Flow of Purchase ( Inventory Procurement Process ) in SAP ERP

PURCHASE REQUISITION  ( ME51N )

After determining the requirement of stock the concerned department will raise a purchase requisition to the Purchasing department through SAP ERP.

PURCHASE REQUISITION (Click on picture to enlarge)

PURCHASE ORDER ( ME21N )

The Purchasing department will raise a Purchase Order in SAP ERP once the supplier is determined.

PURCHASE ORDER (Click on the picture to enlarge)

ON RECEIPT OF RAW MATERIAL ( MIGO )

SAP Menu -> Logistics -> MM ->Inventory Management -> Goods Movement - > MIGO

MIGO  (Click on the picture to enlarge)

The truck personal will handover the documents related to the goods to the gatekeeper and the gatekeper will enter all the details into SAP through MIGO transaction . After taking the printout the gatekeeper will attach a copy along with the documents. After stamping the documents the gatekeeper will handover the documents to the truck personal. Before unloading the goods the quality control personal will check the goods to confirm that the goods are of the specified quality.
                                                  
MIGO transaction will create the following two documents in the system.

One material document for goods received
&
the second document  is in Financial Accounting, with the following journal entry 

Material A/c Dr
             To GR/IR clearing A/c

( As different modules in SAP are integrated , the entry made by stores department for goods receipt in MM module (MIGO) will create (2 entries) the above entry in FI module automatically ).




ON RECEIPT OF INVOICE FROM VENDORS ( MIRO )

SAP Menu -> Logistics -> MM -> Logistic Invoice Verification -> Document Entry - > MIRO

MIRO (Click on the picture to enlarge)

On receipt of goods from vendors the 

      G/R IR A/c Dr
             To Vendor A/c

( As different modules in SAP are integrated , the entry made by stores department for invoice receipt in MM module will create (2 entries) the above entry in FI module automatically ).


PAYMENT TO VENDORS ( Payment F-53 , Automatic Payment F-110 , Down Payment F-48 )

In SAP usually payment is made by running ' Automatic Payment Programme ' . It creates the following entry.

    Vendor A/c Dr

              To Bank Sub A/c

FINALLY THE ENTRIES IN BANK SUB A/C WILL BE TRANSFERRED TO MAIN BANK A/C

    Bank Sub A/c Dr
               To Main Bank A/c

DOCUMENT SPLITTING in new GL in SAP ERP

One of the new features in new GL is 'Document Splitting'. Document Splitting enables you to create financial statements based on Profit Centers, Business Areas or Segments.When the document splitting is activated SAP splits line items according to splitting rules.



For Example : If a company is having two segments named A and B and Document Splitting is activated, then the common expense will be bifurcated among segment A nd B.

In Document Splitting the line item can be split on in the 'GL View'  and not in the 'Entry View'.

ENTRY VIEW
	Item	Amt	Profit Center
31	ABC Co	2500
40	Audit Fees	1500	X
40	Consulting Fees	500	Y
40	Tax	500
GL VIEW
	Item	Amt	Profit Center
31	Payable	1875	X
40	Audit Fees	1500
40	Tax	375
31	Payable	625	Y
40	Consuting Fees	500
40	Tax	125

In the above example we can see that the Tax is bifurcated among segments X and Y in the proportion of the related expenses ( Audit Fees -1500 and Consulting Fees 500 ).

Document splitting can be activated for each client and can be activated or deactivated for each company code.All company codes for a client can use only one document splitting method.The default procedure for document splitting is 0000000012 (Modifiable).  But the important thing to be noted is that once document splitting is done it is not possible to reverse it at a later period of time.

GR/IR A/c in SAP ERP

GR/IR stands for Goods Receipt/Invoice Receipt

GR/IR a/c is a temporary a/c used to post the entries when goods are received before the invoice is received.
                             Another instance is, if the quantity of goods received is less than the the invoice value or more than the invoice value then the difference shall be entered in GR/IR a/c.

The GR/IR a/c is usually cleared at the end of the fiscal year or at the end of the period for such order for which no further invoices or goods receipts are expected. The reversal entry for the GR/IR a/c is the same as the posting you made while entering an invoice for a purchase order.

Entries in SAP ERP during procurement of Raw Materials / Goods

Entries in SAP ERP during procurement of Raw Materials / Goods ( Without considering Tax )


1) ON RECEIPT OF RAW MATERIAL
   
     Material A/c Dr
               To GR/IR clearing A/c

( As different modules in SAP are integrated , the entry made by purchase department for goods receipt in MM module (MIGO) will create (2 entries) the above entry in FI module automatically ).




2) ON RECEIPT OF INVOICE FROM VENDORS

     GR/IR A/c  Dr
                 To Vendor


( As different modules in SAP are integrated , the entry made by purchase department for invoice receipt in MM module will create (2 entries) the above entry in FI module automatically ).



3) PAYMENT TO VENDORS

In SAP usually payment is made by running ' Automatic Payment Programme ' . It creates the following entry.

     Vendor A/c Dr
               To Bank Sub A/c



4) Finally the entries in Bank sub a/c will be transferred to 'Main Bank A/c'
   
     Bank Sub A/c Dr
                 To Main Bank A/c
               

Chart of Accounts in SAP ERP

CHART OF ACCOUNTS is a list of G/L accounts. It defines the structure of G/L accounts . You have to specify the length of the G/L  a/c in the Chart of Accounts (Maximum 10 digits).
                                             Chart of account is defined using a 4 character ID. A company code must be assigned to a Chart of Account.More than one company codes can be assigned to a Chart of Account .

There are three type of Chart of Accounts

(1)  Operative Chart of Accounts (Must)
(2)  Group Chart of Accounts
(3)  Country Chart of Accounts 

Company code in SAP ERP

COMPANY CODE is the most important unit in SAP. It is the minimum structure necessary in SAP. It represents an independent balancing/legal accounting entity.
Financial statements required by law is created at the company code level.A company code is represented by a four digit alpha numeric key.
You can either copy an existing company code or create a new one.

The following details must be entered in the company code details
1) Country
2) Address
3) Currency
4) Language key

Under a client there can be one or more company codes.

Client in SAP ERP

A Client is the highest level in SAP hierarchy. Each client is a independent unit with separate master records. Data that is valid for all organizational units are entered at the client level.

Under a client there can be one or more company codes.
An example of client is a 'corporate group' .