Inventory valuation process in ERP system

Source: Internet
Author: User
This article mainly uses sap as an example to describe the application of moving average method and standard price method in the material moving process of ERP system.

The unit costs of various inventories of an enterprise may be different because they are formed by scattered purchase or batch production. In order to reasonably calculate the value of inventory other than low-value consumable products and packages, You need to select a certain billing method to calculate the inventory issued or used by the enterprise, this provides enterprises with unified pricing standards for production and product sales costs. China's enterprise income tax law and accounting system provide several alternative accounting systems, such as the first-in-first-out method, last-in-first-out method, moving average method, planned cost method, and individual valuation method. This article mainly uses sap as an example to describe the application of moving average method and standard price method in the material moving process of ERP system.
The moving average method enables the management to know the inventory settlement in a timely manner, and the average unit cost calculated as well as the inventory cost for issuance and settlement are objective. The standard cost method is used to calculate the inventory at the standard price, this can simplify the accounting process and help evaluate the Department's performance. However, enterprises that frequently receive and ship data require a lot of computing work. The powerful data processing function of the ERP system makes this problem no longer possible. In the ERP system operation, most of the functions of many modules involve the moving and billing of materials, the system organically integrates them and generates material creden。 and accounting creden. Material creden。 reflect the movement quantity, direction time, and operator of each material, while financial creden。 reflect changes in the quantity and price of each material. Based on these creden。, you can track and analyze the movement changes of each item.
In the ERP system, the inventory valuation method is mainly controlled in the material master data. Material master data includes basic data, purchasing, MRP, accounting, and costing ). When creating each item, you can set whether to choose the moving average price or the standard price. After selecting the appropriate method, if the material has a historical record, the unit price and inventory of the material can be displayed in the accounting section.

The billing process of moving average method in the system for receiving and receiving invoices:
1. When the purchasing supervisor establishes a purchase order in SAP, it must first estimate the price, freight and miscellaneous charges of each material (accrual. The system calculates the total value based on the purchased quantity.
2. When receiving the goods, enter the system according to the actual receipt quantity. The system calculates the total value of the purchased materials based on the purchase order price. The following is an example of this process.


Receiving Process The inventory quantity in the previous period is 100 PC, and the moving average price is 2. The inventory amount is 2*100 = 200. Po receipt for this period: 100 PC, unit price: 2.4, moving average price is 2.2. Inventory amount: 200*440 =. Accounting Entry for receipt of Po: Borrow: raw material 240 loan: Estimated amount payable temporarily 240● It is reflected in the material creden。 that the raw material has been added.
● The increase in the quantity and amount of such materials in the inventory is reflected in the accounting creden, and the increase in the amount of currently estimated accounts payable is also reflected. The currently estimated payable (GR/IR) is an offset in the balance sheet.
● The average mobile price is recalculated.
The calculation process is as follows:
New m.a. P = (100x2.00 + 100x2.40)/(100 + 100) = 2.20


3. After receiving the invoice from the supplier, first check whether the quantity of materials in the invoice is consistent with the quantity received in the system. Confirm the correctness and enter it into the system.


Invoice receiving process
Invoice quantity: 100, unit price: 240. accounting entries: Borrow: Estimated amount of loans payable: 220, loan: raw material 20
● The system recalculates the total inventory value. If the estimated price is greater than the invoice price, the difference system will offset the value of the materials in stock based on the order; otherwise, the difference will be allocated to the material value in stock.
● It is estimated that accounts payable are offset and cleared temporarily.
● Based on the invoice amount, the system transfers the payment to the accounts payable module.
● The average mobile price is recalculated based on the invoice price.
The calculation process is as follows:
New m.a. P = (100x2.00 + 100x2.20)/(100 + 100) = 2.10


The billing process of the standard price method in system receipt and receipt of invoices:


The example is the same as above.


Receiving Process

Inventory quantity in the previous period: 100 PC, material price: 2. Inventory amount: 2*100 = 200. Po receipt for this period: 100 PC, unit price: 2.4 Accounting Entry for Po receipt: Borrow: raw material 200 borrow: Material Price Difference 40 loan: Estimated amount payable for the moment 240

● The price of the received raw materials shall be calculated in accordance with the standard price.
● The amount of currently estimated payable is calculated based on the purchase order price.
● Differences between order price and standard price transfer materials price difference subjects. That is to say, the actual price of materials = standard price + material price difference.
● There are two solutions to material price differences. One is to distribute the materials that have been issued in the current period and the materials that have been stored at the end of the period, which is a difference in the distribution of consumed materials and should be transferred from this subject to the relevant subjects. The other is the current profit and loss of direct transfer.


Invoice quantity: 100, unit price: 2.2.
● This step has no direct impact on stock materials.
● The Account Payable account is calculated for the moment.
● Account payable accounts are recorded based on the invoice price.
● Calculate the material price difference based on the invoice price. Accounting Entry: Borrow: Estimated amount of loans payable for the moment: Account Payable 240, loan: material price difference 20


Pricing of moving average in the production process


In the production process, from raw materials to finished products, there will be a variety of product forms in accordance with the process and production steps, different forms of live labor and material labor consumed by products constitute their production costs. In the SAP system, different products are produced mainly based on the production order, and the production order is generated through MRP operation. The system calculates the amount of standard materials consumed by the products produced in the order based on the standard material list, and standard working hours. When the order is completed, the system adds new products in stock and reduces the inventory of the consumed materials through a confirmation. Generate both material creden。 and accounting creden. From the perspective of Accounting creden。, this is also a process of calculating and allocating production costs. However, the inventory price of the new product is not the real average price. You need to adjust the price of the new product to the average price through the "Settlement" function. This function does not generate material creden。 and only generates accounting creden。, that is, it only affects the calculation of inventory price and production cost. Generally, a production order relies on one process. After each order is completed, these two functions must be executed in the system, and the order cannot be wrong. In addition, it must be executed in the order of the production order. Otherwise, the price of the calculated semi-finished products and the corresponding finished products is incorrect. From the management perspective, the correct analysis of the profitability of customers is affected; from a financial point of view, this leads to a series of data errors, such as incorrect product sales costs, incorrect product marginal contribution, total profit, income tax, and net profit.

The following process is used as an example:


1. Production Order No. 10000 requires 100 dummy Products. 100 A and 50 B are consumed Based on the 100 dummy items in the bill of materials. Direct labor and manufacturing costs are not considered for the moment.


Inventory balance Finished ProductDummy inventory: 100, unit price: 2.2, Material A inventory quantity: 150, price: 1. Material B inventory quantity: 150, price: 0.8.

2. Confirmation)


Inventory balance Production a 100 PC, B 50 PC. accounting entries: Borrow: Production Cost: 140 loan: material-a 100 loan: Material-B 40 Finished ProductDummy 100 PC finished in stock Borrow: finished product 220 loan: Production Cost 220
● The moving average price of dummy materials remains unchanged. The inventory quantity increases by 100, and the amount increases by 100*2.20 = 220.00.
● The moving average price is 2.20 yuan before the stock increases.
● The inventory of raw materials A and B is reduced.
● The subject of variable costs varies by 80.00.


3. price difference adjustment process (Settlement)


Inventory balance Borrow: production cost 80 loan: production cost 80
● The moving average price of dummy changes. The inventory value of this item is reduced by 80 RMB
The calculation process of moving average price is as follows:
New m.a.p = (original inventory value + new value-difference with the value of consumed materials)/initial inventory + new inventory value
= (220 + 220-80)/100 + 100 = 1.80
That is to say:
New m.a.p (original inventory value + value of consumed materials)/inventory at the beginning of the period + new inventory value
= (220 + 100*1.00 + 50*0.80)/100 + 100 = 1.80
● The variable cost subject is zero.
● This step has no impact on the quantity of stock materials and only adjusts the value.


Standard costing is easier to understand in the production process. Raw materials are delivered to the production order at the standard price. At this time, the raw materials are reduced and the change costs increase. After the production order is confirmed, the produced finished products are priced at the standard price, and the change costs are reduced; the standard price difference between the standard price of raw materials and finished products is transferred to the profit and loss of the current period.
The main difference between the moving average price and the standard price is that the moving average price is calculated based on the current receiving price, which is basically close to the market price; however, when establishing a purchase order, if the estimated price is too high or too low than the actual price, the system inventory price will be inaccurate before receiving the invoice. The standard price is a plan price. The difference between the standard price and the actual price is no longer distributed to the stock and directly transferred to the current profit and loss. If the standard price is reasonable, you can assess the procurement department and Production Department by analyzing the difference, so as to reduce procurement costs and save costs. However, the inventory calculated by the standard value cannot accurately reflect the current market price.
Different inventory valuation methods have different effects on the company's financial status, operating results, and cash flow. Therefore, the stock should be priced based on the average mobile price or standard price, and a reasonable method should be selected based on the actual situation of the enterprise.


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