Understanding Non-Distributed Differences in SAP Material Ledger

In SAP Material Ledger, managing inventory valuation and cost accounting involves handling variances. This article provides a detailed example of non-distributed differences and their handling during the Invoice Receipt (IR) process. We’ll walk through all related entries to ensure clarity.

Scenario Overview

Let’s consider the following scenario:

1. Material: MRG Wood
2. Standard Price: $10 per unit
3. Goods Receipt (GR): 200 units at $10 per unit (standard price)
4. Consumption: 100 units in the same period
5. Invoice Receipt (IR): 200 units at $10.50 per unit (actual invoice price)
6. Price Difference: $0.50 per unit (total variance = $100)

Step-by-Step Entries and Calculations

1. Goods Receipt (GR)

When the goods are received, SAP posts the following accounting entry:

Account

Inventory (Standard Cost) $2,000

GR/IR Clearing Account $2,000

• Quantity: 200 units
• Value: 200 units × $10 (standard price) = $2,000

2. Consumption

When 100 units are consumed, SAP posts the following entry:

Account

Cost of Goods Sold (COGS) $1,000

Inventory (Standard Cost) $1,000

• Quantity: 100 units
• Value: 100 units × $10 (standard price) = $1,000

3. Invoice Receipt (IR)

When the invoice is posted, SAP identifies a price difference of $0.50 per unit (actual price = $10.50 vs. standard price = $10). The total variance is:

Total?Variance=200?units×$0.50=$100

SAP posts the following entry:

Account

GR/IR Clearing Account $2,000

Price Difference Account $100

Vendor Account $2,100

• GR/IR Clearing Account: Clears the initial $2,000 posted during the goods receipt.
• Price Difference Account: Records the variance of $100.
• Vendor Account: Reflects the actual invoice amount of $2,100.

4. Distribution of Variance

SAP Material Ledger distributes the variance based on the cumulative inventory or consumption quantity. In this case:

• Cumulative Quantity Consumed: 100 units
• Invoice Quantity: 200 units
• Price Difference: $100

The distributed variance is calculated as:

Distributed?Variance=

(Cumulative?Quantity / Invoice?Quantity)×Price?Difference

(100/200)×100=$50

The remaining $50 is marked as "Not Distributed" and stays in the Price Difference Account.

Key Takeaways

1. Non-distributed differences occur when variances cannot be fully allocated due to insufficient inventory or consumption quantities.
2. Proper handling of these concepts ensures accurate inventory valuation, compliance, and transparency in financial reporting.