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Explain the followings: 1. When we issue materials to production, following entry is happening: Raw material consumption a/c. Dr.
2. When we receive the FG from the production, Finished Good stock Dr.
In fact, the raw material issues for production is part of Cost of Production only. Then where that is reflected in SAP. At the time of FG receipt only, Cost of Production a/c is coming into picture. By Ravi : Let’s assume you are in a scenario where std cost = actual cost.. A. Say, RM cost is 100, labor cost is 30.. So your FG cost is 130. B. When you issue RM, Cons a/c is Dr and Inventory a/c is Cr for 100 Labor cost is debited to prod order via a secondary cost element. This does not result in a FI entry. C. Now, when you do GR, entry is FG Inventory a/c is Dr for 130 and cost of production is credit for 130 again. This cost of prod is nothing but your sum total of RM inventory cost and labor cost.... The accounting logic here is, you have consumed one inventory (Charged to P&L) and made another inventory.... When you consumed (RM), it is charged to P&L... So, now that you have made another inventory (FG), the charged made to P&L is reversed and again the inventory is Debited... The charge reversal is done using another P&L account which is Cost of Prod a/c instead of individual RM consumption a/c. The idea is to show in P&L, RM consumption separately and at the same time reduce the charge and bring back the inventory consumed in its processed form (FG)... That’s why, RM consumption, Cost of prod a.c, COGS a/c all are mapped to the same group in Financial Statement version in FI and are reported together.
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