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Free Goods accounting

dear all ,

we had a scenario where we get some free sample material from vendor

now my question is if i already had stock of suppose 50 KG with price 5000 (100/kg)

and then i add up the free goods 25Kg , what should be the accounting ,price and quantity.

now if i issue 20kg what will be accounting and what will be the quantity and price

now if i issue 55 kg then what will be accounting

regards

raj

Former Memberreplied

HI,

For Free of cost material, The Price control in material master plays a very important Role while Receiving the material.

1. MAP :- If the material is valuated at moving average price, the stock figure is updated on a quantity basis only, not on a value basis. Thus the total stock quantity increases but the total value of the stock remains unchanged. This results in a reduction in the moving average price.

2. STD :- If the material is valuated at standard price, the stock figure is updated on a quantity and a value basis. The receipt is valuated on the basis of the standard price. The offsetting posting to the stock account posting is made to a revenue account for price differences.

Now, let me explain your case with MAP

1.

```now my question is if i already had stock of suppose 50 KG with price 5000 (100/kg)
and then i add up the free goods 25Kg , what should be the accounting ,price and quantity.```

Before Receipt of material, MAP = 5000/50 = 100 / kg

after Receipt of Material = Map = 5000/75 = 66.67 / Kg

Now at the time of receipt, no accounting document generates but increase of your stock results in decrease the map.

2.

`now if i issue 20kg what will be accounting and what will be the quantity and price`

if you issue the material, then Stock Acct is = 20*66.67 = 121.8 Cr and cost center etc = 121.8 Dr

now same you can try for STD price as definition given by me but remember

if the std price vary while purchase then price difference account must hit. suppose for material A, STD is Rs 100

and PO Price is 125 then Amount in PRD is = 25 *qty

but issue will be for std price i.e. 100Qty*

Hope Help U !

Regards,

Pardeep Malik

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