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What are the accounting entries in a Procure to Pay cycle when the PO shipment is enabled for Landed Cost

Management?

Solution
1. Receive the PO with estimated landed cost calculated - Receiving Inspection a/c DR @ Estimated Landed Cost - AP Accrual a/c CR @ PO Price inclusive of Non-Recoverable tax - Landed Cost Absorption a/c CR @ (Estimated Landed cost - PO Price inclusive of NonRecoverable tax) (This a/c is defined in Receiving options)

These accounting entries can be viewed from Receiving Transaction summary > Transactions > Tools > View Accounting These entries get created in rcv_receiving_sub_ledger

2. Deliver the PO to Inventory destination For Standard Costing organization - Material Valuation a/c DR @ Std Cost - Receiving Inspection a/c CR @ Estimated Landed Cost - Purchase Price Variance a/c DR @ difference between Std Cost and Estimated Landed Cost For Average Costing organization - Material Valuation a/c DR @ Estimated Landed Cost - Receiving Inspection a/c CR @ Estimated Landed Cost

These entries can be viewed from Inventory > Material Transactions > Distributions These entries get created in mtl_transaction_accounts

3. Invoice validated and actual landed cost calculated Once the Actual Landed Cost is calculated, LCM will populate this information in cst_lc_adj_interface with rcv_transaction_id corresponding to the receipt to which the invoice is matched. Then the adjustment entries would get created as given below on running the Landed Cost Adjustment Processor Landed cost Adjustment - Receiving - Receiving Inspection a/c DR @ difference between Actual LC and Estimated LC - Landed Cost Absorption a/c CR @ difference between Actual LC and Estimated LC Landed cost Adjustment - Delivery (Standard Costing) - Receiving Inspection a/c CR @ difference between Actual LC and Estimated LC - Purchase Price Variance a/c DR @ difference between Actual LC and Estimated LC

These accounting entries can be viewed from Receiving Transaction summary > Transactions > Tools > View Accounting These entries get created in rcv_receiving_sub_ledger

Landed cost Adjustment - Delivery (Average Costing) - Receiving Inspection a/c CR @ difference between Actual LC and Estimated LC - Landed Cost Absorption a/c DR @ difference between Actual LC and Estimated LC Average Cost Update (Average Costing) - Material Valuation a/c DR @ difference between Actual LC and Estimated LC - Landed Cost Absorption a/c CR @ difference between Actual LC and Estimated LC If this Average cost update happens for updating the item cost with the difference between Actual and Estimated landed cost for an item which has 0 or negative on-hand quantity, then the accounting entries would be as follows: - Material Valuation a/c DR @ 0 - Landed Cost Absorption a/c CR @ difference between Actual LC and Estimated LC - Landed Cost Variance a/c DR @ difference between Actual LC and Estimated LC (This a/c is defined inventory > Set up > Organization > Parameters)

These entries can be viewed from Inventory > Material Transactions > Distributions These entries get created in mtl_transaction_accounts The link between the Receiving transaction and Average Cost update is done through txn_source_line_id. Rcv_transaction_id of deliver transaction is stamped as txn_source_line_id in mtl_material_transactions for the LCM adjustment transaction which has the transaction type as Average Cost Update.

4. Create accounting for item invoice - AP Accrual a/c DR @ PO Price - Tax a/c DR @ tax rate - Liability a/c CR @ Invoice Price including tax - LCM:Invoice Price Variance a/c DR @ difference between PO Price and Invoice Price (This IPV a/c is defined in Receiving options) - LCM:Exchange Rate Variance a/c DR @ difference between receipt exchange rate and Invoice exchange rate (This ERV a/c is defined in Receiving options) 5. Create accounting for charge invoice - Default Charge a/c DR @ invoice price (This charge a/c is defined in Receiving options) - Liability a/c CR @ invoice price 6. Perform Return transaction or negative correction after invoice is accounted and actual landed cost is calculated

Return to Vendor /Negative Correction - Receiving Inspection a/c CR @ Actual Landed Cost - AP Accrual a/c DR @ PO Price + Non-Recoverable Tax - Landed Cost Absorption a/c DR (Actual Landed Cost - {PO Price+Non-Recoverable Tax})

These accounting entries can be viewed from Receiving Transaction summary > Transactions > Tools > View Accounting These entries get created in rcv_receiving_sub_ledger

Return to Receiving/Negative Correction (Standard Costing) - Material Valuation a/c CR @ Std Cost - Receiving Inspection a/c DR @ Actual Landed Cost - Purchase Price Variance a/c CR @ difference between Std cost and Actual Landed Cost Return to Receiving/Negative Correction (Average Costing) - Material Valuation a/c CR @ Actual Landed Cost - Receiving Inspection a/c DR @ Actual Landed Cost

These entries can be viewed from Inventory > Material Transactions > Distributions These entries get created in mtl_transaction_accounts

7. Raise a Debit Note - AP Accrual a/c CR @ PO Price - Tax CR @ tax rate - Liability a/c DR @ Invoice Price including tax - Invoice Price Variance a/c CR @ difference between PO price and Invoice Price