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Valuation and Account Assignment In SAP MM

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SAP MM valuation and Account Assignment

This is completely integrated with FI(Financial Accounting). material Valuation: stock value= stock Qty x Price. The material valuation will update the G/L accounts in Financial Accounting.

SAP MM valuation:

The procurement process begins with generating a purchase order plus ends with invoice verification. Within the entire process, one of the relevant parts is material Valuation. While developing purchase orders, material price is a necessary field plus it is automatically determined. It arises because material valuation is attested within the SAP system in the material master. Material valuation describes integration among MM & FI (Financial Accounting) modules as it updates the general ledger accounts within financial accounting. The important points to note regarding material Valuation are −

Material valuation assists in managing the price of the material.

Stock obtained from one vendor is valuated at a different price than the stock, which is obtained from the other vendor.

We can evaluate the material based on various types of Procurement which are called Split Valuation.  

Split Valuation:

Split valuation assists in evaluating the stocks of materials within the same valuation area differently. Some of the examples where we use split valuations are:

A stock that is procured externally from a vendor has a distinct valuation price than the stock of in-house production.

Stock acquired from one vendor is valuated at a distinct price than the stock obtained from another vendor.

The same material possessing a different batch may maintain distinct valuation prices.

Split Valuation requires to be activated before setting any other configuration.

Valuation and Account Assignment :

• This is fully integrated with FI. Material Valuation: Stock value = Stock Qty X Price
• The material valuation will update the G/L accounts in Financial Accounting.

Material Valuation features:

• It allows you to evaluate the materials
• You can evaluate the materials differently based on sub stocks.
• It allows you to evaluate the balance sheet.

Material Valuation control:

This valuation is controllable by

• System settings (where valuation has to be done)
• Material master records (As a rule for each material has to be evaluated under a material type). If this material type is evaluated or not

For every material, you are assigning a valuation class.

• You are grouping a material type under the valuation class.
• All materials of a material type can have one material valuation class.
• Under a material type, you can have different valuation class for different materials

Materials under different material types can have the same valuation class.

Valuation structure:

Data over material is evaluated using the following structure

• Valuation area
• Valuation class
• Valuation category 
• Valuation type
• Material type
• Movement type

Valuation area:

The valuation area is an Organizational level at which material valuation is done; the valuation area is defined as 

Valuation area= company code

Complete stocks of that particular material in the company code are evaluated together

Valuation area= one plant

Valuation class:

We can group the different materials with the same properties into the valuation calls so that there is no need to control a separate stock account for each material.

All the materials with the same type are assigned to one valuation class.

Various materials with the same material type are assigned to different valuation classes.

Valuation category:

The criterion, according to which split Valuation is carried out:

Procurement: You can evaluate a material uniquely depending on whether it is made in-house or procured externally.

Origin: You can evaluate a material uniquely depending on where it comes from (such as home or else from abroad). 

Status: You can evaluate a material uniquely depending on its status (such as new, used, or repaired). 

Valuation Type:

The valuation type defines the unique character of the valuation category, like internal or external, within the case of Procurement. In the valuation category Origin, you can determine the different countries as the valuation types. You determine valuation types within Customizing. You first define all the correct valuation types for a valuation category.

You specify within this material master record that valuation types are permitted for a different material. For every material subject to split valuation, you must enter all the valuation types permitted within the material master record.

Material Type:

We can assign every material to a material type when we create it. Examples of material types in the standard system incorporate operating supplies, raw materials, and finished products.

Movement Type:

For every material movement, there is a movement type within the SAP System. The movement type manages the properties of the movement, for instance, which entries you have to make when entering a material movement, and which updates are taken out when the movement is posted.

Customization

SPRO -> Material Management -> Valuation and Account Assignment -> Define Price Control for Material Types

SPRO -> Material Management -> Valuation and Account Assignment -> Account Determination -> Account Determination Without Wizard

• Define Valuation Control (OMWM)
• Group Together Valuation Areas
• Define Valuation Classes
• Define Account Grouping for Movement Types (OMWN)
• Configure Automatic Postings

Define Valuation Control (OMWM):

Choosing the valuation level is one of the first steps we will perform while customizing the system.

If using the PP Production module, the valuation area must be set at the plant level. For account determination, you can group valuation areas by activating the valuation grouping code. This makes the configuration of automatic postings much easier.

Group Together Valuation Areas:

Valuation areas are grouped with the objective of simplifying the management of the standard accounts table by minimizing the number of entries.

Along with other factors, the valuation grouping code determines the G/L Accounts, to which a goods movement is posted (Automatic Account Determination).

The valuation grouping code makes it easier to set the automatic account determination.

Within the chart of accounts, we assigned the same valuation grouping code to the valuation areas.

Since we want to assign to the same G/L account, we assigned the same valuation grouping code to the valuation areas.

Define Valuation Classes:

The Valuation class is a group of material with the same G/L account.

When you create a material master record, you must assign the material to a valuation class. The valuation class is assigned to a material at the plant level. However, if using the split valuation, the valuation class will be assigned at the valuation type level.

The choices for valuation class are dependent on the material type. In general, several valuation classes can be allowed for one material type. Also, the same valuation class could be allowed for different material types.

The link between the valuation class and the material type is the account category reference. The account category reference is assigned to a material type.

The G/L account determined for the material is carried out according to the settings for its valuation class.

Step1: Account Category Reference: Account Category Reference (4 Char): Group of valuation classes that’s the system uses to check whether the valuation class you have entered is allowed when you maintain accounting data in a material master record.

Step2: Valuation Class: Here The Valuation Class is defined and an Account Category Reference is attached to a Valuation Class. Example: 3000 (Raw Materials) -> 0001 (Reference for Raw Materials)

Step3: Material Type / Account Category Reference: Here the Material Type can be assigned to an Account Category Reference. Example: ROH (Raw Materials) -> 0001 (Reference For Raw Materials)

Define Account Grouping for Movement Types: Movement type - Special stock indicator - Value updating - Quantity updating - Movement Indicator - Consumption posting - Posting string for values - Counter - Transaction/event key - Account modification - Check

The following diagram shows the relation between Chart of account, Transaction, account modifiers, accounts posting keys. 

TRANSACTION / EVENT KEYS IN SAP

AUM: Stock transfers are there between plants and from one movement type to another with split valuation. The difference between the price at the delivery plant and the receiving point is booked at the latter.

Account to be opened: Loss – Stock Transfer Gain – Stock Transfer A/c

BO1: Check up Subsequent settlement of Provisions (e.g.: volume-based rebate)

BO2: Check up Subsequent settlement of revenues -conditions in inv. Verification

BO3: Check up Provision Differences

BSV: The Company sends materials for subcontract work, this transaction is considered, Accounts to be opened, Materials Consumed/Trading Goods w/o cost element, for ROH Inventory Change, Cost of Goods sold w/o Cost element, for FERT s

BSX: All stock postings to Stock Accounts due to Goods receipts & goods issues in Inventory Management. B/s Inventory A/c s 11101 to 11111

DIF: Small Differences that may arise during invoice verification in the invoice amount not exceeding tolerance.

Accounts to be opened: Loss—Inventory Differences A/c, Gain---Inventory Differences A/c

FRX: These are used for posting delivery costs when goods and invoices are received for purchase orders

FR1: Freight Clearing 69002 Separate A/c s is required

FR2: Provisions for freight Charges 69002

FR3: Customs Clearing 69002

FR4: Provisions for Customs Clearing

FRL: Services are performed for the company externally. Account to be opened: Purchased Services A/c

FRN: Services are performed for the company externally and hence delivery costs

Account to be opened: External Procurement Costs A/c

GBB: Offsetting Entries for Inventory Postings AUA For Order settlement 68005 (Factory output for Production)

AUF: For GRs for orders (w/o account assignment) 68005

BSA: For initial entry of stock balances 11199  

INV: Expenditure/Income from Inventory differences 68004 – Raw Material Consumption A/c  

VAX: For goods issues for sales orders with no assignment object The account will not be a cost element 68002 –Raw Material Indigenous 72001 – Stores & Spares

VAY: For goods issues for sales orders with assignment object The account is a cost element

VBO: Consumption from stock provided to vendor 68002 –Raw Material Indigenous

VBR: For internal goods issues (e.g.: to a cost center) 68005—Factory output for Production 72001 – Stores & Spares

VKA: For consumption in Sales Order without SD (Mvt. Type 231) 68005—Factory output for Production

VNG: For Scrapping & destruction 68004 – Raw Material Consumption – Others

VQY: For sampling with account assignment

ZOB: For goods issues with no Purchase order reference (Mvt 501)

ZOF: For goods issues with no production order reference (Mvt 521)

KBS: Account - assigned Purchase Order ie. account assignment taken from PO Account need not be assigned in OBYC

KDR: Exchange rate rounding differences in case of foreign currency invoices 80029 -- Exchange Rate Difference - Valuation 1

KDM: Exchange rate rounding differences for open items (invoice posting with a Different exch. rate than the GR/due to Std price difference/insufficient stock coverage) 80028 --Exchange Rate Difference - foreign currency to local

KDV: Material ledger from low levels E/R diff.

KON: Consignment payables

KTR: Offsetting entry for price differences in cost object hierarchies 68005—Factory output for Production

LKW: Accruals and deference. acct (material ledger)

PRD: Price Differences, Loss/Gain Inventory Differences (Two A/cs to be opened & assigned) 68004 – Raw Material Consumption – Others A/c is assigned

PRK: Price Differences in cost object hierarchies Loss/Gain Inventory Differences (Two A/cs to be opened & assigned)

RKA:  Inv. reductions from logistic invoice verification

UMB: Gain/loss from revaluation Checkup- 68004 is found attached (Raw Material Consumption – Others A/c )

UPF: Unplanned delivery costs

VST: Input Tax

WGI: Goods issue inflation revaluation

WGR: Goods receipt inflation revaluation

WRX: GR/IR clearing account 40051 – GR/IR Clearing A/c

WRY: GR/IR clearing acct (mat. ledger) (old) 

[Check Out: SAP MM Tutorial ]

Account assignment in SAP MM:

Account Assignment category is a very relevant field available and utilized in the purchasing documents. It has various control functions and assists in managing the objects (e.g. sales order, cost center, project) that are charged within the case of a purchase order for material that is meant for direct usage or consumption.

Use of account assignment:

You define which account assignment object is to be charged through the account assignment category such as (sales order, cost center, etc.,) Which accounts are to be charged. At the same time, the incoming invoice or else goods receipt is posted, and which account assignment data you have to give. The account assignment category is utilized at the time of the creation of a purchase order. For regular PO, no account assignment category is used.

Account assignment category:

The account assignment category defines:

The quality of the account assignment (sales order, cost center, and so on)

Which accounts are to be charged while the incoming invoice or goods receipt is posted.

Which account assignment data you have to provide.

Account assignment categories:

Conclusion :

A valuation modifier is used to let the system find the predefined posting rules discover how the accounts of the financial accounting system are to be posted and update the stock fields within the material master data. Whereas by using the account assignment, we can specify which object is to be charged through the account assignment. 

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ERProof » SAP MM » SAP MM Training » SAP Material Valuation

SAP Material Valuation

SAP valuation area is the organizational level at which materials are valuated such as at the plant or company code level. When the valuation area is at the plant level, you can valuate a material in different plants at different prices. When the valuation is at the company code level, the valuation price of a material is the same in all of the plants of the company code.

Material valuation at the plant level is mandatory if your system is a retail system, or if you want to use either the Production Planning or Product Cost Accounting components.

To define the valuation area at the company code or plant level you should access the path below in SPRO transaction:

Enterprise Structure -> Definition -> Logistic General -> Define Valuation Level

Depending on your requirements, set the valuation level at a company code or at a plant.

Once you’ve defined the valuation area, it is very difficult to change it afterwards because this is the fundamental setting.

SAP Valuation Methods

Material valuation is carried out according to the price controls set in the SAP system. Based on the business scenarios, we can set the valuation method as moving average price (price control V) or standard price (price control S) .

The valuation method is defined in the Accounting 1 view screen of the material master. You can check in this view the total stock quantity and total value of a material.

A standard price is a fixed price defined in the material master record. In general, this method is used for finished goods. In the standard price procedure, the valuation price is defined and fixed in the material master record. If price in a purchase order (PO) is different (either more or less) from the standard price, the difference amounts are posted to a price difference account.

On the other hand, moving average price is a weighted average price. The movements of materials such as goods issue or goods receipts may impact moving average prices. The moving average price will change if purchasing prices of a material are changed. This price is calculated as shown below:

Moving average price = Total stock value / Total stock quantity

The material master record will always be updated with the current moving average price.

Configuration

You must assign the valuation method in the Accounting 1 view while creating material master records. But to reduce the time, you can assign the price control to the material types, so that the price control will be set automatically by the system later on for new materials. To do that, access the path below in SPRO transaction:

Logistic General -> Material Master -> Basic Settings -> Material Types -> Define attributes of material types

Material Price Changes

Material prices can be changed over a period of time due to changes in the market price. The SAP system includes functionality to accommodate these changes, and the stock valuation is revaluated as per the current market price.

Valuation prices can be changed based on business requirement for three scenarios:

• A price change during the current posting period
• A price change during the previous posting period and changes are not carried over to the current period
• A price change during the previous posting period or year and changes are carried over to the current period

Note that changing the material price doesn’t involve changing the material master record. It is an accounting transaction in which the total stock for a valuation area is revaluated. The transaction code MR21 is used to change prices. After the prices are changed, accounting documents are generated and the stock account, expense/revenue accounts will be involved.

SAP Split Valuation

Split valuation helps you to valuate sub-stocks (part of the total stock) of a material in different ways. There are a number of reason you might want to valuate sub-stocks separately, such as:

• The material has different origins (e.g., materials have different country of origin)
• The material is acquired via different types of procurement (e.g., external procurement or internal procurement)
• The material has different categories of quality (e.g., damaged, poor quality or good quality)

Note that split valuation in SAP is used only with the moving average price control, and materials that are subject to split valuation can be valuated only via moving average price method.

To activate the split valuation in the system, you must follow this path in SPRO transaction:

Material Management -> Valuation and Account Assignment -> Split Valuation -> Activate Split Valuation

To configure the split valuation in the SAP system, you must follow this path in SPRO transaction:

Material Management -> Valuation and Account Assignment -> Split Valuation -> Configure Split Valuation

Choose Global Types button to create new valuation types and define their attributes.

• Ext. POs: This field indicates whether external POs are allowed or not.
• Int. POs: This field indicated whether internal POs are allowed or not.
• ARef (Account Category Reference): This field is used to group valuation classes. Specify for which account category reference this valuation type is allowed.

Choose Global Category button to create new valuation categories and define their attributes.

• Default Valuation Type External Procure: The valuation type selected in this field is proposed at the time of PO creation.
• Default Valuation Type External Procure Mandatory: The default valuation type is mandatory and can’t be changed in the PO.
• Default Valuation Type In-House Production: The valuation type is proposed at the time of production order creation.
• Default Valuation Type In-House Mandatory: The default valuation type is mandatory and can’t be changed in the Production Order.
• Determine Valuation Type Automat: The system will automatically determine the valuation type at the time of goods receipt. This indicator is only useful for materials that are managed in batches. A valuation record is automatically created for each batch.

You can check the valuation type and valuation price in the Accounting 1 view of the material master by using the transaction MM03 . If you select a valuation type at the organizational level, the system will display the stock valuation for the selected valuation type.

Did you like this SAP MM tutorial? Have any questions or comments? We would love to hear your feedback in the comments section below. It’d be a big help for us, and hopefully it’s something we can address for you in improvement of our free SAP MM tutorials.

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13 thoughts on “SAP Material Valuation”

hi, could be used batch management & split valuation type same time for same material type? regards.

Yes, it is possible to use batch management and split valuation for the same material at the same time. If a material is both split valuated and batch managed, then its valuation type is saved in the batch master record.

the consultant tried to apply it. When he go to make sales order the system gives in availability check column all qty available of two valuation type. How could make availability check qty give qty belong the only one valuation type i selected. Thank you

I think that you might need to use a user exit for this purpose. Another option will be to specify a batch in a sales order, and then ATP check can be performed at the batch level (each batch belongs to a particular valuation type).

No other way? Because I want warehouse to specify the batch.

Can you please explain how do you want see the whole business process? Do you want sales people to enter material valuation type in sales orders?

Thanks for your concern. The business process Should be as below: 1- Make purchase order or contract of material without specify valuation type and batch. 2- In warehouse Goods receipt will enter qty with valuation type and batch (should deducted from po qty of the material) 3- Sales people should enter the material and valuation type only because each valuation has its own price. 4- Warehouse will specify the batch in outbound.

Hope you help me to apply this business process.

Unfortunately, it is not possible to perform ATP check in a sales order based on valuation type. The standard levels for ATP check are: 1) plant, 2) storage location, 3) batch. If you want to perform ATP based on valuation type, you will need to use a user exit. Please check SAP note 2194342 ( https://launchpad.support.sap.com/#/notes/2194342 ) for further information about user exits that SAP recommends for this purpose. I hope it helps!

Ok. Thanks for your concern.

Best regards

Dear Expert,

Good day. May I know how was the valuation type is automatically determined in the sales order? In the material master record in the Accounting tab, the valuation category is set to Q. In OMWC, the valuation cat Q (Quality) the automatic local valuation categories for plant P500 is not tick. I have 4 different material in one sales order, the valuation type was automatically determine for the first three item but not for the last item. Although when I check the set up in material master record it has the same info and all was maintained with valuation type as per checking in table MBEW. Looking forward for your inputs on this.

Thank you so much, Arlene Siozon

Are these materials managed in batches?

Can we get automatic material price in PO by Valuation Type ? (Without creating inforecord for the material)

dear expert. in my company want to implement valuation type in batch management. which bath have characteristic (Classif class type 023 and 300), how to configuure this? becouse when i trying to set cost estimate. that material can not be set.

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