ORDER SETTLEMENT

[Former Member]

hello,

In simple words what's exact meaning of order settlement?

[Former Member · Accepted solution]

In simple words, who should be the bearer/receiver of the cost incurred in production. Is it the material code itself, or an sales order or a cost element etc.

In most of the cases its mat code by default.

So after identifying the receiver the cost is to be sent to it - that is settlement.

[Former Member]

answered

[former_member184655]

Dear,

From the Production order settlement point of view,

When a production order is settled, the actual costs incurred for the order are settled to one or more

receiver cost-objects (for example, to the account for the material produced or to a sales order). Offsetting

entries are generated automatically to credit the production order:

If the costs for the production order are settled to a material account, the order is credited each time

material is delivered to stock. The material stock account is debited accordingly.

If the costs for the production order are settled to another receiver (for example to a sales order), the order

is credited automatically at the time of settlement. The cost-objects are debited accordingly.

The debit posting remains in the order and can be displayed even after the costs have been settled. The

settled costs are updated in the corresponding receiver cost-object and can be displayed in reporting.

During production, product cost collectors and manufacturing orders are debited with actual costs. Each time goods are received into inventory, the system valuates the receipt and credits the product cost collector or manufacturing order accordingly. The actual costs posted to an order can be more or less than the value with which an order was credited when the goods receipt was posted. When you settle, this difference between the debit and credit of the order is transferred to Financial Accounting (FI). Settlement also feeds data from Cost Object Controlling to other components.

The following can happen during the settlement process:

· The order balance can be reduced to zero by transferring to Financial Accounting (FI) the difference between the preliminary inventory valuation (goods receipt) and the actual costs incurred. The price difference can also be transferred to Profit Center Accounting (EC-PCA) and Actual Costing/Material Ledger (CO-PC-ACT).

· The total variance can be transferred to profitability segments in Profitability Analysis (CO-PA). This enables you to see an additional contribution margin in CO-PA. You can transfer the individual variance categories of the total variance to value fields in CO-PA in combination with certain cost elements or cost element groups.

The variances are normally settled to CO-PA as variance categories. However, you can also settle the order balance to CO-PA.

· The work in process can be transferred to Financial Accounting (FI) and Profit Center Accounting (EC-PCA) in accordance with the posting rules in Customizing.

Regards

Mangalraj.S

[rupesh_brahmankar3]

Dear,

Settlement is nothing but, While doing production the target cost and actual cost will be saved in prod order. This will be in intermediate stage.

In any company FI will follow Debit / Credit principle for accouts management. This is done through G/L account and G/L code.

So what ever the cost stored in prod order will be sent to the respective receivers ( Material / Cost center ) G/L Code during settlement. If ther is any variance this will go to the respective Profir / Loss account.

Where a production order is settled to a material account, the amount settled is the difference between the actual costs incurred for the order and the costs credited to the order when the goods produced were delivered to stock.

The order is credited with the settled costs. Following the credit posting, the order has a balance of zero. The offsetting entry for this credit is made as follows:

If the Price control indicator in the material master record is S, a price difference account is debited.

If the Price control indicator in the material master record is V, the total stock value and the moving average price change accordingly.

Regards,

R.Brahmankar