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SAP Business One

Financial Transaction Journal Entry Module: Purchasing A/P


Purchase Order
There is no Transaction Journal Entry created in the system for Purchase Order On creation of a Purchase Order only the Ordered and Available Quantity will be effected in the Item Status Report or Inventory => Inventory Master Date => Inventory Tab

Goods Receipt PO (Inventory Item)


On creation of a Goods Receipt PO, system passes a Journal Entry as follows Account Debit Credit Inventory Account Purchase Cost Goods Receipt but Not Invoiced Purchase Cost In addition, if there is any Freight Charges included in the GRPO and if it is affecting the cost, then the Inventory Account will be debited for Material Purchase Value + Freight Charges Also, if the Purchase Accounting Posting is enabled, then other two line of entry will be passed along with the above Journal Debit: Purchase Account Credit: Purchase Offset Account Example 1: Create a GRPO of Item A, 100 Nos @ 250.00 Journal Entry for GRPO Account Debit Inventory Account 25000.00 Goods Receipt but Not Invoiced

Credit 25000.00

Example 2: Create a GRPO of Item A, 100 Nos @ 250.00 with Freight Rs.1000.00 (Freight affecting the Item cost) Journal Entry for GRPO Account Debit Credit Inventory Account 26000.00 Goods Receipt but Not Invoiced 25000.00 Expenses Clearing Account 1000.00 Example 3: Create a GRPO of Item A, 100 Nos @ 250.00 with Freight Rs.1000.00 (Freight affecting the Item cost and Purchase Account Posting is enabled) Journal Entry for GRPO Account Debit Credit Inventory Account 26000.00 Goods Receipt but Not Invoiced 25000.00 Expenses Clearing Account 1000.00 Purchase Account 25000.00 Purchase Expenses Offset Account 1000.00 Credit: Purchase Offset Account 26000.00

SAP Business One


Financial Transaction Journal Entry Module: Purchasing A/P
Note: The above Journal Entries has been created based on G/L Account Determination configured at the Item Group Level. To check the G/L Account Determination for Item go to Administration => Setup => Inventory => Item Group. Choose the desired Item Group in find mode and press enter key, in the Accounting Tab, you can find the G/L Account mapped against the Item Group. SAP Business One allows three different type of G/L Account Determination for Item(s), these are Warehouse, Item Group, Item Level. We have configured the Item Group option for GWIPL. Hence the G/L Account determination will be picked from that mapping. No transaction will be passed for Duty/Tax portion while creating the GRPO

Goods Receipt PO (Non-Inventory Item)


There is no Transaction Journal Entry created in the system for Purchase Order

Goods Return (Inventory Item)


Normally the Goods Return transaction can happen only based on a GRPO (which is not converted into an A/P Invoice). So, the Transaction Journal Entry will be just a Reversal Journal Entry of the Journal Entry which was created for Goods Receipt PO. But, if there is a Goods Return created without referring the GRPO, then the following transaction will be created. Example: Goods Return for Item A, 10 Nos @ 2100.00 (without based on GRPO) Journal Entry for Goods Return Account Inventory Account Goods Received but Not Invoiced Purchase Return Account Purchase Offset Account

Debit 21000.00

Credit 21000.00 21000.00

21000.00

SAP Business One


Financial Transaction Journal Entry Module: Purchasing A/P
Incoming Excise Invoice
This transaction is requiring in SAP Business One, while you do a GRPO for an Excisable Item (With/Without Payment of Duty). This transaction books only the CENVAT portion of the Purchase. For a typical GRPO of Excisable Item copying to an Incoming Excise Invoice will create the following transaction: Example: Create a GRPO of Item A, 100 Nos @ 250.00 with 10% BED, 2% Cess, 1% HS Cess and 4% CST Journal Entry for GRPO Account CENVAT BED Input Credit CENVAT Education Cess Input Credit CENVAT HS Education Cess Input Credit Incoming CENVAT Clearing Account Note:

Debit 2500.00 50.00 25.00

Credit

2575.00

No, Local Tax like CST/VAT is accounted here The Transaction Journal is purely for CENVAT components.

Landed Cost
This transaction is required, when there are additional expenses incurred on purchase by the buyers (not charged by supplier) and the same needs to the included in the Item cost. The Landed Cost transaction can only be booked against a GRPO. Basically this transaction is required when there is additional Freight, Clearing & Forwarding Charges. Custom Duty etc against a GRPO which is born by the buyer. Example 1: A GRPO has made and there was an additional cost of Custom Duty Rs.10000.00 and Clearing & Forwarding Charges Rs.7000.00 Journal Entry for Landed Cost Account Inventory Account Custom Duty Payable Clearing & Forwarding Charges Payable

Debit 17000.00

Credit 10000.00 7000.00

SAP Business One


Financial Transaction Journal Entry Module: Purchasing A/P
Example 2: A GRPO has made and there was an additional cost of Custom Duty Rs.10000.00 and Clearing & Forwarding Charges Rs.7000.00 and the Purchase Accounting Posting option is enable. Journal Entry for Landed Cost Account Inventory Account Custom Duty Payable Clearing & Forwarding Charges Payable Purchase Account Purchase Offset Account Note:

Debit 17000.00

Credit 10000.00 7000.00

17000.00 17000.00

While making the payment to your Clearing Forwarding Agent or Booking the Invoice for them, you need to select the Custom Duty Payable and Clearing & Forwarding Charges Payable respectively. So, that both the G/L Account will be nullify at the end. For Custom Duty, the Offset Account can be mapped through Administration => Setup => Inventory => Custom Groups and select the Customs Allocation Account. Also this transaction will take place if the Customs Affects Inventory option is checked in the Landed Cost screen For Other Landed Cost like Clearing & Forwarding Charges, Insurance, Freight the Offset Account can be mapped through Administration => Setup => Purchase => Landed Cost and select the Landed Cost Allocation Account for respective heads

A/P Invoice (Item)


In a Purchase cycle, this is final document which is requiring for completing the Purchase cycle. The supplier liability and local taxes will be booked after booking the A/P Invoice. This is a mandatory document for Purchase; if the A/P Invoice is not booked then the GRPO will be showed as Open status. Example: Creating the A/P Invoice based on the GRPO of Item A, 100 Nos @ 250.00 with Freight Rs.1000.00 and 10% BED, 2% Cess, 1% HS Cess and 4% CST (considering the Incoming Excise Invoice is booked). Journal Entry for A/P Invoice Account Supplier Account Goods Received but Not Invoiced Expenses Clearing Account Incoming CENVAT Clearing Account CST 4% on Purchase

Debit 25000.00 1000.00 2575.00 1103.00

Credit 28678.00

SAP Business One


Financial Transaction Journal Entry Module: Purchasing A/P
Note:

For Excisable Item Purchase, you should book the Incoming Excise Invoice first, without that system will not allow booking the A/P Invoice. After booking the A/P Invoice the Goods Received but Not Invoiced, Expenses Clearing Account and Incoming CENVAT Clearing Account will be nullified For Non-Excisable Item, the Incoming Excise Invoice is not required. So, the local taxes will be accounted only on booking of A/P Invoice. If the A/P Invoice created for Non-Inventory Item then the related Expenses G/L Account under Item Group linked to the Item will be debited instead of Goods Received but Not Invoice.

A/P Invoice (Service)


A/P Invoice (Service) is required, when there is any Service Type of Purchase. Once you choose the Service as Item/Service Type in A/P Invoice, the screen appearance changes under Contents tab. You will have the option to mention the Service Description and the relevant G/L Account to be debited. Example: You are booking a Service Type A/P Invoice for Maintenance Charges and mentioned your desired service description and selected the Repair & Maintenance Ledger. The amount of service is Rs.10000.00 and Service Tax Charged @10%, Education Cess 2% and HS Education Cess 1%. Journal Entry for A/P Invoice Account Supplier Account Repair & Maintenance Service Tax on Input 2% Education Cess on ST 1% HS Education Cess on ST

Debit 10000.00 1000.00 20.00 10.00

Credit 11030.00

A/P Credit Memo (Item)


The A/P Credit Memo is required when there is any adjustment or Debit Note to be raised against the supplier account. Also this is the final document in case of any Goods Return happened in the system after booking of the A/P Invoice. Example: Goods Return for Item A, 10 Nos @ 2100.00 (after booking of A/P Invoice) and now booking the A/P Credit Memo based on the Goods Return Journal Entry for A/P Credit Memo Account Supplier Account Goods Received but Not Invoiced

Debit 21000.00

Credit 21000.00

SAP Business One


Financial Transaction Journal Entry Module: Purchasing A/P
Note: If the Goods Return is for a Excisable Item, then an Outgoing Excise Invoice has to be created before the A/P Credit Memo and the BED on Output, Cess & HS Cess will be accounted (Credit) through Outgoing Excise Invoice by offsetting the Outgoing CENVAT Clearing Account. While creating the A/P Credit Memo the Outgoing CENVAT Clearing Account will be credited and the balance will be nullified.

A/P Credit Memo (Service)


The A/P Credit Memo (Service) is required when there is any adjustment or Debit Note to be raised to supplier for service. Example: You are booking a Service Type A/P Credit Memo for Maintenance Charges (excess charged by supplier) and mentioned your desired service description and selected the Repair & Maintenance Ledger. The amount of service is Rs.2000.00 and Service Tax Charged @10%, Education Cess 2% and HS Education Cess 1%. Journal Entry for A/P Credit Memo Account Supplier Account Repair & Maintenance Service Tax on Input 2% Education Cess on ST 1% HS Education Cess on ST

Debit 2206.00

Credit 2000.00 200.00 4.00 2.00

SAP Business One


Financial Transaction Journal Entry Module: Purchasing A/P Purchase Price Difference Posting
Purchase Price Difference happens on a situation, when you are trying to add additional cost towards Item Cost, while the Inventory is not available. Example 1: Created a GRPO for Item A, 100 Nos @ 250.00 and after that 30 Nos of material has been issued for consumption and after the GRPO while booking the A/P Invoice it is found the purchase is 260.00 per unit. Journal Entry for A/P Invoice Account Supplier Account Goods Received but Not Invoiced Inventory Account Purchase Price Difference Note:

Debit 25000.00 700.00 300.00

Credit 26000.00

Inventory Account Debit = (100 Nos 30 Nos)=70 Nos x 10 (Rs.260 Rs.250) Purchase Price Difference Debit = 30 Nos x 10 (Rs.260 - Rs.250)

Example 2: Created a GRPO for Item A, 100 Nos @ 250.00 and after that 100 Nos of material has been issued for consumption and after the GRPO while booking the A/P Invoice it is found the purchase is 260.00 per unit. Journal Entry for A/P Invoice Account Supplier Account Goods Received but Not Invoiced Purchase Price Difference Note:

Debit 25000.00 1000.00

Credit 26000.00

Purchase Price Difference Debit = 100 Nos x 10 (Rs.260.00 Rs.250.00) If the Purchase Difference is negative then the Inventory Account and Purchase Price Difference account will be credited instead of debit. The above example is considering that the material consumption is from the source GRPO The Purchase Price Difference may occur from the Landed Cost Transaction as well, if the material has removed before booking of the Landed Cost transaction. Basically the Purchase Price Difference is part of the Cost of Goods Sold, so it is advised that map this account under the COGS portion of your P&L Statement.

Recommendation: Book all the additional cost related to purchase before consuming the material to avoid the Purchase Price Difference posting.

SAP Business One


Financial Transaction Journal Entry Module: Purchasing A/P Goods Clearing Account
This account will be affected, while there is a cancellation of GRPO by the user. The GRPO can be cancelled by locating the GRPO and Right Click on that you will get a pop menu and choose Cancel or go to Data in the Main Menu and choose Cancel. Example: Create a GRPO of Item A, 100 Nos @ 250.00 with Freight Rs.1000.00 (Freight affecting the Item cost) Journal Entry for the GRPO Account Inventory Account Goods Receipt but Not Invoiced Expenses Clearing Account Now, cancel the GRPO by choosing the any one option above. Journal Entry for Cancellation of GRPO Account Goods Receipt but Not Invoiced Expenses Clearing Account Goods Clearing Account Note: Debit 25000.00 1000.00 Credit Debit 26000.00 Credit 25000.00 1000.00

26000.00

Ideally the Goods Clearing Account should be a Income type account. Because the buyer has suppose to pay to the supplier for the purchase, but by cancelling the GRPO means that no A/P Invoice will be booked against that and the Inventory is already in and there is no liability for the same. A GRPO can only be cancelled when the A/P Invoice is not preceded for the same. Expenses Clearing Account only comes in the picture, if there is any Freight Charges etc. is there in the GRPO.

Recommendation: In case of GRPO Reversal is required, we recommended not to cancel the GRPO It is better to create a Goods Return for the same to have a accurate Transaction Journal posting.