07 April, 2021
This is completely integrated with FI(Financial Accounting). material Valuation: stock value= stock Qty x Price. The material valuation will update the G/L accounts in Financial Accounting.
The procurement process begins with generating a purchase order plus ends with invoice verification. Within the entire process, one of the relevant parts is material Valuation. While developing purchase orders, material price is a necessary field plus it is automatically determined. It arises because material valuation is attested within the SAP system in the material master. Material valuation describes integration among MM & FI (Financial Accounting) modules as it updates the general ledger accounts within financial accounting. The important points to note regarding material Valuation are −
Material valuation assists in managing the price of the material.
Stock obtained from one vendor is valuated at a different price than the stock, which is obtained from the other vendor.
We can evaluate the material based on various types of Procurement which are called Split Valuation.
Split valuation assists in evaluating the stocks of materials within the same valuation area differently. Some of the examples where we use split valuations are:
A stock that is procured externally from a vendor has a distinct valuation price than the stock of in-house production.
Stock acquired from one vendor is valuated at a distinct price than the stock obtained from another vendor.
The same material possessing a different batch may maintain distinct valuation prices.
Split Valuation requires to be activated before setting any other configuration.
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This valuation is controllable by
For every material, you are assigning a valuation class.
Data over material is evaluated using the following structure
The valuation area is an Organizational level at which material valuation is done; the valuation area is defined as
Valuation area= company code
Complete stocks of that particular material in the company code are evaluated together
Valuation area= one plant
We can group the different materials with the same properties into the valuation calls so that there is no need to control a separate stock account for each material.
All the materials with the same type are assigned to one valuation class.
Various materials with the same material type are assigned to different valuation classes.
The criterion, according to which split Valuation is carried out:
Procurement: You can evaluate a material uniquely depending on whether it is made in-house or procured externally.
Origin: You can evaluate a material uniquely depending on where it comes from (such as home or else from abroad).
Status: You can evaluate a material uniquely depending on its status (such as new, used, or repaired).
The valuation type defines the unique character of the valuation category, like internal or external, within the case of Procurement. In the valuation category Origin, you can determine the different countries as the valuation types. You determine valuation types within Customizing. You first define all the correct valuation types for a valuation category.
You specify within this material master record that valuation types are permitted for a different material. For every material subject to split valuation, you must enter all the valuation types permitted within the material master record.
We can assign every material to a material type when we create it. Examples of material types in the standard system incorporate operating supplies, raw materials, and finished products.
For every material movement, there is a movement type within the SAP System. The movement type manages the properties of the movement, for instance, which entries you have to make when entering a material movement, and which updates are taken out when the movement is posted.
SPRO -> Material Management -> Valuation and Account Assignment -> Define Price Control for Material Types
SPRO -> Material Management -> Valuation and Account Assignment -> Account Determination -> Account Determination Without Wizard
Define Valuation Control (OMWM): Choosing the valuation level is one of the first steps we will perform while customizing the system.
If using the PP Production module, the valuation area must be set at the plant level. For account determination, you can group valuation areas by activating the valuation grouping code. This makes the configuration of automatic postings much easier.
Group Together Valuation Areas: Valuation areas are grouped with the objective of simplifying the management of the standard accounts table by minimizing the number of entries.
Along with other factors, the valuation grouping code determines the G/L Accounts, to which a goods movement is posted (Automatic Account Determination).
The valuation grouping code makes it easier to set the automatic account determination.
Within the chart of accounts, we assigned the same valuation grouping code to the valuation areas.
Since we want to assign to the same G/L account, we assigned the same valuation grouping code to the valuation areas.
Define Valuation Classes: The Valuation class is a group of material with the same G/L account. - When you create a material master record, you must assign the material to a valuation class. The valuation class is assigned to a material at the plant level. However, if using the split valuation, the valuation class will be assigned at the valuation type level. - The choices for valuation class are dependent on the material type. In general, several valuation classes can be allowed for one material type. Also, the same valuation class could be allowed for different material types. - The link between the valuation class and the material type is the account category reference. The account category reference is assigned to a material type. - The G/L account determined for the material is carried out according to the settings for its valuation class.
Step1: Account Category Reference: Account Category Reference (4 Char): Group of valuation classes that’s the system uses to check whether the valuation class you have entered is allowed when you maintain accounting data in a material master record.
Step2: Valuation Class: Here The Valuation Class is defined and an Account Category Reference is attached to a Valuation Class. Example: 3000 (Raw Materials) -> 0001 (Reference for Raw Materials)
Step3: Material Type / Account Category Reference: Here the Material Type can be assigned to an Account Category Reference. Example: ROH (Raw Materials) -> 0001 (Reference For Raw Materials)
Define Account Grouping for Movement Types: Movement type - Special stock indicator - Value updating - Quantity updating - Movement Indicator - Consumption posting - Posting string for values - Counter - Transaction/event key - Account modification - Check
The following diagram shows the relation between Chart of account, Transaction, account modifiers, accounts posting keys.
AUM: Stock transfers are there between plants and from one movement type to another with split valuation. The difference between the price at the delivery plant and the receiving point is booked at the latter.
Account to be opened: Loss – Stock Transfer Gain – Stock Transfer A/c
BO1: Check up Subsequent settlement of Provisions (e.g.: volume-based rebate)
BO2: Check up Subsequent settlement of revenues -conditions in inv. Verification
BO3: Check up Provision Differences
BSV: The Company sends materials for subcontract work, this transaction is considered, Accounts to be opened, Materials Consumed/Trading Goods w/o cost element, for ROH Inventory Change, Cost of Goods sold w/o Cost element, for FERT s
BSX: All stock postings to Stock Accounts due to Goods receipts & goods issues in Inventory Management. B/s Inventory A/c s 11101 to 11111
DIF: Small Differences that may arise during invoice verification in the invoice amount not exceeding tolerance.
Accounts to be opened: Loss—Inventory Differences A/c, Gain---Inventory Differences A/c
FRX: These are used for posting delivery costs when goods and invoices are received for purchase orders
FR1: Freight Clearing 69002 Separate A/c s is required
FR2: Provisions for freight Charges 69002
FR3: Customs Clearing 69002
FR4: Provisions for Customs Clearing
FRL: Services are performed for the company externally. Account to be opened: Purchased Services A/c
FRN: Services are performed for the company externally and hence delivery costs
Account to be opened: External Procurement Costs A/c
GBB: Offsetting Entries for Inventory Postings AUA For Order settlement 68005 (Factory output for Production)
AUF: For GRs for orders (w/o account assignment) 68005
BSA: For initial entry of stock balances 11199
INV: Expenditure/Income from Inventory differences 68004 – Raw Material Consumption A/c
VAX: For goods issues for sales orders with no assignment object The account will not be a cost element 68002 –Raw Material Indigenous 72001 – Stores & Spares
VAY: For goods issues for sales orders with assignment object The account is a cost element
VBO: Consumption from stock provided to vendor 68002 –Raw Material Indigenous
VBR: For internal goods issues (e.g.: to a cost center) 68005—Factory output for Production 72001 – Stores & Spares
VKA: For consumption in Sales Order without SD (Mvt. Type 231) 68005—Factory output for Production
VNG: For Scrapping & destruction 68004 – Raw Material Consumption – Others
VQY: For sampling with account assignment
ZOB: For goods issues with no Purchase order reference (Mvt 501)
ZOF: For goods issues with no production order reference (Mvt 521)
KBS: Account - assigned Purchase Order ie. account assignment taken from PO Account need not be assigned in OBYC
KDR: Exchange rate rounding differences in case of foreign currency invoices 80029 -- Exchange Rate Difference - Valuation 1
KDM: Exchange rate rounding differences for open items (invoice posting with a Different exch. rate than the GR/due to Std price difference/insufficient stock coverage) 80028 --Exchange Rate Difference - foreign currency to local
KDV: Material ledger from low levels E/R diff.
KON: Consignment payables
KTR: Offsetting entry for price differences in cost object hierarchies 68005—Factory output for Production
LKW: Accruals and deference. acct (material ledger)
PRD: Price Differences, Loss/Gain Inventory Differences (Two A/cs to be opened & assigned) 68004 – Raw Material Consumption – Others A/c is assigned
PRK: Price Differences in cost object hierarchies Loss/Gain Inventory Differences (Two A/cs to be opened & assigned)
RKA: Inv. reductions from logistic invoice verification
UMB: Gain/loss from revaluation Checkup- 68004 is found attached (Raw Material Consumption – Others A/c )
UPF: Unplanned delivery costs
VST: Input Tax
WGI: Goods issue inflation revaluation
WGR: Goods receipt inflation revaluation
WRX: GR/IR clearing account 40051 – GR/IR Clearing A/c
WRY: GR/IR clearing acct (mat. ledger) (old)
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Account Assignment category is a very relevant field available and utilized in the purchasing documents. It has various control functions and assists in managing the objects (e.g. sales order, cost center, project) that are charged within the case of a purchase order for material that is meant for direct usage or consumption.
You define which account assignment object is to be charged through the account assignment category such as (sales order, cost center, etc.,) Which accounts are to be charged. At the same time, the incoming invoice or else goods receipt is posted, and which account assignment data you have to give. The account assignment category is utilized at the time of the creation of a purchase order. For regular PO, no account assignment category is used.
The account assignment category defines:
The quality of the account assignment (sales order, cost center, and so on)
Which accounts are to be charged while the incoming invoice or goods receipt is posted.
Which account assignment data you have to provide.
Required account assignment data
Main asset number and sub-number
Order ( F)
Order and G/L account number
Production order number
Cost center and G/L account number
Sales order (C)
Sales order and G/L account number
Individual customer requirement(E)
Sales order and G/L account number
Project and G/L account number
A valuation modifier is used to let the system find the predefined posting rules discover how the accounts of the financial accounting system are to be posted and to update the stock fields within the material master data. Whereas by using the account assignment, we can specify which object is to be charged through the account assignment.
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