Material Valuation

[former_member193587]

hi

Our client having 4 years old non moving material including raw materials & Consumables having 10 lakhs  Rs valuation,(due to rusting of iron) Now we have to show this material is scrap , with scrap valuation .So if i used 551 movement is it correct process? & what will be the effect on accounting.Please suggest suitable solution so that i show that material as scrap in books of account .

Thanks In advance

[BijayKumarBarik · Accepted solution]

Hi,

As you have huge number of valuated material which are  rusted iron but in same time you need each and every material quantity and value at any moment.do not go for using 551 movement type.
Go for following process for raw material:
1.Create new scrap material type as ZSCP with quantity and value update (copying Material type ABF)
2.Create materials with  new scrap material type ZSCP
3.Now do  material(raw material) to material(new scrap material) transfer using 309 movement type

In this process, you will have each rusted iron material with quantity and value for material type ZSCP

Go for following process for consumable material:

1.Create new scrap material type as ZSCC with ONLY quantity update (copying Material type ABF)

2.Create materials with  new scrap material type ZSCC

3.Now do  material(raw material) to material(new scrap material) transfer using 309 movement type 

As you have consumable material where all acount posting alreday happened during Goods Receipt, now just do material(consumable material) to material(new scrap material) transfer using 309 movement type where only quantity will be updated for your reporting purpose if quantity update selected consumable material material type.

Regards,

Biju K

[former_member193587 · Accepted solution]

hi,

Please help me for accounting entries

[BijayKumarBarik · Accepted solution]

Hi,

If you are following above said process, you will have following result:

1.Process for raw material transfer to ZSCP material type on movement with 309 movement type:

1.1. Accounting entries

Raw material Inventory account: Cr

Scrap material Inventory account:Dr

1.2. Quantity  updates

2.Process for consumable material transfer to ZSCC material type on movement with 309 movement type):

2.1. No accounting entries as all account posting already happened during Goods Receipt.

2.2. Quantity  updates

Regards,

Biju K

[Former Member]

Once you pass the material through movement 551 , the material goes out of stock , the accounting entry will be reduction of stock value in the respective material type , Say if it is raw material

Raw material credit,

Scrap account debit.

Now you have reduced the stock from inventory and how much reduced is can be found in the Scrap GL account .

But the material quantity is out of stock and hence you can't show in the closing books and also cannot carry over for the next period , since it is like consumption of stock and not devaluation of stock.

If you want to de-valuate the stock (having the rusted material in stock) try SPLIT VALUATION concept , there with regard to age , Quality,source of purchase etc., you can de-valuate the stock with same material code , and show separately . once if the material is found usable after removal of rusting (just in case) you can promote the stock to the first level. Refer notes on Split valuation.

[former_member213924]

Yes scrapping using movement type 551 is correct process. GL (scrap losses) assigned under GBB-VNG-Valuation class combination will get debited and your stock account will get credited. Below is the screen shot of posting which will happen while scrapping:

Regards,

Samir Rana

[Former Member]

When you post it for scarpping the system handles the valuation of this stock into a separate account assigned under VQP and not to any other AA Object. Posting using 551 is the correct process.

/Manoj