Facts of the Topic:
- The export sales from any manufacturing locations or depot. Gets posted in SAP system at the time of dispatch of the material from the source locations: Following accounting entries gets generated.
- For: Delivery: COGS A/c Dr. To FG Inventory A/c Cr.
- For: Billing: Customer A/c Dr. To Sales Revenue A/c. Cr
- Hence at time of dispatch of goods from factory the revenue gets recognized in the books of accounts, however as per AS 11 i.e. Forex Valuation the Export Revenue can be recognized only after the receipt of Bill of Lading from the Port. Till that time the stock at port also should be recognized in our books of accounts and we cannot take the revenue entry as well.
- In this case in most of the companies running in SAP used to follow the manual accounting entries to adjust and accommodate the AS 11 principle for valuation and Revenue recognition. Following manual entries normally passed by business users;
- For Stock display in Financial Books: FG Inv. A/c Dr. To Stock Change A/c. Cr.
- For Revenue reversal: Sales Revenue A/c. Dr. To Customer A/c Cr.
- This process is cumbersome and painful as we need to follow up with logistics team for bill of lading information to reflect the correct stock valuation and profitability reports.
Solution in SAP
- At the time of PGI for the export sales of material the Accounting entry should be Goods in Transit A/c Dr. To Inventory A/c (This we can achieve through an user exit for changing the account at the time of PGI or by creating a new transaction key in OBYC for export sales)
- The billing from factory will be only created in SD module and not release for accounting, so that the excise invoice and other related documents can be created with respect to the SD invoice no.
- Customer A/c Dr.
- To Revenue A/c Cr.
- COGS A/c Dr.
- To GIT A/c
- With this the Good in Transit amount is also shown in books without any manual intervention and revenue recognition with COGS also correctly done (GIT is B/S account)
- It will solve both the requirements of business i.e. the Stock valuation and Profitability for export sales process.