a) At the time of delivery of goods (PGI)

Cost of goods sold account Dr
Inventory account Cr
(This entry is passed by the cost of the item delivered)

b) During generation of Invoice

Customer / Debtors account Dr
Sales/Revenue account Cr
Taxes Cr
(This entry is passed by the selling price)

c) During collection of Payment

Bank account Dr
Discount Dr

Customer/ Debtors account Cr

 

INVOICE GENERATION
Invoices will be generated at the Smelters  and stock points. The accounting entries for the sale of goods despatched will flow from the Sales invoice generated in SAP Sales and Distribution module. The following entries shall be passed
Customer Account      Dr
Revenue                                                 Cr
Excise Duty Payable                               Cr
Sales Tax Payable (local or central)         Cr

Note: As mentioned above in the FI document, which is created in the background, the SD invoice number shall be captured. However as per the current accounting procedure the accounting entry passed is as follows :-
Customer Account      Dr
Revenue                                                 Cr
Excise Duty Billed                                  Cr
Sales Tax Payable (local or central)        Cr

Excise duty paid a/c     Dr
Excise duty payable a/c                          Cr

EXPORT SALES
There have been very few export transactions in the past. SAP system will be designed to handle export business. Exports are mainly from the mines and will be handled at the mines, however the documentation part will be taken care at the Head Office. The accounting entry is:
Customer Account        Dr
Revenue (Exports)                                  Cr

The realisation of export sales will be directly credited to the bank.  The accounting entries will be as follow:
Bank                            Dr
Customer                                               Cr
Exchange Fluctuation    Dr/ Cr

The accounting entries will be:
Rebates/Discounts        Dr
Customer                                               Cr

DEBIT MEMOS
Debit Memos shall be issued in case of price difference, sale tax difference and interest on usance period and  overdue payments.

The accounting entries for two possible scenarios are as follows:
Price Undercharged:
Customer Account        Dr.
Revenue                                                 Cr.
Sales tax payable                                    Cr.
Sales tax undercharged
Customer Account         Dr.
Sales tax adjustment                                Cr.

Interest on delayed payments/usance period and other charges
Customer Account         Dr.
Interest Others                                        Cr.

In case of HZL  a complete retirement or a partial retirement of asset is done. The system uses the asset retirement date to determine the amount to be charged off for each depreciation area. The existing accounting policy is to provide depreciation for the full quarter in which the asset is sold/discarded, recommended that the depreciation be provided from the date of acquisition on prorata basis .

Accounting entry for sale of Asset to customers:
Customer Account               Dr
Asset Sale                                              Cr
Accumulated Depreciation   Dr
Loss on Sale (if applicable)  Dr
Asset Sale account              Dr
Asset account                                         Cr
Profit on sale (if applicable)                    Cr

Note: In case of any Sales Tax /Excise duty applicable for this transaction, SAP will calculate the Sales Tax/Excise Duty based on the Tax Code selected  the entry is posted to the GL Account (Sales Tax Payable)

Accounting entry for sale without a customer:
Accumulated Depreciation    Dr
Loss on Sale (if applicable)   Dr
Asset Sale account               Dr
Asset account                                      Cr
Profit on sale (if applicable)                 Cr

Accounting entry for scrap
Accumulated Depreciation    Dr
Loss on Sale of Assets         Dr
Asset account                                      Cr

SALE OF SCRAP
The sale of scrap (non-stock) shall be mapped as a direct manual FI entry. The customer will be created as a FI customer. No Logistics module will be involved in the process.

A FI Invoice will be prepared for the sale of scrap with the following entries:
Customer                           Dr
Sale of Scrap                                    Cr
Excise Duty Payable                         Cr

ADVANCES FROM CUSTOMERS
Advances are received from the customers against delivery. These advances will be recorded in a special general ledger account. The accounting entry for the same will be:
Bank Account                      Dr
Advance Customer Payments            Cr

These advances will be later on adjusted against the invoices raised on the customers. Advances can be adjusted against more than one invoice at the time of clearing of the invoices against advances.

Adjustment of Advances
Customer Account                             Cr
Advance Customer Payments  Dr

A financial document would be created for each Bank Guarantee received and this document number will be referred to in the Sales Order which would then monitor the value and the validity of the of the Bank Guarantee instrument wise while doing the billing.The letter of credit /Bank guarantee given will be recorded as a noted item.

Accounting Entry for Goods receipt
Stock/Inventory account         Dr
GR/IR account                                   Cr
Freight clearing account                      Cr

Accounting Entry on invoice verification of supplier
GR/IR                                    Dr
Vendor account                                  Cr

Accounting Entry on invoice verification of freight vendor
Freight clearing account          Dr
Freight Vendor account                       Cr

GOODS RECEIPT
Based on the Purchase order and the Quantity actually received Goods Receipts (GR) will be done. Based on the GR done the following accounting entry will be passed in the Financial Accounts
RM/PM Stock Account       Dr
GR/IR Account                                 Cr
Freight Clearing Account                   Cr

EXCISE INVOICE VERIFICATION
On receipt of the excise invoice cum gate pass the following entry will be passed
RG 23 A / RG 23 C Part 2 Account    Dr
Cenvat Clearing Account                              Cr