About SD and MM Accounting Entries

 

INVOICE GENERATION

Invoices will be generated at the Smelters  and stock points. The accounting entries for the sale of goods despatched will flow from the Sales invoice generated in SAP Sales and Distribution module. The following entries shall be passed 
    Customer Account      Dr
    Revenue                                                 Cr
    Excise Duty Payable                               Cr
    Sales Tax Payable (local or central)         Cr 

Note: As mentioned above in the FI document, which is created in the background, the SD invoice number shall be captured. However as per the current accounting procedure the accounting entry passed is as follows :-
     Customer Account      Dr
     Revenue                                                 Cr
     Excise Duty Billed                                  Cr
     Sales Tax Payable (local or central)        Cr
     Excise duty paid a/c     Dr
     Excise duty payable a/c                          Cr 

EXPORT SALES
There have been very few export transactions in the past. SAP system will be designed to handle export business. Exports are mainly from the mines and will be handled at the mines, however the documentation part will be taken care at the Head Office. The accounting entry is:
     Customer Account        Dr 
     Revenue (Exports)                                  Cr 

The realisation of export sales will be directly credited to the bank.  The accounting entries will be as follow:
     Bank                            Dr
     Customer                                               Cr
     Exchange Fluctuation    Dr/ Cr

The accounting entries will be:
      Rebates/Discounts        Dr
      Customer                                               Cr                                           
DEBIT MEMOS
Debit Memos shall be issued in case of price difference, sale tax difference and interest on usance period and  overdue payments.

The accounting entries for two possible scenarios are as follows:
      Price Undercharged:
      Customer Account        Dr.
      Revenue                                                 Cr.
      Sales tax payable                                    Cr.
      Sales tax undercharged
      Customer Account         Dr.
      Sales tax adjustment                                Cr.

Interest on delayed payments/usance period and other charges
      Customer Account         Dr.
      Interest Others                                        Cr.

In case of HZL  a complete retirement or a partial retirement of asset is done. The system uses the asset retirement date to determine the amount to be charged off for each depreciation area. The existing accounting policy is to provide depreciation for the full quarter in which the asset is sold/discarded, recommended that the depreciation be provided from the date of acquisition on prorata basis .

Accounting entry for sale of Asset to customers:
        Customer Account               Dr
        Asset Sale                                              Cr
        Accumulated Depreciation   Dr
        Loss on Sale (if applicable)  Dr
        Asset Sale account              Dr
        Asset account                                         Cr
         Profit on sale (if applicable)                    Cr

Note: In case of any Sales Tax /Excise duty applicable for this transaction, SAP will calculate the Sales Tax/Excise Duty based on the Tax Code selected  the entry is posted to the GL Account (Sales Tax Payable)

Accounting entry for sale without a customer:
          Accumulated Depreciation    Dr
          Loss on Sale (if applicable)   Dr
          Asset Sale account               Dr
          Asset account                                      Cr
           Profit on sale (if applicable)                 Cr

Accounting entry for scrap
           Accumulated Depreciation    Dr
           Loss on Sale of Assets         Dr
           Asset account                                      Cr

SALE OF SCRAP
The sale of scrap (non-stock) shall be mapped as a direct manual FI entry. The customer will be created as a FI customer. No Logistics module will be involved in the process.

A FI Invoice will be prepared for the sale of scrap with the following entries:
              Customer                           Dr
              Sale of Scrap                                    Cr
              Excise Duty Payable                         Cr

ADVANCES FROM CUSTOMERS
Advances are received from the customers against delivery. These advances will be recorded in a special general ledger account. The accounting entry for the same will be:  
              Bank Account                      Dr
              Advance Customer Payments            Cr

These advances will be later on adjusted against the invoices raised on the customers. Advances can be adjusted against more than one invoice at the time of clearing of the invoices against advances.

              Adjustment of Advances
              Customer Account                             Cr
              Advance Customer Payments  Dr

A financial document would be created for each Bank Guarantee received and this document number will be referred to in the Sales Order which would then monitor the value and the validity of the of the Bank Guarantee instrument wise while doing the billing.The letter of credit /Bank guarantee given will be recorded as a noted item.

Accounting Entry for Goods receipt
                Stock/Inventory account         Dr
                GR/IR account                                   Cr
                Freight clearing account                      Cr

Accounting Entry on invoice verification of supplier
                GR/IR                                    Dr
                Vendor account                                  Cr

Accounting Entry on invoice verification of freight vendor
                Freight clearing account          Dr
                Freight Vendor account                       Cr 

GOODS RECEIPT
Based on the Purchase order and the Quantity actually received Goods Receipts (GR) will be done. Based on the GR done the following accounting entry will be passed in the Financial Accounts
                  RM/PM Stock Account       Dr
                  GR/IR Account                                 Cr
                  Freight Clearing Account                   Cr

EXCISE INVOICE VERIFICATION
On receipt of the excise invoice cum gate pass the following entry will be passed
                   RG 23 A / RG 23 C Part 2 Account    Dr 
                   Cenvat Clearing Account                              Cr

Inventory Accounting Entries

All the Inventory transactions will look for the valuation class and the corresponding G.L. Accounts and post  
the values in the G.L accounts.     
            For Example: during Goods Receipt
            Stock Account - Dr 
            G/R I/R Account  -  Cr 
            Freight Clearing account - Cr 
            Other expenses payable - Cr   

            During Invoice Verification
                  G/R I/R Account - Dr 
                  Vendor - Cr

When the Goods are issued to the Production Order the following transactions takes place:
             Consumption of Raw Materials - Dr 
             Stock A/c - Cr

When the Goods are received from the Production Order the following transactions takes place:
              Inventory A/c - Dr 
              Cost of Goods Produced - Cr                      
              Price difference - Dr/Cr 
             (depending on the difference between standard cost and actual cost)

When the Goods are dispatched to customer through delivery the following transactions takes place:
               Cost of Goods Sold - Dr 
               Inventory A/c - Cr

When the Goods are issued to a Cost Center or charged off against expenses the following transactions takes place:
               Repairs and Maintenance - Dr 
               Inventory A/c - Cr

When the Goods are stock transferred from one plant  to another, the following transactions takes place:
                Stock A/c - Dr (Receiving location) 
                Stock A/c -  Cr (Sending location) 
                Price difference - Dr/Cr  
               (due to any difference between the standard costs between the two locations)

When the stocks are revalued, the following transactions takes place:
                 Stock A/c - Dr/Cr         
                 Inventory Revaluation A/c - Cr / Dr

When the Work in Progress is calculated the following transaction takes place:
                 Work in Progress A/c - Dr 
                  Change WIP A/c - Cr

Physical verification /shortages and excesses :  Shortages/excesses on authorizations shall be adjusted using the physical inventory count transaction.