Treatment of diff items for manufacture, Like, tools, consumables ,spare for machine into Finance

[mohammeed_rafeeq]

Dear Sir,

One of our sister company going to setup manufacture plant and we have only FICO module implemented for that company. I need to know how we can incorporate the below process in to Finance module.

1. Machine ( Will create an asset )
2. Spare parts for machine that we will keep in stock and use it whenever the machine got repair ( how to treat this items in sap Finance – Please explain the process )
3. Tools to repair the machine ( how to treat this in finance like do we have to create inventory or asset? How to control on it when service man took it for machine report )
4. Consumable items like oil, belt etc. which will be used in the production. How to treat this in sap Finance.

At this movement company wants to manage at Fico level

Point number 2 to 4 are not clear for me, appreciate if you draw a compete process on these points.

Thanks you the support.

Rafeeq

[sanilbhandari]

Hi

Since you have only finance, the accounting entries for 2 & 4 will be added as accounting JV. For point 2, you intend to keep the spare parts at your plant. In such a case, these should be treated as capital expenditure and should be treated as fixed assets within the finance module.

Point no 4 are consumables which would be used for production. These should be treated as Consumable Stock. When you bring them into plant, it should be treated as stock in hand and when used up, it should be charged off to Consumption of Consumable and inventory coming down.

Point 3, the tools to repair the machine should also be used as capital expenditure and should be created as fixed assets. Depending on the depreciation rules for your country, you may want to charge off the depreciation in a year. With Finance only implemented, you cannot think of tracking of tools went out for service. You should be implementing modules like PM, MM, PP etc to get a holistic solution.

PS: The points raised by you should be asked to the accounting team in your customer.

Regards

Sanil Bhandari

[mohammeed_rafeeq]

Thanks for the reply Mr. Sanil Bhandari

the accounting entries for 2 & 4 will be added as accounting JV. For point 2, you intend to keep the spare parts at your plant. In such a case, these should be treated as capital expenditure and should be treated as fixed assets within the finance module.

Point 2 Commands.

Since we do not have the SD, MM Modules implemented, we cannot create the inventory. If we create fixed asset for spare parts in this case how we can used it for machine when repair comes what would be the accounting entry and how can we map this process into finance. kindly put some light with complete cycle with accounting entries.

Point no 4 are consumables which would be used for production. These should be treated as Consumable Stock. When you bring them into plant, it should be treated as stock in hand and when used up, it should be charged off to Consumption of Consumable and inventory coming down.

Point 4 Commands.

In the given situation, can it be manage within finance module until SD, MM implemented. If yes what would be the process cycle with account entries.

Point 3, the tools to repair the machine should also be used as capital expenditure and should be created as fixed assets. Depending on the depreciation rules for your country, you may want to charge off the depreciation in a year. With Finance only implemented, you cannot think of tracking of tools went out for service. You should be implementing modules like PM, MM, PP etc to get a holistic solution.

Point 3 Commands

Understood clearly, Tools will be created as fixed asset and depreciation will be followed as per the rules.

Thanks

Rafeeq

[sanilbhandari]

Hi

For point 2, you cannot track this as inventory with qty. When you have procurred and capitalized the spare tools, you need to pass the below accounting entry:

Spare Parts Fixed Asset Dr

To Vendor

When the spare part is being added to an existing machine, depending on your business requirement, you can just execute an asset transfer.

Machinery Fixed Asset Acq A/c Dr

Accumulated Dep Spare Parts Dr

To Spare Parts Fixed Assets

To Accumulated Dep Machinery Fixed Asset

If you are paying repair related expenses to a vendor, please book the repair exp first as operation expense as below

Repair Exp A/c Dr

To Vendor

If your accountant wants to capitalize this, you can post additional acquisition to existing asset as well.

Machinery Fixed Asset A/c Dr

To Repair Exp A/c

Point 4: I have already mentioned the accounting entries. Not sure, if it is not clear enough:

Consumable Stock A/c Dr

To Vendor

On Issuance to Production

Consumption of Consumables Dr

To Consumable Stock A/c Dr

Your Accounting team may want to directly book to Consumption A/c. However, since you are holding inventory in plant (Not in SAP System), you should take that into stock GL A/c and than book consumption. That is how, the accounting flow would also happen as and when MM & PP is implemented for your manufacturing plant.

You cannot have fancy things like tracking movement of materials etc, gate pass etc if you have only FICO implemented. Those are things possible, if you also have logistics related modules implemented like PM, PP, MM etc.

Again, as I stated earlier, you should be asking the questions you are asking from your accounting team on the business side,rather than posting here in SAP Finance Forums and based on business requiement, post application specific questions.

Regards

Sanil Bhandari