PHYSICAL INVENTORY

What is meant by Physical Inventory?

➢ The process of verifying physical quantities with SAP system stock is
Physical inventory, if there any difference between them while counting,
it must be analysed and posted in the SAP system.
➢ After finishing Physical inventory, physical stock and System stock must
be same.
What is the Purpose of Physical inventory?
It checks the Material Stocks which is shown in financial statement of the
company.
It facilitates maximum precision in materials requirement planning.
What are the types of Physical inventory?
PERIODIC INVENTORY: The stock will be counted once in a year and it is also
known as Annual physical inventory.
CONTINUOUS INVENTORY: All the Materials are going to be counted sure but
not in predetermined period, but definitely anytime on the year for all the
materials.
CYCLE COUNTING: This process is done at regular interval of time within the
Fiscal year. While High consumption material (A) will be counted on regular
basis such as Monthly or weekly medium consumption(B) counted on
Quarterly or semi-annual basis and Low consumption(C) counted on annual
basis.
INVENTORY SAMPLING: This is rarely practicing method only randomly selected
stock management units of batches counted on that date.
What are the inventoried Stock management units?
➢ Material
➢ Plant
➢ Storage location
➢ Valuation type
➢ Batch

Prepared by Shiva A
SAP-MM Consultant
 ➢ Special stock

COMMON PHASES INVOLVED IN PHYSICAL INVENTORY:

OVERVIEW STRUCTURE OF PHYSICAL INVENTORY DOCUMENT

HEADER:
➢ Plant, storage location
➢ Special stock
➢ Physical inventory number
➢ Physical inventory reference
➢ Grouping type
➢ PI Document Description
Prepared by Shiva A
SAP-MM Consultant
 ➢ Planned Count date
➢ Count date, posting date, Count status
➢ Adjustment status, Delete status.

ITEM OVERVIEW: DETAILS:

➢ Material
➢ Quantity
➢ Batch, valuation type, Stock type
➢ Alternative units of measure
➢ Item deleted
➢ Physical inventory Status

Prepared by Shiva A
SAP-MM Consultant
(Note: we can also define Tolerances for the posting of inventory difference in
T-CODE: OMJ2)
ACCOUNT MOVEMENTS TAKE PLACE DURING PHYSICAL INVENTORY

1.IN CASE OF OWN STOCK

If the counted result is less than the book inventory
STOCK ACCOUNT-----Credited with (Inventory value*price)
OFFSETTING ENTRY----Expense from Physical inventory Account

If the count is more than the book inventory

STOCK ACCOUNT-----Debited with (inventory diff value *price)
OFFSETTING ENTRY-----Revenue from Physical inventory Account

2.IN CASE OF CONSIGNMENT STOCK:

➢ If count less than book inventory -when inventory difference is posted it
is considered as Material withdrawal.
➢ If the count is greater than the book inventory-When inventory
difference is posted, it is considered as Reversal or cancellation to
‘Liabilities from Consignment stores’ Account.

Prepared by Shiva A
SAP-MM Consultant
 SIMPLIFIED PHYSICAL INVENTORY
Apart from above normal Physical inventory process, there are some
simplified Physical inventory process which involves the efficient execution
of Physical inventory counts and relevant document generation to ensure
accurate inventory management.
1.Enter count without reference to a physical inventory document,
transaction MI09.
➢ When you enter the count result without a document, the system
automatically creates a physical inventory document when you save
the entries. Post the difference with reference to this physical
inventory document.

2. Enter count and post physical inventory differences, transaction MI08.

➢ Enter the count results for an existing physical inventory document.
When you save the count results, the system automatically posts
inventory differences.

3. Enter count without reference to a physical inventory document and post

the inventory difference, transaction MI10.
➢ You can conduct all three phases in one step. We enter the count
results without reference to a physical inventory document. When
you post the results, the system generates a physical inventory
document and posts the inventory difference

GOODS MOVEMENT BLOCKING DURING PHYSICAL INVENTORY

During physical inventory we can block all goods movements related to the
stock management unit by enabling the posting block indicator checkbox in PI
Document header.
In material master it is Shown in Storage location view:
1. X- Material blocked for Physical inventory purpose (during physical
inventory)

Prepared by Shiva A
SAP-MM Consultant
2.A-Count Entered
3.After the posting of Inventory difference, it becomes unset.
BOOK INVENTORY FREEZING
If it is not possible to block the goods movement , we can freeze book
inventory in PHYSICAL INVENTORY DOCUMENT-HEADER as FREEZE BOOK
INVENTORY indicator . This prevents the change in book inventory during
Physical inventory process. (During this process the system compares the date
of the goods movement with the count date)
In T-CODE: OMBP we can check whether the freezing book inventory is
permitted or not
With this Adjustment book inventory function, the book inventory document is
adjusted by the quantity added or deducted by goods movement. The
inventory difference of the item changes accordingly.
T-codes involved in Physical inventory
T-Code T-code Description
MI01 To create PI Document
MI02 To change PI document
MI03 To Display the physical inventory
MI04 Enter the physical inventory count
MI05 To change the physical inventory count
MI06 To display the physical inventory count
MI07 Post inventory difference
MI20 Difference report
MI24 Print physical inventory
MI31 Create physical inventory document for plant

Prepared by Shiva A
SAP-MM Consultant