Those that perform accounting using SAP solutions such as SAP S/4HANA are familiar with the income statement line of cost of goods sold (COGS).
But did you know that there’s a way to further break that cost down? SAP S/4HANA Finance enables you to split COGS into the individual COGS split cost items analogously to the components of the cost component structure.
Originally, the goods issue for delivery is posted to an account for each valuation class. This account is defined in account grouping code GBB-VAX in SAP ERP MM account determination. SAP S/4HANA Finance enables you to distribute these costs across the components of the cost component structure of the costing used for the inventory valuation.
Use the following Customizing path to define the splitting of the COGS: Financials (New) > G/L Accounting (New) > Periodic Work > Integration > Materials Management > Define Accounts for Splitting the Cost of Goods Sold.
You can use New Entries to create a new splitting profile, which has to be assigned to a controlling area and cost component structure. The chart of accounts is automatically determined from the controlling area. In the figure below, you can see splitting profile Z001, which is assigned to controlling area EV00 and cost component structure 01.
In the Splitting of Cost of Goods Sold section on the left-hand side of the screen, navigate to the Detailed COGS Accounts folder. In the COGS Acct column, maintain one entry for each G/L account that is defined for record GBB-VAX in SAP ERP MM account determination. As you can see in the following figure, you maintain entries for G/L account 510000 here. In the CComp (cost component) column, you can select all cost items of the cost component structure that you assigned in the previous figure.
In the Target Acc column, you can define different G/L accounts for every component. You have to create G/L accounts with cost element type 1 (Primary Costs/Cost-Reducing Revenues). In the Default (default account for nonassigned cost components) column, you have to set the checkmark for each line. If the system can’t determine a target account for a cost component according to the costing determination, this cost component is assigned to the account in whose line a checkmark is set in the Default column.
After assigning the accounts to the individual components, navigate to the Company Code Settings folder in the left-hand part of the Splitting of Cost of Goods Sold screen. Use New Entries to make an entry for the company code in which the COGS will be split. As you can see in the next figure, you make an entry for company code US10 in the Company Code column here. Assign procedure Z001 in the Procedure column, which you created in this section. In the Valid From column, enter the validity date on which the costs will be split. This is critical if you adapt the cost component structure or change the G/L accounts for the COGS split, in particular. This way, you can always trace the values if the splitting profile is changed.
The following figure provides an overview of the material cost estimate for material DONGLE2 in plant USP1. The lower part of the Cost Components for Material DONGLE2 screen shows the split of the COGM to the items of cost component structure 01, which you assigned to splitting profile Z001, as evidenced by the first figure.
The next figure shows the financial accounting document for a goods issue posting. The goods issue was split into the individual items of the costing. The value of the COGM is credited and debited to the account for the goods issue posting that is defined for record GBB-VAX in SAP ERP MM account determination; consequently, the balance on change to stock account GBBVAX is zero. For technical reasons, however, postings have to be made to this account.
You can use Transaction SE16N to display the document in the Universal Journal (table ACDOCA), as shown in the final figure. The system displays the financial accounting document of goods issue 4900000045 with reference document 4900000098 and profitability segment 1925. The reference document corresponds to the material document of the goods issue posting. All characteristics assigned to the operating concern and included in the goods issue posting are derived and transferred to the document.
With the COGS split, SAP introduced a function that many customers had been requesting for a long time. This function allows for a detailed analysis of the COGM in financial accounting and account-based Profitability Analysis.
By performing COGS splitting with SAP, you’re able to look into the individual cost of items according to the cost component structure. Not only is this great for those performing actual costing with SAP, but this provides new options for analyzing COGS and a way to better value your inventory.
Editor’s note: This post has been adapted from a section of the book CO-PA in SAP S/4HANA Finance by Kathrin Schmalzing.