Concept of Sales Order as a Cost Object in SAP

In a true make-to-order scenario, there are no finished good inventories maintained with the standard price valuation. That is costs incurred in the production process are not taken to inventory rather the costs are accumulated on the sales order line item(s). There is no evaluated post goods issue in such scenarios.

Since there are no inventories involved here, there are no variances to be calculated. Costs and revenues are analyzed and reported at the level of sales order.

Settlement of sales order leads to Work in progress calculation in case order line item is not billed and in case the order line item is billed, COGS (cost of goods sold) is calculated and posted at the time of sales order settlement. This COGS is also updated in CO-PA.

Relevant Transactions for Results Analysis and Settlement:

  • ACTUAL RESULTS ANALYSIS (KKAK): calculates WIP/COGS (no financial postings) on sales orders
  • ACTUAL SETTLEMENT: SALES ORDER (VA88): settles WIP and COGS (financial postings generated)

Settlement of Sales order when billing is not yet done:

Accounting Entry:

Work in progress (Balance Sheet) Debit
Change in work in progress (P&L) credit

Settlement of sales order when line item in sales order has been billed:

 

Accounting Entry:

Cost of goods sold (P&L) Debit
Change in inventory (P&L) Credit

Settlement of billed sales order line item also generates an internal controlling document. Costs are moved from sales order to the CO-PA.

 

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Revenue is posted when the customer is invoiced. Revenue is also recorded in COPA.

 

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