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Subcontracting accounting entries

Dear SAP MM cons,

Can somebody help me in understanding the accounting entries for subcontracting process ?

How byproduct can be handled for subcontracting ? What will be accounting entries for this byproduct ?

Pls help.

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2 Answers

  • Oct 19, 2007 at 12:45 PM

    Hi,

    The accounting enries for sub contracting process are

    <b>During components issued</b> :

    Cr Stk acct -

    Dr Comp conc acct +

    <b>During GR against SC PO</b> :

    Dr Stk acct FG or SFG +

    Cr Cost of sales s/c acct -

    Dr pur services +

    cr Gr/Ir acct -

    <b>During IR for services performed</b> :

    Cr Vendor acct -

    Dr Gr/Ir acct +

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    Former Member
    Oct 19, 2007 at 02:14 PM

    Hi ,

    You can go thru the folowing example for understanding it.

    In this example, a subcontract order was created for the end product "ASSEM-1". The components COMP-1 and COMP-2 were provided to the subcontractor.

    Purchase order

    50 pieces of material ASSEM-1 were ordered. The subcontract price is $10/piece (total value = $500).The following components were provided to the subcontractor:

    • 15 kg of the component COMP-1

    • 5 pcs of the component COMP-2

    Goods receipt

    The subcontractor delivers 50 pieces of material ASSEM-1.At goods receipt, a consumption posting for the components provided to the subcontractor is automatically made. It is valuated at the price from the material master record, for example:

    • 15 kg of the component COMP-1 at $20/kg = $300

    • 5 pcs of the component COMP-2 at $30/pc = $150

    The goods receipt is valuated with $950. This is calculated as follows:

    • The subcontract price (50 pcs * $10/pc = $500) and

    • Value of the components ($300 + $150).

    Invoice receipt

    The vendor (subcontractor) sends you an invoice for the subcontract work. However, the price is $10.50/pc. Therefore the invoice is 50 pieces ASSEM-1 * $10.50/pc = $525.

    Posting Schema for Moving Average Price Control

    In this example, the following postings are made at goods receipt and invoice receipt, if the material (end product) is valuated at moving average price.

    Postings At goods receipt At invoice receipt

    Vendor account 525 -

    GR/IR clearing account 500 - 500 +

    External service account 500 + 25 +

    Stock account: end product 950 + 25 +

    Change involving stocks 950 - 25 -

    Stock account: comp. 450 -

    Consumption account 450 +

    Posting Schema for Standard Price Control Without Price Differences

    For materials (end products) with standard price control also note that

    • No price differences are posted if the total of the external service value (for example, $500) plus the "material to be provided" value (for example, $450) varies from the value at standard price (for example, $1000). Posting of a price difference is not required because each posting line has its own offsetting entry.

    • No posting lines are created on the stock account or on the stock change account when an invoice is received.

    In the above example, the following postings are made for a material with a standard price of $20.

    Postings At goods receipt At invoice receipt

    Vendor account 525 -

    GR/IR clearing account 500 - 500 +

    External service account 500 + 25 +

    Stock account: end product 1000 +

    Change involving stocks 1000 -

    Stock account: comp. 450 -

    Consumption account 450 +

    Posting Schema for Standard Price Control With Price Differences

    However, if you wish to generate a price difference posting in those cases where the manufactured material is managed at standard price and the standard price varies from the receipt value (externally performed service + value of components + delivery costs), you can configure this in the Customizing system of Inventory Management.In the above example, the following postings (including price differences) are made for a material with a standard price of $20.

    Postings At goods receipt At invoice receipt

    Vendor account 525 -

    GR/IR clearing account 500 - 500 +

    External service account 500 + 25 +

    Stock account: end product 1000 +

    Change involving stocks 950 -

    Price difference 50 +

    Stock account: comp. 450 -

    Consumption account 450 +

    Regarding BYPRODUCTS:-

    1. Similiar to production order processing, by-products are entered in the subcontract order as components with negative quantity.

    2. In the provision of the components (with reference to the purchase order, for example), the system ignores the negative component items.

    3. In the goods receipt for the purchase order, the system automatically posts the receipt of the by-products. In the material document, you can identify the by-product items from their movement type 544. Note that the by-products are posted to the "stock of material provided to vendor" (also referred to as "subcontracting stock").

    The receipt can still be corrected using the Subsequent Adjustment function.

    Due to the receipt of the by-products, the value of the manufactured material is reduced.

    4. To transfer the by-products quantities from the "stock of material provided to vendor" (or subcontracting stock) to the unrestricted-use stock, you enter a transfer posting using movement type 542 (reversal of the provision of the components).

    Hope it helps

    reward if useful

    Rohit

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