SAP Subcontracting Accounting Entries

Overview of Subcontracting in SAP

Subcontracting in SAP involves sending components to a third-party vendor who assembles or processes them into a finished product. Proper accounting entries are crucial to ensure accurate financial records. 

Accounting Process for Subcontract Orders

Invoice Verification for Subcontract Orders

Invoice verification for subcontract orders in SAP follows the same process as standard purchase orders. However, additional postings may occur if price variances are detected between the purchase order and invoice.

Subcontracting Example: Accounting Flow

Let’s consider a real-world example involving the end product ASSEM-1.
  • Order Quantity: 50 pieces
  • Subcontract Price: $10 per piece
  • Total Value: $500

Components Supplied to the Vendor

  • COMP-1: 15 kg @ $20/kg = $300
  • COMP-2: 5 pcs @ $30/pc = $150

Goods Receipt: Valuation Posting

Upon receiving the 50 pieces of ASSEM-1, SAP automatically posts the consumption of provided components using their material master prices.

Valuation Calculation:

  • Subcontracting Cost: 50 pcs * $10 = $500
  • Component Value: $300 (COMP-1) + $150 (COMP-2) = $450
  • Total Valuation at GR: $950

Invoice Receipt with Price Variance

The subcontractor invoices at a slightly higher rate: Invoice Total = 50 pcs * $10.50 = $525 This results in a price difference of $25 that must be accounted for in the posting schema.

Posting Schema: Moving Average Price Control

For materials managed with moving average price, the accounting entries reflect the actual invoice and component costs.

Postings at Goods Receipt

  • Stock account (End product): +950
  • Stock change: −950
  • Stock account (Components): −450
  • Consumption account: +450

Postings at Invoice Receipt

  • Vendor account: −525
  • GR/IR clearing account: +500 / −500
  • External service account: +500 (PO price) +25 (price difference)
  • Stock account (End product): +25
  • Stock change: −25

Posting Schema: Standard Price Control (No Price Difference)

Under standard price control, if the total receipt value equals the standard cost, no price difference is posted—even if the invoice value deviates. Standard Price: $20 per unit Valuation = 50 pcs * $20 = $1000

Postings at Goods Receipt

  • Stock account (End product): +1000
  • Stock change: −1000
  • Stock account (Components): −450
  • Consumption account: +450

Postings at Invoice Receipt

  • Vendor account: −525
  • GR/IR clearing account: +500 / −500
  • External service account: +500 +25
Note: No stock or stock change account is updated during invoice receipt.

Posting Schema: Standard Price Control with Price Differences

To account for price deviations under standard price control, configuration is required in Inventory Management Customizing. When enabled, price differences are posted if: Standard Price ≠ GR Value + Component + Delivery Costs

Postings at Goods Receipt

  • Stock account (End product): +1000
  • Stock change: −950
  • Price difference: +50
  • Stock account (Components): −450
  • Consumption account: +450

Postings at Invoice Receipt

  • Vendor account: −525
  • GR/IR clearing account: +500 / −500
  • External service account: +500 +25
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