Abhinav Malik

SAP FICO Consultant

Management Accounting

Foreign Currency Valuation Page 1 of 9

Abhinav Malik
SAP FICO Consultant

Contents

1. Moving Average Price (MAP) ....................................................................................................................... 3

1.1 Material Master Creation with price indicator ‘V’ ........................................................................................ 3

1.2 Process Steps – Initial Stock Upload.............................................................................................................. 3

2. Costing Systems ........................................................................................................................................... 7

Foreign Currency Valuation Page 2 of 9

Abhinav Malik
SAP FICO Consultant

1. Moving Average Price (MAP)

Moving Average Price is calculated by system on every receipt

1.1 Material Master Creation with price indicator ‘V’

Initially, when the material master is being created the Accounting 1 view will reflect the below
picture.

1.2 Process Steps – Initial Stock Upload

After the creation of material master, closing stock quantity and price calculated by the business as
per the legacy system is required to update in the SAP system.

* T. code: MB1C/MIGO
* Movement Type: 561
* Update stock quantity and Moving Average Price initially
* Accounting Entry will be generated

Foreign Currency Valuation Page 3 of 9

Abhinav Malik
SAP FICO Consultant

On saving the above transaction, material document number and the accounting entry will be
generated.

Accounting Entry

Dr. Raw Material Inventory a/c

Cr. Initial Stock Upload a/c

Uploaded quantity and price will reflect in Material Master and other MM reports and as well in
Finance for stock value.

Foreign Currency Valuation Page 4 of 9

Abhinav Malik
SAP FICO Consultant

System will start using the Moving price updated in material master.

Scenario 1

PO Quantity 1 EA
PO Price 15

Goods receipt against the above Purchase Order

Transaction to be used: MIGO

Accounting Entry on Good Receipt

Dr. Raw Material Inventory 15

Cr. GR/IR for Materials 15

On receipt of material for 1 quantity with price 15, system will update the Moving Average Price in
Material Master.

Op. Stock Op. Price Add. Qty New Price Cl. Qty Stock Val MAP
1 10 1 10 10
1 10 1 15 2 25 12.5

Foreign Currency Valuation Page 5 of 9

Abhinav Malik
SAP FICO Consultant

Invoice Receipt

Transaction to be used: MIRO

Enter the invoice against the Purchase order and an accounting entry will be generated.

Accounting Entry on Invoice Receipt

Dr. GR/IR for Materials 15.00

Dr. VAT Input @ 15% 2.25
Cr. Vendor A/c 17.25

Foreign Currency Valuation Page 6 of 9

Abhinav Malik
SAP FICO Consultant

2. Costing Systems
 Historical Costing: Costs are ascertained only after they are incurred. Such type of costing
system is extremely useful for conducting post-mortem examination of costs, i.e. analysis of
the costs incurred in the past. It may not be useful from cost control point of view but it
certainly indicates a trend in the behavior of costs and is useful for estimation of costs in
future. For example, costs incurred in the month of April, 2007 may be ascertained and
collected in the month of May.
 Absorption Costing: costs are absorbed in the product units irrespective of their nature. In
other words, all fixed and variable costs are absorbed in the products.
 Marginal Costing: Only variable costs are charged to the products and fixed costs are written
off to the Costing Profit and Loss A/c. The principle followed in this case is that since fixed
costs are largely period costs, they should not enter into the production units. Naturally, the
fixed costs will not enter into the inventories and they will be valued at marginal costs only.
 Uniform Costing: adoption of identical costing principles and procedures by several units of
the same industry or by several undertakings by mutual agreement.

2. Cost Sheet

It is a statement of cost showing the total cost of production and profit and loss from a particular
product or service.

S. No Particulars
A Direct Materials Opening Stock
+ Purchase

Foreign Currency Valuation Page 7 of 9

Abhinav Malik
SAP FICO Consultant

+ Carriage Inwards
- Closing Stock
B Direct Wages
C Direct Expenses
I. Prime Cost ( A + B + C )
D Factory Overheads- Indirect materials
Loose Tools
Indirect wages
Rent and Rates ( Factory)
Lighting and heating ( F )
Power and fuel
Repairs and Maintenance
Drawing office expenses
Research and experiment
Depreciation – Plant ( F )
Insurance – ( F )
Work Manager’s salary
II. Factory Cost/Works Cost ( I + D )
E Office and Administrative Overheads
Rent and Rates – office
Salaries – office
Insurance of office building and equipments
Telephone and postage
Printing and Stationery
Depreciation of furniture and office
equipments
Legal expenses
Audit fees
Bank Charges
III. Cost of Production ( II + E )
F Selling and Distribution Overheads
Showroom rent and rates
Salesmen’s salaries and commission
Traveling expenses
Printing and Stationery – Sales Department
Advertising
Bad debts
Postage
Debt collection expenses
Carriage outwards
Depreciation of delivery van
Debt collection expenses

Foreign Currency Valuation Page 8 of 9

Abhinav Malik
SAP FICO Consultant

Samples and free gifts

IV. Cost of Sales ( III + F )
V. Profit/Loss
VI. Sales ( IV + V)

Foreign Currency Valuation Page 9 of 9