) 130100 BA02 GR IR Clearing 10000000 INR
3 Debit (40) 130150 Modvat Clearing 1600000 INR
4 Debit (40) 130150 Modvat Clearing 320000 INR
5 Debit (40) 130150 Modvat Clearing 160000 INR
6 Debit (40) 245039 BA02 VAT RM Deductible 1510000 INR
The diagrammatic view of above example is as below ndash
Purchase Order 100 PC at INR 1000 GRN for this PO 100 PC Invoice 100 PC at INR 1000
Goods Receipt
Invoice Receipt
100000 +
20800 +
15100 +
135900 ndash
100000 +
100000 ndash
20800 ndash
Stock Account
GR IR Account
Modvat clearing
VAT
Vendor
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 41
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 amp 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 amp 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 ndash Quantity Variance Price Variance Quality Inspection Manual block date variance and Amount variance The process flow is as below ndash
Purchase Order for Material Service
GRN for Material Service Entry Sheet for Services performed
Purchase Order History
Delivery Costs
Material Master
Vendor Master
GL Account
Assets
Cost Center
Project
Sale Order
Invoice Verification FI Invoice
Document
MM Invoice Document
Further Document
Train Doc KBLCICSAP MM12MM-FI Integration Page 42
Following entries are posted when an invoice for vendor is posted in the system
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (31)
Vendor Account
Business Area Vendor Number
Amount to be paid to Vendor
INR
2 Debit (86)
GR IR Clearing
Business Area GR IR Clearing
GR IR Clearing Amount
INR
3 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash B Excise Duty
INR
4 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash ECS Amount
INR
5 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash SampH ECS Amt
INR
6 Debit (40)
VAT RM Deductible Amount
Business Area from where payment is made
VAT RM Deductible
VAT Amount to be paid to Vendor
INR
Example of above is transaction is as below ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (31) 300664 BA02 WalchandNagar Industries 13590000 - INR
2 Debit (86) 130100 BA02 GR IR Clearing 10000000 INR
3 Debit (40) 130150 Modvat Clearing 1600000 INR
4 Debit (40) 130150 Modvat Clearing 320000 INR
5 Debit (40) 130150 Modvat Clearing 160000 INR
6 Debit (40) 245039 BA02 VAT RM Deductible 1510000 INR
The diagrammatic view of above example is as below ndash
Purchase Order 100 PC at INR 1000 GRN for this PO 100 PC Invoice 100 PC at INR 1000
Goods Receipt
Invoice Receipt
100000 +
20800 +
15100 +
135900 ndash
100000 +
100000 ndash
20800 ndash
Stock Account
GR IR Account
Modvat clearing
VAT
Vendor
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 42
Following entries are posted when an invoice for vendor is posted in the system
Item Posting
Key Account Business Area
Account Short Text
Amount in Loc Curr
Curr
1 Credit (31)
Vendor Account
Business Area Vendor Number
Amount to be paid to Vendor
INR
2 Debit (86)
GR IR Clearing
Business Area GR IR Clearing
GR IR Clearing Amount
INR
3 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash B Excise Duty
INR
4 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash ECS Amount
INR
5 Debit (40)
MODVAT Clearing Account
Business Area from where payment is made
Modvat Clearing
MODVAT Clearing Amount ndash SampH ECS Amt
INR
6 Debit (40)
VAT RM Deductible Amount
Business Area from where payment is made
VAT RM Deductible
VAT Amount to be paid to Vendor
INR
Example of above is transaction is as below ndash
Item Posting
Key Account
Business Area
Account Short Text Amount in Loc Curr
Curr
1 Credit (31) 300664 BA02 WalchandNagar Industries 13590000 - INR
2 Debit (86) 130100 BA02 GR IR Clearing 10000000 INR
3 Debit (40) 130150 Modvat Clearing 1600000 INR
4 Debit (40) 130150 Modvat Clearing 320000 INR
5 Debit (40) 130150 Modvat Clearing 160000 INR
6 Debit (40) 245039 BA02 VAT RM Deductible 1510000 INR
The diagrammatic view of above example is as below ndash
Purchase Order 100 PC at INR 1000 GRN for this PO 100 PC Invoice 100 PC at INR 1000
Goods Receipt
Invoice Receipt
100000 +
20800 +
15100 +
135900 ndash
100000 +
100000 ndash
20800 ndash
Stock Account
GR IR Account
Modvat clearing
VAT
Vendor
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 43
Assignment
Topic MM ndash 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 ndash
a) Salary payment to Employee b) Procurement of Machinery c) Expenses booked for Cost Center
2) What is meaning of ndash
a) Profit amp Loss Statement b) Balance Sheet c) Cash Flow statement
3) State whether following entries will go to Balance Sheet or to Profit amp Loss
statement ndash
a) GRN for Raw material posted to store b) Invoice for receipt of above material posted (payment yet to be made) c) Material Consumed to Production Order d) Payment received from customer for material already supplied
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO
Train Doc KBLCICSAP MM12MM-FI Integration Page 44
4) For which material type following price control should be maintained amp why
a) Moving Price Control b) Standard Price Control
5) Explain the effect on FI entry at following instances ndash
a) Purchase Order for Sub-Contracting raised b) BOM components required for above Purchase Order transferred to Sub-
Contractor 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 ndash
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 bdquo12550022‟ (Gland) raised on Ms Vishal
Foundry as per following details ndash Quantity 100 PC at INR 3750- per PC
Freight ndash 1 (To be inventorised) Excise 14 Ecess 2 SampH Ecess 1 (Set-Off to be taken) VAT ndash 125
b) GRN for above material for quantity 64 PC posted as per Delivery Challan cum Commercial Invoice Number 346 amp Excise Invoice Number 238 from Vendor along with freight amp Excise conditions
c) Invoice for above Purchase Order booked in system
8) A Sub-Contracting Purchase Order is raised on Ms Nitin Engineering Works for material bdquoS2006242‟ (Driving Unit) for Quantity 50 As material in above example No 7 [bdquo12550022‟ (Gland)] is maintained in BOM of ordered material the same is sent to the sub-contractor for processing along with following components ndash 02304010 ndash Ball Bearing (Price ndash INR 74 Quantity required ndash 50 PC) 14000011 ndash Bearing Housing (Price ndash INR 689 Quantity required ndash 50 PC) What entries will be posted at the time of booking GRN for above PO