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Abhinav Malik (/users/143542/abhinavmalik.html)
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Accounting entry - WIP, Variance Calculation & Settlement of Production Orders
Mar 03, 2014 at 11:48 AM | 1.7k Views
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Hi All,
Please explain the process of WIP calculation, variance and settlement of production orders. At each stage will there be an accounting entry generated?
1. WIP calculation: All production orders for which the status is REL at the month end will be included in WIP calculation. How the amount of WIP is derived and what will be the
accounting entry.
2. Variance calculation: Production order needs to have the status TECHO in order to do the variance settlement. Will there be an accounting action and how the amount will be
calculated?
3. Settlement of Production Orders: Dr. WIP A/c (Balance Sheet a/c)
Cr. Volume Variance WIP a/c (P&L Account)
Is this the correct accounting entry? If yes, please advice how the WIP a/c is showing balance on settlement of production order, how it will get nullified? If no, please advise on
the correct process?
Regards 😊
FIN Controlling (/tags/165905235116577077914579113243106)
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3 Answers
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Best Answer
Former Member
Mar 03, 2014 at 12:32 PM
Dear Andy,
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2 Answers to your questions as follows
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1) WIP amount is the di erence between the actual debit and actual credit in the order provided the status of the order is NOT TECO OR DLV.
Also ,only WIP Calculation will not create an entry in FI. System will just calculate the amount of WIP for the order.
2) When the status of the order is TECO or DLV, system cancels the WIP created previously,if any, on the order and calculates the variance.
Again the variance is the di erence between Actual debit and actual credit in the order. NO FI entry is created at the time of variance
calculation. System only calculates the variance on the order
3) In settlement of the order, entry regarding reversal / creation of WIP and variance is passed in FI.
For Variance entry , both debit and credit will be posted to P & L hence there is NO impact over the pro tability.
/
In case of WIP, the entry you have mentioned is correct as far as Balance sheet and P & l accounts are concerned. The description of P & L
account should preferably be " Change in WIP" instead of Volume variance WIP.
Once the status of order is changed to DLV or TECO, system reverse the WIP entry for the order which had a status other than DLV or TECO
in previous period,and that way it is nulli ed.
First , system assumes to carry out WIP calculation , then variance calculation and then Settlement of production order.
regards,
Makrand
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Rajneesh Saxena (/users/9383/rajneeshsaxena.html)
(/users/9383/rajneeshsaxena.html)
Mar 03, 2014 at 12:34 PM
Dear Andy
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2 In product cost by order scenario the WIP or Variance calculation is dependent on order status. If the Order has a status of REL or PDLV, the
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system will calculate WIP and if the order status is DLV or TECO the system will calculate variance on this order. At the time of calculation of WIP
or Variance no accounting entry i generated but when you settle the order at that time FI documents are passed in the books.
Ans1- In product cost by order WIP or variance is calculated based on the actual cost debited to the order and value of GR made to the order.
System does calculation by the formula GR value-(GI value+Activity value+ Overheads)
Ans2- As I said at the time of calculation no FI entries are passed but at the time of settlement FI entries are generated. The method of calculation
is the same as described in Ans1.
Ans3- Entry at WIP settlement WIP (P&L) a/c Dr and WIP O setting(B/S a/c) Cr.
Entry at variance settlement : Variance a/c dr/cr and COGM cr/dr.
and if there is already a WIP posted for this order then at settlement WIP entry is reversed provided we have calculated WIP again the the month
of settlement of variance
Note for Anand: Dear Anand we need to calculate WIP again in the period when the order status is changed to DLV or TECO otherwise system will
not pass reversal entry of WIP. Kindly test it in your IDES and let me know if you nd something on the contrary.
Regards
Rajneesh Saxena
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Rajneesh Saxena (/users/9383/rajneeshsaxena.html) Abhinav Malik
Mar 04, 2014 at 10:13 AM (/comments/10724340/view.html)
Dear Andy
To add to my reply I have uploaded a document for such report, which I prepared using report write. You can see the below mentioned thread:
Cost Component wise detail of Production Orders- Report Designing through Report Painter/Writer (Modi ed Document) (https://archive.sap.com/documents/docs/DOC-
48968)
Regards
Rajneesh Saxena
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Former Member
Mar 03, 2014 at 12:10 PM
Hi,
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0 The WIP entry will get reversed when you calculate variance and do settlement again. So that the WIP will be nulli ed.
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When you change the order status to teco or dlv, we can calculate the Variance and same can be settled. So this time system will generate
variance entry and it will reverse WIP entry.
Regards
Anand.
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Former Member
Mar 03, 2014 at 12:16 PM (/comments/10720982/view.html)
So at 1st settlement A/c entry is Dr WIP Inventory A/c and Cr Change in WIP A/c.
After changing the status to TECO or DLV and when we calculate variance and do settelment system will pass 2 entries.
1. Dr COGM A/c and Cr Production Variance A/c
2. Dr Change in WIP A/c and Cr WIP inventory A/c.
In this way WIP will be nulli ed.
Regards
Anand
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