Product costing error while defining posting rules

Question

Hi Friends,
When I'm trying to define posting rules for settling WIP using OKG8,
I get an error msg "GL account 7000100 cannot be created as a cost element" and the aforesaid account is WIP (P&L account).
The long text of the error msg is as follows:
G/L account 7000100 cannot be created as a cost element
Message no. KQ119
Diagnosis
When maintaining the posting rules for passing on results analysis data to Financial Accounting, you entered a G/L account that is defined as a primary cost element in cost and revenue element accounting. This is not allowed. You must enter a G/L account in the posting rules that is not defined as a cost element.
System Response
The entry invalid.
Procedure
You have the following options:
Enter a G/L account for which no cost element is specified in Cost and Revenue Element Accounting.
You can change the message type with user-defined error management (transaction OPR4_KKA). What should be observed when you enter a G/L account in a posting rule that is defined as a primary cost element in Cost and Revenue Element Accounting? You need to define a CO account assignment so that the posting defined in the posting rule can be executed. You do this with transaction OKB9 (default account assignment) or OKC9 (substitution), or using the default account assignment in the cost element master.
Could anyone suggest me on this.
The steps that I've already defined as far as the account are concerned:
1. Have defined the aforesaid account as a cost element
2. Assigned Prodn. C CTR in OKB9 agnst the same.
But then I dont understand why the system pops up this msg, saying, cannot be created as a cost element, wherein the account is already a cost element.
Plz suggest
regards
sandhya

Answer 1

Hiya,
WIP accounts (neither Inventory nor Offset) should NEVER be created as Cost Elements.
In most manufacturing scenarios, costs are tracked on the P&L. During period-end, since there is the risk of writing off some issues to the Production/Process/Sales Order, SAP has introduced the complex but ingenious system called Results Analysis that moves the balance of all open Orders to the Balance Sheet.
If the Order balance is (+)ve, the P&L is credited and the Balance Sheet is debited and vice versa. When you display the Order costs at period-end, the WIP costs are not considered. In order to calculate WIP, we have separate RA GL accounts that track costs independently of the Orders. Therefore, these are never created as Cost Elements. Creating these as Cost Elements would force the system to inadvertently post the WIP costs back on the Order (alongwith posting these to the B/S??? - an unimaginable situation).
At period-end, you have postings like:
Dr WIP Inventory Account
Cr WIP Offset Account
and, this is reversed at settlement:
Cr WIP Offset Account
Dr WIP Inventory Account
Along with this, the system calculates the Actual COS for the finished product. Neither of the two WIP accounts used above is created as a Cost Element. If you have created any of these as Cost Elements, the system will not allow you to save OKG8. Delete the Cost Element and then try saving the posting rule.
(PS: The "Cost Element" field in this screen has a different use. It is used to specify if a Secondary Cost Element from the RA Update table should be posted to a G/L Account. This is not meant for Primary Cost Elements. I think these Secondary CEs are of type 31 (requires confirmation - no SAP access right now). As you may have guessed, you can only enter either the RA Category or this Secondary CE).
You may also delete the OKB9 assignment to the Cost Centre. It is redundant.
Hope this helps.
Cheers.