Cost of Goods & Revenue Recognition

Dear All,
I have a typical requirement related with the cost of goods sold (COGS) G/L account & the revenue recognition.
Under SAP best practice, the COGS account is updated together with the Inventory account when post goods issue (PGI) is done.
there are 2 scenarios here -
1. Normal Sales - delivery related invoicing. Here the invoice is created immediately after the delivery. So here the revenue & cost recognition matches.
2. Project sales - PS not being used. Just created milestones using milestone billing. Here the invoice is order related with billing plan. So the milestones are
a. 50% after order confirmation.
b. 40% after delivery.
c. 10% after installation & commissioning.
Here the revenue will be generated at three stages & the COGS will be updated after delivery (PGI).
Is there any way we can update the COGS at the time of invoice in standard SAP.....?
With best regards,
Niyaz.

Hi friend,
Pls use T-code OMJJ and OBYC to setting as stop update acct in PGI! I only know the location to impact about it! With update acct in Invoice, I need to verify again for! I will update when I cover it. Hope this help
Best regards,

Similar Messages

LOADING ADDITIONAL COSTS (change matches revenue cost of goods in warehouse

Subject: LOADING ADDITIONAL COSTS (change matches revenue cost of goods in warehouse and not accounting for the year 2008)
Problem:
we must add the cost of goods of the raw material (for which was made a check invoice) of the costs, which are arising and charged by different suppliers (transport, freight, insurance, etc. ..). These are already included in FI with fb60.
The result should be:
- From the consignment of goods entering, add (only in Warehouse (STOCK), NOT IN ACCOUNTING ') cost accessory
- Do not change the quantity
- Having the total cost of stock
- Exploiting the average cost to FIFO must consider the total cost after additional adjustment
Example:                                                                                data
ME21N: purchaise order No. 321 = article 1000kg a price of u20AC / kg 2.30               01/07/2008
MIGO: goods receipt PO confirms price quantity x (u20AC 23,000) batch 298                      07/07/2008
MIRO(enter incoming invoice): Check invoice OK per (u20AC 23,000) batch 298           07/08/2008
Invoices received for costs Accessories:                                                                08/08/2008
FB60: transportation bill on all'purchaise order above cost u20AC / 0.11 kg
0.11 * 1000kg = 110 recorded in cost and accounting of stock.
In accounting, the cost has been reported, in warehouse I need to reverse (add) u20AC / kg to 0.11 initial cost of u20AC / 2.30 kg without adjustments in general accounting, but only in warehouse value and not in the quantity.
So in the end I should have:
batch n° 298 - kg 1000 at a cost of u20AC 2.41 (2.30 +0.11) for the year 2008. How should I do?
thanks

Thomas,
I presume that your client has activated 'Revenue Recognition' component in SAP.
If your client has already activated the RR component, they may be aware that the activation is unreversible.
Recognition of costs in a deferred revenue scenario requires some customization effort but definitely do-able. It is not falling within standard SAP.
I worked on scope of one such project but it did not happen unfortunately.
Can you please post your regular updates in this forum?
All the best.
Thanks
PS: I am not an employee of SAP AG and by answering questions, I am not getting any monetary benefits anywhere. I am answering questions here in my spare time for recognition and the points awarded, which gives me a sense of self-satisfaction. Awarding points is also a way of saying thanks and it will encourage me to answer more questions and share my knowledge and experience

Account Based COPA Cost of goods sold and Revenue Split

Dear Experts,
We are using account based copa in a automobile company.
As per the requirement when a car is sold, depending on the customer request the car goes for a conversion. like adding Radio, Seat cover, etc
As per our setup we have different profit centers for vehicle and Parts(radio, seat cover etc) and in this case radio, seat cover, etc are the classes of the material vehicle(not separate material).
After the vehicle conversion there is a sales order raised which goes to profit center derived from vehicle material master.
As per the reporting requirement I need to spit the Cost of good sold and revenue by vehicle profit center and parts profit center for COPA reporting purpose
Is there any way to do this in standard SAP? Or I need an exit?
Appreciate your response and please let me know in case of any clarification.
Many thanks
Roy
Edited by: roy001 on Aug 4, 2011 4:52 PM

For those who may need an answer to this, our solution was the following:
1)       Created new types for SO, SO Item, Sched. Line, Delivery, Delivery Item, Billing type
2)       Created new Pricing procedure
3)       Created new movement type Y61/Y62 modeled after 601/602
4)       Mapped Y61/Y62 to account modifier ZAX.
5)       Mapped GBB/ZAX to the new account.
Benefits, they now have better view of the orders going inter-company. It is flexible enough to adjusting prices for intercompany separate from standard orders, even though for now it is a straight copy of cost. They are able to remove the sales/use tax, from the calculations. They are able to plan with these orders separated out. Plus, this will standardize their process for inter-company.
Hope this helps someone.
Cheers!
Rick

Compare with my cost of goods sold account to my sales revenue account

Hi,
i want to compare with my cost of goods sold account to my sales revenue account.
After PGI my COGS a/c will be debited INVENTORY a/c will be credited so after sales my SALES a/c credit & customer a/c debit . I want to see what is the difference value of COGS a/c with respective billing Sales A/C
No doudt we can see in Profit of margin in billing doc. It is quite impossible to see all document in respective wise. Please give a solution for which i can know what is profit of margin with comparing values in both of Account.
Thank's
Abhay

Hi,
This is possible through CO-PA report. You can get the result per sales order.
Also the same can be achieved in FI as follows:
Outbound delivery document thr" VL01N is captured in "Reference field" of FI doc (BKPF-XBLNR) generated through delivery.
If the settings are done by SD person to capture the outbound delivery no. in "Reference field" of FI doc generated through Billing document (VF01), then there will be a common field to compare the documents in both accounts.
In transaction FAGLL03, select the account COGS & Sales revenue account. Once the report displays, sort or take sub total on this common field "Reference".
This will give you difference between COGS & Sales revenue per document.
Hope this resolves your query.
Regards,
Ashutosh

Cost/VPRS condition in Revenue Recognition to COPA

Hi All,
Appreciate any inputs and suggestions for the issue which i am facing.
We are using Revenue Recognition with type Service based (B). Whereby, Revenue Recogntion is carried out based on Delivery Order/PGI.
I am facing issue with Cost/VPRS value that is being transferred to CO-PA. We are using Moving Average Price for inventory.
1. Upon Sales Order creation, VPRS condition type picks up the material price of that time. e.g , was $100
2.Delivery and PGI is performed, and material price /COGS valid upon delivery/PGI time was $90
3. Revenue Recognition is carried , Accounting document is generated to post the revenue accordingly. CO-PA document is also generated to post to CO-PA, where by COGS /VPRS is updated.
4. However,in REvenue Recognition lines, SAP records 2 lines for VPRS.
VPRS with $90 which picked up from PGI value --> correct, and another line which is $10. So SAP is recognizing the COGS/VPRS from Sales Order value. This is causing the CO-PA and GL account is not tally. BEcause, GL is correct , based on the actual PGI value. While, CO-PA is taking COGS/VPRS upon sales order creation.
Please advise how to fix this issue, we only want RR to pick up the COGS/VPRS from PGI only.
Thanks a lot
yd

Any leads? Any help would be appreciated on this.

LOADING ADDITIONAL COSTS (change matches revenue cost of goods in Stock and

Problem:
we must add the cost of goods of the raw material (for which was made a check invoice) of the costs, which are arising and charged by different suppliers (transport, freight, insurance, etc. ..). These are already included in FI with fb60.
The result should be:
- From the consignment of goods entering, add (only in Warehouse (STOCK), NOT IN ACCOUNTING ') cost accessory
- Do not change the quantity
- Having the total cost of stock
- Exploiting the average cost to FIFO must consider the total cost after additional adjustment
Example:                                                                                data
ME21N: purchaise order No. 321 = article 1000kg a price of u20AC / kg 2.30          01/07/2008
MIGO: goods receipt PO confirms price quantity x (u20AC 23,000) batch 298          07/07/2008
MIRO(enter incoming invoice): Check invoice OK per (u20AC 23,000) batch 298       07/08/2008
Invoices received for costs Accessories:                                                                08/08/2008
FB60: transportation bill on all'purchaise order above cost u20AC / 0.11 kg
0.11 * 1000kg = 110 recorded in cost and accounting of stock.
In accounting, the cost has been reported, in warehouse I need to reverse (add) u20AC / kg to 0.11 initial cost of u20AC / 2.30 kg without adjustments in general accounting, but only in warehouse value and not in the quantity.
So in the end I should have:
batch n° 298 - kg 1000 at a cost of u20AC 2.41 (2.30 +0.11) for the year 2008. How should I do?
thanks

Hi Rahul,
In My GRPO in all there are e items in 2, 3 and 4 qty respectively.
During GRPO:
Finished Product=149610
During Landed Cost:
Finished Product= 35764.22
So (149610+35764.22)/GRPO Qty (9) = Per Unit Cost during GRPO (20597.135)
Now when you sale against above GRPO then
you COGS Will be
In my invoice i sold all the above items in qty 1 each so
COGS= Per Unit Cost during GRPO ( 20597.135) * Sales Qty(3) Dr,
Finished Product= 32634.71 (CR) does not come to this
So this Finished Product 32634.71 (CR) is nothing but Per Unit Cost during GRPO*Sales Qty
Am i doing something wrong ?
Thanks
Malhaar

Book revenue on this month but the cost of goods sold need to get from last month

Hi experts,
I have a question about cost and revenue. We have a standing service repair order and a contract to customer. Because the revenue is calculated by flight cycle so maybe when we get the flight cycle information for this month should be the midle of next month. Due to the monthly end close schedule I need to book the revenue on this month but the cost of the revenue we need the get the cost occur last month. For example, current month is May, 2014 and I book the revenue and posting date is May, 31, 2014. But the cost I just want the amount occurred in customer service order(IW31) on Apr, 2014. And the cost occured in May, 2014 should become WIP. Is it possible? Please advise.
Thanks and Best Regards,

Hi experts,
I have a question about cost and revenue. We have a standing service repair order and a contract to customer. Because the revenue is calculated by flight cycle so maybe when we get the flight cycle information for this month should be the midle of next month. Due to the monthly end close schedule I need to book the revenue on this month but the cost of the revenue we need the get the cost occur last month. For example, current month is May, 2014 and I book the revenue and posting date is May, 31, 2014. But the cost I just want the amount occurred in customer service order(IW31) on Apr, 2014. And the cost occured in May, 2014 should become WIP. Is it possible? Please advise.
Thanks and Best Regards,

SD Revenue Recognition-Account settings for deferring COGS

Hi Experts
In the current process, COGS, cost of goods sold is getting posted into the COGS G/L account, while creation of billing document.
In VF44 transaction, we find option for VPRS cost being captured against every line item & are available for posting along with revenue line.
In that case, if we have to defer the COGS while creating the billing document & would recogonize it while running VF44 alone with the revenue lines, could you suggest me the account setting to be done for the same?
Anticipating earliest responses
Thanks
Banu

hi
820417 - Implementation Guide for Revenue Recognition
779365 - Best Practice document for revenue recognition
REVENUE RECOGNITION
In revenue recog. you can create your billing documents and they will be passed to accountings.But in this case your customer account would be debited and deferred accounts would be credited.
The purpose of revenue recognition is that you can post all the revenues from a deferred account to sales revenue account for a particular period together for all the docs. through transaction VF44.
if you can se your sales docs no. in VF44,then your revenue recognition is successful.Press on collective processing inside VF44 for posting the revenues from deffered acc to sales revenue account.
Configuration part includes the setting of revenue recog. in item category by following the path sd-basic functionsaccount assnmnt/costingrevenue recog.
Then you have to assign G/L accounts.In the first column of assigning g/l accounts ,enter your sales revenue account and in the second column enter deferred revenue accounts.Deferred revenue account is a spcl g/l account.
Don't forget to enter reconcilliation account in your customer master as well.
It may happen that in revenue recog item categories fields may greyed out but you have to get authorization for your id from a basis guy.
:The point at which revenue (income) is credited to a revenue account in General Ledger. There are three possible types
Time-based : Revenue is recognized in equal proportions between specific start and end dates based on the number of posting periods defined at the company level. Revenue recognition for time-based documents can occur before, during, or after the invoice process.
Performance-based : Revenue is recognized based on the occurrence of certain events such as goods issue or the performance of a service. Revenue recognition for performance-based documents can occur before, during, or after the invoice process.
Standard : Revenue is recognized at time of invoice:
The specified item was not found.
Re: Revenue Recognition
CONTRACTS
Lets take standard CQ contract type:
First maintain customer - material info record in VD51 T-code
Secondly maintain pricing for customer / material or only material combination in VK31 / VK11 T-code
Then use VA41 T-code to create a contract
VA42 to change contract
VA43 to display / view contract
In VA41, enter the document type CQ, followed by the sales area details,
Enter Sold to party.
Enter PO number
Enter PO Date
Enter Validitiy from Date
Enter Validity to Date
Enter Material
Enter Quantity say 999,999,999 or any other higher quantity as it is referred again and agaain
Hit Enter.
Save.
regards
balajia

Revenue recognition - deferred revenue

Hi Experts,
We want to recognize some of our revenues other than the billing date.
Some of our sales are by sea and using CIF incoterms, so if the goods was sent during the last days of the accounting period, we can not recognize it in the FI reports till the goods arrived it's destination.
So I want to do the PGI and the billing today and credit the deferred revenue account instead of the revenue account.
I saw the SPRO regards it.
1. What are the specific setting I have to use in "spro, sales and distribution, basic function, account assignment/costing, revenue recognition, set revenue recognition for item category" for this case? (time related/service related/billing related...etc)
2. Can I use regular sales order, delivery, PGI, billing document or do I have to use contract or something else?
3. Can the trigger be the incoterms/destination country instead of the item category?
Thanks
Ifer

Symptom
After you implement Note 1239165, the source code prerequisites for connecting the accruals account determination to the incompletion log in the standard system are met. This note describes the Customizing settings that you have to make to use the functions described in Note 1239165.
Other terms
Standard revenue realization, Customizing, incompletion, KONV, SAKN1, SAKN2, ZZ_RR_TVUVF, RV_INVOICE_ACCOUNT_DETERM, RR_ACCOUNT_MISS_DEF, RR_ACCOUNT_MISS_UNB, TVUVF, SAKUR, TVRRUR
Reason and Prerequisites
The Customizing settings are required to use an error group in revenue realization to specify the incompletion and to prevent the system creating subsequent documents.
Solution
Make the following settings:
1. Create the following procedures in Customizing:
Sales and Distribution -> Basic Functions -> Log of Incomplete Items -> Define Incompleteness Procedures -> Incompletion Group B (Sales - Item) -> Procedures ->
-> RR (text RevRec item). Save your entry.
2. For the accruals account, create the following status group:
Sales and Distribution -> Basic Functions -> Log of Incomplete Items -> Define Status Groups
-> Status grp General Delivery Billing doc. Price Goods movement
   RR        X        X         X             X
Additional information: The revenue accounts are assigned to the status group 00 through the error group "MP". This status group permits subsequent documents to be created.
3. It is not necessary to assign the incompletion procedure RR to the item category that is relevant for revenue recognition. In the case of item categories that are relevant for account determination, by default, the system uses the error group "MP" for the revenue accounts and the error group "RR" for the accruals accounts.
4. Create the report ZZ_RR_TVUVF to execute the entries required to check the fields and to assign the status groups. The report enters the required entries in the tables and in TVUVF. If these already exist, the system issues an error message.
The following check fields and status groups are entered:
Table     Field name Description   Screen Status Warning Rank
KONV SAKN2    accruals account          PKON RR
TVRRUR SAKUR    unbilled receivable account       RR
Attributes
Title: Insert/delete RR incompletion settings in TVUV and TVUVF
Type: 1 (Executable program)
Status: T (Test program)
Application: V (Sales and Distribution)
Package: (Customer-specific package)
Selection texts
P_DELKZ Delete revenue recognition records
P_INSKZ Create revenue recognition records
The source code is provided in the attached correction instructions.
Insert Block
*& Report ZZ_RR_TVUVF                                                 *
report zz_rr_tvuvf.
Tables *
tables: tvuvf.
Work areas *
data: begin of gvt_tvuvf occurs 0.
        include structure tvuvf.
data: end of gvt_tvuvf.
data: lvf_subrc1 like sy-subrc,
      lvf_subrc2 like sy-subrc.
data: gvs_tvuvf like tvuvf.
======================================================================
Definition of the selection screen                                   *
======================================================================
parameters p_inskz radiobutton group act.
parameters p_delkz radiobutton group act.
======================================================================
Initialization                                                       *
======================================================================
initialization.
clear   gvt_tvuvf.
refresh gvt_tvuvf.
======================================================================
Selection of data                                                    *
======================================================================
start-of-selection.
select single * from tvuvf into gvs_tvuvf
                            where fehgr = 'RR'.
                            and tbnam = 'KONV'
                            and fdnam = 'SAKN2'
                            and statg = 'RR'
                            and fcode = 'PKON'.
lvf_subrc1 = sy-subrc.
select single * from tvuvf into gvs_tvuvf
                            where fehgr = 'RR'.
                            and tbnam = 'TVRRUR'
                            and fdnam = 'SAKUR'
                            and statg = 'RR'
                            and fcode = '    '.
lvf_subrc2 = sy-subrc.
Populate fields
gvt_tvuvf-mandt = sy-mandt.
gvt_tvuvf-fehgr = 'RR'.
gvt_tvuvf-tbnam = 'KONV'.
gvt_tvuvf-fdnam = 'SAKN2'.
gvt_tvuvf-statg = 'RR'.
gvt_tvuvf-fcode = 'PKON'.
append gvt_tvuvf.
clear gvt_tvuvf.
gvt_tvuvf-mandt = sy-mandt.
gvt_tvuvf-fehgr = 'RR'.
gvt_tvuvf-tbnam = 'TVRRUR'.
gvt_tvuvf-fdnam = 'SAKUR'.
gvt_tvuvf-statg = 'RR'.
gvt_tvuvf-fcode = '    '.
append gvt_tvuvf.
clear gvt_tvuvf.
insert case
if not p_inskz is initial.
    if not lvf_subrc1 is initial and
       not lvf_subrc2 is initial.
    insert line
      insert tvuvf from table gvt_tvuvf.
      if sy-subrc is initial.
      line already there
        write: 'Line in table TVUVF inserted'.
      else.
      Error when insert
        write: 'Insert not possible'.
      endif.
    else.
    line already there
      write: 'At least one entry already in the table TVUVF'.
    endif.
else.
delete case
    if not p_delkz is initial.
      if lvf_subrc1 is initial
      and lvf_subrc2 is initial.
      delete line
        delete tvuvf from table gvt_tvuvf.
        if sy-subrc is initial.
        line already there
          write: 'Lines in table TVUVF deleted'.
        else.
        error when insert
          write: 'Delete not possible'.
        endif.
      else.
      line not there
        write: 'At least one entry not in the table TVUVF'.
      endif.
    endif.
endif.
See you Monday

Revenue Recognition Forecast Based on Quotations

I have a requirement to create a revenue recognition forecast based on the open quotations. These quotations linked to opportunities are open for some time before being signed and provide a good basis for forecasting revenue recognition in upcoming quarters. We have many revenue recognition methods here including time based, service based, collection based, POD, and POC. I don't see much useful standard functionality in SD revenue recognition nor in results analysis for creating these forecasts from quotes.
The SD revenue schedules in tables VBREV* are not generated on quotation document lines nor on items that are not billing relevant. RA can be run in planning mode, but it is a secondary process on the saved data in CO on a cost object that must be run individually for each future period.
Not only do we need the Revrec forecast, but we want to simulate changes to our quotes and projects and immediately see the affect on Revrec. I am about to create a custom development within sales document processing to create the Revrec forecasts in a rough manner in a Z table. Before I start to code, I am curious to know if anyone else has had such requirement and has better ideas of how to accomplish this.

Hello Karl,
The Best Practices document in the Note 1172799 provides details regarding all the SAP supported processes for RR functionality.
Regards,
Raghavendra

Revenue recognition through RA

Hi CO and RA Gurus
Does any one know how to do Revenue Recognition using Result Analysis Keys.
thanks
KT

Hi,
Result Analysis:
Overview:
The objective for calculating Work in Process (WIP) is to determine the value of manufacturing activity in process at the end of a fiscal period, during a fiscal period and to properly reflect this value on the financial statements. WIP calculation is a facet of Results Analysis (RA). RA is a specialized tool within the controlling module that computes and analyzes the value of WIP. The terms WIP calculation and RA are generally interchangeable.
Results analysis is used to:
a. Calculate the inventory value of finished and unfinished products in a non-valuated project stock or non-valuated sales stock environment or
b. You are using a valuated sales order stock or valuated project stock and want to capitalize goods that have been delivered but not yet invoiced.
The difference between SAP and other systems is in the treatment of material consumption for manufacturing. Component issues to production orders, run schedules, WBSs, etc is immediately treated as an expense to the P&L statement. The issue is not treated as a reclassification from raw or semi-finished inventory to WIP inventory. SAP considers WIP to be a snapshot of values that can be computed on demand and passed to the general ledger as required to re-class the values to the balance sheet. This process demands a specific, methodical approach to be used for period-end and mid-period processing. Rules used to calculate the value of WIP and settle WIP to the G/L are defined in multiple RA tables depending upon the requirements of the company. RA is designed to support a variety of calculation techniques and there may and are alternate settings depending on the demands of the company. To support the configuration, scenarios and unit testing need to be thorough. RA needs to be configured towards the middle of the of the implementation with subsequent testing. This will allow for configuration of the data needed to support WIP and RA (chart of accounts, production orders, projects, cost centers, cost elements, etc.)
Configuration Transactions:
OKG1 u2014 Create Results Analysis Key
OKG2 u2014 Results Analysis Version
OKG9 u2014 Results Analysis Version
OKGC u2013 OKGD u2014 Valuation Methods
IMG SPRO u2014 Define Line IDs
OKGB u2014 Define Assignment Mapping by incoming charges by cost element to line IDs
OKG5 u2014 Define Assignment Mapping by incoming charges by cost element to line IDs
OKG4 u2014 Define Update
OKG6 u2014 Define Number Ranges
If your done with RA configuration and posted actual cost,plan cost and plan revenue.
you can calculate revenue recognistion using KKA2 T.code for projects.
Hope this helps you.
Thanks,
Rau

Difference between Revenue Acct Determination , Revenue Recognition

Hi All,,
Can any one exmplain me clearly the difference between Revenue Account Determination, Revenue Recognition and Reconciliation Account determination
Regards
Rajesh

Hi Rajes
REVENUE ACCT. DETERMINATION:
Account Determination
Use
To be able to use revenue recognition, you should select several special general ledger accounts. Choose: Sales and Distribution -> Basic Functions -> Account assignment/Costing -> Revenue Recognition
Determining the Revenue Account
Revenue recognition uses revenue account determination. To set up revenue account determination, use transaction VKOA.
Determining Non-Billed Receivables Accounts
The account for non-billed receivables is a special general ledger account, used to determine revenue which has been implemented but not yet billed.
If you want to set up an account, join an account with non-billed receivables together with a customer reconciliation account which is a part of your chart of accounts. You can use the transaction OVUR for this.
The standard system has the balance sheet account 142100 for non-billed receivables in the USA and in Canada (Accruals and Deferred Income).
Determining the Deferred Revenue Account
The deferred revenue account is a special general ledger account, used to determine revenue which has been billed but not yet implemented.
The system determines the deferred revenue account for a document item using standard SD account determination. Use the transaction VKOA for this.
REVENUE RECOGNITION:
Revenue Recognition Method 1: Sales Basis
This is the method that probably makes the most sense to investors. Under the sales basis method, revenue is recognized at the time of sale (defined as the moment when the title of the goods or services is transferred to the buyer.) The sale can be for cash or credit (i.e., accounts receivable.) This means that revenue is not recognized even if cash is received before the transaction is complete. A magazine publisher, for example, that receives $120 a year for an annual subscription, will only recognize $10 of revenue every month. The reason is simple: if they went out of business, they would have to return a pro-rated portion of the annual subscription price to the customer since it had not yet delivered the merchandise for which it had been paid.
Revenue Recognition Method 2: Percentage of Completion
Companies that build bridges or aircraft take years to deliver the product to the customer. In this case, the company responsible for building the product wants to be able to show its shareholders that it is generating revenue and profits even though the project itself is not yet complete. As a result, it will use the percentage of completion method for revenue recognition if two conditions are met: 1.) there is a long-term legally enforceable contract and 2.) it is possible to estimate the percentage of the project complete, revenues and costs.
Under this method, there are two ways revenue recognition can occur:
Using milestones such as number of railway track complete
A construction company is paid $100,000 to build fifty miles of highway. For every mile the company completes, it is going to recognize $2,000 in revenue on its income statement ($100,000 / 50 miles = $2,000 per mile.)
Cost incurred to estimated total cost
Using this metric, the construction company would approach revenue recognition by comparing the cost incurred to-date by the estimated total cost. For example: The business expects the same $100,000 of highway to cost it $80,000 in parts, material, labor, etc. At the end of the first month, it has spent $5,000 working on the project. $5,000 is 6.25% of $80,000; therefore, it would multiply the total revenue ($100,000) by the percentage of the cost incurred (6.25%), or $6,250, and recognize this amount as revenue on its income statement.
One caveat: if you find yourself reading through the 10K of a company that is utilizing the percentage of completion revenue recognition method, you may want to watch out for premature booking of expenses such as the purchase of raw goods. Until the goods have actually been used in the production cycle (e.g., pouring the actual concrete on the job site, not purchasing the concrete at Home Depot), the cost should not be counted. A business that does not make this distinction is prone to overstate revenue, gross profit, and net income for the period as a result.
Reward if useful to u

Cost of Goods sold in cross company sales

Hi ,
We have a situation where we need to transfer goods from one company code and site ( Company A ) to another company code and site ( Company B )at the cost price of company A. We are creating a purchase order for this goods from Company B to Comapny A and in turn a sales order is issued for this from Company A.We pick up purchase price in PO from as the Per unit cost of comapny A.
The issue arises here about in the delivery from company A where the cost of goods sold in delivery is done based on the total stock value divided by the quantity sold as this is SAP method of calculation and this does not always match with the per unit cost. Currently we are passing this difference as discounts.
This is the best we could achieve where by we have been able to satisfy the business need of having no difference on the purchanse price of company B and sales price of company A.
My question is : Whether is there any more effecient method of achieving the desired result without having the difference which we are currently passing on as discounts ???
Would really appreciate any help.
Thanks and Regards,
Kartik Shah

Hi Raj/ Mahendro,
Thank you for sending me the reply. I will briefly explain you the our process. The purchase from external vendor is done in warehouse belonging to one company code. The purchase is done at Moving average price but normally for an article there are no price variations. Goods receipt in warehouse is done after adding freight and insurance onto the cost of article.This is the value at which we want to transfer to another site in anotehr company code.
Now the replneshiment requirement from the other site which belongs to different company code raises a PO on to the warehouse. This PO picks up the article price (KOMV-KBETR) as the MAP from the warehouse (MBEW-VERPR). However the field MBEW-SALK3 for the warehouse is not exactly the quantity multiplied by MAP.It is actually the VERPR field which has the value based on the field SALK3 divided by the stock quantity and rounded off to the two decimal places. There is slight variation here itself due to the rounding of the total stock value and then again rounding at the per unit price.( Both the above fields of MBEW)
What we are doing on the sales order is to pass the MBEW-VERPR as EDI1 and the sotck value for the quantity ordered ( ZDEI a new condition) by the site as MBEW-SALK3 divided by the total stock at that point and multiply by the quantity ordered. So due to rounding differences there is difference in the value of EDI1 and ZEDI . Again during the billing from warehouse this condition ZEDI picks up the stock value based on the quantity delivered.
Since there are minor differences due to the rounding of values between per unit price and the actual stock value this are being passed off as discount and the payables by the ordering site and receivables from the warehouse are the same. Cost of goods sold from warehouse is the actual stock value being sold which is the revenue for the warehouse.
Even if we use the standard SAP stock transport order with billing how could we ensure that we do not have even this minor differences.
Doing away with another document is not the requirement since we already have automated the process of sales order creation from the pruchase orders.
Do you think we can achieve our requirement using SAP standard process? Except for this rounding differences we are fine with the current process as well.
Do Look forward to your answer.
Warm Regards,
Kartik Shah

Cost of Goods Sold Accounts by Region

Hi Friends,
While doiing the GL settings base on Item Groups, there is an option to set the Revenue Account based on Domestic.EU.Foreign.
Bu why is there no Cost of Goods of Sold accounts based on that.
Is Cost of Goods Sold account use for calculating gross profit. If so it makes sense to have a single Cost of Goods Sold.
Can anyone correct me if ia m wrong and please explain to me why Cost of Goods Sold account is not divided in to Domestic, EU, Foreign.
Further what is the Expenses Account, in GL settings according to Item Groups, mean.
Thanks & Regards
Shiva

Hey Julie,
We also need to use a different GL account for inter-company and I am wondering where do you setup GL account by warehouse?
Can you please provide the menu path or transaction code?
Thanks,
Kundan

Cost of Goods Sold Calculations

I have a planning folder where the user first enters a company code, a currency and a profit center into the respective variables. In the subsequent template user enters material SKU along with planned Sales Quantity and planned Average Selling Price (ASP). I load standard prices for all material from R/3. I have two FOX formulae running in the background as soon as the user saves his/her entries. First one calculates product revenue, which is (ASP * Quantity). This one works perfectly fine. The second formula needs to calculate Cost of Goods Sold (COGS), which is (Standard Price * Quantity). This formula fails miserably. As far as my understanding goes, in order for a FOX formula to work all the characteristics that are not in the parameter group between the standard price record and the quantity record should match exactly. If there is an inherent mimatch between the records then you try to take care of the mismatch in the FOX formula by hard coding. The quantity records have SKU, company code, profit center, currency (!yeah, currency!), units of measure. Whereas the standard price records have SKU, distribution plant, currency. I understand that I can put # sign for company code and profit center in the FOX formula for selecting a standard price record, but unfortunately the currency of the standard price record may not be the same as that of currency of the quantity record since many materials are sourced from a distribution center outside the company code!! So the simple multiplication of Std price * quantity is not working!!!
I think of two options here.
1. As it doesn't make sense to populate currency field for a quantity record, I should move the currency variable into the data field for ASP records only. This way I can put # in currency field for quantity record selection. But the downside of this is that instead of posting quantity and ASP in one record into the cube, two seperate records get posted when user saves the data. As our users plan on 10000 different SKUs across the globe, this may not be a good idea unless the option two doesn't work.
2. There must be a way to make the FOX formula work even with the mismatch of currencies between quantity and standard price. I need your inputs in this regard.
If someone could also explain whether or not my understanding of FOX formula is correct, that would be great. As always, I would appreciate all the helpful inputs with points.

Yes FOX can be difficult to achieve things that are simpler than simple
The way you described, it will only search fo a standard price on the same currency.
Try to set the currency as changeable characteristic and then search prices for each possible currency.
standard price value = {standard price, currency1} + {standard price, currency2} etc..
The possible currencies could also be filled in a variable which is read at runtime.
Don't know an easier way!
Regards,
Beat

Cost of Goods & Revenue Recognition

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