Accounting Views in SAP CO Product Costing
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The costing related material master views consist of two accounting views and two costing views. These four views are plant-specific and are required for valued materials.
If material ledger is activated for a company code, the accounting views look different and contains more fields. If split valuation is activated for a material, the accounting views are plant-specific and valuation type-specific.
The Accounting 1 view consists of general and current valuation data which are relevant to valuing materials (see Figure 3.5).
Figure 3.5: Material master accounting 1 view
Valuation class is a group of raw materials with the same account determination.
Valuation class is a plant-specific field that accounting uses to further divide a material type. The valuation class and movement type used during material movements indicate which general ledger account is used in postings with the financial impact.
SAP Valuation Classes:
3000: Raw materials
3030: Accessory materials
7920: Finished materials
Valuation classes are configured in transaction OMSK or through the IMG menu path MATERIALS MANAGEMENT • VALUATION AND ACCOUNT ASSIGNMENT • ACCOUNT DETERMINATION • ACCOUNT DETERMINATION WITHOUT WIZARD • DEFINE VALUATION CLASSES.
When configuring valuation classes, you must also configure an account category reference. The account category reference links the material type to relevant valuation classes. For example, material types FERT and HALB only require valuation classes in the 7900 range. Those material types could be mapped with one account assignment category that contains valuation classes in the 7900 range only.
Additional configuration, called automatic posting, is required to link valuation classes to GL accounts based on transaction types. This configuration is the linkage between material valuation classes and the GL account that should receive a debit or credit based on a certain transaction in the system.
Automatic postings are configured in transaction OBYC or through the IMG menu path MATERIALS MANAGEMENT • VALUATION AND ACCOUNT ASSIGNMENT • ACCOUNT DETERMINATION • ACCOUNT DETERMINATION WITHOUT WIZARD • CONFIGURE AUTOMATIC POSTINGS.
Figure 3.6: Automatic posting configuration
The price control of a material determines whether the material is valuated at the standard price, the periodic unit price, or the moving average price.
Price control represents the plant-specific valuation strategy of a material.
In the SAP System, there are two types of price control:
Moving average price
These two types of price control differ in how they handle price variances resulting from goods receipts or invoice receipts.
Generally, produced materials are set at standard cost and purchased materials are set at a moving average price.
You determine the price control that should be used for a material when you create the material and enter the accounting data for it. You enter one of the following indicators in the Price control field to determine how the price is controlled:
- S for standard price control
- V for moving average price control
The accounting department generally sets standard costs once per year, but can update materials more frequently as required. Standard costs can be set in a variety of ways based on configuration in the costing variant and valuation variant.
The Standard cost for produced materials picks up the Bill of Material and Routing in order to value the material. A bill of material (BOM) holds the material components required to produce the material. A routing contains the production activities required to produce the material. Generally, a production version is used to indicate the most common combination of a BOM and Routing o Master Recipe.
If a material is purchased, the standard cost could be set by manually entering a price (using transaction MR21 to update), using a purchase information record, or by using planned price fields. There are more details on standard costing in the costing execution chapter.
Moving Average Price (MAP) represents the cost used to value a material if the price control is V. Moving average price is a weighted average cost that fluctuates with each purchase (goods receipt). Each time a material is purchased, the moving average price changes to the current weighted average at the time of goods receipt. At the time of invoice, if the purchase price is different than the price at goods receipt, the moving average price adjusts accordingly.
Moving average is typically used only on purchased materials. SAP has officially advised against using moving average for semi-finished and finished materials. The Use of moving average on purchased materials may be appropriate where the item is an easily obtained commodity, with small fluctuations in cost. If inventory quantity reaches zero, the unit price on the next PO will set the new moving average.
The price control method is identified on the material master accounting views which are plant-specific. Therefore, different materials can use different methods within a plant, and the same material can have different price units at different plants.
Price unit is a plant-specific field that indicates the denominator of the standard or moving average price. Price unit means the standard price or moving average price is a cost per X. Price unit is a unit per the base unit of measure, which is a display field on the accounting and costing views.
Price Unit Example
For example, a price unit of 10 means a standard cost of $100 is a cost of $100 per 10. Therefore, this material is $10 per 1.
Valuation category / Split valuation
Valuation category is a field that indicates if a material is split valued. Split valuation can be used to give one material number multiple costs.
Split valuation enables you to valuate stocks of a material in the same valuation area (company or plant) differently. Some of the examples where split valuation is required are as follows.
- Stock that is procured externally from vendor has a different valuation price than the stock of in-house production.
- Stock obtained from one vendor is valuated at a different price than stock obtained from another vendor.
Same material having different batch may have different valuation prices.
Without split valuation, materials are valued at plant level.
With split valuation, the same material number at a plant can have different stock quantity and value for different groupings (called valuation types).
Split valuation example
If you have a product that is internally refurbished, you could use split valuation to value new, defective, and rebuilt materials differently. A second reason to use split valuation would be to value the same material at the produced cost separate from the purchased cost. You may also have international requirements to track the local purchase price of materials separate from other purchase prices. You can achieve this requirement through split valuation as well.
If a valuation category is selected for a material, the Accounting 1 and 2 views can be extended for each valuation type. Valuation types are specific to each valuation category, so different valuation types could be configured in different valuation categories.
Split valuation is an important decision when designing your SAP system. The configuration involved is relatively minimal, but the impact to users and master data is substantial. Product costing users should be involved in working with plants to determine the list of materials that should be split valued and to determine who will maintain this setting.
For any material with split valuation active, the valuation type (or batch) must be specified on every material movement. This means when a material is purchased, moves storage locations, or is shipped, a valuation type must be selected by the user. For this reason, it is important to only set up materials as split valuation if they actually require it. Users must also understand the impact and any custom transactions or RFID gun programs must include the valuation type so the user can input the valuation type.
The Accounting 2 view consist of several price fields for the determination of lowest value and a LIFO data section (Figure 3.7).
Figure 3.7: Material master accounting 2 view
Tax and commercial price fields
Tax and commercial price fields can be used to hold additional prices for a material for reporting purposes. These price fields do not have a relevancy date, so the Planned Price fields on the costing 2 view are more frequently used. You can configure your costing variant and valuation variant to allow releasing costing run results to these fields.
Price unit on the Accounting 2 view is an optional price unit that can be used for the tax and commercial price fields. This field can be used if the price unit on the Accounting 1 view is not the same as the price unit required for tax and commercial prices. This field is typically not used because the price unit on the Accounting 1 view is often the same.
LIFO relevancy and LIFO pool
LIFO means LAST IN FIRST OUT
LIFO relevancy and LIFO pool fields are optional, plant-specific fields that can be used to indicate whether a material is LIFO relevant and which configured LIFO pool is applicable.
Configure LIFO pools
LIFO Pools are plant-specific, so you must configure LIFO Pools for applicable plants. There are many options within SAP for valuing inventory and reporting based on different LIFO prices.