GL Entries During Sub Contracting

[former_member183818]

I am working for a cement industry. We have a new requirement for sub contracting our end product (Cement).

Requirement:

We will be supplying 1 raw material to a vendor for producing finished product Cement ( Two raw materials are required. 1 we will be supplying and the remaining 1 the vendor will add from their side).

After converting to FG vendor will return us FG (cement) based on a mutually agreed ratio. Ex: for 1000 TON of raw material we supplied they will return us 600 KG of FG (Cement), remaining 400 KG of Raw Material will be their charge.

No money transaction is involved in the whole process. Sub Contracting charges are being paid in the form of extra raw material.

What should be the financial entry involved in the whole transaction.

Process Involved:

- Transfer of Raw Material Stock to the Vendor

- Receipt of FG (Cement)

Kindly guide.

Thanks

[Former Member · Accepted solution]

Please refer to below linkage:

http://www.sap-img.com/mm004.htm

[former_member183818 · Accepted solution]

Hi Thanks,

I am new to this field. Can you please explaing me in detail the entres.

[former_member183818 · Accepted solution]

hi experts,

Sub Contracting PO Created 1000 TO at 200 / TO = 200000 Price

Cost of Raw Material 1500 TO at 100 / TO = 150000 Price

In our case 1500 - 1000 = 500 TO is the Sub Contractor charge

i.e Sub Contractor Charge = 500 * 100 = 50000

We will be selling the FG at 210 / TON

FG Sold price = 1000 *210 = 210000

What should be the GL entries in this case.

[MANISH_KE]

Pls ask your Accounts division for the GL entries.

It would make more sense. As consultants we can suggest, however ultimately the nature of the account & how it it be posted should

come from Accounts division.