ACCOUNTS PAYABLE NOTES

What are Golden Rules of Account?

In Personal Account Debit the ReceiverCredit the Giver

In Real Account Debit what comes inCredit What goes out

In Nominal Account Debit the Expenses /LossesCredit the income/gain

What is Account Payable?

Accounts payable is a file or account sub-ledger that records amounts that a person or company owes to suppliers, but has not paid yet (a form of debt), sometimes referred as trade payables. When an invoice is received, it is added to the file, and then removed when it is paid. Thus, the A/P is a form of credit that suppliers offer to their customers by allowing them to pay for a product or service after it has already been received.Example: Company Purchase some materials on credit basis, the Credit period is span of one month. So until made payment to Vendor, it is treated as dues in Accounts Payable in balance sheet.

What are the teams in Accounts Payable?

Indexing/ sorting – Sorting team will sort the invoice according MM vendor invoice, finance vendor invoice, Service vendor invoice, and Employee vendor invoice, date of invoice, vendor Name.

Invoice posting team – invoice posting team Posting the vendor invoices, if they found any wrong (quantity mismatch, amount mismatch, or both , any require field is missing or not visible proper like invoice no., vendor name etc then they post the invoice as park document.

Query handling Team – Query handling team release the Parking invoice by solving the query & post that Invoice.

Payment Team – This team is responsible for all types Vendor payment – Normal Payment, Advance payment, payment request.

Vendor Reconciliation team: The team is responsible for confirmation the vendor dues by reconcile vendor payment history in system & Vendor Statement. If they found any dues still to be paid, they raised supplementary payment or if they found any overpayment or duplicate payment against duplicate invoice posting by user they raised credit memo to recovery of over payment or they adjusted the over payment in next payment once confirmed for superior/manager.

& another responsible to handle the TDS transactions from top to bottom like Submitting the tds amount in the bank on line, Bank challan receipt number update & TDS raised to vendor

What is Purchase Order?

Purchase order is a commercial document which is issued by the purchaser to the seller for ordering goods or serves. Purchase order creates legal agreement between purchaser and the seller.It containsName of the supplierDescription * specification of materialQuantity orderedDate & place of delivery

What are Types of Purchase Order?

Standard Purchase order: This PO is created for one-time purchase of material.

Blanket Purchase Order: In this PO delivery schedule are not known clearly.

Contract Purchase Order: In this PO material required are not specified.

Planned Purchase Order: It is a long term agreement purchase Order. In this PO it specifies materials, estimated costs, and tentative delivery schedules

What do you mean by four way matching, three Way Matching, and two way matching?

2-ways- we will compare 2 documents - match Purchase order with Invoice

Whatever you have ordered for the PO we will make the payment for the suppliers in 2-way (we will compare two documents PO and Invoice).Example: Suppose we had given PO for 100 items, for that we will receive invoice for 100 items. So that we will make payment for that 100 items.

3-Way matching - we will compare 3 documents - Purchase Order + Goods receipt +Invoice

Example: Suppose we have ordered 100 items in Purchase Order. But we had received only 80 items, but we had received invoice for 100 items. So, we will make payment for only 80 items

4-Way we will compare 4 documents – Purchase Order + Inspection + Goods Receipt + Invoice+

Example: Suppose we have 100 items in Purchase Order .Suppers send us 80 items we will do

inspection on those items whatever we have received, IF 10 items got damaged. Finally, we are going to make payment to the 70 items only.

What is Down payment Process flow?

This Fundamental is used to give advance payment to vendor to receive the goods. If it is declared that material receives against advance payment in purchase order, in this situation purchase department Notified that give down payment to vendor by create down payment request. The finance Department is converted down payment request to down payment made on respective due date. Sap process like :

Down payment Request f-47 (it many times created by purchase department & infirm to finance department to pay the down payment on that due date)

Down payment Made – f-48 (if down payment request is exit first release that or if not make down payment directly)

Down Payment Cleared – f-54 (Cleared the Down payment Against Invoice number, once vendor invoice posted in the system)

What kind of error can be occurred during Document Posting?

Error of commission – this is happened when in invoice quoted amount is 560 and user entered 650 so it is an error of commission.

Error of omission – you totally omitted that invoice in system.

Duplicate invoice posting – if double time invoice posted in the system by give different invoice/reference number.

To avoid this kind of an error you have to create doubt, if you posted same vendor’s invoice recently.

Who is indenter?

Indenter is a person who raised the Requirement to procure material.

Example: A manager in finance department needs 2 Printers to purchase. He will infirm to Purchase Department regarding printer. In this case indenter is manager.

What is Procurement to pay or accounts payable or purchase Process flow with Journal entry?Material Requisition Planning T.CODE

Material Requisition ME51NPurchaser raised Shortlisted vendors ME21N Goods Receipts - Raw Material A/c Dr. 500 MIGO

To GR/IR Clearing A/c  Cr. 500Invoice Receipt - GR/IR Clearing A/c Dr. 500 MIRO

To Vendor A/c  Cr. 500

Vendor Payment - Vendor A/c Dr. 500 F-53/F-58/F110                    To Outgoing Bank Clearing A/c  Cr. 500

What are the Sub parts in Accounts Payable in sap?

Vendor invoice PostingRelease Park invoiceVendor PaymentReportingVendor Reconciliation

What is sap?

Sap is an ERP (Enterprise Recourse Planning). The acronym of SAP is System Application & Product in Data Process.

What is ERP?

Enterprise Resource Planning system is a fully integrated business management system covering functional areas of an enterprise like Logistics, Production, Finance, Accounting, Sales and Human resources etc. It organizes and integrates Operation processes and information flows to make optimum use of resources such as men, material, money and machine. ERP is a global, tightly integrated closed loop business solution package and is multifaceted ERP promises one database, one application and one user interface for the entire enterprise. ERP system enhances a manufacturer ability to accurately schedule production, fully utilize capacity, reduce inventory, and meet promised shipping dates.

What is Company?

Company represents a group. Means it is used for consolidating individual Company codes.Example: Reliance Group is company Reliance Auto mobile, Reliance Perotrolium , Reliance Telecom, Reliance Insurance, Reliance Multimedia are individual Company codes.

What is Company code?

It represents by four digits alpha numeric keys. It is separate legal entity for which all financial

Statements are drawn like Balance Sheet, Profit & loss Accounts, cash flow statements , Funds flow statements etc.

What is Business area?

Four digits code (Business area) represents a segment/Responsibility of the Organization for Which Separate financial Statements are Prepared. It can be divided by Location wise, Product line wise, segment wise.Example: For company code 1000 (Reliance Auto) has five location Pune, Mumbai, Kolkata, bang lore, Delhi branches are different business areas.

What is Fiscal year Variant?

Fiscal/financial year is a combination of 12 months periods. Which stats from April to March of every year. In sap system there are two types of period one is regular posting periods of 12 months & special periods of 4 months for the purpose of accounts adjustment at year end.

What is Document type?

Document types are used to differentiate the business transactions and to manage how document are stored. Accounts Payable Document types are:

KA = Vendor DocumentKG = Vendor Credit MemoKR = Vendor InvoiceRE = MM Vendor InvoiceKZ = Vendor paymentSA = GL A/C Document

What is Account type?

Accounts Types are used to identification of relevant category like A- Asset, K-vendor, D-Debtor, M-Material, S- General ledger

What is posting keys?

The posting key controls how the line item is entered and processed Which side of an account can be posted to whether Dr. Side or Cr. Side?Which type of account can be posted to A- Asset, K-vendor, D-Debtor, M-Material, and S- General Ledger?40 G/L account debit posting50 G/L account credit posting01 Customer invoice11 Customer credit memo21 Vendor credit memo25 Vendor payment

31 Vendor Invoice PK Transaction vendor Debit PK Transaction vendor Credit21 Credit memo 31 Invoice 22 Reverse invoice 32 Reverse credit memo 24 Other receivables 34 Other payables 25 Outgoing payment 35 Incoming payment 26 Payment difference 36 Payment difference 27 Clearing 37 Other clearing 28 Payment clearing 38 Other clearing 29 Special G/L credit 39 Special G/L credit

What is Reconciliation Account?

Reconciliation Account is ledger account, which is updated through Sub-ledger account. We could not post directly into reconciliation. All individual Vendors are Sub-ledger accounts.

Example: Vendor Reconciliation account is a Ledger & Ram, Hari, Gopals, Sudam accounts are sub ledger accounts. When post the Ram’s invoice. Ram sub-ledger is updated as open item dues as well as Vendor Reconciliation account is update through RAM. If post all vendors’ invoice then reflection will be as below

Vendor Recon. Acct =Ram dues+ Hari’s dues + Gopals Dues + Sudam’s dues1000 = 100+200+500+200

What are the Special Gl indicators used in sap?

Special GL indicators are used to identify the special transaction. This reflects in vendor line item report under Special GL indicator column.

F- Down Payment RequestJ- Simple Payment RequestA-Down payment madew- Bill of exchange PaymentG- Bank Guarantee.L – Letter of Credit Payment.

What is noted Item?

When you note down something to be paid in future that is Called as Noted item. Noted item has no effect in books of accounts. Transactions like Down payment request, payment request, and bill of exchange payment until release, letter of credit until release.It is displayed in vendor line item report under Special GL indicator column.

What are Special Gl transactions?

Apart from normal transaction like invoice posting & simple vendor payment are called special gl transactions. Example Down payment made.

What is line item?

Line item that provides a detailed information about the document like amounts, posting date, due date, dues, not dues, over dues, open item or cleared item etc.

What is open item?

Items are identified by Red colour which represents as dues/not dues not paid yet to vendor

What is cleared item?

Items are indentified by Green Corlour Square button which represents payment has been made to vendor.

Difference between partial & Residual payment?Partial Payment Residual paymentIn partial payment, partial amount can be paid & this document will reflect in open item in vendor line item report until full settlement the dues.Example : Vendor dues 1000Partial amount paid 400System response dues is 600 but 400 & 1000 will appear you in red colour open item.When you paid remain 600 then total it will be displayed in cleared item.

Here you also make partial payment to vendor but one thing is that Residual item amount is generated a new open item with new document number.Example : Vendor dues 1000Partial payment = 400 is paidRemain Residual item amount = 600 will be created as open item automatically by systemSo 400 will be cleared & displayed in cleared item. 600 will be displayed in open item.

Difference between Hold Document & Parked Document?Holding Document Parking DocumentHolding Document is hold by temporary number whatever given by user.

Parking document is created with internal number range

Holding document is only viewed/changed by user

Parking document can viewed & changed by anyone

Hold Document in SAP means It is for short term and is being used when SAP transaction Debit or Credit is uncertain and generally its is used for external purpose for example Advance from unknown customer etc.

SAP Park Document means for longer period and is generally used for internal purpose. Till approval take place etc. after this SAP parked document posted in SAP.

Difference between vendor invoice posting by transaction code screen FB60 & F-43?FB60 SCREEN F-43 SCREEN

Single screen data entry Multiple screen date entry Automatic document type, posting key updated by the system.

Manually enter Document type, Posting key in the system.

Difference between vendor Payment posting by transaction code F-53 VS F-58 VS APPF-53 F-58 F110 APPMultiple payment posting Manually

Multiple payment posting manually with Form print

Multiple payment Automatically with form printing by set parameter in APP.

What do you mean by posting date, Document date, Value date, clearing date & Base line Date?Posting date Doc. Date Value date Clearing Date Base line dateOn which date document is posted into system

invoice quoted date is document Date to be filled in document Date field

Use full for Bank

Clearing date is auto updated once payment made or cleared the document.

To calculate all Due dates with reference to payment terms.

What is APP?

APP is nothing but Automatic Payment Program is used to make huge payment to huge number of Vendors at a time, where system clears the vendor accounts & prints the Check, Payment advice & payment summery automatically. The transaction code to run the APP is F110.

How payment is executed through APP?

Set the Parameter >>> Give proposal Edit proposal if any need to edit >>> payment run >>>print the forms.You launch transaction F110 and specify parameters for the selection of items to be paid. Then you run Proposal Run which creates Payments Proposal. This proposal is analyzed by Treasury / Accountants / somebody else and then it is approved immediately or with some corrections. After that you run Productive Run. At this moment postings are done (or not done – see separately). When Productive Run is finished, you can create payment file or paper payment documents for the bank and/or payment recipients.

Terminology in APP set the Parameter – set the payment parameter to executed the app where run date, identification code, company code, Payment method, next run date & vendor code are compulsory to filled up.Give proposal to run – you give Proposal to system to consider invoices for payment as per your set parameter. If any invoice with red color those need to be release by edit proposal.Edit Proposal: here you release the invoice for payment by avoid the payment block, assign payment method, House bank by reallocation functionality.Run payment: at last once clarified proposal you make payment by press payment run button.

Free selection tab: it is help full if management wants payment to be made by document type wise, posting date wise, profit center wise or any other aspect wise. You can specify by assign respective value in these fields. Additional Log: You can define criteria for an additional log. If you call up the log later on, the system displays the processing logic of the payment program in appropriate detail. Before doing anything, you should read the note under Checking the Log in "Creating the Payment Proposal".The following processing steps can be logged.Due date checkPayment method selection in all casesPayment method selection if not successfulPayment document itemsProcedureFor the additional log, choose the Additional log tab on the Automatic Payment Transactions screen. Click next to the corresponding option and enter the account numbers of the vendors or customers.

Next payment run date: This date is needed in order to check the due date of payables. If an item is already overdue on the date of the next payment run, or would lose cash discount, the system pays the item in this payment run. In real time most of companies are run app in every fortnightly. Run schedule is in-between 1 st and 15 th . You run app on 1st date of the month and two items has due date on 3 rd and 5 th of the month, it will be overdue on next payment run (15 th

date ) or some item are falls under cash discount due date 31th , then if you keep 31 st date in NEXT RUN DATE field, system pays these item in this payment run and you get cash discount benefits.

Invoice under Exceptions:

When executing the  automatic payment program (F110 transaction), a proposal run must always be carried out in SAP system  first. The proposal list will sometimes include exceptions or it is displayed with red color error button.

Common exceptions are:

SAP Invoice contains payment block. To pay this invoice, remove the payment block when editing the proposal list (unless the payment block is one which cannot be edited during payment proposal) or remove payment block via FB02 for each SAP invoice.

Payment method in vendor master/invoice is different from the one specified in the payment program parameter. To pay this invoice, allocate the payment method in the parameter of the payment run to this invoice while editing the proposal list.

Vendor master does not contain information specified as mandatory in the payment method in the parameter of the SAPÂ payment program. For example, depending on the payment method configuration for the country, certain fields such as city or PO Box must be populated in the vendor master. In this case, delete the proposal run, make the necessary changes in the vendor master and execute the proposal run again.

Typically, Â payment program pays due invoices in full. To cater for partial payment via automatic payment program, payment request will be used (optional). Down payments to staff and vendor can also be made via the automatic payment program if down payment request was posted.

If  foreign currency invoice is paid via  automatic payment run, the relevant exchange rate type should be selected in the payment run parameter. Exchange rate gain/loss on making the payment will be automatically posted to the relevant profit and loss account based on the reconciliation account of the vendor.

The  payment method specified in the parameter of the payment program determines the bank account and the GL account used to make the payment. Also, depending on the payment method, cheques, other forms and payment files will be generated.

What is Vendor Reconciliation?

It is Month end activities once Full accounts payment process is completed by payment to vendor. The vendor reconciliation team reconciles payment by matching Vendor statement with system payment history. They confirm whether any dues to be paid if any, they raise supplementary or any amount to be collect from vendor by raise credit memo.

Country India version (CIN): Indian taxation & withholding tax (TDS)

What is TDS/withholding tax & its process Flow?

TDS (Tax Deducted at Source) is deducted at source of vendor’s income. We can Charge TDS when we receive Govt. specified services from vendor & that person should eligible as per Govt. slab incomes.TDS can be deducted at the time of payment to vendor or vendor invoice processing which is ever is earlier.

What are the Section codes, percentage rates & Slab rates in TDS? Follow the link: http://finotax.com/itax/tds0910.htm

All forms related TDS: Follow the below link: http://taxworry.com/new-form-16-form-16a-form-24g-form-27d-notified-download-now/

What are due dates for TDS payment

Due Date Table for TDS and TCS quarterly returns: QuarterForm 24Q Form 26Q Form 27Q Form 27EQ

First July 15th July 15th July 14th July 15thSecond October 15th October 15th October 14th October 15th

Third January 15th January 15th January 14th January 15thFourth May 15th May 15th May 15th May 15th

Tax deducted by companyTime to deposit TDS (due date to deposit tds) Rule 301 tax deductible in March 30th April of next year2 other months & tax on perquisites opted to be deposited by employer 7th of next month Note: Assessing officer, with prior approval of Joint commission, may permit quarterly payment of TDS under following sectionsSection Description quarter of Financial

year ended ondate of payment

192 salary 30th June (1st qtr)

7th July

194A TDS on interest other than securities

3th September (2n qtr)

7th October

194D TDS on insurance commission

31st December (3rd qtr)

7th January

194H TDS on commission 31st March(4th qtr)

30th April

Note:TDS is to be deposited online mode only through Debit card or Interenet banking Mode, except in case of Book adjustment by Govt Offices

AP STEP BY STEP TRAINING

CREATE VENDOR MASTER DATA  –  FK01 FUNCTIONALLY (FINANCE VENDOR)  & XK01- CENTRALLY (MATERIAL MANAGEMENT VENDOR)

FINANCE RELATED TRANSACTION

STEP 1 – INVOICE POSTING & PAYMENT

VENDOR INVOICE POSTING FB60 OR F-43

DISPLAY DOCUMENT – FB03

DISPLAY VENDOR LINE ITEM – FBL1N

DISPAY VENDOR TRANSACTION FIGURE – FK10N

VENDOR PAYMENT – F-53/F-58(WITH CHECK PRINTING/PAYMENT ADVICE/PAYMENT SUMMARY)

STEP 2 – PARK INVOICE & POST PARK INVOICE & PAYMENT

VENDOR INVOCE PARKING FV60 OR F-41

POST  PARKING VENDOR INVOCE FBV0 & FV60

DISPLAY DOCUMENT – FB03

DISPLAY VENDOR LINE ITEM – FBL1N

DISPAY VENDOR TRANSACTION FIGURE – FK10N

VENDOR PAYMENT – F-53/F-58(WITH CHECK PRINTING/PAYMENT ADVICE/PAYMENT SUMMARY)

STEP 3- REVERSE OPEN ITEM DOCUMENT FB08

STEP 4 – REVERSE CLEARED ITEM DOCUMENT FBRA

STEP 5- DOWN PAYEMENT

CREAT DOWN PAYMENT REQUEST – F-47 FBL1N WITH NOTED ITEM

RELEASE DOWN PAYEMNT REFERENCE TO DOWN PAYEMNT REQUEST – F-48 FBL1N WITH SPECIAL GL TRANSACTION

POSTING VENDOR INVOICE – FB60 FBL1N WITH NOTED ITEM,SPECIAL GL TRANSACTION, NORMAL ITEM

ADJUST DOWN PAYEMNT WITH VENDOR INVOICE – F-54  (GIVE VENDOR INVOICE (KR) NUMBER) – FBL1N WITH ALL ITEMS.

REST AMOUNT PAID (VENDOR PAYMENT) – F-53/F-58 FBL1N WITH ALL ITEM CRITATIA.

STEP 6 - PAYMENT WITH CASH DISCOUNT RECEIVED.

CREAT DOWN PAYMENT REQUEST – F-47 FBL1N WITH NOTED ITEM

RELEASE DOWN PAYEMNT REFERENCE TO DOWN PAYEMNT REQUEST – F-48 FBL1N WITH SPECIAL GL TRANSACTION

POSTING VENDOR INVOICE – FB60 FBL1N WITH NOTED ITEM,SPECIAL GL TRANSACTION, NORMAL ITEM

ADJUST DOWN PAYEMNT WITH VENDOR INVOICE – F-54  (GIVE VENDOR INVOICE (KR) NUMBER) – FBL1N WITH ALL ITEMS.

REST AMOUNT PAID & RECEIVED CASH DISCOUNT (VENDOR PAYMENT) – F-53/F-58 FBL1N WITH ALL ITEM CRITATIA.

STEP 7- PARTIAL PAYMENT & RESIDUAL PAYMENT

F-53/F-58AT THE PAYMENT SELECT PARTIAL PAYMENT TAB GIVE PARTIAL AMOUNT IN ACTIVE FIELD. THEN SIMULATE & SAVE. – FBL1N

STEP 8– PAYMENT WITH AUTOMATIC PAYMENT PROGRAM.

VENDOR INVOICE POSTING FB60 OR F-43

DISPLAY DOCUMENT – FB03

DISPLAY VENDOR LINE ITEM – FBL1N

DISPAY VENDOR TRANSACTION FIGURE – FK10N

VENDOR PAYMENT – F110 (WITH CHECK PRINTING/PAYMENT ADVICE/PAYMENT SUMMARY WITH AUTOMATIC)

                                                                                

STEP 9 – TRANSFER WITH CLEARING

EXAMPLE YOU WRONGLY CREDIT A VENOR. F-51

STEP 10 – WITH HOLING TAX ADJUSTMENT

CREAT DOWN PAYMENT REQUEST – F-47 FBL1N WITH NOTED ITEM(OF RS- 10000)

RELEASE DOWN PAYEMNT REFERENCE TO DOWN PAYEMNT REQUEST – F-48 FBL1N WITH SPECIAL GL TRANSACTION (OF RS. 10000)

POSTING VENDOR INVOICE – FB60 FBL1N WITH NOTED ITEM,SPECIAL GL TRANSACTION, NORMAL ITEM (OF RS. 20,000 BUT W.TAX AMOUNT 10000 & DELETE TAX CODE FOR PAYMENT POSTING)

ADJUST DOWN PAYEMNT WITH VENDOR INVOICE – F-54  (GIVE VENDOR INVOICE (KR) NUMBER) – FBL1N WITH ALL ITEMS.

REST AMOUNT PAID (VENDOR PAYMENT) – F-53/F-58 FBL1N WITH ALL ITEM CRITATIA.

CREAT TDS CHALL FOR PAYIN TDS AMOUNT – J1INCHLN

BANK RECEIPT UPDATE – J1INBANK

TDS CERTIFICATE PRINT – J1INCERT

REPRINT TDS CERTFICATE – J1INREP

QUATERLLY RETURN – J1INQEFILE

TDS STATUS - J1INMIS

MATERIAL MANAGEMENT RELATED TRANSACTION

CREATE MM VENDOR BY T.CODE XK01

STEP 11 – PO CREATE, CHANGE & DISPLAY

CREATE PURCHASER ORDER – ME21N

CHANGE/DISPLAY – ME22N/ME23N

STEP 12 – GOODS RECEIPT & DISPLAY

GOODS RECEIPT –MIGO

DISPLAY GOODS RECEIPT DOCUMTN MB03

STEP 13 – LOGISTIC INOICE VERIFICATION & PAYEMENT

LOGISTIC INOICE VERIFICATION - MIRO

DISPLAY MM INVOICE DOCUMENT – MIR4

DISPLAY VENDOR LINE ITEM – FBL1N

DISPAY VENDOR TRANSACTION FIGURE – FK10N

VENDOR PAYMENT – F-53/F-58(WITH CHECK PRINTING/PAYMENT ADVICE/PAYMENT SUMMARY)

AP LOGICAL QUESTING

If in invoice Po number is Mentioned, then Which T.code you will be used to Process that Invoice?

Ans :We can directly post the invoice by using t.code FB60 if goods receipt is not required. Example: service invoice.

We can use MIRO if it is GR base invoice.

What is WBS Element?

It is nothing but work break down structure, it represents that goods are taken for specific project where budgetary control is applied. So you have to entered WBS code number during Invoice posting like cost center.

How you will know whether down payment or payment request has made to vendor not?

Ans : (FBL1N) In vendor line item there is a column of special general ledger indicators are displayed. A- Down payment made, F- down payment request (noted item)

Whether the invoice is against the PO or Non PO it should go to the concern department's head for the approval

Finance will check if the purchases are budgeted for both (PO & Non PO) and if Non PO then finance will ask for the reasons and GM approval to process the payment

If the invoice itself does not have the complete details then it is better to reject the invoice and ask the supplier to provide the invoice with full details and supporting.

What is the difference between Consigner and Consignee?

Consigner is the person who is the owner of the goods and who deliver the goods to the consignee.Consignee is the person who receives the goods and he just possesses the goods and not the owner.

What steps would you take before approving an invoice for payment?

The following are the important steps one should take before approving the payment.

Refer the Purchase Order issued.

Refer the Goods Received Note (GRN) for having received goods / service as mentioned in the P.O

Refer the terms and conditions for making the payment (any credit period)

Check the bank balance before approve the invoice for payment

The most critical part of AP process is "verification" of goods / services as per invoice. Whether it is thru' certification of the concerned team which has raised the PO or by confirmation of the Stores Department having received the material - depending on the nature of invoice - it is

important for a Payables team member to look into this before starting to vet the other aspects of the invoice.

What the situation we parked the document?

Information required for posting the invoice document is missing in the invoice document and you do not want to have to enter again the data already entered

1. The balance is not zero 2. The following updates are to take place:

3. Log of document changes

4. Informative purchase order history

5. Data for advance tax returns

6. Index for checking for duplicate invoices

7. Vendor open items

8. Vendor open items for parked documents 

When you Save Invoice Documents as Complete?

You create an invoice document in document parking. Choose Save as complete to do this. Before saving the data, the system performs consistency checks. In the event of errors, the data is not saved, but is presented for correction instead. Subsequently, you can still change, delete, or post Documents complete for posting.

Use Save as complete if: No more changes are to be made to the invoice document The balance is zero The invoice document is to be parked for posting but not posted yet

Can we specify payment method in open items? Is it done in invoice?

A: Payment method is specified in several places in SAP system:

Vendor master record. You can specify several payment methods in there, and APP will automatically select the best one.

Directly in the invoice.\

In the payment terms, and then this value will be inherited into the invoice.

Payment method in the invoice has a priority over the payment method in vendor master record.

Why do I have Vendors and Customers on the selection screens of APP? What is a relation between Customers and Payment program which is used for outgoing payments?

A: First of all, we can pay Customers too. For example, refunds or returns of down payments. Second, APP can be also used for payments collection. For example, direct debits.

That’s why customers are pretty much on their place in APP.

Can we make Down payment to vendor in APP?

Ans: yes, first create Payment Request by using T.code F-47, that request can be converted in to down payment in APP.

Can we make Partial payment to vendor in APP?

Ans : No, Only full amount of invoice (bill to bill) is consider for payment in APP.

Can you verify the Logistic invoice before to goods Receipt?Yes, if the case is Import purchase.

What are the prior activities to post an invoice?

All required filled are entered correctlySystem should response Green signal Debit & Credit should equalSimulate the transaction - check Journal entry, check document header data – posting date, reference no., document date, company code, document type & currencies.

How many vendors you handled in your company?

Ans : I Was handled around 100 vendors in terms of Reconciliation.

Is there any daily target for posting the Invoice?

Ans : yes, Every individual has daily target of 60 invoices to post.

If I assign Payment term 0001, 0002, 0003, 0004 & baseline date is today, then tell me about all the due dates. (1st due date, 2nd Due date, 3Rd due date or Net due date)

CONTENT  

INTRODUCTION

CLASSIFICATION OF ACCOUNTS:

GOLDEN RULES OF ACCOUNTING:

ACCOUNTING ENTRY IN SAP APPLICATION:

SALES AND DISTRIBUTION

INVOICE GENERATION:

DEBIT MEMOS

MATERIAL MANAGEMENT

GOODS RECEIPT

INVOCIE RECEIPT

CREDIT MEMO:

INVENTORY ACCOUNTING ENTRIES

FICO:

CENVAT EXCISE ENTRIES:

BANKING TRANSACTION FINANCIAL ACCOUNTING ENTRIES :

INTRODUCTION

The double-entry bookkeeping system was codified in the 15th century and refers to a set of rules for recording financial information in a financial accounting system in which every transaction or event changes at least two different accounts. In modern accounting this is done using debits and credits within the accounting equation: assets = liabilities + equity. The accounting equation serves as a kind of error-detection system: if at any point the sum of debits does not equal the corresponding sum of credits, an error has occurred.

An organizations having large assets, external suppliers of capital and thousands of transactions to deal with in a reporting period, it is more appropriate to use a double entry accounting system.

There are two distinct characteristic features of a double entry bookkeeping system, which are, that every transaction is recorded in two accounts and each account has two columns. In a double entry bookkeeping method, two entries are made for each transaction. One entry is made as a debit in one account and one entry is made as a credit in another account. The entries are entered in this manner to keep the accounting equation in balance. The columns in a double entry bookkeeping system are namely date, accounts, debit and credit. The debits are entered in the left column and the credits are entered in the right column. For each debit entry, an equal and opposite credit entry is entered. When totaling the accounts, the sum of all debits must be equal to the sum of all credits.

Online bookkeeping is where books are updated through a online bookkeeping application. Online bookkeeping is very secure as the documents are uploaded on to a secure location or into a online bookkeeping application.

In the double entry book keeping system every transaction has to have with at least two line items i.e. one debit and one credit entry. The line item of an accounting document may be more that one and in case of clearing document, there may be zero line item.

In double entry book keeping, account has been subdivided into two types i.e. Personal and impersonal Account. Impersonal is again sub divided into real and nominal. Personal accounts represent the person involved in the organization. Real accounts include like cash, bank, inventory, goods and services and tangible assets. Nominal accounts include all the intangible assets, incomes, profits, gains, losses, and expenses.

There two sets of books of accounts like General Ledger Accounting and Sub Ledger Accounting. Sub Ledger accounting records transaction in detail and post to its corresponding Control Account in General Ledger Accounting. Sub Ledger includes Account Payable, Account Receivable and Fixed Assets Accounting.

CLASSIFICATION OF ACCOUNTS:

1. Personal Account: when a transaction involved with a person known as personal account such as Mr. Roy, Bose& sons ABC Ltd. co. etc.

2. Impersonal Account:

Impersonal Account is subdivided into two accounts as follows:

· Nominal Account: All recurring expenses/incomes/ gains/losses are known as Nominal Account, such as salary, Rent, Interest etc.

· Real Account: Other than above two accounts all are fall under this category,such as Machinery, Furniture etc.

GOLDEN RULES OF ACCOUNTING:

The golden rules for accounting entry in an accounting document are as follow

a) Personal Account :

Debit the receiver and credit the giver.

b) Real Account :

Debit what comes in and credit what goes out.

c) Nominal Account :

Debit all loses & expenses and credit all income & Gains.

ACCOUNTING ENTRY IN SAP APPLICATION:

SAP is one of the online booking applications and is being used in most of the Large and SME organizations. We need to think about the accounting entry is SAP since the posting transaction having impact on GL Account Balances. GL Account gets value from different source such as Billing Document in SD, Material document and Invoice in MM, Payroll Entry in HR and Direct FI Entry in FI Module. We will try to bring most of the commonly used accounting entry in the SAP Application System. Accounting Entry will be posted based on the Account Determination in the configuration settings as well as manual entry of GL Account. Account Determination settings required for the following to get a real time auto posting to GL while executing a Sub Ledger or other transaction which generates a automatic line items based on the rule defined, e.g., Input Output Tax, Withholding Taxes, FOREX Evaluation.

Tax Transaction Bank Transaction

Account Receivable and Account Payable Transaction

Foreign Currency Transaction

Fixed Asset Transaction

Payroll Transaction

Sales and Distribution Transaction

Purchasing Transaction

Inventory Transaction

Travel Expenses Transaction

Excise and Custom Transaction

SALES AND DISTRIBUTION

INVOICE GENERATION:

Invoices will be generated at the Smelters and stock points. The accounting entries for the sale of goods dispatched will flow from the Sales invoice generated in SAP Sales and Distribution module. The following entries shall be passed.

a) DOMESTIC SALE

Customer Account DrRevenue CrExcise Duty Payable CrSales Tax Payable (local or central) Cr

Note: As mentioned above in the FI document, which is created in the background, the SD invoice number shall be captured. However as per the current accounting procedure the accounting entry passed is as follows:

VF01:

Customer Account DrRevenue CrExcise Duty Billed CrSales Tax Payable (local or central) Cr

J1IIN:

Excise duty paid a/c DrExcise duty payable a/c Cr

b) EXPORT SALES

There have been very few export transactions in the past. SAP system will be designed to handle export business. Exports are mainly from the mines and will be handled at the mines, however

the documentation part will be taken care at the Head Office. The accounting entry is:

Customer Account DrRevenue (Exports) Cr

The realization of export sales will be directly credited to the bank. The accounting entries will be as follow:

Bank DrCustomer CrExchange Fluctuation Dr/ Cr

Rebates/Discounts DrCustomer Cr

DEBIT MEMOS

Debit Memos shall be issued in case of price difference, sale tax difference and interest on usance period and overdue payments.

The accounting entries for two possible scenarios are as follows:

Price Undercharged:Customer Account Dr.Revenue Cr.Sales tax payable Cr.Sales tax underchargedCustomer Account Dr.Sales tax adjustment Cr.

Interest on delayed payments/usance period and other charges

Customer Account Dr.Interest Others Cr.

In case of HZL a complete retirement or a partial retirement of asset is done. The system uses the asset retirement date to determine the amount to be charged off for each depreciation area. The existing accounting policy is to provide depreciation for the full quarter in which the asset is sold/discarded, recommended that the depreciation be provided from the date of acquisition on prorata basis .

SALE OF SCRAP

The sale of scrap (non-stock) shall be mapped as a direct manual FI entry. The customer will be created as a FI customer. No Logistics module will be involved in the process.

A FI Invoice will be prepared for the sale of scrap with the following entries:

Customer DrSale of Scrap CrExcise Duty Payable Cr

ADVANCES FROM CUSTOMERS

Advances are received from the customers against delivery. These advances will be recorded in a special general ledger account. The accounting entry for the same will be:

Bank Account DrAdvance Customer Payments Cr

These advances will be later on adjusted against the invoices raised on the customers. Advances can be adjusted against more than one invoice at the time of clearing of the invoices against advances.

Adjustment of Advances:

Customer Account CrAdvance Customer Payments Dr

A financial document would be created for each Bank Guarantee received and this document number will be referred to in the Sales Order which would then monitor the value and the validity of the of the Bank Guarantee instrument wise while doing the billing. The letter of credit /Bank guarantee given will be recorded as a noted item.

MATERIAL MANAGEMENT

GOODS RECEIPT

Based on the Purchase order and the Quantity actually received Goods Receipts (GR) will be done. Based on the GR done the following accounting entry will be passed in the Financial Accounts

Accounting Entry for Goods receipt:

Stock/Inventory account DrGR/IR account CrFreight clearing account Cr

Accounting Entry on invoice verification of supplier:

GR/IR DrVendor account Cr

INVOCIE RECEIPT

Accounting Entry on invoice verification of freight vendor

Freight clearing account DrFreight Vendor account Cr

SAP Transaction Code:  

RM/PM Stock Account DrGR/IR Account CrFreight Clearing Account Cr

CREDIT MEMO:

EXCISE INVOICE VERIFICATION

On receipt of the excise invoice cum gate pass the following entry will be passed

RG 23 A / RG 23 C Part 2 Account DrCenvat Clearing Account Cr

INVENTORY ACCOUNTING ENTRIES

All the Inventory transactions will look for the valuation class and the corresponding G.L. Accounts and post the values in the G.L accounts. 

For Example: during Goods Receipt

Stock Account - DrG/R I/R Account  -  CrFreight Clearing account - CrOther expenses payable - Cr       

During Invoice Verification

G/R I/R Account - DrVendor - Cr

When the Goods are issued to the Production Order the following transactions takes place:

             Consumption of Raw Materials - Dr             Stock A/c - Cr

When the Goods are received from the Production Order the following transactions takes place:

              Inventory A/c - Dr              Cost of Goods Produced - Cr                                   Price difference - Dr/Cr             (depending on the difference between standard cost and actual cost)

When the Goods are dispatched to customer through delivery the following transactions takes place:

               Cost of Goods Sold - Dr               Inventory A/c - Cr

When the Goods are issued to a Cost Center or charged off against expenses the following transactions takes place:

               Repairs and Maintenance - Dr               Inventory A/c - Cr

When the Goods are stock transferred from one plant  to another, the following transactions takes place:

                Stock A/c - Dr (Receiving location)                Stock A/c -  Cr (Sending location)                Price difference - Dr/Cr                (due to any difference between the standard costs between the two locations)

When the stocks are revalued, the following transactions takes place:

                 Stock A/c - Dr/Cr                         Inventory Revaluation A/c - Cr / Dr

When the Work in Progress is calculated the following transaction takes place:

                 Work in Progress A/c - Dr                  Change WIP A/c - Cr

Physical verification /shortages and excesses :  Shortages/excesses on authorizations shall be adjusted using the physical inventory count transaction.       

Transaction Code:

FICO:

Journal Entry

Accrual/Deferral

Recurring Entry

Account Payable

Account Receivable

Fixed Assets

Bank Account

CEBAVT

SALE OF ASSETS

Accounting entry for sale of Asset to customers:

Customer Account DrAsset Sale CrAccumulated Depreciation DrLoss on Sale (if applicable) DrAsset Sale account DrAsset account CrProfit on sale (if applicable) Cr

Note: In case of any Sales Tax /Excise duty applicable for this transaction, SAP will calculate the Sales Tax/Excise Duty based on the Tax Code selected the entry is posted to the GL Account (Sales Tax Payable)

Accounting entry for sale without a customer:

Accumulated Depreciation DrLoss on Sale (if applicable) DrAsset Sale account DrAsset account CrProfit on sale (if applicable) Cr

Accounting entry for scrapAccumulated Depreciation DrLoss on Sale of Assets DrAsset account Cr

CENVAT EXCISE ENTRIES:

1. On receipt of material (MIGO)

DR Inventory 1000.00

CR GR/IR Clearing Account 1000.00

2. At the time of Posting excise invoice (J1IEX_P)

i) if it is raw material

DR RG23 Part II Posting 160.00

CR Cenvat Clearing Account 160.00

ii) if it is capital goods

DR CENVAT on hold Account 80.00

DR RG23 Part II Posting 80.00

CR Cenvat Clearing Account 160.00

iii)when making transfer posting (J2I8)

DR RG23 Part II Posting 80.00

CR CENVAT on hold Account 80.00

3. At the time of Invoice Verification (MIRO)

DR GR/IR Clearing Account 1000.00

DR Cenvat Clearing Account 160.00

CR Vendor 1160.00

4. Excise Duty payable on dispatches

DR Excise Duty Account 240.00

CR Excise Duty Liability Account 240.00

5. Advance payment of Excise Duty (F-02)

DR PLA On Hold Account 80.00

CR Bank 80.00

6. Creation of TR6 Challan (J1IH) after Deposit

DR PLA Account 80.00

CR PLA On Hold Account 80.00

7. Adjustment of Duty liability Utilization (J2IU)

DR Excise Duty Liability Account 240.00

CR RG23 Part II Posting 160.00

CR PLA 80.00

Transaction Code:

BANKING TRANSACTION FINANCIAL ACCOUNTING ENTRIES :

Settlement Of Tour Advances Domestic/Foreign

1) Settlement of advance will be done by the Accounts Department based on the Travel Expense Statement submitted by the employee, which is approved by the Concerned Department Head.

 2) Expenses  Account                                DR     Cash/Bank  Account                            DR  (if, refund)     Employee Advance Account             CR     Cash/Bank Sub ledger Account      CR  (if, payable)

 3) Banking Operations - Maintenance Of Bank Master 

 4) A House Bank is a combination of a Bank and a Branch. Account id is the account number. A house bank can have multiple account IDs.. There could be a main account as also payable account, which will be defined as separate account ids. General Ledger accounts have to be created for each combination of a house bank and account ID. The bank master details are to be provided by HZL. 

 5) General Ledger accounts have to be created for each account ID in the house bank. Bank Account Master data will be maintained by the Finance Department centrally.

 6) Each house bank and account ID combination shall have one main general ledger account and several sub accounts mainly based on broad transaction types. These sub accounts are necessary to facilitate automatic bank reconciliation process in R/3 system. 

Bank Accounting

 7) The accounting entries will be generated automatically according to the posting rules attached to the Transaction type. The following accounting entry is passed by the system in respect of cheque deposit on account of collection from domestic customers. 

Bank cheque deposit account         Debit Customer account                               Credit

 8) In this case, a bank sub account is selected based on the transaction code entered by the user. The customer account is cleared i.e. invoice is cleared against the receipt. In respect of any other deposits, the relevant accounts to be credited will depend on the nature of transaction. 

 9) Payment against bills for collection. Based on the bank advices falling due on a particular day one payment advice is made debiting the vendors and crediting bank.

Cheque Deposit - Customer Receipts

10) All cheques received from customers shall be accounted at the point of receipt.  The entry posted shall be 

Bank  Sub account  Dr Customer Account    Cr

Cheque Deposit - Other Than Customer Receipts

11) All  other receipts will be accounted through the Incoming Payment Transaction of the Accounts Receivables module.

Cheque Bouncing – Other Than Customer Receipts

12) Based on the information of cheque bounced from the Bank, the accounts Department will pass accounting entries for the cheque that have been bounced. The procedure to handle bouncing of a cheque has been discussed under the following

13) Reset the clearing document – If the document has been cleared i.e. an    open outstanding item has been cleared against an incoming receipt, then the clearing document has to be reset to its original status of open item. This process is known as reset of cleared document. 

14) Reverse the entry passed for cheque deposited earlier – Once the document has been reset it will be reversed. The following accounting entry will be passed.

FI Customer       DR

Bank cheque deposit account  CR

15) In case of cheques being damaged while printing, the concerned cheques no. has to be voided and the payment will be rer

Bank Reconciliation 

16) The Bank reconciliation process is based on the entries passed through the Bank sub account and main account. The process is dependent on the Bank Statement received from the Bank that will be entered into SAP. Accounting rules are to be defined for each transaction type and posting rule for posting accounting entries as per bank statement.  Bank statements to be uploaded into SAP.

17) Bank Main account balance is the actual balance as per the bank statement whereas the Bank sub accounts denote the reconciliation items. These sub accounts show those entries, which will flow from the sub account which are not cleared in the bank statement.

18) Adding or subtracting the Bank sub accounts will help in preparing the Bank reconciliation statement.

19) The following scenarios would explain the reconciliation process:

-Cheque received from customer.-Cheque issued to vendors.-Cheque received from Other than Customers.-Direct Debits in Bank Statement.

-Direct Credits in Bank Statement.-Fund Transfer between Bank Accounts.

Cheque Received From Customer

20) Accounting entry at the time of cheque deposit entry

                    Bank Cheque deposit account   Debit                    Customer                                          Credit

21) Accounting entry after cheque has been cleared in the Bank statement Main Bank account 

                   Debit Bank                    Cheque deposit account  Credit

22) The clearing criteria for updating the bank main account and bank sub account will be amount and document  number which will be captured in the allocation field of the bank sub account. The items, which have not been cleared in the bank statement, will remain open in the bank sub account and will form part of the bank reconciliation statement.

Cheque Issued To Vendors

23) Accounting entry at the time of cheque issue 

                   Vendor account     Debit                    Bank cheque payment account  Credit

24) Accounting entry after cheque has been presented in the Bank 

                   Bank cheque payment account  Debit                   Main Bank account       Credit

25) The clearing criteria used for updating vendor account and Bank cheque payment account will be amount and cheque number. The cheques presented to the bank and are cleared are transferred to the bank main account. The remaining cheque issued will form part of the bank reconciliation statement.

Direct Debit In Bank 

26) Direct debit instructions will be given to the bank for example, LC payments or certain bank charges are directly debited in the Bank Statement. In this case accounting entry is passed only after the entry is passed in the bank statement.

                   Vendor / Expense Account  Debit                     Bank clearing account  Credit

Direct Credit In Bank

27) Customer receipts are sometimes directly credited in Bank. E.g. export receipts. In this scenario accounting entry is passed only at the time of bank statement entry.  The following accounting entry is passed

                   Bank clearing account    Debit                   Customer account    Credit                   Main Bank A/c    Debit                   Bank Clearing A/c    Credit

Bank Fixed Deposits

28) HZL has a practice of converting any amount above Rs. 1 crore in its Main bank account, to a fixed deposit subject to a minimum of Rs. 1.01 crores. The FDR number can be filled in one of the fields available in the accounting document. 

Cheque Management / Cheque Printing Cum Advice

29) The function of cheque management will enable printing of cheque through SAP. Cheque series will be defined for a combination of a Company code and Bank Account. Cheque numbering will be sequential order. 

30) Cheque series for automatic payment has to be in sequential order. Cheque printing facility will be available for the bank account.

Cash Management / Liquidity Analysis

31) The day-to-day treasury process in a company includes a number of transactions. This includes determining the current liquidity using bank account balances (cash position), determining open receivables and liabilities (liquidity forecast), manually entering planned cash flows (payment advice notes), through to clearing bank accounts, that is, collecting multiple bank account balances on one target account.

32) The main objective is to ensure liquidity for all due payment obligations. It is also important to control and monitor effectively the incoming and outgoing cash flows.

33) This section shows you the overall liquidity status of your company by displaying together the cash position and the liquidity forecast. The cash position is used in Cash Management to show the value-date-dependent bank accounts and bank clearing accounts, as well as the planned cash flows (payment advice notes). The liquidity forecast comprises the incoming and outgoing cash flows, as well as the planned items on the sub-ledger accounts. 

 

When the Goods are stock transferred from one plant to another, thefollowing transactions takes place: Stock A/c - Dr (Receiving location)Stock A/c - Cr (Sending location)Price difference - Dr/Cr(due to any difference between the standard costs between the twolocations)When the stocks are revalued, the following transactions takes place: Stock A/c - Dr/CrInventory Revaluation A/c - Cr / DrWhen the Work in Progress is calculated the following transaction takesplace: Work in Progress A/c - DrChange WIP A/c - CrPhysical verification /shortages and excesses: Shortages/excesses onauthorizations shall be adjusted using the physical inventory counttransaction.Sales and Distribution Accounting Entries INVOICE GENERATION Invoices will be generated at the Smelters and stock points. The accountingentries for the sale of goods despatched will flow from the Sales invoicegenerated in SAP Sales and Distribution module.The following entries shall be passedCustomer Account DrRevenue CrExcise Duty Payable CrSales Tax Payable (local or central) CrNote: As mentioned above in the FI document, which is created in thebackground, the SD invoice number shall be captured. However as per thecurrent accounting procedure the accounting entry passed is as follows :-Customer Account DrRevenue CrExcise Duty Billed CrSales Tax Payable (local or central) CrExcise duty paid a/c DrExcise duty payable a/c Cr  EXPORT SALES There have been very few export transactions in the past. SAP system will bedesigned to handle export business. Exports are mainly from the mines and willbe handled at the mines; however the documentation part will be taken care atthe Head Office.The accounting entry is:Customer Account DrRevenue (Exports) CrThe realization of export sales will be directly credited to the bank. Theaccounting entries will be as follow:Bank DrCustomer CrExchange Fluctuation Dr/ CrThe accounting entries will be:Rebates/Discounts DrCustomer CrDEBIT MEMOS Debit Memos shall be issued in case of price difference, sale tax difference andinterest on usance period and overdue payments.The accounting entries for two possible scenarios are as follows:Price Undercharged:Customer Account Dr.Revenue Cr.Sales tax payable Cr.Sales tax underchargedCustomer Account Dr.Sales tax adjustment Cr.Interest on delayed payments/usance period and other chargesCustomer Account Dr.Interest Others Cr.In case of HZL a complete retirement or a partial retirement of asset is done.The system uses the asset retirement date to determine the amount to becharged off for each depreciation area. The existing accounting policy is toprovide depreciation for the full quarter in which the asset is sold/discarded,recommended that the depreciation be provided from the date of acquisition onprorata basis.Accounting entry for sale of Asset to customers:Customer Account DrAsset Sale Cr  Accumulated Depreciation DrLoss on Sale (if applicable) DrAsset Sale account DrAsset account CrProfit on sale (if applicable) CrNote: In case of any Sales Tax /Excise duty applicable for this transaction, SAPwill calculate the Sales Tax/Excise Duty based on the Tax Code selected theentry is posted to the GL Account (Sales Tax Payable)Accounting entry for sale without a customer:Accumulated Depreciation DrLoss on Sale (if applicable) DrAsset Sale account DrAsset account CrProfit on sale (if applicable) CrAccounting entry for scrapAccumulated Depreciation DrLoss on Sale of Assets DrAsset account CrSALE OF SCRAP

 The sale of scrap (non-stock) shall be mapped as a direct manual FI entry. Thecustomer will be created as a FI customer. No Logistics module will be involvedin the process.A FI Invoice will be prepared for the sale of scrap with the following entries:Customer DrSale of Scrap CrExcise Duty Payable CrADVANCES FROM CUSTOMERS Advances are received from the customers against delivery. These advances willbe recorded in a special general ledger account. The accounting entry for thesame will be:Bank Account DrAdvance Customer Payments CrThese advances will be later on adjusted against the invoices raised on thecustomers. Advances can be adjusted against more than one invoice at the timeof clearing of the invoices against advances.Adjustment of AdvancesCustomer Account CrAdvance Customer Payments Dr  A financial document would be created for each Bank Guarantee received andthis document number will be referred to in the Sales Order which would thenmonitor the value and the validity of the of the Bank Guarantee instrument wisewhile doing the billing. The letter of credit /Bank guarantee given will be recordedas a noted item.Accounting Entry for Goods receiptStock/Inventory account DrGR/IR account CrFreight clearing account CrAccounting Entry on invoice verification of supplierGR/IR DrVendor account CrAccounting Entry on invoice verification of freight vendorFreight clearing account DrFreight Vendor account CrGOODS RECEIPT Based on the Purchase order and the Quantity actually received Goods Receipts(GR) will be done. Based on the GR done the following accounting entry will bepassed in the Financial AccountsRM/PM Stock Account DrGR/IR Account CrFreight Clearing Account CrEXCISE INVOICE VERIFICATION On receipt of the excise invoice cum gate pass the following entry will be passedRG 23 A / RG 23 C Part 2 Account DrCenvat Clearing Account CrVendor Invoice Verification Accounting Entries VENDOR INVOICE VERIFICATION The detail process related to invoice verification is documented in MaterialsManagement Document.On receipt of vendor bill the following entry will be passed:GR/IR Account DRFreight Clearing Account DRCenvat Clearing Account DRVendor Account CR  Invoice Verification for Foreign VendorOn receipt of vendor bill the following entry will be passed:GR/IR Account DRVendor Account CRInvoice Verification for Custom vendorOn receipt of Vendor bill the follo wing entry will be passed:1) RG 23A/RG 23C Part 2 A/c (CVD) A/c DRCenvat Clearing A/c CR2) G/R I/R A/c DRCenvat Clearing A/c DRVendor A/c CR3) Cost of Material A/c DRVendor A/c (Customs) CRInvoice Verification for Freight / Clearing AgentCost of Material A/c DRVendor A/c (Clearing Agent) CRInvoice Verification for Octroi ExpensesCost of Material DRVendor A/c (Octroi) CRTDS (Work Contract Tax) for Service Orders shall be calculated and deductedaccordingly.The following entry will be passed on bill passing:Expenses Account DRVendor Account CRTDS Account CRThe material shall be returned to the vendor using theReturn to vendor movement type in SAPCreating a Return POThese transactions will be processed in the MM module.The accounting entries will be :Returns after GRNGR/IR A/c DrStock A/c CrThe accounting in respect of debit / credit memos for FI vendors, the process willbe similar to that of invoice processing. The accounting entries will be:On issue of debit note  Vendor Account DRExpenses Account CRIn respect of import vendor - capital goods exchange differences are to beaccounted manually through a Journal Voucher for capitalization.Exchange rate differences will be accounted at HO. An example of theaccounting entry in this case shall be:Invoice entry @ 40 INR: 1 USDAsset / Expense A/c

DR 100Vendor A/c CR 100Payment Entry @ 41 INR: 1 USDVendor A/c DR 100Bank A/c CR 110Exchange rate loss Capital A/c DR 10Asset A/c DR 10Exchange rate loss Capital A/c CR 10A new G/L account shall be created for the special G/L transactions.The accounting entry for making the down payment shall be:Advance to supplier account DebitBank A/c CreditWhen the invoice is booked the following entry is passedGR/IR account DebitVendor account CreditClearing of Invoice against Down PaymentVendor A/c DebitVendor down payment account CreditWherever, TDS is applicable, the TDS will be deducted at the time of down-payment to the vendor.Down Payment for Capital (tangible) AssetsDown payment to vendors for capital acquisitions is to be reported separately inthe Balance Sheet under the head Capital Work in Progress. Hence downpayment for capital goods would be tracked through a separate special generalledger indicator.The procedure to be followed is:Definition of alternative reconciliation accounts for Accounts Payable for postingdown payments made for Capital assetsClearing the down payment in Accounts Payable with the closing invoice.

SAP FI MM Integration:Accounting Entries related to MM transactions

Initial stock entry:

Movement type - 561(Receipt per initial entry of stock balances into unrestricted-use)

TCODE - MB1C

FI Document Type - WA

89 Raw material BSX S91 Initial Stock entry GBB BSA H

Physical inventory differences:

Movement type – 702 (Goods Issue – Physical Inventory difference) this is triggered because of the movement type 102, which is given while calculating the difference – INV: for expenditure/income from inventory differences

TCODE - MI07 (MI01 & MI04)

FI Document Type - WI

81 Inventory differences – G/L GBB INV S99 Raw material BSX H

Goods Issue to Production Order:

Movement type - 261 (Consumption for order from warehouse) – VBR: for internal goods issues (for example, for cost center)

TCODE - MB1A

FI Document Type - WA: Goods Issue

81 Raw material Consumption GBB VBR S99 Raw material BSX H

In case Movement type given is 201(Consumption for cost center from warehouse), at the time of MB1A system asks for the COST center & GENERAL LEDGER. Here, the account determination happens

directly from MB1A and not from the OBYC. Accounting entry will be same as above except the 'Raw material Consumption'; it triggers whatever the GL given.

Goods Issue / Delivery: SD

Movement type - 601 (Customer delivery) – VAX: for goods issues for sales orders without accountassignment object (the account is not a cost element)

TCODE - VL02

FI Document Type - WL: Goods Issue/Delivery

81 Mater. consumed/trading goods without cost elementCOGS

GBB VAX S

99 Finished Goods BSX H

Goods Receipt: FG PP

Movement type - 101 (Goods Receipt) – GBB-AUF: for goods receipts for orders (without account assignment) and for order settlement if AUA is not maintained

TCODE - MB31 Goods Receipt for Production Order

FI Document Type - WE: Goods Receipt

89 Finished Goods BSX S91 Inventory change – factory

output COGPGBB AUF H

Goods Receipt: RM MM

Movement type - 101 (Goods Receipt)

TCODE - MIGO Goods Receipt for Purchase Order

FI Document Type - WE: Goods Receipt

89 Raw Material BSX S96 GR / IR Clearing account WRX H

Invoice Receipt: RM MM

Movement type - 101 (Goods Receipt)

TCODE - MIGO Goods Receipt for Purchase Order

FI Document Type - WE: Goods Receipt

86 GR / IR Clearing account WRX S31 Vendor account KBS H

KBS – is without any account determination and posting keys are 81 & 91. It triggers when there is no material is assigned in the PO at that time.

WRX – In case of any posting required without material, account determination should be without valuation class.

If price changed at the time of IR, then based on the difference in the material price system posts amounts to particular material account and not to the price difference account (this is related to the materials with price control – V).

Material Valuation: MM

Movement type -

TCODE - MR22 Dr/Cr Material – material valuation (below given calculation) & MR21: Price Change(Difference amount posts to the material account and calculation is ((New price – Old price) * Quantity)

FI Document Type - PR: Price change – Below entry in case of price increase

89 Raw material BSX S93 Material Valuation UMB H

Calculation - {Current Stock Value + (Amount given in MR22 / Quantity given in MR22 * Cr.

Quantity)}Billing Document: SD

TCODE - VF01 Billing - VF11 Cancel Billing

FI Document Type - RV: Billing document transfer - RW: Reversal of billing

01 Customer account BSX S50 Sales Revenue account UMB H