3.2 Inventory Management
3.2.2 Inventory Valuation
Accounting document and stock value
The accounting document in Fig. 3.8 was generated as a document in Accounting for the material document in Fig.3.6. The subject of the material movement was a goods receipt into unrestricted-use stock. The posting record of this accounting document thus refers to the increase in stock of an unfinished product, and posts the material value in the amount of€6.00 on the debit side of Account 300000. The offsetting entry is posted to the credit side of Account 400020, a stock change account without a cost element. The material value of €6.00 was automatically determined from the material master record of the posted material and rounded off.
The value-based management of material inventory is done automatically through the updating of stock whenever goods are moved. In addition to quantity- and value-based updating of stock, account assignment can also be performed in Cost Accounting. Value-based inventory management is done on thevaluation area level. The valuation area is an organizational level that can correspond to a plant or company code. The company code, in turn, is derived from the plant via the assigned valuation area responsible for quantity-based inventory management.
Generally, valuation of inventory is performed on the plant level.
In Volume 1, Chap. 4, “Procurement Logistics”, we briefly looked at material valuation and account assignment in relation to consumable material. Updating of quantity and value (see Fig. 3.8) is based on system settings in addition to the material type of a material (see also Volume 1, Chap. 3, Sect. 3.2.2). The system settings control the basic parameters of the valuation: In what level, plant or company code are the materials evaluated? What goods movements are relevant to valuation and what accounts are updated for which procedures? The material type is a fixed parameter that controls whether a material is to be managed in a value- and stock-based manner. In the accounting views, the material master determines whether, for instance, various partial stock of a material is to be valuated differently (split valuation) and what price is to be used for the valuation.
The control of the valuation price of valuated stock requires a material type that allows inventory management and inventory valuation. The actual valuation, that is, the valuation price of the material, is based on price control settings in the material master.
According to these settings, stock can be valuated with a constant price (stan- dard price) or, adjusting to fluctuations in the procurement price, with a moving average price. Moving average prices are advisable for raw materials and exter- nally procured material for which price fluctuations are to be recorded for stock when they happen. Standard prices are constant and suitable for finished and semi- finished products, especially for products manufactured in-house.
Non-valuated stock is maintained for materials for which quantity-based but not value-based inventory management is intended. Such stock includes consumable
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materials whose valuation and quantity update are based on the settings of the respective material type. Because no stock values are updated for these non- valuated materials, there is no need to maintain accounting views in the material master. The procurement of these materials is thus done only with account assignment.
In the case of materials that are maintained in stock on a quantity as well as a value basis, goods receipt leads to an account-assigned, neutral stock order. The procured quantity is posted to consumption and the value to a consumption account, where the respective account assignment object is debited (see also the procurement of consumption material in Volume 1, Chap. 4, “Procurement Logistics”). Goods receipts fornon-valuated materialsthat are managed on a quantity basis lead to an increase in stock and an update of the material master record. The material value is posted to the consumption account, and the account-assigned object is debited with the costs. Non-stock materials represent a special case.
Non-stock materials refer to materials for which neither inventory manage- ment nor valuation is to take place. As in the case of non-valuated materials, accounting data is not maintained and procurement is solely done with reference to an account assignment object. When a goods receipt of such materials occurs, neither a quantity nor a value update is undertaken, since the procured quantity is immediately posted as consumption, and the account assignment object is debited with the costs.
In contrast to the uniform valuation of materials on a plant or company-code level,split valuationenables a differentiation between the partial stock of a material with regard to various criteria. Such criteria allow you to evaluate certain partial stock with differing values within a plant. For instance, split evaluation is done when a material is simultaneously produced in-house and externally procured, because material stock from in-house production usually has a different valuation price than external production. A further criterion and thus a reason for split valuation is a difference in material qualities and conditions, or batch stock with varying valuation prices.
Split valuation is performed in the following situations:
• Batches with varying characteristics
• Materials of varying sources
• Materials from various deliveries
• Materials of varying quality
The differing valuation of a material is done for each partial stock. Thus, you must indicate which partial stock is concerned regarding logistics and value for every valuation-relevant procedure, every goods movement, every invoice receipt and every inventory. Any change in value only applies to that particular stock and is based on the parameters in the accounting view of the material master record that determine whether and how a split valuation is to be performed for the material.
Partial stock is a subquantity of a total stock. The value of the total stock is thus derived from the sum of the partial stocks and their respective stock values.