Following changes to be made.
Big gap - numbering in BPML and numbering in presentation are not in sync. In BPML FI 03.05 is Vendor-
Customer Advances but in presentation the Customer in voice is numbered as FI 03.05.
In the whole presentation there is no mention of Vendor/Customer down payment process. Rest is ok only
some correction needed in the following slides
Slide 10- Invoice can be "posted" not post
Slide 11 - Vendor Payment ...T.Code would be F-53 not F-47
Slide 20 - Will the deduction from salary be automatic ??? Lets be ready with the answer. Since they are
implementing payroll they will expect it to be automated
Slide 27 - Corresponding old asset will be scrapped even when asset procurement happens via
AUC..visio diagram to be corrected
Slide 29 - Asset transfer from one asset class to another ...what is that ?
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
Sales and Distribution 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
Vendor Invoice Verification Accounting Entries
VENDOR INVOICE VERIFICATION
The detail process related to invoice verification is documented in Materials
Management Document.
On receipt of vendor bill the following entry will be passed:
GR/IR Account DR
Freight Clearing Account DR
Cenvat Clearing Account DR
Vendor Account CR
Invoice Verification for Foreign Vendor
On receipt of vendor bill the following entry will be passed:
GR/IR Account DR
Vendor Account CR
Invoice Verification for Custom vendor
On receipt of Vendor bill the follo wing entry will be passed:
1) RG 23A/RG 23C Part 2 A/c (CVD) A/c DR
Cenvat Clearing A/c CR
2) G/R I/R A/c DR
Cenvat Clearing A/c DR
Vendor A/c CR
3) Cost of Material A/c DR
Vendor A/c (Customs) CR
Invoice Verification for Freight / Clearing Agent
Cost of Material A/c DR
Vendor A/c (Clearing Agent) CR
Invoice Verification for Octroi Expenses
Cost of Material DR
Vendor A/c (Octroi) CR
TDS (Work Contract Tax) for Service Orders shall be calculated and deducted
accordingly.
The following entry will be passed on bill passing:
Expenses Account DR
Vendor Account CR
TDS Account CR
The material shall be returned to the vendor using the
Return to vendor movement type in SAP
Creating a Return PO
These transactions will be processed in the MM module.
The accounting entries will be :
Returns after GRN
GR/IR A/c Dr
Stock A/c Cr
The accounting in respect of debit / credit memos for FI vendors, the process will be
similar to that of invoice processing. The accounting entries will be:
On issue of debit note
Vendor Account DR
Expenses Account CR
In respect of import vendor - capital goods exchange differences are to be accounted
manually through a Journal Voucher for capitalization.
Exchange rate differences will be accounted at HO. An example of the accounting
entry in this case shall be:
Invoice entry @ 40 INR: 1 USD
Asset / Expense A/c DR 100
Vendor A/c CR 100
Payment Entry @ 41 INR: 1 USD
Vendor A/c DR 100
Bank A/c CR 110
Exchange rate loss Capital A/c DR 10
Asset A/c DR 10
Exchange rate loss Capital A/c CR 10
A new G/L account shall be created for the special G/L transactions.
The accounting entry for making the down payment shall be:
Advance to supplier account Debit
Bank A/c Credit
When the invoice is booked the following entry is passed
GR/IR account Debit
Vendor account Credit
Clearing of Invoice against Down Payment
Vendor A/c Debit
Vendor down payment account Credit
Wherever, TDS is applicable, the TDS will be deducted at the time of down-payment
to the vendor.
Down Payment for Capital (tangible) Assets
Down payment to vendors for capital acquisitions is to be reported separately in the
Balance Sheet under the head Capital Work in Progress. Hence down payment for
capital goods would be tracked through a separate special general ledger indicator.
The procedure to be followed is:
Definition of alternative reconciliation accounts for Accounts Payable for posting
down payments made for Capital assets
Clearing the down payment in Accounts Payable with the closing invoice.
A new G/L account shall be created for the special G/L transactions.
The accounting entry for making the down payment shall be:
Vendor Advance for Capital Goods Account Debit
Bank A/c Credit
When the invoice is booked the following entry is passed
Asset A/c / Asset WIP Debit
Vendor A/c Credit
Clearing of Invoice against Down Payment
Vendor A/c Debit
Vendor Advance for Capital Goods Account Credit
The Following are the TDS Rates (to be confirmed with the recent changes)
Particulars Tax Rate Surcharge Rate Total
Contractors – 194 C 2% 5% 2.10%
Advertising – 194 C 1% 5% 1.05%
Prof. Fees – 194 J 5% 5% 5.25%
Rent – Others – 194 I 15% 5% 15.75%
Rent – Company – 194 I 20% 5% 21%
Commission – 194H 5% 5% 5.25%
Interest - Others – 194 A 10% 5% 10.50%
Interest – Company – 194 A 20% 5% 21%
Special Concessional Tax
Works Contract Tax
SECURITY DEPOSITS /EARNEST MONEY DEPOSIT RECEIVED FROM
VENDORS
Bank A/c DR
Security Deposit Vendor CR
EMD to give the age so as to enable the same to be transferred to unclaimed EMD
account.
PAYMENT OF TOUR ADVANCE DOMESTIC TOURS
Employee Advances will be paid by the Accounts Department unit wise based on the
requisition or recommendation of the respective departmental head.
Employee Travel Advance A/c DR
Cash / Bank Account CR *-- Shashikanth Teegala -
skteegala@yahoo.co.in
