Sales and Distribution Accounting Entries

INVOICE GENERATION Invoices will be generated at the Smelters  and stock points. The accounting entries for the sale of goods despatched will flow from the Sales invoice generated in SAP Sales and Distribution module. The following entries shall be passed      Customer Account      Dr     Revenue                                                 Cr     Excise Duty Payable                               Cr     Sales Tax Payable (local or central)         Cr 

Note: As mentioned above in the FI document, which is created in the background, the SD invoice number shall be captured. However as per the current accounting procedure the accounting entry passed is as follows :-      Customer Account      Dr      Revenue                                                 Cr      Excise Duty Billed                                  Cr      Sales Tax Payable (local or central)        Cr

     Excise duty paid a/c     Dr      Excise duty payable a/c                          Cr 

EXPORT SALES There have been very few export transactions in the past. SAP system will be designed to handle export business. Exports are mainly from the mines and will be handled at the mines, however the documentation part will be taken care at the Head Office. The accounting entry is:      Customer Account        Dr       Revenue (Exports)                                  Cr 

The realisation of export sales will be directly credited to the bank.  The accounting entries will be as follow:      Bank                            Dr      Customer                                               Cr      Exchange Fluctuation    Dr/ Cr

The accounting entries will be:       Rebates/Discounts        Dr       Customer                                               Cr                                             DEBIT MEMOS Debit Memos shall be issued in case of price difference, sale tax difference and interest on usance period and  overdue payments.

The accounting entries for two possible scenarios are as follows:       Price Undercharged:       Customer Account        Dr.       Revenue                                                 Cr.       Sales tax payable                                    Cr.       Sales tax undercharged       Customer Account         Dr.       Sales tax adjustment                                Cr.

Interest on delayed payments/usance period and other charges       Customer Account         Dr.       Interest Others                                        Cr.

In case of HZL  a complete retirement or a partial retirement of asset is done. The system uses the asset retirement date to determine the amount to be charged off for each depreciation area. The

existing accounting policy is to provide depreciation for the full quarter in which the asset is sold/discarded, recommended that the depreciation be provided from the date of acquisition on prorata basis .

Accounting entry for sale of Asset to customers:         Customer Account               Dr         Asset Sale                                              Cr         Accumulated Depreciation   Dr         Loss on Sale (if applicable)  Dr         Asset Sale account              Dr         Asset account                                         Cr          Profit on sale (if applicable)                    Cr

Note: In case of any Sales Tax /Excise duty applicable for this transaction, SAP will calculate the Sales Tax/Excise Duty based on the Tax Code selected  the entry is posted to the GL Account (Sales Tax Payable)

Accounting entry for sale without a customer:           Accumulated Depreciation    Dr           Loss on Sale (if applicable)   Dr           Asset Sale account               Dr           Asset account                                      Cr            Profit on sale (if applicable)                 Cr

Accounting entry for scrap            Accumulated Depreciation    Dr            Loss on Sale of Assets         Dr            Asset account                                      Cr

SALE OF SCRAP The sale of scrap (non-stock) shall be mapped as a direct manual FI entry. The customer will be created as a FI customer. No Logistics module will be involved in the process.

A FI Invoice will be prepared for the sale of scrap with the following entries:               Customer                           Dr               Sale of Scrap                                    Cr               Excise Duty Payable                         Cr

ADVANCES FROM CUSTOMERS Advances are received from the customers against delivery. These advances will be recorded in a special general ledger account. The accounting entry for the same will be:                 Bank Account                      Dr               Advance Customer Payments            Cr

These advances will be later on adjusted against the invoices raised on the customers. Advances can be adjusted against more than one invoice at the time of clearing of the invoices against advances.

              Adjustment of Advances               Customer Account                             Cr               Advance Customer Payments  Dr

A financial document would be created for each Bank Guarantee received and this document number will be referred to in the Sales Order which would then monitor the value and the validity of the of the Bank Guarantee instrument wise while doing the billing.The letter of credit /Bank guarantee given will be recorded as a noted item.

Accounting Entry for Goods receipt                 Stock/Inventory account         Dr 

                GR/IR account                                   Cr                 Freight clearing account                      Cr

Accounting Entry on invoice verification of supplier                 GR/IR                                    Dr                 Vendor account                                  Cr

Accounting Entry on invoice verification of freight vendor                 Freight clearing account          Dr                 Freight Vendor account                       Cr 

GOODS RECEIPT Based on the Purchase order and the Quantity actually received Goods Receipts (GR) will be done. Based on the GR done the following accounting entry will be passed in the Financial Accounts                   RM/PM Stock Account       Dr                   GR/IR Account                                 Cr                   Freight Clearing Account                   Cr

EXCISE INVOICE VERIFICATION On receipt of the excise invoice cum gate pass the following entry will be passed                    RG 23 A / RG 23 C Part 2 Account    Dr                     Cenvat Clearing Account                              Cr

Now, check with: J91:Export Sales under Bond Key-Configurations: 1. Maintain seperate distribution channel for exports.2. Define Sales Area for Exports Sales org/dist channel/ Division3. Define sales document type for exports4. Assingn sales document type to sales Area.5. Define pricing proceedure for exports6. Maintain Pricing proceedure determination7. Maintain proper G/l Accounts for condition types8. Maintain copy control from order to delivery and delivery to billing9. Decide the export type whether it is Export/export under bond/export under no bond/ deeemed export If it is export under bond you need to configure ARE 1 documents for the same.If it is deemed export ARE 3 document must be configured.

Export Sales Process :  In Export Sales no taxes are applicable as Excise & VAT are exempted in case of exports.  

Path: SAP Best Practices --> Baseline Packages --> Based on SAP ECC 5.00 --> Select Country: for eg, Localized for India --> Technical Information --> Building Blocks --> Select Country for eg, India --> J91:Export Sales under Bond Or Path: SAP Best Practices --> Baseline Packages --> Based on SAP R/3 4.70 --> Select Country: for eg, Localized for India --> TAXINN --> J91 - Export Sales under Bond (New)

1. ERP Operations 2. …

 

3.  Business Scenario

Deemed ExportSkip to end of metadata

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Deemed ExportWelcome to the SD-CIN-Deemed Export page.This process is specific to India Localisation Business Scenario.

OverviewThis scenario deals with Deemed Export or CT-1/CT-3 or SEZ sales that refer to sale of goods to customers within India, who are generally holders of an export license. The materials sold are required to be used in the production of goods meant for ultimate export. The customers can be an export-oriented unit (EOU) or located in one of the following areas:

An Export processing zoneAn Electronic hardware technology parkA Software technology park.

Sales ProcessFor this Deemed Export sale:

An inquiry can be the first step in the order cycle. The purpose of this activity is to create an inquiry to represent the customer’s inquiry in the system.

Then a quotation can be created to determine material, their quantities, prices and payment terms that are valid for a given sold-to customer during a specified time period. As prerequisites, it can be referred from an existing inquiry and terms of payment need to be in

place.

Then in system we need to capture the Customer’s License Details. This done for

Deemed Export License is captured in the system to represent customer’s licenses.For capturing Customer’s License details like material, quantity, value, expiry date etc.,Deliveries will take place against the license quantity / value.

As prerequisites, a copy of the license obtained by the customer from issued by relevant authorities.

Then a Sales Order is created to represent the customer’s requirement in the system. That will calculate the price and check for the availability of materials. As prerequisites, it can be referred from an existing quotation and should mention material that are mentioned in customer licence details.

Then with reference to the created sales order, a Pro Forma Invoice can be created in order to inform the customer about the value of the goods, so that he will make arrangements for the payment to be made, when goods arrive at his place.

With reference to the created sales order, the delivery document is created for shipping point mention in sales order to pick the goods and post goods issue based on availability of the ordered material.

With reference to post goods issue delivery material, a billing document is created to send a commercial invoice to the customer. It also updates the corresponding GL Accounts. Further its output can be taken.

With post goods issue completed for the delivery and respective billing document generated, the Excise Invoice created for the excise authorities. And subsequently print for accompanying materials that are being sent to the csurtomers.

ARE-3/ARE-1document is created with reference to generated outgoing Excise Invoice. This is assigned to a License captured for the customer. This document is a proof that, goods are treated as Deemed exports and Excise duty does not need to be paid for these goods, which are mentioned in the ARE-3/ARE-1.

After the responsible official confirms that all the details are correct, we can post the ARE-3/ARE-1 document. The changes are allowed to the ARE-3/ARE-1 document only if, it is in the process pending posting. Once posted, the ARE-3/ARE-1 cannot be changed but can only be cancelled.

Going further, we can print the ARE-3/ARE-1 documents for submitting to the customer and the excise authorities. After ARE-3/ARE-1 Document is created and posted and also when the goods arrive at the Customer’s premises, they will check them against the excise invoice and the ARE-3/ARE-1. If there are any discrepancies in the quantity of the goods, the customer will record the actual quantity received on the ARE-3/ARE-1.To record the customer’s confirmation of the quantity delivered, we update the ARE-3/ARE-1 document.Finally, when the countersigned ARE document arrives back at your premises from the customer, the ARE-3/ARE-1 is further updated with the date of receipt. This closes the ARE-3/ARE-1.

Figure: Flow Chart for the Scenario: Deemed Export from supplier point of view.

Also refer SDN wiki link on ARE1: CIN Creation - Updation - Post - Cancel for process flow with transaction code in ARE1.

System Configuration Considerations   1        Defining Sales Document Type for deemed export

   2        Creating Pro Forma Invoice for deemed export

   3        Creating Billing Type for deemed export.

   4        Assigning Billing Types to Delivery Types

   5        Maintaining Item Categories

   6        Copying Control for

                  a.    Sales Document to Sales Document (Inquiry – Quotation, Quotation – Deemed Export Sal Doc Type)

                  b.    Sales Document to Billing Document (Deemed Export Sal Doc Type – Pro Forma Invoice)

                  c.    Sales Order type to Delivery Type (Deemed Export Sal Doc Type – Delivery Doc)

                  d.    Delivery type to Billing Type (Delivery Doc – Billing Doc)

  7        Configuring Pricing

                    a.    Pricing procedure for pricing

                    b.    New customer pricing procedure (Cust.pric.proc. is maintained at customer master) need to be maintain for deemed export for differentiating from export pricing while pricing determination.

8        Account determination

9        Maintaining Number Range for Excise Bonding License for object J_1ILIC

10        Creating a new Series Group (maintain new series group

                    a.    Maintaining Number Range for Local Excise Invoice for object J_1IEXCLOC

                    b.    Making Settings for ARE-3/ARE-1 Procedure

                    c.    Maintaining Number Range for ARE-3/ARE-1 for object J_1IARE3/J_1IARE1

                    d.    Defining Processing Modes per Transaction, this will make ARE-3/ARE-1 options active in the ARE-3/ARE-1 screen

                    e.    Defining Reference Documents per Transaction

11        Maintaining an output types for ARE-3/ARE-1 Sales which will be based on plant.

12        The following Master Data will attract attention,

                     a.    Maintaining Customer Master, particularly, Cust.pric.proc. in pricing section of Sales Tab in Sales data.

                     b.    Customer CIN details (J1ID)

                     c.    Maintaining Material Master

                    d.    Material CIN details (J1ID)

                     e.    Maintaining relevant conditions records for:

                            i.      Pricing

                           ii.      Tax