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    Intercompany Accounting With Shipment Cost-Transfer Price

    Uploaded by

    Amit Gupta
    1) The document describes intercompany transactions between US Manufacturing Company and US Distribution Company. US Manufacturing Company sells a finished product for $60,000 to US Distribution Company, which was purchased for $40,000. 2) The accounting entries for both companies are provided, showing the sale, shipment costs, and inventory adjustments. US Distribution Company then sells the product to an unrelated third party for $82,000. 3) An elimination entry is made to remove the intercompany transactions from the consolidated financial statements. Transfer pricing concepts that can be applied at the group level are also discussed.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Intercompany Accounting With Shipment Cost-Transfer Price

    Uploaded by

    Amit Gupta
    41 views5 pages
    1) The document describes intercompany transactions between US Manufacturing Company and US Distribution Company. US Manufacturing Company sells a finished product for $60,000 to US Distribution Company, which was purchased for $40,000. 2) The accounting entries for both companies are provided, showing the sale, shipment costs, and inventory adjustments. US Distribution Company then sells the product to an unrelated third party for $82,000. 3) An elimination entry is made to remove the intercompany transactions from the consolidated financial statements. Transfer pricing concepts that can be applied at the group level are also discussed.

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    Intercompany Accounting with shipment cost-Transfer Price

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    1) The document describes intercompany transactions between US Manufacturing Company and US Distribution Company. US Manufacturing Company sells a finished product for $60,000 to US Distribution Company, which was purchased for $40,000. 2) The accounting entries for both companies are provided, showing the sale, shipment costs, and inventory adjustments. US Distribution Company then sells the product to an unrelated third party for $82,000. 3) An elimination entry is made to remove the intercompany transactions from the consolidated financial statements. Transfer pricing concepts that can be applied at the group level are also discussed.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    41 views5 pages

    Intercompany Accounting With Shipment Cost-Transfer Price

    Uploaded by

    Amit Gupta
    1) The document describes intercompany transactions between US Manufacturing Company and US Distribution Company. US Manufacturing Company sells a finished product for $60,000 to US Distribution Company, which was purchased for $40,000. 2) The accounting entries for both companies are provided, showing the sale, shipment costs, and inventory adjustments. US Distribution Company then sells the product to an unrelated third party for $82,000. 3) An elimination entry is made to remove the intercompany transactions from the consolidated financial statements. Transfer pricing concepts that can be applied at the group level are also discussed.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 5

    Document Created by Pruthviraj Raj

    Lead SAP S4 HANA FICO CONSULTANT


    [email protected]
    +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

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