Scrapping of Material !!

[Former Member]

Hi Friends

Material X is an excisable raw material (ROH)

It undergoes different operations and changes to X1 then X2 then X3 (all HALB).

Finally it changes to Y a finished product (FERT). This is also excisable.

During different operations its valuation changes due to the various operations.

Now during one of the operations X2 is rejected and it has to be scrapped.

How to go about it ... we need to book losses also.

How to deal with excise and stock? How to scrap it?

Scap is sold with excise

Any idea? Gud ideas wil be suitably awarded

Thank You

[pankaj_singh9]

Hi,

1. When you found that the Material X2 is defective then transfer that much quantity of X2 to Blocked Stock using movement type "344" in MB1B or MIGO. During this material movement, no FI entry will be generated. (This is optional activity, do if required)

2. Then do Goods Issue > Others (In MIGO, use movement type "551" - GI for Scrapping, Specify a Cost Center against with expense is to be booked)

During this material movement, following A/c Entry will get generated; (from OBYC)

(BSX) RM Stock A/c - Cr

(GBB-VNG) Scrap Expense A/c - Dr

3. MM01 - Create a material code for Scrap and maintain it for Scrap Stores.

Note: - Create a new Storage Location in OX09 as Scrap Stores

4. Then do Goods Receipt > Others (In MIGO, use movement type "552" - GI for Scrapping - Reversal, Specify a Cost Center from which stock is to be received)

During this material movement, following A/c Entry will get generated; (from OBYC)

(BSX) Scrap Stock A/c - Dr

(GBB-VNG) Scrap Expense A/c - Cr

5. Now Stock of Scrap is available in MMBE.

6. VA01 - Create Sales Order for Scrap Sales

7. VL01N - Outbound Delivery against Sales Order (For Scrap material), at this stage movement type "601" will get hit.

During this material movement, following A/c Entry will get generated; (from OBYC)

(BSX) Scrap Stock A/c - Cr

(GBB-VAX) COGS Scrap A/c - Dr

8. VF01 - Billing Document w.r.t. Outbound Delivery

Accounting Document generated will be; (From VKOA)

Customer A/c - Cr

Sales Revenue - Scrap - Dr

Excise Recovery - BED - Dr

Excise Recovery - ECS - Dr

Excise Recovery - SECess - Dr

9. J1IIN - Outgoing Excise Invoice w.r.t. Billing Document

Accounting Document generated will be; (Excise A/c detmn for ETT "DLFC")

Excise Duty Paid - Dr

CENVAT Receivable - BED - Cr

CENVAT Receivable - ECS - Cr

CENVAT Receivable - SECess - Cr

[Former Member]

1.) After doing 551 do we need to do J1IH or not.

2.) What to do if we dont scrap the material ... lets say we use it for some other purpose(other than manufacturing) ... ????

[pankaj_singh9]

Hi,

If your raw material got scrapped during manufacturing of some SF or FG then you don't have to reverse excise duties since it is not scrapped directly but got spoiled during manufacturing. so 1.) After doing 551 do we need to do J1IH or not. - There will not be any Excise Entry in J1IH.

If you have scrapped Raw materials directly instead of using it for production the use following process;

1. Making Adjustment Postings for Scrap

Use: - You follow this procedure if you have scrapped a material and want to reverse the excise duty debited to your CENVAT account.

Procedure: -

1. J1IH - Excise JV > Create > Matl write-off.

2. Enter data as required, including:

u2022 Document number (This Document is of Movement Type u2013 551 i.e. GI for Scrap)

Enter the number of the document that you used to scrap the material.

u2022 CENVAT account selection group box

Specify which account is affected by the adjustment posting is for. If the posting does not have to be remitted immediately, select Fortnightly payment.

3. Click on u201CEnteru201D button.

The system displays the information from the material document.

4. Adjust the posting date as necessary.

5. Adjust the excise duty for each line item either:

u2022 Manually

u2022 By assigning the line item to an excise invoice

6. Specify which G/L accounts are to be posted to.

Here you can change Debit A/c as per your requirement.

7. Save the adjustment posting.

System will post Excise JV Document, Accounting Document Part2 Serial No.

2.) What to do if we dont scrap the material ... lets say we use it for some other purpose(other than manufacturing) ... ????

Use following process;

2. Making Adjustment Postings for Materials Not Used in Production

Use: - You follow this procedure if you have not used a material in the production process and want to reverse the excise duty debited to your CENVAT account.

Procedure: -

1. J1IH > Excise JV > Create > Matl non-prod.

2. Enter data as required, including:

u2022 Document number

Enter the number of the material document that the adjustment posting is to refer to.

u2022 CENVAT account selection group box

Specify which account is affected by the adjustment posting is for. If the posting does not have to be remitted immediately, select Fortnightly payment.

3. Click on u201CEnteru201D button.

The system displays the information from the material document.

4. Adjust the posting date as necessary.

5. Adjust the excise duty for each line item either:

u2022 Manually

u2022 By assigning the line item to an excise invoice

6. Specify which G/L accounts are to be posted to.

Here you can change Debit A/c as per your requirement.

7. Save the adjustment posting.

Excise JV Document, Accounting Document with Part2 Serial No has been successfully created

[Former Member]

If raw material is scrapped then we do 551 and J1IH

If material undergoing processes has to be scrapped then we do just 551

And to book losses we do 552 ....

And if we issue the so called processed rejected material for some non production purpose then we do 201 and J1IH ....In which scenario we have to do do 202??