Account Entries Created in Purchase Costing

This document describes which account entries are created at goods receipt of purchased items in different scenarios.

Outcome

You are able to verify that correct account entries are created, depending on your settings.

Use the information to follow up true costs per purchase order in 'Internal Account Entry. Open' (CAS300) and compare them to the cost of the items involved in 'Product Costing. Display' (PCS300) or 'Purchase Costing. Simulate' (PPS295).

Important Parameters

The following two parameters in 'Settings – Cost Accounting' (CAS900) determine the creation of some account entries when a goods receipt of a purchase order is reported:

The parameters allow for an improved follow-up of costs in purchase costing.

List of All Account Entries

The table below lists all account entries that can be created when goods are received and reported in 'Purchase Order. Receive Goods' (PPS300).

Accounting Rule

Description

Credit/ Debit

Comment

PP10–903

Expense – non-inventory item

D

Net total value of the purchase order (PO) line.

PP10–910

Inventory (for inventory item)

D

Inventory value according to the inventory accounting method of the item (total of the inventory value for the item and the charges).

PP10–951

Delivered, not invoiced. Connected to a customer order or service order with line type 2.

Net total value of the PO line.

PP10–225

Charge – goods received, not invoiced

C

External charge from the costing model selected for the purchase order.

PP10–226

Charge – goods received, not invoiced

C

External charge from the costing model selected for the purchase order.

PP10–251

Internal charge

C

Internal charge from the costing model selected for the purchase order.

PP10–227

Price variance for the item (only for items with inventory accounting method 1='Standard cost')

Inventory value of the item. The difference between the net total value of the PO line and the inventory value. Only created when the 075 check box is selected in (CAS900).

PP10–228

Price variance (only for items standard costed items)

The difference between the PO net value and the inventory value. Only created when the 075 and 080 check boxes are not selected in (CAS900).

PP10–911

Price variance for the charge (only for standard costed items)

Inventory value of the charge, that is, the difference between the PO line charge and the charge according to the inventory cost. Only created when the 075 check box is selected in (CAS900).

PP10–301

Realized exchange gains (only for standard costed items)

C

Created if the exchange rate selected for the PO values causes an exchange rate gain in the standard cost calculation, provided that the 080 check box is selected in (CAS900).

PP10–302

Realized exchange losses (only for standard costed items)

D

Created if the exchange rate selected for the PO values causes an exchange rate loss in the standard cost calculation, provided that the 080-check box is selected in (CAS900).

The Case

The scenarios in this document are based on the following case:

Purchase Cost Calculation

The calculated purchase cost for one item is:

Type of Cost

In GBP

In USD

10 Purchase price

150.00

225.00

20 External line charges

2.00

3.00

30 Internal line charges

25.00

37.50

40 Total (Purchase Cost)

 

265.50

Change in Scenario

However, the following changes take place:

Changed Purchase Cost Calculation

Type of Cost

In GBP

In USD

10 Purchase price

160.00

2,560.00

20 External line charges

3.00

48.00

30 Internal line charges

30.00

480.00

40 Total (Purchase Cost)

 

3,088.00

Scenario 1 – No Split of Variances

The amounts in the tables below are expressed in U.S. dollars.

Setup in (CAS900)

Purchase Cost Calculation

Type of Cost

Standard Cost

PO Value

PO Variance

Exchange Rate Gain/Loss

10 Purchase price

2,250.00

2,560.00

   

20 External line charges

30.00

48.00

   

30 Internal line charges

37.50

480.00

   

40 Total (Purchase Cost)

2,655.00

3,088.00

433.00

 

Account Entries Created

   

Inventory Accounting Method

Account

Acc. Rule

Standard Cost

Average Cost, Dynamic Product Cost, Actual Cost

Non-inventory (Zero Cost)

Inventory

PP10–910

2,655.00

3,088.00

 

Expense

PP10–903

   

3,088.00

Goods received, not invoiced – item

PP10–225

–2,560.00

–2,560.00

–2,560.00

Goods received, not invoiced – external charges

PP10–226

–48.00

–48.00

–48.00

Internal charges

PP10–251

–480.00

–480.00

–48.00

Price variance

PP10–911

433.00

   

Account Entries Created

   

Inventory Accounting Method

Account

Acc. Rule

Standard Cost

Average Cost, Dynamic Product Cost, Actual Cost

Non-inventory (Zero Cost)

Inventory

PP10–910

2,655.00

3,088.00

 

Expense

PP10–903

   

3,088.00

Goods received, not invoiced – item

PP10–225

–2,560.00

–2,560.00

–2,560.00

Goods received, not invoiced – external charges

PP10–226

–48.00

–48.00

–48.00

Internal charges

PP10–251

–480.00

–480.00

–48.00

Price variance

PP10–911

433.00

   

Scenario 2 – Split Variance between Item and Charges

The amounts in the tables below are expressed in U.S. dollars.

Setup in (CAS900)

Purchase Cost Calculation

Type of Cost

Standard Cost

PO Value

PO Variance

Exchange Rate Gain/Loss

10 Purchase price

2,250.00

2,560.00

310.00

 

20 External line charges

30.00

48.00

18.00

 

30 Internal line charges

375.00

480.00

105.00

 

40 Total (Purchase Cost)

2,655.00

3,088.00

433.00

 

Account Entries Created

   

Inventory Accounting Method

Account

Acc. Rule

Standard Cost

Average Cost, Dynamic Product Cost, Actual Cost

Non-inventory (Zero Cost)

Inventory

PP10–910

2,655.00

3,088.00

 

Expense

PP10–903

   

3,088.00

Goods received, not invoiced – item

PP10–225

–2,560.00

–2,560.00

–2,560.00

Price variance – item

PP10–227

310.00

   

Goods received, not invoiced – external charges

PP10–226

–48.00

–48.00

–48.00

Price variance – charge

PP10–228

18.00

   

Internal charges

PP10–251

–480.00

–480.00

–480.00

Price variance – charge

PP10–228

105.00

   

Scenario 3 – Split Exchange Rate Gains/Losses

The amounts in the tables below are expressed in U.S. dollars.

Setup in (CAS900)

Purchase Cost Calculation

Type of Cost

Standard Cost

PO Value

PO Variance

Exchange Rate Gain/Loss

10 Purchase price

2,250.00

2,560.00

310.00

160.00*

20 External line charges

30.00

48.00

 

3.00**

30 Internal line charges

375.00

480.00

 

30.00***

40 Total (Purchase Cost)

375.00

3,088.00

240.00

 

* PO price: (Currency)*(Exchange rate variance)*(Quantity) = 160*0.1*10 = 160.00

** Charge price: (Currency)*(Exchange rate variance)*(Quantity) = 3*0.1*10 = 3.00

*** Charge price: (Currency)*(Exchange rate variance)*(Quantity) = 30*0.1*10 = 30.00

Account Entries Created

   

Inventory Accounting Method

Account

Acc. Rule

Standard Cost

Average Cost, Dynamic Product Cost, Actual Cost

Non-inventory (Zero Cost)

Inventory

PP10–910

2,655.00

3,088.00

 

Expense

PP10–903

   

3,088.00

Goods received, not invoiced – item

PP10–225

–2,560.00

–2,560.00

–2,560.00

Exchange rate loss

PP10–302

160.00

   

Goods received, not invoiced – external charges

PP10–226

–48.00

–48.00

–48.00

Exchange rate loss

PP10–302

3.00

   

Internal charges

PP10–251

–480.00

–480.00

–480.00

Exchange rate loss

PP10–302

30.00

   

Price variance

PP10–911

240.00

   

Scenario 4 – Split Price Variance and Exchange Rate Gains/Losses

The amounts in the tables below are expressed in U.S. dollars.

Setup in (CAS900)

Purchase Cost Calculation

Type of Cost

Standard Cost

PO Value

PO Variance

Exchange Rate Gain/Loss

10 Purchase price

2,250.00

2,560.00

150.00

160.00*

20 External line charges

30.00

48.00

 

3.00**

30 Internal line charges

375.00

480.00

 

30.00***

40 Total (Purchase Cost)

2,655.00

3,088.00

   

* PO price: (Currency)*(Exchange rate variance)*(Quantity) = 160*0.1*10 = 160.00,

** Charge price: (Currency)*(Exchange rate variance)*(Quantity) = 3*0.1*10 = 3.00

*** Charge price: (Currency)*(Exchange rate variance)*(Quantity) = 30*0.1*10 = 30.00

Account Entries Created

   

Inventory Accounting Method

Account

Acc. Rule

Standard Cost

Average Cost, Dynamic Product Cost, Actual Cost

Non-inventory (Zero Cost)

Inventory

PP10–910

2,655.00

3,088.00

 

Expense

PP10–903

   

3,088.00

Goods received, not invoiced – item

PP10–225

–2,560.00

–2,560.00

–2,560.00

Exchange rate loss

PP10–302

160.00

   

Price variance

PP10–227

150.00

   

Goods received, not invoiced – external charges

PP10–226

–48.00

–48.00

–48.00

Exchange rate loss

PP10–302

3.00

   

Price variance

PP10–228

15.00

   

Internal charges

PP10–251

–480.00

–480.00

–480.00

Exchange rate loss

PP10–302

30.00

   

Price variance

PP10–228

75.00

   

Compressing Account Entries

If you have selected to split payment variances and exchange rate gains or losses, the number of internal transactions created can be high. However, you can select to reduce the number of transactions to transfer to the General Ledger by compressing them based on accounting dimension. The selection is made for each account in 'Accounting Identity. Open' (CRS630).

Example

Certain internal transactions in 'Internal Account Entry. Open' (CAS300) have item number specified in accounting dimension 4. If you, for the receiving account, select to compress this accounting dimension, the item number will be blanked out when transferring the transactions from the CINACC table to the General Ledger table (FCR040) by running 'Internal Account Entry. Create' (CAS950). This compression results in fewer transactions.

Although the transactions in the General Ledger now lack item number as part of their accounting string, you can still review the original transactions by drilling down to (CAS300) from 'General Ledger. Display Transactions' (GLS210).

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