Objective:
In order to have a successful ERP Implementation all the three perspectives (Operational, Managerial and Financial) has to be addressed. Operational perspective is addressed during the initial requirement gathering phases and while addressing the reporting needs – managerial perspective is covered. Most often financial requirements (SCM related) are never fully addressed as it always falls under the Financial Consultant’s radar.
I’m writing this article as guidance for consultants with non accounting background to have an overview of the underlying accounting entries.
Note: This is not an exhaustive list of entries within SCM
Content:
| Sr.No. | Transaction | Accounting Entries | At what value |
| 1 | Receipt of Material | Dr. Receiving Inventory A/c. | PO Rate * Qty |
| Dr. Receiving Inventory A/c. | Excise Duty Amt. | ||
| Dr. Receiving Inventory A/c. | Cess Amt. | ||
| Dr. Receiving Inventory A/c. | S&HE Cess Amt. | ||
| Dr. Vat Interim Receivable A/c. | Vat Amt. | ||
| Cr. AP Accrual A/c. | Rate*Qty+All Taxes | ||
| 2 | PO Inspection | No Entries | |
| 3 | On Claiming CENVAT | Dr. Cenvat Receivable A/c. | Exicise Duty |
| Dr. Cess On Cenvat Receivable A/c. | Cess | ||
| Dr. S&HE Cess On Cenvat Rece. A/c. | S&HE Cess | ||
| Cr. Receiving Inventory A/c. | Total Of Above | ||
| 4 | Material Delivery to Inventory | Dr. Material Inventory A/c. | PO Rate * Qty |
| Cr. Receiving Inventory A/c. | PO Rate * Qty | ||
| 5 | Claim Vat | Dr. Vat Receivable A/c. | Vat Amt. |
| Cr. Vat Interim Receivable A/c. | Vat Amt. | ||
| 6 | Receipt of Vendor's Invoice | Dr. AP Accrual A/c. | PO Price |
| Cr. AP Liability A/c. | Invoice Price | ||
| Cr./Dr.Invoice Price Varience A/c. | (PO Price - Inv. Price) | ||
| 7 | Return to Receiving Point from Inventory | Dr. Receiving Inventory A/c. | PO Price |
| Cr. Inventory Valuation A/c. | PO Price | ||
| Cr. Input Tax | |||
| 8 | Return to Vendor from Receiving Point | Dr. AP Accrual A/c. | PO Price |
| Cr. Receiving Inventory A/c. | PO Price | ||
| 9 | Payment Made to Vendor | Dr. AP Liability A/c. | Amount Paid |
| Cr. Bank A/c. | |||
| 10 | Misc. Receipt | Dr. Inventory Valuation A/c. | User Input Value |
| Cr. User Specified A/c. | |||
| 11 | Misc. Issue | Dr. User Specified A/c. | User Input Value |
| Cr. Inventory Valuation A/c. | |||
| 12 | Inventory Adjustment (Physical/Cycle Count) | Dr./Cr. Inventory Valuation A/c. | |
| Cr./Dr. Inventory Adjustment A/c. | |||
| 13 | Issue to Job from Inventory | Dr. WIP Inventory A/c. | |
| Cr. Inventory Valuation A/c. | |||
| 14 | Component Return to Inventory | Dr. Inventory Valuation A/c. | |
| Cr. WIP Inventory A/c. | |||
| 15 | Charge Labour Resource to Job | Dr. WIP Resource A/c. | |
| Cr. Resource Absorption A/c. | |||
| 16 | Charge Non Labour Resource to Job | Dr. WIP Resource A/c. | |
| Cr. Resource Absorption A/c. | |||
| 17 | Charge Overhead to Job | Dr. WIP Overhead A/c. | |
| Cr. Overhead Absorption A/c. | |||
| 18 | Charge OSP Charges to Job | Dr. WIP OSP Charges A/c. | |
| Cr. OSP Absorption A/c. | |||
| 15 | Completion of Job | Dr. Inventory Valuation A/c. | |
| Cr. WIP Inventory A/c. | |||
| Cr. WIP Resource A/c. | |||
| Cr. WIP Overhead A/c. | |||
| Cr. WIP OSP Charges A/c. | |||
| 16 | Completed Job Return to Shop Floor | Dr. WIP Inventory A/c. | |
| Dr. WIP Resource A/c. | |||
| Dr. Overhead Absorption A/c. | |||
| Dr. WIP OSP Charges A/c. | |||
| Cr. Inventory Valuation A/c. | |||
| 17 | Scrap of Job From Shop floor | Dr. Scrap A/c. | |
| Cr. WIP Inventory A/c. | |||
| Cr. WIP Resource A/c. | |||
| Cr. WIP Overhead A/c. | |||
| Cr. WIP OSP Charges A/c. | |||
| 18 | Sales Order Shipment | Dr. Cost Of Goods Sold A/c. | |
| Cr. Inventory Valuation A/c. | |||
| 19 | Return From Customer (RMA) | Dr. Inventory Valuation A/c. | |
| Cr. Cost Of Goods Sold A/c. | |||
| 20 | Invoice Raised on Customer | Dr. Receivables A/c | |
| Cr. Revenue A/c. | |||
| 21 | Payment Received From Customer | Dr. Bank A/c. | |
| Cr. Receivable A/c. | |||
Assumptions:
SLA is defined to default
Projects is not involved
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