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There is no cost re-average or PPV at the time of deliver or I/C transfer. This
is because there was no physical receipt of goods
Intercompany Transactions
12
Return in Flow 1A: External drop shipment from supplier to customer with interme
diate financial nodes
25$ Price list C1 DC SOB3/LE3/ OU3
20$ Transfer price
12$ 15$ Current cost Transfer price RC PC SOB2/LE2/ SOB1/LE1/ OU2 OU1
10$ PO price S1
PO OU: OU1 Ship to: PC
Order OU: OU3 Ship from: PC Shipping Txn Flow: OU1->OU2->OU3 Procuring Txn Flow:
None
Financial Flow Physical Flow
Time T1
Transaction RMA in PC
Description MMT: RMA in PC (No accounting) MMT: RMA in DC (Accounting transactio
n) (Logical RMA) MMT: DC->RC (Accounting transaction) (Logical I/C Shipment) (Lo
gical I/C Receipt)
OU1 Accounting
OU2 Accounting
OU3 Accounting
(Cost processor) Dr Inventory DC Cr COGS (Cost processor) Dr Inventory RC Cr I/C
COGS
20 20
15 15
(Cost processor) Dr I/C Accrual 20 Cr Inventory DC 20 (I/C Invoicing) (Credit Me
mo) Dr I/C Payable 20 Cr I/C Accrual 20
(I/C Invoicing) (Credit Memo) Dr I/C Revenue 20 Cr I/C Receivable 20 MMT: RC->PC
(Accounting transaction) (Logical I/C Shipment) (Logical I/C Receipt) (Cost pro
cessor) Dr Inventory PC Cr I/C COGS (I/C Invoicing) 12 12 (Cost processor) Dr I/
C Accrual 15 Cr Inventory RC 15 (I/C Invoicing)
Intercompany Transactions
13
Dr I/C Revenue 15 Cr I/C Receivable 15 T2 T3 T4 AR Credit Memo Return to Receivi
ng (Inventory) Return to Vendor (Purchasing) MMT: PC->PC RI RT: Return to S1 (PC
RI->S1) (Cost processor) Dr RI PC 10 Cr Inventory PC 10 (Receiving processor) D
r Accrual 10 Cr RI PC 10 OU3 Reconciliation Dr I/C Payable 20 Dr Revenue 25 Cr C
OGS 20 Cr Receivable 25
Dr I/C Payable 15 Cr I/C Accrual 15 (AR) Dr Revenue DC 25 Cr Receivable DC 25
OU1 Reconciliation Dr Inventory 2 Dr I/C Revenue 15 Dr Accrual 10 Cr I/C COGS Cr
I/C Receivable
12 15
OU2 Reconciliation Dr I/C Payable 15 Dr Revenue 20 Cr COGS 15 Cr Receivable 20
NOTE: RMA receipts are always physical receipts, with transaction cost as the it
em's current cost There is no re-average or PPV at the time of RMA receipt Since c
urrent cost might have changed, the I/C COGS reversal may not completely nullify
the expense that was originally incurred. This however, is a limitation in the
current architecture for Sales Order Shipments and will not be addressed in the
context of this project However, to help customers, a cost hook will be provided
for the RMA receipt transaction (NICE TO HAVE)
Flow 1B: External Drop shipment from supplier with shipment and procurement fina
ncial flow
Intercompany Transactions
14
25$ Price list C1
Asset Item Inv. dest DC SOB3/LE3/ OU3
20$ Transfer price
Asset Item 15$ Accrue rcpt Transfer price RC PC SOB2/LE2/ SOB1/LE1/ OU2 OU1 Logi
cal Receiptt
Asset Item Inv. dest
10$ PO price S1
PO OU: OU1 Ship to: RC
Order OU: OU3 Ship from: RC
Financial Flow Physical Flow
Time T1
Transaction Receipt in RC
Description RT: Receive in RC
OU1 Accounting (Receiving Processor) Dr OU1 Clearing 10 Cr Accrual 10 (Cost proc
essor) Dr Inventory PC Cr OU1 Clearing (I/C Invoicing) Dr I/C Receivable Cr I/C
Revenue (Cost processor) Dr I/C COGS Cr Inventory PC 10 10
OU2 Accounting (Receiving Processor) Dr OU2 Clearing 15 Cr I/C Accrual 15
OU3 Accounting
MMT: PO receipt in PC (Accounting transaction) (Logical PO receipt) MMT: PC -> R
C RI (Accounting transaction) (Logical I/C Shipment)
15 15 10 10
(I/C Invoicing) Dr I/C Accrual 15 Cr I/C Payable 15
T2 T2 >= T1
Deliver into RC
RT: Deliver in RC MMT: Logical PO Receipt in RC Cost Processor Dr Inventory RC 1
5 Cr. OU2 Clearing 15
MMT: RC -> DC (Accounting transaction)
I/C Invoicing)
Intercompany Transactions 15
(Logical I/C Shipment) (Logical I/C Receipt)
Dr I/C Receivable 20 Cr I/C Revenue 20 (Cost processor) Dr I/C COGS 15 Cr Invent
ory RC 15
(Cost Processor) Dr Inventory DC 20 Cr I/C Accrual 20 (I/C Invoicing) Dr I/C Acc
rual 20 Cr I/C Payable 20 (Cost Processor) Dr COGS DC 20 Cr Inventory DC 20 (AR
Invoice) Dr Receivable DC 25 Cr Revenue DC 25
MMT: DC -> C1 (Accounting transaction) (Logical SO Issue)
OU1 Reconciliation Dr I/C Receivable 15 Dr I/C COGS 10 Cr Accrual 10 Cr I/C Reve
nue 15
OU2 Reconciliation Dr I/C Receivable 20 Dr I/C COGS 15 Cr I/C Revenue 20 Cr I/C
Payable 15
OU3 Reconciliation Dr COGS DC 20 Dr Receivable DC 25 Cr Revenue DC Cr I/C Payabl
e
25 20
Intercompany Transactions
16
Flow 1B: Return: External Drop shipment from supplier with shipment and procurem
ent financial flow
Asset Item 15$ 20$ Current cost $12 Accrue rcpt Transfer Transfer price price DC
RC PC SOB3/LE3/ SOB2/LE2/ SOB1/LE1/ OU3 OU2 OU1 Asset Item Inv. dest 10$ PO pri
ce S1
25$ Price list C1
PO OU: OU1 Ship to: RC
Order OU: OU3 Ship from: RC
Financial Flow Physical Flow
Time T1
Transaction RMA in PC
Description MMT: RMA in RC (No accounting) MMT: RMA in DC (Accounting transactio
n) (Logical RMA) MMT: DC->RC (Accounting transaction) (Logical I/C Shipment) (Lo
gical I/C Receipt)
OU1 Accounting
OU2 Accounting
OU3 Accounting
(Cost processor) Dr Inventory PC Cr COGS (Cost processor) Dr Inventory RC Cr I/C
COGS
20 20
12 12
(Cost processor) Dr I/C Accrual 20 Cr Inventory PC 20 (I/C Invoicing) (Credit Me
mo) Dr I/C Payable 20 Cr I/C Accrual 20 (AR) Dr Revenue PC 25 Cr Receivable PC 2
5
(I/C Invoicing) (Credit Memo) Dr I/C Revenue 20 Cr I/C Receivable 20 T2 T3 AR Cr
edit Memo Return to Receiving (Inventory) MMT: RC->RC RI (Cost processor) Dr RI
RC
15
Intercompany Transactions 17
T4
Return to Vendor (Purchasing)
RT: Return RC RI to S1 MMT: RC RI ->PC (Accounting transaction) (Logical I/C Shi
pment) (Logical I/C Receipt) (Cost processor) Dr Inventory PC Cr I/C COGS
Cr Inventory RC 15 (Receiving Processor) Dr I/C Accrual 15 Cr RI DC 15 10 10 (I/
C Invoicing) (Credit memo) Dr I/C Payable 15 Cr I/C Accrual 15
MMT: PC->PC RI (Accounting transaction) (Logical RTV) RAE: Return PC RI to S1 (A
ccounting transaction) (Logical RTV)
(I/C Invoicing) (Credit memo) Dr I/C Revenue 15 Cr I/C Receivable 15 (Cost proce
ssor) Dr OU1 clearing 10 Cr Inventory PC 10 (Receiving Processor) Dr Accrual Cr
OU1 clearing 10 10
OU1 Reconciliation Dr I/C Revenue 15 Dr Accrual 10 Cr I/C COGS 10 Cr I/C Receiva
ble 15
OU2 Reconciliation Dr I/C Revenue 20 Dr I/C Payable 15 Cr Inventory Cr I/C COGS
Cr I/C Receivable
3 12 20
OU3 Reconciliation Dr Revenue 25 Dr I/C Payable 20 Cr Receivable 25 Cr COGS 20
Flow 2: Internal drop shipment from supplier (Global Procurement)
Intercompany Transactions
18
20$ Price list C1
Asset Item Inv. dest DC SOB2/LE2/ OU2
15$ Transfer price
Asset Item Accrue rcpt RC SOB1/LE1/ OU1
10$ PO price S1
PO OU: OU1 Ship to: DC
Order OU: OU2 Ship from: DC
Financial Flow Physical Flow
Shipping Txn Flow: None Procuring Txn Flow: OU1->OU2
Time T1
Transaction Receipt in DC
Description RT: Receive in DC
OU1 Accounting (Receiving Processor) Dr OU1 Clearing 10 Cr Accrual 10 (Cost proc
essor) Dr Inventory RC Cr OU1 Clearing (I/C Invoicing) Dr I/C Receivable Cr I/C
Revenue (Cost processor) Dr I/C COGS Cr Inventory RC 10 10
OU2 Accounting (Receiving Processor) Dr RI DC 15 Cr I/C Accrual 15
MMT: PO receipt in RC (Accounting transaction) (Logical PO receipt) MMT: RC -> D
C (Accounting transaction) (Logical I/C Shipment)
15 15 10 10
(I/C Invoicing) Dr I/C Accrual 15 Cr I/C Payable 15
T2 T2 >= T1
Deliver into DC
RT: Deliver in DC MMT: PO Receipt in DC (Regular transaction) (Cost Processor) D
r Inventory DC Cr RI DC (Cost Processor) Dr COGS DC 15 15 15
Intercompany Transactions 19
T3
Ship from DC to C1
MMT: DC->C1 (Regular transaction)
Cr Inventory DC 15 (AR Invoice) Dr Receivable DC 20 Cr Revenue DC 20 OU1 Reconci
liation Dr I/C Receivable 15 Dr I/C COGS 10 Cr Accrual 10 Cr I/C Revenue 15 OU2
Reconciliation Dr COGS DC 15 Dr Receivable DC 20 Cr Revenue DC 20 Cr I/C Payable
15
NOTE: The physical PO receipt transaction in DC will be used to re-average the i
nventory cost, or reflect PPV, as appropriate The PO receipt maybe at the Purcha
se Order price or the Transfer Price, based on the pricing option setup in the t
ransaction flow. This transaction however, is not accounted for, or cost collect
ed. The transaction is costed, when the associated accounting transactions have
distributions.
Intercompany Transactions
20
Return in Flow 2: Internal drop shipment from supplier (Global Procurement)
20$ Price list C1
14$ Current cost DC SOB2/LE2/ OU2
15$ Transfer price
RC SOB1/LE1/ OU1
10$ PO price S1
PO OU: OU1 Ship to: DC
Order OU: OU2 Ship from: DC
Financial Flow Physical Flow
Shipping Txn Flow: None Procuring Txn Flow: OU1->OU2
Time T1 T2 T3 T4
Transaction RMA in DC AR Credit Memo Return to receiving (Inventory) Return to v
endor (Purchasing)
Description MMT: RMA in DC (Regular transaction)
OU1 Accounting
MMT: DC->RI DC (Regular transaction) RT: Return DC RI to S1 MMT: DC RI ->RC (Acc
ounting transaction) (Logical I/C Shipment) (Logical I/C Receipt) (Cost processo
r) Dr Inventory RC Cr I/C COGS 10 (I/C Invoicing) (Credit memo) Dr I/C Revenue
OU2 Accounting (Cost Processor) Dr Inventory DC 14 Cr COGS DC 14 (AR) Dr Revenue
DC 20 Cr Receivable DC 20 (Cost processor) Dr RI DC 15 Cr Inventory DC 15 (Rece
iving Processor) Dr I/C Accrual 15 Cr RI DC 15 10 (I/C Invoicing) (Credit memo)
Dr I/C Payable 15 Cr I/C Accrual 15
Intercompany Transactions 21
MMT: RC->RC RI (Accounting transaction) (Logical RTV) RT: Return RC RI to S1 (Ac
counting transaction) (Logical RTV)
15 Cr I/C Receivable 15 (Cost processor) Dr OU1 clearing 10 Cr Inventory RC 10 (
Receiving Processor) Dr Accrual Cr OU1 clearing 10 10
OU1 Reconciliation Dr I/C Revenue 15 Dr Accrual 10 Cr I/C COGS Cr I/C Receivable
10 15
OU2 Reconciliation Dr I/C Payable 15 Dr Revenue 20 Cr COGS 14 Cr Receivable 20 C
r Inventory 1
NOTE:
RMA receipt is a physical receipt at the item's current cost. Hence I/C COGS may n
ot be completely reversed The RTV transaction will reverse accruals at the PO pr
ice. However, I/C accounting may not be completely reversed, since transfer pric
e could have changed in the interim The user will need to post manual journal en
tries as appropriate to remove I/C profits while consolidating at the enterprise
level
Intercompany Transactions
22
Flow 2A: Internal drop shipment from supplier with intermediate financial nodes
(Global Procurement with intermediate financial nodes)
25$ Price list C1
Asset Item Inv. dest DC SOB3/LE3/ OU3
20$ Transfer price
Asset Item 15$ Accrue rcpt Transfer price RC PC SOB2/LE2/ SOB1/LE1/ OU2 OU1
Asset Item Inv. dest
10$ PO price S1
PO OU: OU1 Ship to: DC
Order OU: OU3 Ship from: DC
Financial Flow Physical Flow
Shipping Txn Flow: None Procuring Txn Flow: OU1->OU2->OU3
Time T1
Transaction Receipt in DC
Description RT: Receive in DC
OU1 Accounting (Receiving Processor) Dr OU1 Clearing 10 Cr Accrual (Cost process
or) Dr Inventory PC Cr OU1 Clearing 10
10
OU2 Accounting (Receiving Processor) Dr OU2 Clearing 15 Cr I/C Accrual 15
OU3 Accounting (Receiving Processor) Dr RI DC 20 Cr I/C Accrual 20
MMT: PO receipt in PC (Accounting transaction) (Logical PO Receipt)
10
MMT: PC -> RC (Accounting transaction) (Logical I/C Shipment) (Logical I/C Recei
pt)
(I/C Invoicing) Dr I/C Receivable Cr I/C Revenue (Cost processor) Dr I/C COGS Cr
Inventory RC
15 15 10 10
(Cost Processor) Dr Inventory RC 15 Cr OU2 Clearing 15 (I/C Invoicing) Dr I/C Ac
crual 15 Cr I/C Payable 15
Intercompany Transactions
23
MMT: RC -> DC (Accounting transaction) (Logical I/C Shipment)
(I/C Invoicing) Dr I/C Receivable 20 Cr I/C Revenue 20 (Cost processor) Dr I/C C
OGS 15 Cr Inventory RC 15
(I/C Invoicing) Dr I/C Accrual 20 Cr I/C Payable 20
T2 T2 >= T1
Deliver into DC
RT: Deliver in DC MMT: PO Receipt in DC (Regular transaction) Cost Processor) Dr
Inventory DC 20 Cr RI DC 20 (Cost Processor) Dr COGS DC 20 Cr Inventory DC 20 (
AR Invoice) Dr Receivable DC 25 Cr Revenue DC 25
T3
Ship from DC to C1
MMT: DC->C1 (Regular transaction)
OU1 Reconciliation Dr I/C Receivable 15 Dr I/C COGS 10 Cr Accrual 10 Cr I/C Reve
nue 15 NOTE:
OU2 Reconciliation Dr I/C Receivable 20 Dr I/C COGS 15 Cr I/C Revenue 20 Cr I/C
Payable 15
OU3 Reconciliation Dr COGS DC 20 Dr Receivable DC 25 Cr Revenue DC 25 Cr I/C Pay
able 20