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Subcontracting

Case:

I have an arrangement to manufacture one unit of a particular finished product (FG) with a Contractor. As per agreement, per unit subcontracting charge is Rs.50. I have made one PO (TC=ME21N) for the subcontracting charges and this PO is linked to BOM required for manufacture of FG. All the required raw materials are issued by me to the contractor against this particular PO for manufacture of FG (TC=MB1B & movement type 541). The total cost of raw material given to the contractor is Rs.750.

The price control of the FG is ‘S’ and current standard price in the material master is Rs.1000.

Kindly let me know the accounting entry that should happen at the time of making the GR of the FG.

RM Consumption A/C Dr. 750

Subcontracting Charges A/C Dr. 50

FG Stock A/C Dr. 1000

RM Stock A/C Cr. 750

GR/IR Cr 50

FG COGS Cr. 1000

OR

RM Consumption A/C Dr. 750

Subcontracting Charges A/C Dr. 50

FG Stock A/C Dr. 1000

RM Stock A/C Cr. 750

GR/IR Cr 50

FG COGS Cr. 800 (i.e. 750+50)

Price Difference A/C Cr. 200

Whether the price difference A/C will come into picture or not? If yes, when this price difference A/C will be hit- immediately at time of making GR or month end?

Former Member

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