Sometimes we need to change the value (price) of our inventory material in order to adjust it to a certain condition.

Maybe, it because the current standard price (for material with price control procedure S) has been differed too greatly with the statistical moving average price (MAP). For a material with price control procedure S, SAP R/3 system also calculates its moving average price and save it as statistical-MAP at accounting view on material master data. This statistical MAP has no influence in material valuation.

Or, for a material with price control procedure V, we maybe need to change the price of a material because it has no movement transaction for a long time period and we want to revaluate it to the current market price (You can read our previous article to understand more about Material Valuation in SAP ).

This material price change transaction usually occurs in manufacturing or trading companies. This transaction is an accounting transaction, not material transaction. It will post an accounting document but will not create a material document. It will change the price of a material at accounting view on material master data but will not change the quantity of it. The T-code fro the transaction is: MR21. The typical accounting journals for this transaction are:
If

the new price is higher than the old one.

For example, current material price is 5000, and we want to revaluate it to 6000. This transaction will increase the material value by 1000. Inventory account Revenue from material

revaluation

1000

1000

If

the new price is lower than the old one.

For example, current material price is 5000, and we want to revaluate it to 4000. This transaction will decrease the material value by 1000. Expense from material revaluation 1000

Inventory account 1000

In the end, this transaction will result the same to the Balance Sheet and Profit & Loss Statement. It because as long as the business operation of the company runs, the material that revaluated by this transaction will be used, either for internal consumption or for sales. Lets assume that there is no other transaction for this material. For first condition (new price > old price) The typical accounting journal for consumption is: Inventory account Material consumption

expense account

6000

6000

The first journal will decrease the Asset by 6000 (the new material value), so it will result 0 in Inventory account. The second journal will decrease the current year profit, so it will decrease Equity, by 6000. It will result -6000+1000 (from revenue from material revaluation account when material price change transaction was done) =-5000 (decrease in Equity). It is the same with if there is no material price change transaction before. Material consumption Inventory account expense account

5000

5000

For second condition (new price < old price) The typical accounting journal for consumption is: Material consumption Inventory account expense account

4000

4000

The first journal will decrease the Asset by 4000 (the new material value), so it will result 0 in Inventory account. The second journal will decrease the current year profit, so it will decrease Equity, by 4000. It will result -4000-1000 (from expense from material revaluation account when material price change transaction was done) =-5000 (decrease in Equity). It is the same with if there is no material price change transaction before. Material consumption Inventory account expense account

5000

5000