Posted by: ahmedashfaque | April 15, 2014

Integration of SAP MM with SAP FI-CO – offsetting accounting

All modules in SAP system need to integrate with Finance & Accounting module of SAP (SAP FI, CO). It is because, in the end of the day, accounting of expenses and revenues need to be done for all activities in manufacturing, purchasing, sales, services etc. Let us see how integration of SAP MM with SAP FI,CO works.

When a goods receipt (GR) is done for a purchase of goods which are supposed to go any storage location, SAP generates 2 documents. One document is the material document which specifies how much quantity of which material on what time has gone to which storage location. The other document is the accounting document which specifies which account entries for the purchase need to be done in which accounting book. At this point of time, the vendor is not paid for the goods purchased as invoice verification is not done yet. So the account entries at this point of time can not be made in the general ledger account number of the vendor. So where this accounting entry is made?

In SAP there is a system of keeping account entries in some placeholder or offsetting accounts. For entries after GR, an offsetting account is used which is known as GR/IR account. This is not a general ledger account but only a placeholder account. After invoice verification, invoice receipt (IR) is generated after matching PO, GR and invoice verification values for material quantity and price. At this time, another document is generated which is a true financial document. Here entries are made in the general ledger account number of the vendor. At this same time, entries in the GR/IR account are debited and the same is credited in the vendor account number.

Similar offsetting accounts exist for Goods Issue. goods transfer and other inventory management transactions.


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