msTe017 ‘Subcontracting In SAP & Accounting Entries 43th February 2014 Subcontracting In SAP & Accounting Entries Subcontracting is a very common Scenario in today's manufacturing industry. Many business involve in manufacturing get many components and material produced by sub-contractors in order to produce and deliver fine finish goods on time as ordered by customers. (There are many threads and sources that help you to learn theoretical aspects on subcontracting in real world and SAP. Therefore refer them for theoretical understanding). In this blog I'm just illustrating you the subcontracting process and few subcontracting Examples with its posting entries under different scenarios and general configuration. (In this blog | do not discuss about subcontracting with chargeable components). Let’s start from Subcontracting Process Process of Subcontracting hitps:/)www.blogger.com/null] Create Info Record - MEt1 - An Info Record must have been created for the material reference to subcontracting Create Purchase Order ~ ME21N - With Item category ‘L’. Good issuance to subcontractor i.e. Transfer Posting - MB1B - Transfer the components from your storage location to the subcontractor using the movement type - 541 (at this point no accounting entry will be posted. only the stock transfer will take place from current storage location to subcontracting vender) Goods Receipt - MIGO - receive the end product (and components) to Stock, movement types ~ 101 for main material(end Product) and 543 for components Subsequent Settlement if any- MBoq ~ Subsequent adjustment of components other than the entries in GR(above 4) Invoice verification - MIRO - Similar to normal invoice verification If you are intending to implement subcontracting process comprehensively in your organization make sure you have maintained all master data requirements related to subcontracting. For example, Procurement Type (External Procurement/Both), Special Procurement key (30) in addition to the Info records, BOM explosion field should blank etc. Other data are similar to the rest of the SFG/FG materials according to the nature of your subcontracting requirement and valuation levels. Note: Even without the aforesaid parameters you can execute the subcontracting transactions but as mentioned it is not comprehensive and not correct as per standard process which will cause errors for examples in standard costing run and therefore the standard price of such material will be incorrect. Let's take some simple example so that it will be easy for you to understand. E.g.: 1 Material XYZ is sent to sub-contracting vender Tea-times (2500) by High-times (1000 -CC) for further processing. Note: Cost of Sub-contracting end product (SFG/FG) will consist of its component Cost which is sent for subcontracting and Sub contractors Price (external service cost). According to the above problem below are the component of sub-contracting product ie. FABot - (SFG sent to subcontractor) Sub- contracting Cost (External Service Cost) To produce 10 PAA of XYZ Material below quantity of component (Items) required FABot-10Kg, Subcontracting cost $10(s1 per PAA) Standard Cost The standard cost itemization can be shown as below. Item Cat Resource Cost Element Total Value mM 1000 FABo1 900720 7.81 L 2500 4000150215 1000 900700 10.00 17.81 hpiisubcontractingsap.blogspot.my/2014/02Isubcontractng-n-sap htm utmsTe017 ‘Subcontracting In SAP & Accounting Entries Scenario 01 - Posting Schema for Standard Price Control Without Price Differences Goods issue -no entries posted Goods received - At good received below entries will be posted(refer E.g. 01) GLAIC AIC DESCRIPTION CRIDR AC COST CURR. MAT = COST _ _ TYPE CENTER ‘e2t720 | RMCon.Against Sub-Contracting Dr P&L 7.81 USD FABox _t0001000 501000 | Raw Material Stock Ale GBS FABor 921630 | Inventory Change Sub Contracting CR PRL 7.81 USD XYZ _—_—_t0001000 501030 DR BS a7. USD XYZ 900700 | External Service Alc DR P&L 10.00 - USD XYZ_—_—t0001000 6oot00 | GRIIR Clearing alc CRBS 0.00 USD XYZ ‘Scenario 02 - Posting Schema for Standard Price Control With Price Differences (Price change in Invoice) Company receives an invoice with value §15, i.e. at each PAA $1.5 Accounts postings are similar till GR as in scenario 1. Only in Invoice verification the price difference would arise. GLAIC AICDESCRIFTION CRIDR ACTYPE COST CURR. MAT —_COSTCENTER “920301 | Price Diff Aje De P&L 500 USD XYZ 10009000 600100 | GRIER Sup Serv. Dr BS 10.00 USD XYZ 7500 | Tea-Times Cr Vender/BS 15.00) USD Scenario 03 - Posting Schema for Standard Price Control With Price Differences (Price Change at PO) Below will be the Posting entries. Goods Receipt - GLA AIC DESCRIPTION 21720 | RMCon. Against SubCont. 501000 | Raw Material Stock Alc g20301 | Price Diff Ale 921630 | Inventory Change Sub Cont 501030 | Semi-finished stock afc 1900700 | External Service Alc 600100 | GRIR Clearing alc INVOICE VERIFICATION - MIRO 600100 | GRIR Sup Serv %500_ | Tea Times Subcontracting Configuration — CRIDR De or oe R DR DR a oR AICTYPE AMOUNTS CURR. Pa Bs PAL PaL 8s PaL Bs Bs VenderiBS hpiisubcontractingsap.blogspot.my/2014/02Isubcontractng-n-sap htm 7.81 USD 781 usp 5.00 uso 22.81 usp 7.81 usp 45,00 usp 15.00 Usp 15.00 uso 15.00 usp MAT COST CENTER FABo1 10001000 FABot XYZ 10003000 XYZ tooc1000 XYZ XYZ 10001000 XYZ xyz 216msTe017 ‘Subcontracting In SAP & Accounting Entries In terms of configuration there are few. 1. Out of this automatic account determination in OBYC is important. It is mentioned below. External Service cost (Sub-Contracting Cost) - Transaction FRL - Sub contracting Service Cost (P&L) alc should be maintained with reference to the valuation class. Sub-contracting inventory Change a/c determination - Transaction BSV - Change in stock account * Consumption for subcontracting - Transaction - GBB with General Modification VBO with relevant valuation classes and GL a/c And apart from that the other genera configuration mention below + GR/IR Clearing account Determination — Transaction WRX - GRIR Clearing a/c + Stock A/c determination - Transaction BSX (Inventory posting) with Stock GL accounts 2. Automatic a/c assignment has to be done as well for the P&L accounts such as External Cost, Inventory change a/c and consumption a/c. It is common that one Cost center is assigned for these P&L a/c so end of the day the cost center will always show a ZERO balance. 3. In CO separate cost component with origin group can be created for subcontracting in OKTZ. So that the sub-contracting cost can be separately shown within cost component reports. 4. Inline with Cost component you can assign a separate Value field in COPA for subcontracting. So all report will be in same line. | hope the above information provided will guide you and help you in understanding sub contracting and its posting. If find special and important areas related to subcontracting I'll be sharing with you. Posted 13th February 2014 by Azhar Mashroon Labels: Subcontracting in SAP & Account Postings, (2) Add a comment hpiisubcontractingsap.blogspot.my/2014/02Isubcontractng-n-sap htm 38msTe017 ‘Subcontracting In SAP & Accounting Entries Enter your comment: Comments: Select profile... 7 Preview hpiisubcontractingsap.blogspot.my/2014/02Isubcontractng-n-sap htm \ 48