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Reconciliation
White Paper
Anil Kumar
KASPL
March 2014
This report contains 12 pages
Decoding GL-Inventory Reconciliation.docx
Contents
1
Introduction
2.1
2.2
2
2
3.1
3.2
3.3
3
4
5
4.1
4.2
4.3
4.4
8
9
10
Introduction
This white paper aims at the following 1. Providing insights into inventory period closure process.
2. The process that may be followed to reconcile Inventory Cost.
3. Troubleshooting the GL-Inventory Reconciliation issues.
Intention of the white paper is to provide effective guidelines and some handful scripts which
can be used in checking various aspects of period closing as well as Reconciliation between
Inventory and General Ledger.
This white paper is applicable for Average Costing Organizations for 11.5 and above
application versions. The document has been on the basis of testing and process validation done
for a Discrete Manufacturing organization and the Reader is requested to validate before
applying the document in any other environments.
2.1
2.2
Summarization Process
The Summarization process creates summary of the period transactions in table
CST_PERIOD_CLOSE_SUMMARY (CPCS). Summarization process is done by the
concurrent program named Period Close Reconciliation Report, (henceforth referred in the
document as PCRR). The process of summarization has been delinked from the process of
period closure. This means summarization process can be run for an open period also. When
PCRR is run for an open period, it becomes a simulation report and pulls data from the temp
table that holds the data for the period. The data will be included for the dates given as
parameter by the user at the time of submission of the program. To further clarify the report, the
From and To Dates are displayed along with the period name. When this report is run for a
closed period, the report will show the real inventory value summary. The report will pull the
data from the CST_PERIOD_CLOSE_SUMMARY table in such case.
The
process
of
summarization
(i.e.
updating
inventory
values
in
CST_PERIOD_CLOSE_SUMMARY table after period closure) can be done manually as well
as automatically. This is governed by the profile option CST: Period Summary. If the value
for the profile is set to Automatic, the PCRR is automatically run as soon as a period is closed.
If this is set to Manual, the PCRR need to be run manually after every period closure.
When the program PCRR is run for the first time for a closed period, it updates values in table
CPCS and then extracts the data from the same table and print the report. Afterwards, it only
extracts the data from CPSC and prints the report.
The ORG_ACCT_PERIODS table is used to store information regarding accounting periods.
This table also store information on the accounting periods using the Open, Closed not
Summarized, or Closed status. The column SUMMARY_FLAG is used to show if a period has
been summarized. If the value is Y, it has been summarized. If the value is N or NULL, no
summarization has taken place.
3.1
Material Cost
Outside Processing Cost
Material Overhead
Overhead Cost
Resource Cost
In accounting (GL) terminology, these elements are referred to as Valuation A/cs and item cost
is distributed among these five elements. These cost elements are defined under the tab Costing
Information of the Organization Parameters of an Inventory Organization.
Navigation:
Inventory Responsibility Setup Organizations Parameters Costing Information
3.2
elemental value of the items, the report includes inventory residing in receiving and intransit. Items in receiving inspection are valued at the PO cost.
It is pertinent to note that last three reports give output on the basis of on-hand material
and prevailing item average cost at the time of submitting the program. Hence, it is
advisable to run these reports and save the outputs as soon as the period is closed and
before next period is opened so that these reports can be used during period end
reconciliation.
3.3
The program can be run for any period, whether open or closed. If it is generated for an open
period, one is creating a simulation, or snapshot of the period. The simulation status is indicated
in the report title. If the program is run for an open accounting period the report reads directly
from a temporary table.
Following columns are displayed in the report output for Average Costing Organizations
Cost Group: Name of the cost group. In case of PJM enabled organizations, it is an attribute of
project which allows the system to hold item unit costs at a level below the inventory
organization.
Cost Group Description: Description of the cost group.
Item: Inventory Item code
On-hand Value: On-hand Value is calculated as multiplication of ROLLBACK_QUANTITY
(On-hand quantity) with item average cost at the time of period closure.
ROLLBACK_QUANTITY is calculated by taking current on-hand quantity from table
MTL_ONHAND_QUANTITY
MOQ
and deducting transaction
quantities
in
MTL_MATERIAL_TRANSACTION MMT for all transactions taking place after the end of
the concerned period.
Accounted Value: This is the valuation calculated by adding current periods account
distributions from MTL_TRANSACTION_ACCOUNTS table to the previous periods on-hand
value.
Discrepancies: The difference between Accounted Value and On-hand Value. Some
discrepancies may occur due to rounding-off; however larger differences would need to be
looked into further.
4.1
Discrepancies owing to back dated transactions get corrected in the PCRR on its own after two
periods as long as there is no back dated transaction in subsequent periods. The reason for this is
that the Accounted Value is restarted each period from On-hand Value on the assumption that
On-hand Value is the True value. Suppose we have three periods , and . Below is what
happens when we backdate a transaction to the beginning of and have otherwise normal
transactions
Accounted Value = Correct
On-hand Value = Affected by Backdated transactions
Matching Status = Mismatch
4.2
transaction results in increase or decrease (as the case may be) in inventory report whereas GL
balances remain unaffected since both debit and credit accounts are same for such transactions.
Same issue arises when any of the valuation account is used at the time of Average Cost
Updates.
The best practice to avoid such issues is to use separate accounts for miscellaneous transactions
and average cost updates and control the usage of Valuation Accounts for these transactions.
4.3
4.4
Other Issues
Following transactional issues could also cause reconciliation gaps
1. Manual journal entries in GL
2. Unposted transactions in GL
3. Interface transaction not imported in GL
4. Wrong usage of Cost Cut-offs
5. Uncosted/unaccounted inventory transactions