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Free Goods accounting

dear all ,

we had a scenario where we get some free sample material from vendor

we created free purchase order for free goods

now my question is if i already had stock of suppose 50 KG with price 5000 (100/kg)

and then i add up the free goods 25Kg , what should be the accounting ,price and quantity.

now if i issue 20kg what will be accounting and what will be the quantity and price

now if i issue 55 kg then what will be accounting

regards

raj

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5 Answers

  • Best Answer
    Aug 13, 2010 at 03:34 PM

    HI,

    For Free of cost material, The Price control in material master plays a very important Role while Receiving the material.

    1. MAP :- If the material is valuated at moving average price, the stock figure is updated on a quantity basis only, not on a value basis. Thus the total stock quantity increases but the total value of the stock remains unchanged. This results in a reduction in the moving average price.

    2. STD :- If the material is valuated at standard price, the stock figure is updated on a quantity and a value basis. The receipt is valuated on the basis of the standard price. The offsetting posting to the stock account posting is made to a revenue account for price differences.

    Now, let me explain your case with MAP

    1.

    now my question is if i already had stock of suppose 50 KG with price 5000 (100/kg)
    and then i add up the free goods 25Kg , what should be the accounting ,price and quantity.

    Before Receipt of material, MAP = 5000/50 = 100 / kg

    after Receipt of Material = Map = 5000/75 = 66.67 / Kg

    Now at the time of receipt, no accounting document generates but increase of your stock results in decrease the map.

    2.

    now if i issue 20kg what will be accounting and what will be the quantity and price

    if you issue the material, then Stock Acct is = 20*66.67 = 121.8 Cr and cost center etc = 121.8 Dr

    now same you can try for STD price as definition given by me but remember

    if the std price vary while purchase then price difference account must hit. suppose for material A, STD is Rs 100

    and PO Price is 125 then Amount in PRD is = 25 *qty

    but issue will be for std price i.e. 100Qty*

    Hope Help U !

    Regards,

    Pardeep Malik

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  • Aug 13, 2010 at 06:00 AM
    we had a scenario where we get some free sample material from vendor we created free purchase order for free goods now my question is if i already had stock of suppose 50 KG with price 5000 (100/kg) and then i add up the free goods 25Kg , what should be the accounting ,price and quantity. now if i issue 20kg what will be accounting and what will be the quantity and price now if i issue 55 kg then what will be accounting 

    When you received Free goods than in Material Document There will be no Accounting Document Generate. In system stock only Qty. will be updated.

    Impact In Accounting Data of material will :

    Moving price - No changes, it will remain same i.e. Rs. 100

    *Total Stock - 50 + 25 = 75 qty. * (After good received of Free material Qty. increased)

    Total Value - 5000 (No changes)

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    Former Member
    Aug 13, 2010 at 06:17 AM

    >

    > dear all ,

    >

    > we had a scenario where

    we get some free sample material from vendor

    > we created free purchase order for free goods

    >

    > now my question is if i already had stock of

    suppose 50 KG with price 5000 (100/kg)

    > and then i add up the free goods 25Kg ,

    what should be the accounting ,price and quantity.

    >

    > now if i issue 20kg what will be

    accounting and what will be the quantity and price

    >

    > now if i issue 55 kg then what will be accounting

    >

    >

    > regards

    > raj

    For free goods material is not valuated,it will update stock.

    If u have already stock of 50kg with price 100 material is valuated as 5000,later 25 kg stock is added without value,

    so 75 kg is valuated with price 66.66(5000/75=66.66).

    If material is received in batches,it will be issued with receiving price other wise it will valuated with moving average price.

    Edited by: Jeyakanthan A on Aug 13, 2010 11:48 AM

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  • Aug 13, 2010 at 07:10 AM

    Hi,

    Though the prcurement is free, i do not thibk so that the value is not changed.

    if you procure a qty of 10 as free nd if you already have 20 , the total qty will be 30 and tatal value be 30*x whare x is MMR price.

    Please check at MMBE after doing a GR with a free item checked PO and run the MC.9 report so thta system will give the total qty and value for that material.

    MAP/STD price rules apply while calculating the price.

    Regards,

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    Former Member
    Aug 25, 2010 at 09:30 AM
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