Document Created by Pruthviraj Raj

Lead SAP S4 HANA FICO CONSULTANT

raj.pruthviraj@gmail.com
+919824745807

Intercompany End to End

Accounting.
Intercompany End to End Accounting.
For this example, U.S. Manufacturing Company will sell a finished product costing $40,000 to U.S. Distribution Company
for $60,000 (With 20000 Markup) & Shipment cost $2000 The accounting entries on each entity’s books for this sale are
shown as below.
➢ U.S. Manufacturing Company Accounting
1, Deliver Good from U.S. Manufacturing Company.
Cost of Goods Sold Ac Dr $40000
Inventory Ac Cr $40000
2, Shipment Document
Shipment Cost Ac Dr $2000
SR/IR Ac Cr & SR/IR Dr to Freight Vendor Cr $2000 through MIRO against service entry sheet.
3. Invoicing from U.S. Manufacturing Company.
Sale Ac Cr $60000
Shipment Cost A/c Cr 2000
U.S. Distribution Company (Customer Ac) Dr $62000.
Distribution Company in turn sells this product to a third-party customer for $82,000. ( With profit $20000 )
The accounting entries on U.S. Distribution Company’s books are shown as below
➢ U.S. Distribution Company Accounting.
Document Created by Pruthviraj Raj Lead SAP S4 HANA FICO CONSULTANT +919824745807
4, Good Receipt from U.S. Manufacturing Company
Inventory Ac Dr $ 62000
GR/IR Clearing Ac Cr $62000
5, Vendor Invoicing
GR/IR Clearing Ac Dr $62000
U.S. Manufacturing Company (Vendor Ac) Cr $62000
Note :- If not capture at GR then load cost on inventory at the time of Invoice & Up to this Trading partner will be updated in
Intercompany related transaction and derived from respected AR & AP master data.
➢ U.S. Distribution Company to an unrelated third-party customer Accounting.
6, Deliver Good from U.S. Distribution Company.
Cost of goods sold Ac Dr $62000
Inventory Ac Cr $62000
7, Invoice to Third-Party Customer
Sale Ac Cr $82000
Third-Party Customer Ac Dr $82000
Note :- Fright will capture as per business scenario for good transfer to end customer location and it is part of cost of sale not
COGS.

Document Created by Pruthviraj Raj Lead SAP S4 HANA FICO CONSULTANT +919824745807
Based upon the transactions, before applying any rules for consolidation, a partial profit and loss statement
using the trial balances of both entities would appear as below in Legal View.
US MFG US DIST TOTAL
SALE ($60000) ($82000) ($142000)
COGS $40000 $62000 $102000
Gross Margin ($20000) ($20000) ($40000)

➢ Elimination entry Intercompany Customer and vendor through ICMR standard process
7, Intercompany elimination entry.
Cost of goods sold Cr $62000
U.S. Manufacturing Company (Vendor Ac) Dr $62000
Sale A/c Dr $62000
U.S. Distribution Company (Customer Ac) Cr $62000.
US MFG US DIST Elimination TOTAL
SALE ($60000) ($82000) $62000 ($80000)
COGS $40000 $62000 ($62000) $40000
Gross Margin ($20000) ($20000) ($40000)

Document Created by Pruthviraj Raj Lead SAP S4 HANA FICO CONSULTANT +919824745807
 Group currency with group valuation and Profit center valuation with leading ledger.( Transfer pricing concept )

Group reporting

US MFG US DIST Elimination TOTAL ( Shipment Cost )

Inventory ($40000) $62000 $20000 $2000

➢ Transfer pricing concept is possible through Inter company and Intra Company.
➢ If Material transfer from company A to Company B, then markup value come into picture and business
need to remove mark up at group level reporting & system add markup at Legal valuation currency type
10.
➢ If Material transfer from plant A to Plant B under one company code , then markup value come into
picture and business need to remove mark up at group level reporting & system add markup at profit
center valuation currency type 32.

Document Created by Pruthviraj Raj Lead SAP S4 HANA FICO CONSULTANT +919824745807