Defining Location Accounting

One option for structuring accounting rules is with the location accounting approach. Location accounting enables you to define different ChartField combinations for each storage area within an inventory business unit. For example, you can assign a raw material account to one storage area and a finished goods account to another storage area. Any material residing in the raw material storage area debits or credits the raw material inventory account when material moves in or out of that storage area. Any material residing in the finished goods storage area debits or credits the finished goods inventory account.

When using the location accounting option in a manufacturing environment, assign ChartFields to both storage areas and production areas. By assigning ChartFields to storage and production areas, you can segregate raw material, in process material, and finished goods inventory for accounting purposes.

Note: For location accounting, you perform many of the same steps used to define the basic accounting structure. Please read the preceding section, " Defining the Accounting Structure" before setting up location accounting.

To define the location accounting structure:

Select the Location Accounting Required check box on the Inventory Options page.
This page is defined by SetID. Any inventory business unit using this SetID for the record group IN_01 (business unit attributes) uses location accounting.
Define cost profiles to use storage area control.
Use the Storage Area Accounting page to establish ChartField combinations for each storage area within the inventory business unit.
(Manufacturing environment only) Use the Production Area Accounts page to define the ChartField combinations for each production area.
Use the Accounting Rules page to define ChartField combinations that are not included in the Storage Area Accounting page.
The system uses both pages to create the complete accounting entries.

After establishing the accounting structure, the Transaction Costing process costs transactions and the Accounting Line Creation process creates accounting entries. Both processes are initiated from the Cost Accounting Creation process page.

Page Name	Definition Name	Usage
Inventory Options Page	BUS_UNIT_OPT_IN	Select the Location Accounting Required check box to turn on location accounting.
TableSet Control - Record Group Page	SET_CNTRL_TABLE1	Verify that the inventory business unit uses the SetID from the Inventory Options page. Check the record group IN_01.
Profiles Page	CM_PROFILE_DEFN	Use cost profiles to determine how the system costs items in the business unit's cost book. When using location accounting, select the Storage Area Control for Costs check box.
Storage Area Accounting Page	STORAGE_ACCT_INV	Define the ChartField combinations for each storage area. The system debits and credits these ChartFields when material is moved in and out of the storage area.
Production Area Accounts Page	SF_PRAREA_ACCT	Define the ChartField combinations for each production area. The system debits and credits these ChartFields when material is received into or issued from the production ID or schedule. This page applies to a manufacturing environment only.
Accounting Rules Page	CM_ACCTG_DIST	Create the debit and credit lines for the accounting entries based on the business unit, transaction group, distribution type, item or item group, and cost element. The system uses this page in combination with the Storage Area Accounting page.

Use the Inventory Options page (BUS_UNIT_OPT_IN) to select the Location Accounting Required check box to turn on location accounting.

Navigation:

Set Up Financials/Supply Chain > Business Unit Related > Inventory > Inventory Options

To use storage location accounting, select the Location Accounting Required check box on the Inventory Options page. This page enables you to set up storage location structures and attributes (such as stocking units and dimensions) at the TableSet level. You can share these attributes with one or more inventory business units. Use the Set Control - Record Group page to attach these inventory options to an inventory business unit by setting the record group IN_01 to the same SetID that you used to define the Inventory Options page.

It is highly recommended that if you are using location accounting, you should use the storage area control option located on the Cost Profile page (Set Up Financials/Supply Chain, Product Related, Cost Accounting, Cost Profiles, Profiles). Select the Storage Area Control for Costs check box to apply the FIFO or LIFO depletion method (defined in the cost profile) at the storage-area level. The system uses FIFO or LIFO as the cost based on the receipts to the specific storage area from which the item was depleted. In PeopleSoft Cost Management, you assign cost profiles to items to determine how to cost inventory transactions.

Storage area control can be used even with storage area accounting off. This enables you to stratify the granularity of FIFO and LIFO layers. For example, suppose that there is a FIFO cost flow method on the cost profile. Three receipts are putaway in an inventory business unit (receipts 1, 2, and 3). Each has a separate receipt cost. Receipt 1 is placed in the storage area Zone A. Receipts 2 and 3 are placed in Zone B. Then, items are issued from Zone B. Without storage area control, the deplete cost would be from receipt 1 in a FIFO environment, but with storage area control, the deplete cost comes from receipt 2, because it is the first within Zone B.

To define accounting by storage area, use the Storage Area Accounting component (STORAGE_ACCTS). Use the Storage Area Accounting Rules component interface (STORAGE_ACCTS_CI) to load data into the tables for this component.

Use the Storage Area Accounting page (STORAGE_ACCT_INV) to define the ChartField combinations for each storage area.

The system debits and credits these ChartFields when material is moved in and out of the storage area.

Navigation:

Set Up Financials/Supply Chain > Product Related > Cost Accounting > Storage Area Accounting Rules > Storage Area Accounting

Storage Area Accounting page (partial page)

If you are using location accounting, enter the ChartField combinations for each storage area using the Storage Area Accounting page. Use these ChartField combinations to create the debit entry when materials are received in the storage area and to create the credit entry when materials are issued from the storage area. The other side of the entry comes from the matching Accounting Rules page.

This page remains available to edit, thus, giving you the ability to alter the ChartField combinations over time.

Working with Cost Elements

An item can have one or more cost elements defined in its product structure. The Transaction Costing process calculates and stores the costs by cost element. During the Accounting Line Creation process, the system attempts to match up the item's transaction costs by cost element to any rows using the same cost element on the Storage Area Accounting page. If this is not found, then the system uses a row with a blank cost element. Therefore, you add flexibility to the system by adding different combinations of cost elements using different rows on the same page. Rows with a blank cost element can be used for any unspecified cost elements. If you can use the same ChartFields, regardless of the cost element, leave the Cost Element field blank.

Use the Production Area Accounts page (SF_PRAREA_ACCT) to define the ChartField combinations for each production area.

The system debits and credits these ChartFields when material is received into or issued from the production ID or schedule. This page applies to a manufacturing environment only.

Navigation:

Production Control > Define Production > Production IDs/Schedules > Production Area > Accounts

If you are using location accounting in a manufacturing environment, use this page to define the ChartField combinations for the production areas to track in-process inventory. As material is received or issued from a production ID or production schedule, the system uses the ChartField combinations of the production area to create debit or credit entries. When you create accounting entries, the system debits the ChartFields specified here for any material consumption, earned labor, applied overhead, or favorable variances. The system also credits the ChartFields for any assembly completions to stock or to another production area, assembly scrap, or unfavorable variances. The other side of the entry comes from the matching Accounting Rules page.

This page remains available to edit, thus, giving you the ability to alter the ChartField combinations over time.

Select the production type for which the ChartFields are defined. You can define a set of accounts for Production, Rework, and Teardown production types.

Working with Cost Elements

In the Accounting Line Creation process, the system attempts to match up the item's transaction costs by cost element to any rows using the same cost element on the Production Area Accounts page. If this is not found, then the system uses a row with a blank cost element. If you can use the same ChartFields, regardless of the cost element, leave the Cost Element field blank.

Use the Accounting Rules page (CM_ACCTG_DIST) to create the debit and credit lines for the accounting entries based on the business unit, transaction group, distribution type, item or item group, and cost element.

The system uses this page in combination with the Storage Area Accounting page.

Navigation:

Set Up Financials/Supply Chain > Product Related > Cost Accounting > Transaction Accounting Rules > Accounting Rules

The Storage Area Accounting page and Production Area Accounts page defines one side of the accounting entry when material is putaway, issued, or adjusted within a storage or production area. The other side of the accounting entry comes from the corresponding Accounting Rules page based on the business Unit, Transaction Group, Item ID or Item Group, and Distribution Type fields. If the transaction is not directly related to a storage or production area, then they system derives both sides of the transaction from the appropriate Accounting Rules page.

If you are using location accounting, the system derives ChartField combinations that it uses to create accounting entries from these pages:

Transaction Group	Description	DR	CR
010	Receipt to Inspection	Storage Area Accounting	Accounting Rules
012	Return to Vendor	Accounting Rules	Storage Area Accounting
013	Return to Vendor From Inspection	Accounting Rules	Storage Area Accounting
020	Putaway	Storage Area Accounting	Accounting Rules
021	Receipts from Production	Storage Area Accounting	Production Area Accounts
024	Customer Returns	Storage Area Accounting	Accounting Rules
030	Usages & Shipments	Accounting Rules	Storage Area Accounting
032	Non Stock Shipment	Accounting Rules	Accounting Rules
037	VMI Interunit shipment	Accounting Rules	Storage Area Accounting
038	VMI Consumption	Accounting Rules	Storage Area Accounting
040	Physical Count Adjustments	Accounting Rules	Storage Area Accounting
041	Cycle Count Adjustment	Accounting Rules	Storage Area Accounting
050	User Adjustments	Accounting Rules	Storage Area Accounting
051	Inventory Scrap	Accounting Rules	Storage Area Accounting
052	Shipping Adjustment	Accounting Rules	Storage Area Accounting
053	Floor Stock Issues/Ret	Accounting Rules	Storage Area Accounting
054	Inventory Scrap for RTV	Accounting Rules	Storage Area Accounting
060	Bin-to-Bin Transfers	Storage Area Accounting	Storage Area Accounting
200	Inventory Revalue	Accounting Rules	Storage Area Accounting
201	Inventory Reval - Inspection	Accounting Rules	Storage Area Accounting
205	Value Adjustment	Accounting Rules	Storage Area Accounting
206	Value Adjust/ActCost Items	Accounting Rules	Storage Area Accounting
210	WIP Revalue (Comps, Assys)	Accounting Rules	Production Area Accounts
211	WIP Revalue (Conv Costs)	Accounting Rules	Production Area Accounts
212	WIP Revaluation (Scrap)	Accounting Rules	Production Area Accounts
220	Component Kit	Production Area Accounts	Storage Area Accounting
221	Route to Production Kit	Production Area Accounts	Production Area Accounts
222	Waste Completion	Production Area Accounts	Accounting Rules
223	Component/Output Transfers	Production Area Accounts	Production Area Accounts
230	Component Consumption	Production Area Accounts	Storage Area Accounting
231	WM Usage (Maintenance Management Usage)	Accounting Rules	Storage Area Accounting
240	Earned Labor	Production Area Accounts	Accounting Rules
250	Assembly Scrap	Accounting Rules	Production Area Accounts
261	Material Variances	Accounting Rules	Production Area Accounts
262	Conversion Variances	Accounting Rules	Production Area Accounts
263	Rework Expense	Accounting Rules	Production Area Accounts
264	Outside Processing PPV	Accounting Rules	Accounting Rules
265	Teardown Variance	Accounting Rules	Production Area Accounts
400	Std Cost Variance Receipts	Accounting Rules	Accounting Rules
401	Wt Avg Updates from AP	Storage Area Accounting	Accounting Rules
402	Std Cost Exchange Rate Var	Accounting Rules	Accounting Rules
403	Wt Avg Cost Updates - ERV	Storage Area Accounting	Accounting Rules
405	Wt Avg Update Writeoffs	Accounting Rules	Accounting Rules
407	Subcontract Standard Cost PPV2*	Accounting Rules	Accounting Rules
408	Subcontract Standard Cost PPV2 ERV*	Accounting Rules	Accounting Rules
415	RTV Variances	Accounting Rules	Accounting Rules
461	Voucher Variance Writeoffs	Accounting Rules	Accounting Rules
500	Miscellaneous Charges	Accounting Rules	Accounting Rules
501	Freight Charges	Accounting Rules	Accounting Rules
601	Wt Avg Upd Production Var	Storage Area Accounting	Accounting Rules
605	Wt Avg Upd Prod Writeoffs	Accounting Rules	Accounting Rules
606	Avg Rev Compl Write-off*	Accounting Rules	Accounting Rules
622	Actual Waste Cost	Production Area Accounts	Accounting Rules
630	Overhead	Production Area Accounts	Accounting Rules
640	Actual Labor Costs	Production Area Accounts	Accounting Rules
645	Actual Machine Costs	Production Area Accounts	Accounting Rules
651	Production Cost Writeoff	Production Area Accounts	Accounting Rules
661	Actual Cost Variances	Production Area Accounts	Accounting Rules
664	Subcontracted Cost	Accounting Rules	Accounting Rules

If the transaction involves interunit or intercompany transfers, then part of the accounting entries are derived from pages defined for the interunit model explained in the "Managing Interunit Transfer Pricing and Additional Costs" topic. The interunit and intercompany transaction groups include:

022 - IBU Transfer Receipts.
025 - InterCompany Receipts.
031 - InterBU Transfer Shipments.
035 - InterCompany Transfers.
042 - IBU Transfer Adjustments.
300 - Gain/Loss on Transfer Price.
301 - InterCompany Cost of Goods.

If the transactions involve Shipment On Behalf Of or InterUnit Expensed Issues, see the sections in this topic related to these subjects. These transaction groups are:

034 - Ship on Behalf of Other BU.
036 - InterUnit Expensed Issue.
026 - Expensed Issue Return.
302 - ShipOnBehalf Gain/Loss.

Defining Location Accounting

Pages Used to Define Location Accounting

Inventory Options Page

Using Storage Area Control

Storage Area Accounting Page

Working with Cost Elements

Production Area Accounts Page

Working with Cost Elements

Accounting Rules Page