Skip to Content

COGS in P&L

We have implemented SAP in our company recently. previously we will not show COGS in our P&L but in SAP system is showing COGS and COGM in P&L. what is the reason? P&L will show RM consumption, Labour,OH COGS also include RM,labour and OH.Please anybody explain....

Add a comment
10|10000 characters needed characters exceeded

Assigned Tags

Related questions

1 Answer

  • Posted on Jul 10, 2020 at 07:49 PM

    A production process starts with spending resources like raw materials, labour, utilities, etc. These costs then need to be allocated to inventory. The costs on the cost accounts are not reduced during allocation to inventory. Instead, there is a separate P&L account which is used to take the production costs out of P&L: Dr Inventory / Cr P&L "credit in cost" from increase of inventory. The periodic production costs on the cost accounts remains untouched.

    However, SAP stores the information about how much of that total credit was coming from raw materials, labour, utilities etc. in Material Ledger cost components. When the goods are sold, the cost of goods issued for delivery can be split into those original cost components again. I.e. it is possible to know how much raw materials, labour, utilities, etc. were used to produce those goods.

    The costs on the original cost accounts are the full costs of production in the current period. Cost components within the cost of goods sold are costs allocated to the products in the periods when those goods were produced.


    cogs-logic.jpg (78.3 kB)
    Add a comment
    10|10000 characters needed characters exceeded

Before answering

You should only submit an answer when you are proposing a solution to the poster's problem. If you want the poster to clarify the question or provide more information, please leave a comment instead, requesting additional details. When answering, please include specifics, such as step-by-step instructions, context for the solution, and links to useful resources. Also, please make sure that you answer complies with our Rules of Engagement.
You must be Logged in to submit an answer.

Up to 10 attachments (including images) can be used with a maximum of 1.0 MB each and 10.5 MB total.