Sapexperts.wispubs.com-Moving Average Price Learn How It Functions in Project Stock and Figure Out How to Explain the Unexpl

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Moving Average Price: Learn How It Functions in Project Stockand Figure Out How to Explain the UnexplainableKey ConceptMaterials that are entered into an SAP system as inventory are either plant stock or special stock. The mostcommon examples of special stock are consignment stock and project stock. Consignment stock is stock that isloaded into and managed within an SAP system, and is usually on site, but actually still belongs to a vendor.Project stock is stock that is obtained for and dedicated to a specific project. An SAP project is a large unit of workthat is managed by the Project System module and is broken down into smaller units of work called workbreakdown structures (WBSes). Resources in the form of funding, labor, and materials are allocated to the projectat the WBS level. Plant stock then is any inventory that is not special stock. It is neither still owned by a vendor,nor obtained for and dedicated to an SAP project. Plant stock is obtained by the company and entered asinventory for normal use that is, for any purpose or work that is not project related. For example, in amaintenance type facility, plant stock would be obtained and kept on hand as recommended spare parts forvarious systems and equipment that would likely require repair or replacement at some point in the future.

Executive Summary

Your project or company uses SAP materials management (MM). Go-live occurred some time ago. Anyconsultants you may have used are long gone, and youre now in sustainment mode. You the users, managers,and support personnel are left to function with what was created. You are expected to understand the systemresulting from all the configuration and you must make it work. But how do you deal with the complexity andconfusion of MM on a daily basis? Here are some issues related to MM:

Nothing is more confusing to users than the depiction in purchase order (PO) history of multiple goodsreceipts or reversals, invoices or reversals, and subsequent debits or credits that do not balance out. Thisreport clarifies the confusion, explains how to correct it, and tells when to stop trying to correct it.Why do some goods receipts and some invoices affect moving average price while others do not? Forthose that do, the degree of effect can vary widely. For most users, that effect is either unknown, orrepresents a mysterious lack of logic on the part of the system. This report pulls back the curtain for thereader, exposing the logic and the effect that it brings about.The meaning of the following error message is not clear to users: Moving Average Price for material isnegative. This message also confuses most users with regard to when and whether or not the error isencountered. This report removes the confusion by explaining the functionality involved and thecircumstances that determine when the error does and does not occur. It also provides options on how bestto deal with the error when it does occur.Few users understand, and many misuse the MR11 transaction (Maintain GR/IR Clearing Account). Itsdepiction in PO history is counterintuitive and at odds with both its intended use and actual impact. Thisreport provides the reader with an understanding of its purpose, its functionality, and the reasons to avoid itsuse.

I cover the following topics in this report:

1. MR21 price change2. Goods receipts Mov types 101 & 5053. Goods receipt reversal (Mov type 102) 4. Effect of a GR reversal on PO history (Three-Way Match) 5. Conditional goods receipt (Mov type 103)

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6. Invoices7. Invoice reversals8. Subsequent debits or credits9. Credit memos

10. MR11 (Maintain GR/IR Clearing Account) 11. MB1C/561 & 562 Initial Entry of Stock & reversal (i.e., Pennies from Heaven and its Reversal) 12. 561/562 On Split Valuated Materials13. MB1B Transfer/ 415 & 416 Plant Stock to Project Stock and its Reversal 14. MB1B Transfers/415Q Project to Project15. Goods Issues against a Work Order (Mov Type 261) 16. Goods Issue Reversal /26217. Price Control V or S on a WBS18. Error Message: Moving Average Price for material is negative 19. MI07/701 & 702 - Gain/Loss by Inventory

I also include examples and Q&As to show you the logic behind system actions that may at first glance seemrandom. Examples include the frustration of not being able to get the value of the reversal of a goods receipt tomatch the original goods receipt value. Another is the confusion created by repeated unsuccessful attempts to getthe goods receipt and invoice sections of the purchase order (PO) History tab on a PO to match.

In a standard SAP system, moving average price, as the term implies, is a value that changes automatically overtime based on the value of individual postings for a material such as goods receipts (GRs) and invoices. For along time, our materials management (MM) team thought that moving average price did not work at our project.We had been executing GRs and invoices on project stock, and then looking at the moving average price field onthe material master to see the effect.

Not seeing any change, we decided that moving average price did not work in our particular SAP environment.However, I later realized that it does indeed work. We had simply been looking for the effect in the wrong area.The material master reflects only plant stock moving average price. We execute GRs and invoices against onlyproject stock here (never on plant stock). GRs or invoices on project stock affect the moving average price on onlyproject stock. Therefore, they do not affect the material master.

We did not realize that moving average price works separately for plant stock and project stock. (A circumstancethat has an effect on the moving average price for a project stock has no effect on the plant stock price for thatmaterial and vice-versa.) In addition, the moving average price on project stock is calculated separately on eachplant or work breakdown structure (WBS) for that material (just as material requirements planning [MRP] is forproject stock).

NoteThe content in this report is based on findings in a system using largely standard SAP settings and movingaverage price as the method of price control specified in the material master. Specific IMG settings for automaticaccount determination and other areas may bring about slightly different results. The content also reflects the useof Financial Accounting (FI), Funds Management (FM), and Managerial Accounting (CO) as the financial structure.However, I believe projects using only FI/CO would react in the same or similar fashion.

Why Is Moving Average Price Important?The SAP system uses the current moving average price to determine the value of certain transactions involvingmaterials. These transactions include goods issues that establish actual costs for materials. Many transactions donot use moving average price, but rather establish or affect the moving average price whenusers execute them.

Understanding how moving average price works allows you to understand changes to the values of specificaccounts. Knowledge of these changes can be very important to auditors (internal and external) and therefore toyou. This knowledge is also very important with regard to available budgets, including budgets for procurement ofmaterials.

In a real-life example, a customer (highly upset) called me regarding the cost of a goods issue to a maintenancework order (MWO) on a specific project. The material involved was an inexpensive item priced at only $0.59apiece. The goods issue was for a quantity of 250, thereby requiring a charge against the MWO and project ofless than $150.00. Instead, the actual cost was $39,853.39. The discrepancy caused a problem with the budgetfor that project. It was discovered because the system prevented any further purchase orders (POs) from beingcreated for that WBS due to payment budget exceeded errors.

Whether the SAP implementation is for an environment involving manufacturing, sales and distribution (SD),maintenance, or any other type that uses and incurs cost for materials, budgets cannot be managed effectivelywithout an understanding of moving average price. For instance, in maintenance projects, the availability of fundsfor the repair of equipment is affected largely by the money spent on labor and materials.

The cost charged against an MWO for a material is a function of the current moving average price for that materialmultiplied by the quantity issued. If the moving average price is skewed, it can artificially reduce the budget moneyshown as available for the project. As with the preceding example, that can prevent the creation of POs until youidentify the mistake and correct it. To find the cause of the error and fix it, you need to understand what can affectmoving average price, what it in turn affects, and to what degree.

Finding the Moving Average PriceTo see the current moving average price for plant stock and project stock, you have to look in a different place foreach.

For the current plant stock moving average price, the moving average price is shown in the Mov. avg. price field ofthe material master on the Accounting 1 tab (Figure 1).

Figure 1

Material master

Directly entering or changing the price on the material master can be done only during creation of the record(transaction MM01). After you create and save the record, you need to use transaction MR21 to revise the materialmaster price. You also can find the current moving average price for plant stock on table MBEW. Use tableMBEWH for history on the moving average price. (However, it does not include the current period, only pastperiods.)

For the current project stock moving average price, use transaction MBBS. Add columns on the Results screen todisplay the moving average price and price control (Figure 2).

Figure 2

A list of results for the valuated sales order and project stock

Use the current display variant icon to access additional columns for display. The columns for movingaverage price and price control are on the right. You can also use table QBEW. Use table QBEWH forhistory on the moving average price by period. (Again, it includes data only for the past prices).

What Does and Does Not Affect Moving Average PriceThe following transactions and events affect moving average price:

MR21 price changeGoods receipts/101 valuated goods receipt and 505Goods receipt reversals/102 (frequently)InvoicesInvoice reversals (potentially)Subsequent debits/subsequent creditsCredit memos (rarely)MR11 Maintain GR/IR clearing accountMB1C/561 and 562 Goods receipt other (also known as pennies from heaven, and its reversal)MB1B transfer/415 and 416 (915, 916 and Z15, Z16) plant stock-to-project and its reversalGoods issue reversal /262 Goods issue has no effect, but a reversal can affect moving average pricePrice control V or S

The following transactions and events do not affect moving average price:

Goods issue to a work order/261Goods receipts/103 conditional goods receiptMI07/701 and 702 Gain/loss by inventory

Deliveries (At my current project, we create or execute delivery orders only from plant stock, and thetransaction uses the price on the material master and multiplies by the quantity involved (moving averageprice remains unchanged.)

Note that except for transaction MR21, the methods I discuss do not have any immediate effect on the movingaverage price unless they either create (put) stock on hand or already contain actual stock on hand in that type ofstock (i.e., project stock or plant stock as applicable to what you are doing). The reason is because the systemcalculates the moving average price dynamically by dividing the total value of the on-hand stock by the totalquantity of the on-hand stock. If there is no stock for that calculation, there can be no change to the movingaverage price.

MR21 Price ChangeThe MR21 price change is almost always executed with the default settings. The most important of these settingsis the Variant field. This field is on the follow-on screen to the initial screen and is set up by default to deal withstock material (i.e., plant stock) as shown in Figure 3.

Figure 3

The default setting for the MR21 price change variant

If you leave the Variant field in its default setting and enter the new price, the transaction changes only the plantstock moving average price, resulting in immediate changes to the material master and the price of any on-handplant stock. The price change shows up on the change log in the material master. When you execute MR21 withthe default setting, there is no effect on project stock.

However, the Variant field is changeable. The field has a drop-down menu with additional choices ( Figure 4):

All MaterialsSpecial Stock - Sales OrderSpecial Stock - WBS Element

Figure 4

Variant field settings

The settings labeled All Materials and Special Stock - WBS Element can both change the project stock price. Ifyou select either setting, the screen changes to include a field to specify the WBS number. By entering a WBS, themoving average price is directly changed for that (and only that) specific project stock line. This change alsoimmediately changes the value of all on-hand materials on that WBS in that plant (regardless of in which storagelocation they are). With these selections, no change is made to plant stock or the material master.

It is important to note that no materials management (MM) movement type is associated with transaction MR21.No material document is created. Therefore, you cant use transaction MB51 to find the price change. Becausethese two selections for the Variant field do not change the plant stock, you wont see the change in the materialmaster either.

The only way to find the actual transaction or occurrence of the price change via MR21 to project stock is to usetransaction MR51 (accounting documents for material) to search for the actual price change document. Enter theMaterial number, the Valuation Area, and relevant dates. Click the drop-down in the Document Type field andselect PR (Figure 5). Click the execute icon .

Figure 5

The initial screen for MR51

On the results screen double-click the Accnt. Doc number. On the subsequent Doc Overview screen click theheader icon. Now double-click the value in the Reference key field. This action provides you with the actual PriceChange document showing the WBS involved. Both the old and new moving average price of the material (shownin the table at the bottom of Figure 6) appear. Although this report does not include the actual screen, it isessentially the same as the screen shown in Figure 6 except that the actual screen also shows the total change invalue (up or down) of the stock on hand at the time.

Figure 6

Price Change document with old and new moving average prices shown

NoteWhen used to change the plant stock price, MR21 can also skew the outcome of a report on plant stock balances.MR21 changes not only the value shown on the material master but also the value of all plant stock inventoryquantity currently on hand. However, it does not change the value shown on the constituent movements thatbrought about the plant stock quantity currently on hand. Although the totals shown in transaction MC.5 - StorageLocation Analysis (for plant stock) and table MBEW (Material Valuation) match the total of the movements shownin MB51 (Material Document Movements) before the price change, they are out of sync after the price change.

Goods Receipts Movement Types 101 and 505Whether movement types 101 and 505 affect moving average price depends on which account assignmentcategory is used on the purchase order. Only GRs that create inventory can affect the moving average price. Theonly account assignment category used at my current project that creates inventory is Q (i.e., Project Stock Make-to-Order). GRs for POs with an account assignment category of Q have a direct or proportionate impact on thecurrent moving average price of that material or WBS (used on that PO). The system adds the GR quantity andvalue to the stock already on hand and then recalculates the moving average price. The GR establishes themoving average price if there was none already on hand.

The hypothetical GR just mentioned has no impact on the project stock moving average price for the samematerial on any other WBS. This GR also doesnt affect the plant stock moving average price for the samematerial. Account assignment category K (Cost Center), I (Internal Order), F (Order), and P (Project) areconsumption account assignment categories. They produce no inventory and thus have no impact on movingaverage price.

NoteMind your Ps and Qs here so to speak regarding account assignment categories. P and Q are not the same. Bothdo indeed procure materials for a project, but again, materials obtained on a PO using P as the accountassignment category are consumed (i.e., expended) upon receipt. The Q, however, actually creates inventory on

the project stock line for the WBS included on the PO. A blank account assignment category also createsinventory, but that is used for real stock (i.e., plant stock). At our project, we do not execute receipts of plant stock.

Goods Receipt Reversal (Mov Type 102)After you execute a 101 goods receipt and you determine that the receipt was posted in error (e.g., the wrongmaterial number or the wrong storage location was entered), you need to execute an additional receipt usingmovement type 102 to reverse the effect of the original GR.

A GR reversal often changes the moving average price because the system does not use the moving averageprice to determine the dollar value of GR reversals. Under normal circumstances, the system uses the dollar valueof the original GR. Because moving average price is dynamic, it is often different from the price created when theoriginal GR was entered by the time the reversal occurs. Therefore, a GR reversal changes the moving averageprice any time the reversal dollar value per item is different from the current moving average price.

Because the system normally values the GR reversal the same as the value of the original GR, that is the dollarvalue that the system charges against the stock account when you execute the GR reversal. The systemrecalculates the moving average price to its new amount after the reduction in quantity and value brought about bythe reversal. (Conceptually, this is clear.)

However, theres a catch. This is only true if:

No invoice is postedAn invoice is posted, but with same value as the GRAn invoice has been posted and then reversed

In other words, whether the GR reversal is given the same value as the original GR depends completely on theinvoice circumstance. If you post an invoice (even one for partial quantity) with a different price per item from theprice listed for the GR, and that invoice is still in place (i.e., not reversed before the GR reversal is executed), thevalue of the GR and GR reversal is always different.

The degree of effect on the moving average price depends largely on the value of the GR reversal. However, italso depends on how much of that value is charged against the stock account. (Its not always the entire amount ofthe GR reversal.) Determining that amount is easy just look at the accounting document created by the reversal.

Understanding why the system chose this as the amount to charge against the stock account can be a verydifferent matter because it is affected by a couple of variables. To limit the confusion, lets ignore the movingaverage price for a moment and concentrate instead on how the system determines the dollar value of the GRreversal itself when an invoice with a different price per item is still in place.

GR Reversal ValueConsider two quantity circumstances as examples: a full quantity and a partial quantity invoice:

A full quantity invoice: When you post this invoice, the system makes an accounting adjustment to the valueof the stock account because the invoice has a different price per item from the GR price per item. (See thelater section on invoices for details.) Therefore, the concept in this case is as follows: The systemdisregards the GR and uses the value of the invoice as the value of the GR reversal. In other words,because the system already made that adjustment previously, if it used the value of the original GR here, itwould be compensating for the difference twice (thats why it ignores the GR here).

The system captures the information from all transactions associated with GRs and invoices for a PO and recordsthis data in the Purchase Order history. Figure 7 shows a view of the historical record that results from thisscenario. First, the original GR is shown by the row with movement type (Mvt) 101 and a value of $9.00.Chronologically, the invoice was posted next for $45.00 (represented by the row labeled IR-L). Finally, the userreversed the GR (Mvt 102). Because the invoice was still in place at the time of the GR reversal, the system bases

the value of the reversal on the invoice value. Thus, the 102 GR reversal is valued at -$45.00 rather than -$9.00.

Figure 7

GR reversal value with invoice still in place

A partial quantity invoice: Again, when the invoice was posted, the system also made an accountingadjustment to the value of the stock account to compensate for the difference in price per item on theinvoice compared with the previously posted GR. However, in this case, it was a lesser amount because itwas compensating for only the partial quantity on the invoice. When the GR is reversed, to establish thevalue of the reversal, the system uses the invoice price per item for the portion of the GR quantity coveredby the invoice, and the GR price per item for the remaining quantity of the GR.

Consider this example. A GR is posted for 10 at $0.87 each for a total GR value of $8.70. An invoice is laterposted for 5, but at a higher price per item: $1.00 each for a total invoice value of $5.00. With the invoice still inplace, the user reverses the GR. The system calculates the full quantity of 10 in the reversal. However, it figures 5of the 10 at $1.00 each and the other 5 at $0.87 each. So the total value of the GR reversal is -$9.35 (not theoriginal GR value of $8.70).

Regardless of whether the invoice is for full quantity or partial quantity, if that invoice is still in place when a GRreversal is executed, you need to understand this concept: If the invoice was at a higher price per item than theGR, then the GR reversal value is greater than the original GR value and vice versa. The bottom line: Reversethe invoice before the GR reversal.

Portion of Reversal Charged to Stock AccountNow for how much of the GR reversal value (what portion of it) is charged to the stock account. (Remember, this isif the differing value invoice is not reversed first.) As stated earlier, the easy way to determine this is to review theaccounting document that the GR reversal created.

Only a few things affect the document that the GR created.

Question: Is the quantity on hand a variable here? Answer: No, not with regard to how much of the GR reversal value is charged to the stock account. There is eitherenough quantity for the system to allow the reversal to occur or there is not. The system disallows a GR reversalfor a quantity greater than the quantity on hand (i.e., the system does not allow a partial quantity reversal. Its theentire line-item quantity or nothing).

Question: Does it matter whether the invoice dollar value is higher or lower than the original GR value?Answer: No. That certainly matters with regard to both the direction and amount of the difference between theoriginal GR value and the GR reversal value, but either way, the GR reversal can cause a change in the value ofthe stock account only in one direction down. That does not mean that the moving average price always goesdown, only that the total value of the stock account does.

Question: Does it matter whether the invoice was for full quantity rather than partial quantity?Answer: No. This too only affects the size of the reversal itself not how much of that affects the stock account.

So whats left? You need to focus on two issues pertaining to the current stock account dollar value:

Was the current stock account dollar value enough to cover the GR reversal dollar value? (The stockaccount cant be charged more than it has in value. If its current total value is less than the GR reversalvalue, the stock account is reduced to zero, and the remainder of the reduction is charged to one of the losstype accounts. In that case, any remaining on-hand quantity has a moving average price of $0.00.)Was the current stock account dollar value already literally at zero before the GR reversal, even thoughthere was sufficient quantity on hand? If so, different accounts would be affected, possibly even the plantstock account (also referred to as the warehouse fund). If the project stock account value was already atzero, its value is not affected by the reversal. Consequently, the moving average price stays at what it wasas well zero. If the stock account still has quantity and value after the impact of the GR reversal, thesystem divides the new total value by the new quantity to establish the new moving average price.

Effect of GR Reversal on PO History (3-Way Match)PO history is somewhat of a different subject than the moving average price, but worth discussing because theHistory tab on the PO is what everyone looks at (and many users become confused when they view data in thistab). When users execute a GR reversal, they expect to see it shown with the same value as the GR itself on thePO History tab. When that occurs, the math on the GR history balances out to zero. Thats a great result. The usercan start over no problem or confusion exists.

However, as I explain in the previous section, this is not the case if the invoice is posted for a value different fromthe GR, and that invoice has not been completely reversed via an actual MR8M transaction or a full quantity creditmemo within the MIRO transaction.

A subsequent credit for the entire amount of the invoice does not suffice to remove the invoice. That is not areversal of an invoice. It is simply changing the value of the invoice to a lower one. Even if a subsequent credit forthe full invoice amount were executed, the system would still consider that an invoice had been posted, and thatthe material was literally free. Unless the original GR was also free, that would confuse things on the PO History toan even greater degree.

When the GR and the GR reversal are posted with different values, the GR history shown is not zero, and its nolonger simple. When that occurs, it affects (from a visual look at the PO History perspective) the three-way matchbetween the PO line-item price/GR price, or invoice price. That can create a very confusing circumstance to theuser responsible for ensuring that these prices all match each other. Usually, they make it worse trying to get themto match each other.

NoteIn the previous section I explain how the system determines the dollar value of the GR reversal (i.e., on what itbases that value). I restate the basic concept here in a different way: If the GR and the invoice are for the samequantity, and the invoice is still in place, then the GR reversal value shown is the same as the invoice value (plusor minus the value of any subsequent debits or credits). There may be an exception to this, but if there is, I havenever seen it. (Refer to the previous section for the effect of partial invoices.)

Technically, the reversal value shown on in the PO History tab represents the amount charged against the GR/IRaccount for the reversal. This value also represents the countering entry to the project stock account or the pricedifferences account. (The price difference account comes into play in circumstances such as the value on thestock account not being sufficient to cover the reversal.)

The consequence of the preceding scenario is a zero total quantity shown for the goods receipts section in the POHistory, but with a total value that is not zero. (The PO History is simply showing the math result for valuation onthe goods receipt side.) The users see this, and often try to fix it by posting a cancellation of the 102 GR reversal(i.e., reversing the reversal which results in the system posting a 101 GR in the background), or manuallyposting another 101 goods receipt.

Users often continue through many attempts (sometimes very many) but always to no avail. They still have themismatch between the GR total value and invoice total value, or a GR total quantity of zero with some dollar value

(negative or positive), as shown in Figure 8. This figure shows the effect of an original GR (101) for $9.00, aninvoice for $45.00, and multiple attempts to reverse (102) and repost (101) the GR with the invoice still in place.

Figure 8

Effect of GR reversal on PO History (3-way match)

The resulting GR totals are: Quantity = 0, and $ Value = -36.00.

As long as that full quantity invoice is still in place, all 101 and 102 postings continue to be valued at the amount ofthe invoice (no matter what). It doesnt even matter if the moving average price is manually changed withexecution of an MR21 transaction or even if the PO line-item price is changed. The system still values any manualGR 101s, reversals, or reversals of reversals at the same price as the invoice.

Question: With PO History showing the quantity at zero, should the user try to get rid of the value shown for thatzero quantity? Answer: No. The system has made the correct postings as it is. Any problem is really only with the visual of thePO History. When that invoice with the value that is different from the GR is posted, the system immediatelymakes a posting for the difference against the project stock account. A careful review of the accounting documentsfor the invoice shows that this occurred. The accounting document labeled Cost accounting doc shows this activity.That posting against the project stock account actually changed the moving average price. So even though POHistory seems to indicate that something needs to be done to correct an imbalance, the system has already madethe correction. What looks like a problem on PO History is actually not a problem.

Question: Why does the system create or allow this confusion by showing the GR reversal value as being that ofthe invoice? Why doesnt it use the value of the original GR?Answer: The invoice value is the only remaining value of the original GR. As stated above, the difference betweenthe GR and the invoice is already dealt with (in terms of the stock account) when the invoice is posted. Therefore,the invoice value is all that is left to deal with. So that is the correct value of the GR reversal. If the system used thefull amount of the original GR as the value of the GR reversal, it would be dealing with (correcting) the amount ofthe difference a second time. That truly would create an accounting mismatch or error. Any manual attempt tochange the GR portion of PO History is unnecessary. The result is artificial at best, and makes it worse behind thescenes. I recommend that you live with that value on the PO History as it is.

Some people may advise posting an MR11 transaction (Maintain GR/IR Clearing Account) in this circumstance. Idont agree. The system would allow an MR11 to execute in this case because there is (at this point) a differencebetween the quantity invoiced and the quantity received. However, this is not the circumstance that an MR11 isintended to correct. An MR11 does not cause that existing dollar value for the quantity of zero to go away. It showsa posting of the quantity involved, and shows that quantity with a value of zero. (Visually, that is not even shown inthe GR area of PO History. It is shown in PO History between the GR area and the invoice area.)

More important from an accounting point of view, even though the line in PO History shows zero value, in thiscase, the MR11 actually adds value to the stock account (with no increase in quantity on hand). It incorrectlyincreases the moving average price and still does not make the PO History look any better. I think it is as if you areforcing the balance on a checkbook for all the wrong reasons. (See the section labeled MR11 Maintain GR/IRClearing Account for an explanation of what MR11s are for, how they work, and what the system uses todetermine the dollar value.)

Question: I still have zero quantity received, but with a value. What is the best approach here? Answer: Well, first even now reverse the invoice. Then, if the PO line-item price is not correct, change it so itis. Then, you need to get the inventory back on hand, so post a GR. This time the system uses the price on the POline item (because the invoice is gone now). Then repost the invoice. The system suggests the new GR price asthe invoice value Use this price. The PO History totals for GR and invoice still do not match, but the accounting iscorrect. Leave it as it is at this point, and move on.

Without a doubt, the best way to avoid the apparent mismatch (and the incredible confusion that can follow intrying to fix it), is to reverse the invoice with transaction MR8M (and nullify any subsequent debits or credits withopposite postings) before executing the first GR reversal.

Conditional Goods ReceiptA 103 Conditional GR (movement type 103) does not affect the moving average price. This is a conditional receiptintended only to document that the material has arrived and that it is in your possession. However, its eitherdamaged or is the wrong material, and you accept no liability to the vendor. No quantity is posted on PO History,and no inventory is created. Therefore, no charge to the stock account occurs, and there is no impact on themoving average price

InvoicesInvoices are similar to GRs in that their impact on the moving average price depends on the account assignmentcategory of the PO. Like GRs, invoices affect the moving average price only for POs with account assignmentcategories that accumulate stock on hand (only account assignment category Q or Blank at projects with realstock). Even then, the stock must be on hand when the invoice is posted or the invoice still has no effect.

NoteThe information below assumes that a GR has already been executed for the specific PO that the invoice is for,and that GR has not been reversed. An invoice executed without a GR having been posted (i.e., the GR-based IVcheck box on the PO was not checked), or with a GR posted but then reversed, has no impact on the movingaverage price, even if the project stock account already has quantity on hand and value. This may seem surprisingor even counterintuitive, but it is true because an invoice cannot create inventory itself, and does not affectinventory price or value until the material it is billing for is received into inventory for the PO and the WBS thatordered it. The system does not try to determine if any quantity of the same material for the same WBS exists ininventory and increase the value of that project stock.

Most POs do have the GR-based IV check box on the Invoice tab checked. The system responds by preventing aninvoice from being posted until a GR exists (at least a partial receipt). Invoice tolerances can also be establishedat the system level to limit the invoice quantity to the quantity received. In a standard SAP system, though, once aGR for any quantity exists, the entire PO quantity can be invoiced.

By design, the system does not use the current moving average price for valuating invoices. When the invoice isexecuted (via MIRO) and the PO number involved is entered, the system suggests or defaults to the quantity andprice from the GR. If the invoice is posted with that suggested quantity or price, the invoice has no impact on themoving average price. The GR has already established the impact for that quantity or price.

However, the invoice transaction MIRO allows manual entry or change of both quantity and price. (This is standardSAP functionality because the vendors actual bill sometimes varies from what you expect.) If an invoice is postedwith a price per item that differs from the GR, the invoice absolutely affects the moving average price. The invoiceimpact trumps the effect of the GR. The GR affects the moving average price, but only temporarily until theinvoice is posted. Then it depends on the circumstances as to what happens:

If the invoice price per item is higher than the GR price per item, the invoice is for full quantity, and the totalquantity is still on hand, the invoice price is not just averaged in with the GR price. The invoice in effect replacesthe GR impact completely. It is as if the system says, OK, you must have thought the price was going to be $1.00each when you posted the GR, but now we see by the invoice that it is actually $2.00 each. And were going to let

the invoice have the final say. The system overwrites the effect of the GR with the impact of the invoice as if theGR never happened. (Although the system actually just adds the $1.00 each increase to the $1.00 each valueestablished by the GR, the effect is as if the invoice replaced the GR.)

The preceding explanation applies only if there is stock on hand when the invoice is posted. If a GR is made, andthe goods issue of that material or a transfer occurs before an invoice for a higher dollar amount is posted (leavingthe on hand quantity at literally zero), the invoice does not affect the moving average price. The system leaves thestock account charged with only the original amount shown on the GR and posts the rest of the higher invoiceamount to a price differences account, thereby leaving the moving average price as it was before.

Concept: Some transactions or movement types put stock on hand (i.e., they create inventory) such as goodsreceipts or movement types 561 (goods receipt other or pennies from heaven) or 415 (transfer plant stock toproject stock). These affect the moving average price even if no stock existed on hand prior to their execution.However, transactions that do involve price, but that do not put stock on hand can only change the moving averageprice if there already is stock on hand on which to change the price. Examples are invoices and subsequentdebits.

If the invoice is for a greater (or lesser) quantity, but the price per item is still the same (as it was on the GR), thenposting the invoice changes neither the moving average price nor the total value. You might think that with aninvoice for a greater quantity, the total value on the stock account would increase, and that the moving averageprice would therefore increase. However, that is not what happens. The quantity on hand is still what the GRbrought in. (As stated earlier, the invoice does not add or remove inventory quantity.)

Instead, the system says the following: Ok, you GRd a quantity of 4 at 1.00 each. You then invoiced a quantity of8 at 1.00 each. I (the system) still have an actual quantity of 4 on hand, and since the price on the invoice is still1.00 each, none of that invoice charge for the additional quantity is going to be posted to the stock account. Itstotal value is still 4.00. I hit only two accounts for that invoice the GR/IR Clearing Account and the VendorAccount (debiting one and crediting the other for offsetting amounts). I always do that when its a quantitydifference, but with the same price per item. You and your vendor should discuss this and decide whether anotherGR is going to be executed for the other four, or if a credit memo for a quantity of 4 is going to be needed instead.

The same principle applies for an invoice with the same price per item, but a lesser quantity. However, if theinvoice is for both a greater quantity and a greater price per item (than the GR), then it gets a little morecomplicated. Instead of only the GR/IR and vendor accounts being debited and credited for equal amounts, theproject stock account and the price differences account are also involved (and not for equal amounts). It seemslogical that these are the accounts affected consistently, but how much goes to the GR/IR account, how muchgoes to the stock account, and how that affects the moving average price can appear to be utterly random.However, it is not. There is logical method to the madness. The below example demonstrates that logic.

The circumstance: Zero quantity of a material exists initially.A GR is posted for a quantity of 2 at $1.00 each. Total value of GR = $2.00, total value of stock account = $2.00,total quantity on hand = 2, moving average price = $1.00 each.An invoice is then posted for a quantity of 3 at $2.00 each for a total invoiced value of $6.00.

The system uses two separate calculations in the accounting for the invoice. One determines how much of theinvoice value affects the GR/IR account. (In this circumstance, it is not all of it.) The other calculation is used todetermine how much of whats left affects the stock account. (In this case as well, it is not the entire amount.)

Heres what the system did: The vendor account = -$6.00 (total value of invoice). The GR/IR account = +$4.00.Why? The system determines the difference between the GR price per item and the invoice price per item. It thenmultiplies the difference by either the GR quantity or the invoice quantity, whichever is the lower of the two. In thiscase, thats the GR quantity. The difference between GR price per item and invoice price per item is $1.00 each.That difference value times the quantity received (2) equals $2.00. That is the portion of the invoice value thatdoes not affect the GR/IR account. The amount that is posted to the GR/IR is $4.00.

That leaves $2.00 of the invoice value that has to be posted somewhere to finish offsetting the amount that went to

the vendor account. It does not all go to the stock account because even though the full quantity of the GR is stillon hand, the full quantity of the invoice is not. Therefore, the system divides the $2.00 in proportion to the quantityon hand (i.e., it sets up a ratio of the quantity on hand compared with quantity invoiced). Although the GR quantitycan come into play on the first calculation, it is not considered on this (the second) calculation. Even if the GRquantity is less than the invoice quantity, the on-hand quantity is always compared with the invoice quantity.

Therefore, the stock account = $1.33 (i.e., quantity two of the three invoiced are actually on hand, so thesystem applies two-thirds of the $2.00 to that account.)The price differences account = $0.67 (i.e., the remainder of the $2.00)The $1.33 is added to the previous stock account value of $2.00 to make a new total value for the stockaccount of $3.33. With a quantity of two on hand, that made the new moving average price $1.67 each.

The next example shows the same accounts affected and, in my opinion, shows the same logic at play regardingthe amount charged to GR/IR and to the stock account. The circumstance: Zero quantity of a material existsinitially.

A GR is executed for a quantity of three at $3.00 each. Total value of stock account = $9.00, moving average price= $3.00 each. Two were then issued, so only a quantity of one remains on hand with moving average price still at$3.00. Then an invoice is executed for a quantity of nine at $5.00 each for a total invoiced value of $45.00.

Heres what the system does: The vendor account = -$45.00. The GR/IR account = + $39.00. Why? Thedifference between GR price per item and invoice price per item is $2.00 each. Again, the system multiplies that bythe lower of the GR and invoice quantity (in this case, the GR quantity). That difference value ($2.00) times thequantity received (3) equals $6.00. That is the portion of the invoice value that does not hit the GR/IR account.The amount that is posted to the GR/IR is $39.00.

Notice that for this calculation, the quantity on hand is ignored. Thats because the system is determining howmuch to charge the GR/IR account (not the stock account) so the GR quantity is whats in play.

That leaves $6.00 of the invoice value that has to be posted somewhere to finish offsetting the amount that to thevendor account. Remember, the system has another calculation to determine how much of that $6.00 goes to thestock account. Now the quantity on the stock account is pertinent, and the GR quantity is ignored. If (as in thiscase), the quantity on hand is less than the quantity invoiced, the full $6.00 does not go to the stock account.Again, the system sets up a ratio of quantity on hand (one) compared with quantity invoiced (nine) to determinethe amount with which to change the value of the stock account.

That ratio is 1/9. That means one-ninth of the $6.00 remaining (i.e., $0.67) went to the stock account. The $0.67 isadded to the current stock account value of $3.00 to make a new total value of $3.67. With a quantity of one onhand, that makes the new moving average price $3.67 each. What about the rest of the $6.00? The remaining$5.33 is charged to the price difference account.

These examples are important for understanding the effect on the moving average price in this invoicecircumstance. They explain the how and why of the accounting. If you run into one of these, keep the following inmind:

The bottom line on invoices with greater quantity and greater price per item: To figure out the effect on the movingaverage price easily just review the accounting documents and see how much went to the stock account. Thatamount would be added to the total value that was previously there. The system would then recalculate themoving average price with that new value divided by the (unchanged) quantity. If you determine later that theinvoice was incorrect in quantity, price, or both, dont try to fix it with a credit memo or subsequent debit or credit.That approach is certain to create a web of complexity and confusion that cannot be overstated. Instead, to fix aninvoice like this, make sure there is enough quantity on hand to cover the invoice quantity (reverse the goods issueif the material is already issued). Then simply reverse the whole invoice with an MR8M transaction and start over.

If the invoice price per item is lower than the GR price per item, (regardless of whether the invoice quantity ishigher or lower than the GR quantity), how moving average price is affected again depends mostly on the quantity

still on hand when the invoice is posted. If nothing else has caused a change in moving average price between thetime of the GR and the invoice, the following applies:

If full quantity is on hand (and the GR and invoice are for the same quantity), the system simply reduces thetotal value of the stock account by the amount the invoice is lower than the GR. The system recalculates themoving average price by dividing the new lower total value by the same quantity as before. The newmoving average price is thus proportionately lower.With partial quantity on hand, the system reduces the stock account value, but in this case, only by theamount of difference proportionate to the quantity on hand compared with the quantity invoiced. The ratio ofon hand quantity or invoiced quantity applies here, too.

For example, a GR is posted for a quantity of 3 at $30.00 each. Total value = $90.00, (moving average price =$30.00 each). Then a goods issue is posted for one leaving a quantity on hand of two. The total value is now$60.00 (moving average price still is at $30.00 each.) An invoice is then posted for a quantity of four, but at a valueof $3.00 each, or a total invoice value of $12.00. The difference between the GR price per item and the invoiceprice per item is $27.00 each. This difference times three (lower of the quantities for GR and invoice) = $81.00.Since there are only two on hand at the time, the ratio of on-hand quantity to invoice quantity is two-fourths, or halfthe $81.00. (Remember, the GR quantity is not involved in this part.) The system only reduces the $60.00 stockaccount value by $40.50. The other $40.50 of the $81.00 difference is posted to the price difference account. Thenew total value of the stock account is $19.50. The new moving average price for the two on hand is $9.75 each.

With zero quantity on hand the end result is no change to moving average price. The system can only recalculatethe moving average price if there is stock on hand.

Potential Error Message

If the current total value of the stock account is so low that it is less than the amount that the system would need toreduce the stock account, and there is any quantity on hand, the system disallows the invoice and provides a harderror message, Moving average price for material is negative. The system is not saying here that the movingaverage price is already negative. It is saying that it would be negative if the system were to allow the invoice topost. The system prevents that from occurring.

You can use three methods to force the system to allow the invoice to post:

Preferred method: If a goods issue has been executed, reversing it usually puts enough quantity/value onhand to allow the invoice to post. This is the preferred method because it also means that when the goodsissue is reposted afterward, the system uses the new, lowered moving average price to establish the valueof the goods issue transaction. That means it will more accurately reflect the actual cost to the work order.Acceptable method: Use MR21 to change price on the material/WBS such that the total value of the projectstock account is higher than the amount of the reduction to the stock account. (The price can then bechanged back again if desirable.) Then execute the invoice.Acceptable method: Temporarily issue all the material quantity on hand to an MWO on this WBS. Nowexecute the invoice, and then reverse the goods issue. (The explanation on why this is allowed followsbelow.)Least preferable method: Use transaction MB1C/561 Q Initial Entry of Project Stock (also referred to aspennies from heaven) to temporarily place enough stock on the project stock line to increase the stockaccount value to cover the reduction amount. Post the invoice, and then reverse the 561 Q (pennies fromheaven) with a 562 Q (i.e., heaven took it back) to re-establish the original inventory quantity.Any other method that would either result in stock being on hand at a total value high enough to cover thereduction in stock account value created by the invoice, or that would remove the stock on hand completely.

For a complete explanation of when this error message occurs, see the later section labeled Error Message:Moving Average Price for Material Is Negative. Although the system prevents the invoice posting in the

circumstance resulting in this error message, there is an exception to the rule. If there is literally zero stock onhand, the system does allow the invoice to be posted. In that case, automatic account determination is set up tosimply post the reduction to the price difference account. The above error therefore does not occur.

Using the previous example, if all three of the quantities received had been issued leaving zero quantity on handwhen the invoice was posted, the system would post all the $81.00 difference to the price difference account, andwould not recalculate the moving average price. Table QBEW would show zero for both total quantity and totalvalue, and would still show moving average price as $30.00 ea. (Although the invoice in this case certainly affectsthe vendor account, it has no effect at all on the stock account.)

Realistically, though, the $30.00 moving average price is somewhat meaningless since there is zero quantity onhand. As soon as a transaction occurs that puts quantity on hand, the system would completely ignore the $30.00moving average price and calculate a new one from scratch based on that new transaction.

Another way to look at part of this: If an invoice is posted for a lesser quantity than the GR covered, and theinvoice is for a lower or higher price per item and the full receipt quantity is still on hand, the invoice affects onlythat portion of the total quantity that it included. The GR still controls/affects the moving average price of thequantity not covered by the invoice.

For example: Lets say you perform a GR on a quantity of 10 at $5.00 each for total value of $50.00. If none wereon hand before, the moving average price is $5.00 each. You then invoice a quantity of 1 of those items for a valueof only $1.00. The system recalculates the moving average price. It replaces the GR value of 1 of the 10 at $5.00with the invoice value of $1.00, so the total value is reduced from $50.00 to $46.00. Total quantity is still 10 onhand. The system calculates the new moving average price as $4.60.

Invoice ReversalsReversals of invoices behave exactly like the invoice itself does as far as the impact on the moving average pricegoes. Just as with invoices, invoice reversals do not change the quantity on hand. Reversals of invoices on POswith consumption type Account Assignment Categories have no effect on moving average price. The system doesnot use the current moving average price to valuate the reversal; it uses the value of the original invoice.

The degree to which the moving average price is affected depends completely on the quantity on hand at the timeof the reversal. The direction of the effect (up or down) depends on whether the invoice price per item is higher,lower, or the same as the GR.

If the full invoiced quantity is still on hand, (and the total value of the stock account is sufficient) the value of theoriginal invoice is taken away from the total value the system shows for that stock account (in table QBEW). It isreplaced by the dollar value of that quantity from the GR.

Note that replacing the invoice value with the GR value for the same quantity is only meaningful to the movingaverage price if the price per item on the GR and invoice are different. If they are the same, there is no impact tothe moving average price at all. However, if they are in fact different, upon reversal of the invoice, the systemreestablishes the GR as the controlling price for that particular quantity, and then recalculates the moving averageprice by dividing the new dollar value by the total quantity. The moving average price would go back to what it wasbefore the invoice (or to what it would have been without the invoice if other movements have changed the movingaverage price in the time between the execution of the GR and the invoice).

As with the original invoice, invoice reversals may result in the hard error message Moving average price formaterial is negative. There must be stock on hand for this error to occur, and the current total value of the stockaccount must be less than the amount by which the system would have reduced the stock account for thatquantity. However, the system does not always reduce the stock account by the full dollar value of the invoicereversal. For a complete explanation, see the later section labeled Error Message: Moving Average Price forMaterial is Negative.

Again, (although it may seem strange), if there is zero quantity on hand, the system does not invoke the error, and

instead allows the reversal to post. In that case, automatic account determination functionality is set to simplyapply the entire reduction to the price differences account. The system accepts that, but does not allow the projectstock account to have a negative value/moving average price.

If only partial quantity is on hand, the reversal of the invoice affects the moving average price much differently. Forexample, a quantity of 1 already exists on hand with a total value and moving average price of $3.00 (in tableQBEW). A GR is executed for a PO of quantity 3 at $3.00 each for a total GR value of $9.00. Total quantity onhand is therefore now 4, the total value of the stock account is therefore now $12.00, and the moving averageprice is still $3.00.

An invoice is executed for a quantity of 3, but at $10.00 each for a total invoice value of $30.00. The system (ineffect) replaces the $9.00 GR with the $30.00 invoice. So, the total value of Stock Account in table QBEW is now$33.00 ($3.00 previously there, plus the $30.00 invoice). The quantity is still 4, so the moving average price is now$8.25.

A goods issue is then executed for a quantity of 3 (3 at $8.25 ea, so the value of the goods issue is $24.75). Thetotal quantity left is 1, the total value is now $8.25, and therefore the moving average price is still $8.25.

Now completely reverse the invoice (that had been for a quantity of 3, at $10.00 each for a total invoice value of$30.00). The accounts impacted are the vendor account and the GR/IR account. The accounting works out asfollows: The vendor account is debited (the liability to the vendor is reduced) by $30.00. The GR/IR account iscredited by -$9.00, which is the value of the original GR and therefore the amount posted to the GR/IR accountfrom the original invoice. The GR quantity affects the GR/IR posting. On hand quantity affects the stock accountposting.

That leaves $21.00 of the $30.00 that still has to be applied somewhere to balance out the amount that hit theVendor Account. However, there is only 1 of the quantity of 3 left on hand (one third of the invoice quantity).Therefore:- Stock Account: -$7.00 (system applies one-third of the $21.00 to the stock account)- Price Diff Accnt: -$14.00 (system applies the remainder of the $21.00 here)

The $7.00 is subtracted from the previous total value in table QBEW of $8.25. That leaves table QBEW showingthe stock account with a quantity of 1, total value of $1.25, and the moving average price = $1.25.

If there is no stock on hand (zero quantity), the reversal of the invoice is ignored in terms of the moving averageprice. The moving average price simply stays as it was before the reversal. (Accounting documents are stillcreated but as stated above, the full value of the reversal is applied to the price difference account, with nothingapplied to the stock account.)

Subsequent Debits/Subsequent CreditsSubsequent debits and credits simply revise the degree of the effect of an invoice. A subsequent debit or credit canonly be done for (and in reference to) an invoice that was previously executed (thus the term Subsequent). Itcannot stand on its own. Therefore, it simply changes the dollar value of the invoice it pertains to. It does notchange the quantity. The quantity of the related invoice is still as it was. The change in invoice price is expressedin terms of the whole amount, not the amount per item.

The system increases or decreases the total value of the stock account by the value of the subsequent debit orcredit (as applicable). The system uses that new value in the recalculation of the moving average price which isrevised accordingly.

This too though is only if there is still stock on hand. Even if there was stock on hand when the invoice wasposted, if that stock is issued before the subsequent debit/credit is posted, there is no impact on the movingaverage price. Here too, the accounting document for the subsequent debit/credit would simply show the up ordown dollar value posted to the price differences account.

If there is partial quantity on hand at the time of the subsequent debit or credit, the system raises or lowers the

moving average price of the material proportionately.

Credit MemosA credit memo is a type of invoice reversal (and therefore, you cant post one unless an invoice already exists).

A credit memo and transaction MR8M (Cancel Invoice Document) are different only in that an MR8M can only beused to reverse the entire invoice, while a credit memo can be used either to reverse a portion of an invoice or tothe reverse the whole thing.

A credit memo is used to correct an invoice that was posted with the correct price per item, but with the wrongquantity.

Quantity is always involved in a credit memo not the quantity in inventory, but the excess quantity invoiced. Letssay that the vendor physically sent you a quantity of 5, and you GRd that quantity of 5 at $4.00 each. Then thevendor invoiced you for a quantity of 8 at $4.00 each, and you posted the invoice that way. As soon as yourealized the mistake, to correct it youd do a credit memo for a quantity of 3 at $4.00 each, $12.00 total. (Youwould not do that if the quantity on the original invoice is correct and only the price is wrong. In that case, asubsequent debit or subsequent credit would be the appropriate correction method, not a credit memo.)

The following question might arise: If both quantity and price per item on the original invoice are wrong: Can Icorrect both with a (single) credit memo? (Or, do I have to execute the credit memo to correct the quantityinvoiced, and then do a subsequent debit or credit to correct the pricing?) You could actually do either, but Irecommend neither.

Take this advice instead: Make sure the full quantity involved is still on hand (i.e., reverse the goods issue ifnecessary to bring that about). Then simply reverse the whole invoice and repost it correctly. Otherwise, its likelythat youll be in for a lot of confusion, complexity, and work.

MR11 Maintain GR/IR Clearing AccountI am not a big fan of the use of transaction MR11; largely because many people who execute it do not understandwhat it is intended for nor what it does to accomplish that intent, and therefore use it for the wrong reason. I amalso not a fan because I think there are far better approaches available than the use of the MR11 even when it isexecuted for its intended purpose. The very nature of the transaction makes it deceptive to users.

The transaction deals with circumstances of difference in quantities received versus quantity invoiced on a PO.Some people understand that, but mistakenly take that to mean that executing it will cause the History tab on POsto then visually reflect a balance between GRs and invoices. Others mistakenly think that it will bring about anactual difference in quantity on hand. It will do neither of those. Its effect is only on the accounting side, and onlybehind the scenes.

An MR11 is used to make an accounting correction (the clearing of the GR/IR account) based on a difference inquantity existing between a GR and an invoice. The physical inventory side of that difference is totally ignored.The quantity difference is used only to determine the direction and the dollar amount of correction needed on theaccounting side as a result of that difference. The transaction essentially forces a balance. I think that is seldomappropriate. In its most logical use, it is intended to compensate for a difference in GR and invoice quantity whenthe lower quantity of the two is correct. (It should never be used when the higher quantity is correct since anadditional GR or invoice could easily correct that type of difference. The system wouldnt correct in that directionanyway. All it can ever do is lower the effect of the higher of the two.) Even when the lower quantity is correct, I saya far better approach is to correct the underlying problem using reversals and re-postings rather than execution ofan MR11.

An MR11 cannot be executed if the quantity of the GR and the invoice are the same, even if the dollar value of theGR and invoice are different. The value does not matter at all in regard to whether or not the system will allow anMR11 to be executed.

So what does an MR11 do/how does it work/how is its result depicted? An MR11 is executed against a PO. ThePO can have any circumstance of difference between the GR and invoice for a line item. That could be a PO withan existing GR but with no invoice, an invoice with no GR, one of each but with different quantities, or several ofeach that result in a total difference in quantity. Lets say the MR11 is executed on a PO that had an invoice andmultiple GRs or a GR and multiple invoices on a single PO line item and a resulting difference between them intotal quantity:

The system determines which particular GR or invoice is the offending document (i.e., which one caused thehigher quantity posting), and the quantity difference that document caused/created and now needs to becorrected. The system determines the price per item involved in that particular document. It then determines thedollar value of the correction by multiplying that price per item times the quantity difference that the correction is for(not the necessarily the entire quantity on that particular document).

The system makes a correction to the GR/IR account in that amount and posts a corresponding, oppositecorrection to the stock account. The direction of the charge against the stock account depends on whether thecorrection was for excess GR quantity, or excess invoice quantity.

The system depicts the execution by inserting a separate line/section in PO History to show the correction. It islisted as AccM (for Account Maintenance Document) in Figure 9. This is not a material document like that shownfor a GR. (Notice there is no material movement type shown beside the document number.) It is strictly anaccounting document just as an invoice is.

This PO History line shows a quantity (with either a negative or positive sign), but always shows a value of $0.00.Note that this is one of the reasons many people are confused as to the intended purpose of the MR11. Thisdepiction in PO History makes it appear that the correction is only to quantity with no effect on value, when in fact,(as explained above) it is only based on quantity. It has no actual effect on quantity in the stock account, but doesindeed affect the stock account in terms of dollar value, even though the resulting line in PO History shows a valueof $0.00. (Confusion is almost guaranteed for the average user.)

Figure 9

PO History after execution of transaction MR11

The system inserts the AccM line showing the number of the accounting document created, in this example5800001143, as well as the Quantity and the value established by the system. The value is shown in the Amt. inloc. Cur column.

The quantity of 6 in Figure 9 represents the difference between the total GR quantity and the total invoice quantityinvolved. The negative sign is due to the invoice quantity in this case being higher than the GR quantity. When thequantity shown on the AccM line in PO History is negative (-), it means the system removed the accounting effectof excess invoice quantity and added money to the stock account as a correction. The transaction executes evenif the current value of the stock account is zero.

However, there must be quantity on hand in the stock account for the posting to take place on the stock accountitself. If the quantity on hand is zero at the time of the MR11, value is added to a price difference account insteadof to the stock account.

As long as there was already quantity on hand in the stock account, this affects the moving average price - and

always makes it higher. (It absolutely has to every time because it adds value to the account without addinginventory quantity.)

If the quantity shown on the AccM line is positive, it means that the MR11 removed the accounting effect of excessGR quantity. That means that the system took money from the stock account as a correction. (Remember, it doesnot remove physical quantity from inventory.) This affects the stock account value (and therefore, the movingaverage price) only if there is current value on the stock account (and therefore, there has to be quantity on handas well).

As you might expect from the above, as long as there is stock on hand with value, this circumstance alwaysmakes the moving average price lower because it removes value from the stock account without reducinginventory quantity. However, the MR11 still occurs, even if the stock account has both zero dollar value and zeroquantity on hand. In that case, the money again is simply charged against a price difference account instead ofagainst the stock account value and therefore leaves the moving average price unchanged.

If there is only a partial quantity on hand on the stock account at the time, the dollar amount that the system addsto or takes from the stock account (depending on whether this is correcting excess invoice quantity or GRquantity) is proportionate to that quantity, and based on the price per item of the invoice or GR for which the MR11is correcting.

Bottom line on MR11: Its purpose, functionality, and effect are not understood by most users. The quantity,negative/positive signs, and the zero dollar value shown in PO History are all counter-intuitive. This has aconfusing rather than a clarifying impact on PO History. So why create the confusion?

For me, unless it is a very special circumstance that I cant think of at the moment, I would much prefer to see (forexample), a reversal of the invoice involved so that the incorrect GR could be reversed, and then the posting of thecorrected GR, and the re-posting of the invoice. Those would be depicted in PO History in an unambiguousmanner that all could understand, and inventory and accounting balances would be accurate with no forcing ofbalance.

MB1C/561 and 562 (i.e., Pennies from Heaven and Its Reversal)Transaction MB1C is Goods Receipt Other. 561 is the movement type used with this transaction to put the initialinventory into the system. This is sometimes referred to as pennies from heaven since it is treated as if its free.Movement 562 reverses it.

If an MB1C/561 is executed in the normal manner, the system uses the current moving average price for thatmaterial to determine the value of the receipt. It uses the current plant stock moving average price for that materialif the material is being put into plant stock. If putting it into project stock, the system uses the current movingaverage price for that material on the WBS into which it is being put. (If there is no project stock on hand on thatWBS, the value would be based on the price on the material master.)

In this case, (normal execution), there is no effect on moving average price. After the transaction, the movingaverage price still is whatever it was before. (You simply have a greater quantity, but at the same price per item.)However, this transaction (MB1C/Movement Type 561 or 562) allows a user to manually enter the total value ofthe receipt if they want to (i.e., an externally entered price rather than the system entering it automatically).

It could be entered as a ridiculously high or low dollar value. In that case, the transaction has a proportionate effecton the moving average price of the material. On a 561, if zero quantity was on hand before, the moving averageprice is simply the total value of the receipt divided by the quantity. If there was already stock on hand, the effecton the moving average price is proportionate, just as it would be with any GR.

On a 562, you can even enter a value that is higher than the total value of the stock on hand. In that case, whenthe system recalculates the moving average price after the 562, it makes the moving average price $0.00. It doesnot let it go below zero dollars from a manually entered price on a 562. There may even still be quantity on handwith that moving average price of zero but the system does not show a negative total value or moving average

price in that circumstance.

Transaction MB51 (Material Document List) provides information on movements of materials. The normal resultsdisplay is very limited in the amount and type of information provided to the user. However, if the detailed list iconon the icon bar of the results screen is clicked, far more fields are made available for display via use of the CurrentDisplay Variant icon. The selection Amount LC (Amount in Local Currency) normally shows the value ofmovements (including 561/562).

However, if a price is entered manually as described above, that column only shows the value that would havebeen the result of the transaction/movement if the system entered the price automatically. (That also representsthe amount actually charged against the stock account.) You have to also add the column labeled Ext. Amount inLocal Currency to the screen display in order to see the manually entered value, and therefore, the actual totalvalue of the transaction/movement. (Figure 10 shows the results screen [in detailed list mode] of an MB51 searchfor MB1C transactions with movement type 561.)

Figure 10

Material Document List

The figure includes the Detailed list icon to change the screen from the default display, as well as theCurrent Display Variant icon. The Amount in LC (Local Currency) and Ext. Amount in LC columns are alsoshown added to the default display. Most transactions do not allow manual entry of valuation price. MB1Cis one of the transactions that do. Note: This value was enlarged for purposes of clarity.

I do not believe this would skew a report on plant stock Inventory Value. That report was created and executed ona quarterly basis at a project I worked on. It compared the total value shown in transaction MC.5 (Plant Stock byStorage Location) to the total of the values shown in Amount in Local Currency field/column on transaction MB51for movement types that affect plant stock inventory. These values should match. Even if the report uses MBEWfor the value rather than MC.5, it too shows zero rather than a negative value. As long as it is compared to thesame field on MB51, the totals should match.

To manually enter the dollar value on a MB1C/561 or 562:

Fill in the initial MB1C screen. On the next screen, enter the material number and quantity. Then while stillon that second screen, click the magnifying glass icon. That brings up the Details screen (Figure 11).

The system allows the Amount in LC (Local Currency) field to be used for manual price entry if the user sochooses. Otherwise, the value of the transaction is established by the system in the background based thecurrent moving average price for that material (current plant stock price or project stock price as applicable).

Figure 11

Initial entry of stock with MB1C Goods Receipt Other

Enter the dollar amount in the Amount in LC field in the lower right corner of the Details screen. Click the saveicon. The name of the field is somewhat confusing because it does not include the word Exact, but it is the correctfield. The system calculates the moving average price with this factored in immediately. The same method appliesto manually entering the price on the 562 movement.

If execution of a 561 or 562 includes manual manipulation of the dollar value on Plant Stock, youll actually see theeffect on the material master itself (immediately). If it is executed on project stock, youll see the effect for thatmaterial on that WBS immediately in table QBEW. (In that case the material master/plant stock price would not bechanged at all.)

One last point on movements 561 and 562 is that these are often inappropriately executed by users as an easyway to adjust inventory balances without having to go through the normal sequence of inventory transactions.Once users learn that a 562 removes inventory from the system, they tend to remember it. The next time theyrealize that inventory shown in the system does not physically exist, they may be tempted to say Hey, we can do a562 movement and itll be like the material never existed.

Well, it is easier, and it does remove it from the system, but it is not a wise approach. MB1C/561 and 562 involvedifferent accounts than those set up for inventory transactions. This means that accounting is ultimately skewed inthe above circumstance. There will have been an actual goods receipt showing valid postings to accounts. Thosewill not be supported by anything logical that would expend or remove them from the system (such as a goodsissue, a transfer to plant stock or to another project, or a loss by inventory adjustment).

Other than one exception that I describe in the next section, the only circumstance in which a 562 movement isappropriate is using it to reverse an incorrect 561. In other words, if the material did not get into the system via a561, it should never be removed from the system by a 562.

561/562 On Split Valuated MaterialsManual entry of the price on an MB1C/561 can be put to good use in one particular circumstance. That is to applyit to material masters (plant stock) for split valuated materials that were incorrectly set up with $0.00 for the priceon the Parent. While the system lets you manually change the material master price with a MR21 transaction onthe Children (the accounting views for the valuation types), it does not allow changing of the Parent price that way.

(The system expects the Parent price to be changed only by movements [such as receipts or invoices] of theChildren.)

In a project stock environment that does not execute goods receipts/invoices, for example, on plant stock, the$0.00 price on the Parent material master would stay there forever. This skews the planned cost on MaintenanceWork Orders (MWOs) since that planned cost value is based solely on the price reflected on the material master. Ifthe material is entered on the MWO without specifying a valuation type, it is the Parent price that is used forplanned cost. (Zero is obviously not an accurate depiction of what the material will cost.) The only way I know of toget rid of that $0.00 for the Parent price on an implementation that executes receipts for that material only asproject stock is with an MB1C/561/562.

Just execute an MB1C/ 561 on the material for a quantity of 1 treating it as plant stock (no special stockdesignation included). The system will require that you specify a Valuation Type. Choose any available type. Itdoes not matter which one. Enter the dollar value that you want the Parent to reflect on the Details screen asexplained above. (This is only a virtual temporary movement.) Once executed, the system accepts that amount asthe new plant stock moving average price for the Parent and changes the material master accordingly.

Then immediately execute a 562 reversal for that quantity of 1 to get the inventory accurate. You dont even haveto manually enter a price this time. The system puts in what you just established as the moving average price withthe 561 movement.

Even though there is no quantity left on hand, the material master continues to show this corrected price from thatpoint forward instead of the zero price, unless, of course, someone changes it the same way. (Again, this ispertains to an implementation that only executes goods receipts and invoices for that material to project stock.)

MB1B Transfer/415 and 416The project I am currently on created custom movement types 915/916 and Z15/ Z16 based on standardmovement types 415 (transfer from plant stock to project stock) and 416 (transfer from project stock to plantstock). This was for reasons involving QM inspection, auto creation of storage locations, and the Automated DataCollection (ADC) software we used at our project. In terms of moving average price, they function the same as415/416.

In the case of movement type 415 (transfer from plant stock to project stock), the system uses the value frommoving average price for plant stock and charges that to the WBS. If the WBS (project stock) price is different thanthe plant stock price, the project stock moving average price is affected up or down proportionately.

For example: The plant stock moving average price is $5.00 each. The Project has 6 on hand on one WBS with atotal value of $60.00 (moving average price = $10.00 each). A quantity of 4 was transferred from plant stock to thatWBS via MB1B/415 (915, Z15). The total value of movement is $20.00. The new total value of that project stockline is $80.00. The new quantity is 10. The new moving average price for those 10 on that WBS is therefore $8.00.

In the case of movement type 416 (916, Z16), which is transfer from project stock back to plant stock, the systemalso uses the value from the plant stock moving average price. If the project stock moving average price is higherthan the plant stock moving average price, any remaining inventory on the project stock line is then increased inmoving average price.

For example: A quantity of 10 is on hand in project stock with a total value of $100.00 (moving average price =$10.00 each.). The plant stock moving average price is $5.00 each. A quantity of 4 on that WBS is moved to plantstock via MB1B/416 (916, Z16). The total value of the movement is $20.00 (not $40.00). That leaves a total valuein project stock of $80.00 and a quantity of 6. The new project stock moving average price for those six itemsremaining on that WBS is $13.33 each.

MB1B Transfers/415Q Project to ProjectMB1B transfers of materials from one project to another affect the moving average price on the Receiving project

only. With this transfer, the moving average price on the material/WBS in the Sending project is always used todetermine the valuation of the movement. The Receiving project is charged that amount times the quantitytransferred. The moving average price on the receiving project is affected/changed accordingly if its movingaverage price for that material is different than that.

The quantity and total value on the sending project are reduced but the moving average price is logicallyunchanged.

Goods Issues Against a Work Order (Movement Type 261)A goods issue has no effect on moving average price. However, the goods issue is affected by the moving averageprice. The goods issue is simply valuated at whatever the current moving average price is for that material on thatWBS at the time of the issue.

This incurs actual cost for materials against the MWO temporarily until the MWO is settled. Then, this actual costrolls up to the WBS. This impact on actual cost to the work order and WBS is in large part why understandingmoving average price is so important.

In any project, it is obviously critical that these actual costs are depicted accurately. It is therefore critical tounderstand how and why they can be artificially inflated or deflated.

It doesnt matter what price was shown on the PO that the material was received against. Nor does it matter whatprice the invoice for that PO was posted at. To valuate the goods issue, the system uses the current movingaverage price, which may be entirely different than either the GR or invoice price per item.

Question: Why would the current moving average price be different than the GR or invoice price?Answer: Something else may have changed the moving average price for that material between the time of theGR/invoice and the goods issue. Examples include a manual change via transaction MR21 against thematerial/WBS. Goods receipts or invoice postings for other POs with that same material and WBS may have beenexecuted for higher or lower prices. Transfers to or from plant stock or other projects (with a different movingaverage price) may have occurred. These are not the only possible causes. Other circumstances could apply aswell.

Regardless of the reason for the change in moving average price, the goods issue cost is based on the movingaverage price at the time the issue is executed. This can truly confuse users and management.

Question: Why doesnt the system use the PO (i.e., GR) price or invoice price to valuate the goods issue?Answer: In standard SAP, the system doesnt know or care exactly how a specific piece of material got on theproject stock line and became eligible for issue. That item can be one of many in a quantity of that particularmaterial that came from any of several sources. Some may have been transferred as excess from another projectstock line with a greater or lesser value than the receiving project. Some may have been placed directly on theproject as initial inventory (i.e., pennies from heaven) with a manually entered external price. Some may havebeen via a PO that paid excessive expediting costs. The system has no way to consistently allocate a specificpiece of material from a specific source, to a specific work order and establish the actual cost on that basis.Moreover, a goods issue can be made up of quantities from several different sources.

Therefore, it relies simply on the average cost. The system was told to do so by virtue of the selection of movingaverage price as the price control method on the material masters when they were created. Even if the standardprice were used as the price control method on the material masters rather than moving average price, the systemwould still disregard the PO and invoice price when valuating goods issues. In that case, it would simply use theprice shown on the material master. But the PO and invoice prices could still be different from that. For moredetails on price control, see the later section labeled Price Control V or S on a WBS.

Goods Issue Reversal/262As just explained, a 261 goods issue has no effect on moving average price. The system simply always uses the

current moving average price for that material on that project stock line (WBS) at the time of the goods issue. Itreduces quantity on hand, but at the existing price per piece. Thus there is no impact on moving average price.

However, a 262 goods issue reversal can affect moving average price. On the 262 (GI reversal), the systemdisregards the current moving average price and uses the price and quantity from the original GI. That means thesystem adds that original quantity back into inventory and adds the original value back onto the project stockaccount. As with any circumstance that results in a change to either the total value or quantity of the account, thesystem then recalculates the moving average price by dividing the new total value by the new total quantity.

If the moving average price had changed between the time of the original goods issue and the goods issuereversal, the reversal absolutely affects the moving average price in one direction or the other.

Price Control V or S on a WBSSAP implementations frequently choose price control V (moving average price) when setting up their materialsrather than S (standard price) because it provides for a more accurate capturing of the cost of materials if formalmanual price changes on materials are only to be executed on a periodic (e.g., yearly) basis.

For those implementations, when creating material masters, price control is always V for any materials that are notsplit valuated. On split valuated materials, however, it should be V for the Parent and S for the Children (valuationtypes).

However, when creating materials in standard SAP, the system defaults to S on the Price Control field of theAccounting 1 View (Figure 12). If it is not changed, it stays as S on the material master (i.e., plant stock).

Figure 12

Material master accounting 1 view

In Figure 12, note that the Price Control field is defaulted to S, the Standard price field is at 500, and the Materialnumber is 450109030. In this case $500 was established as the initial price of the material. During the creation ofthis material (450109030), the S was unintentionally left in place when the material master was saved. The impactof this is not limited strictly to plant stock. If left unchanged, the S would have a tremendous impact on projectstock as well. Briefly stated, if a PO is created with an assignment category of Q to obtain this material for aproject/WBS, and the GR is executed, this material number would have an absolutely unchangeable price controlof S on that WBS (project stock line). A detailed explanation follows.

The project stock has a price control as well. It gets it from the material master the first time the material isreceived into inventory on that project stock line (WBS). Once the price control is established for a material on aWBS, it keeps it no matter what you do to the material master.

This occurs when the material is initially received against the PO. At the time of the receipt, the project stockaccount adopts the price control shown for that material on the material master. If tha