This blog post is part of a series of related blog posts highlighting the enhancements to address the handling of landed costs.
The objective of this blog post is to explain the impact of returns to supplier with respect to landed costs.
Due to quality issues with the material or an over delivery, you might want to return the material to the supplier.
The return to supplier with a reference to an inbound delivery item that involved landed costs is processed in logistics in the same way as any other return to supplier. In the corresponding financial postings, the planned portions of the landed cost components are also updated.
For a material that has perpetual cost method moving-average and a landed cost component that is capitalized, the inventory is reduced by the material net value and the capitalized planned landed cost as maintained in the related purchase order item.
Let’s say, based on our example – in the blog inbound process after everything is cleared – we return partial quantities to the supplier with the release of the outbound delivery:
in Purchase Order
|Material Net Value||Planned Freight|
|LC005||4 ea||100 USD||400 USD||40 USD|
|LC003||6 ea||200 USD||1.200 USD||120 USD|
The corresponding journal entries show the following:
The inventory account is credited by the material price and landed costs of the purchase order multiplied by the return quantity. The offset to the inventory account is split into:
- Unbilled Payables – the amount is calculated based on the material price of the related purchase order multiplied by the return quantity
- Expense account for the landed cost category (because the proportional planned landed costs are to be treated as expenses). The amount is calculated based on the planned landed cost per UoM of the related purchase order multiplied by the return quantity. The reason for this is that the remaining inventory does not have to absorb the full landed cost.
This posting is independent of whether a landed cost clearing was performed or not.
For a landed cost component that is expensed, the planned landed costs portion is ignored since the costs were already fully posted to the expense account when receiving the goods. For more details on the standard scenario variant, please see this blog.
For a material with perpetual method standard, the planned landed cost is posted to the expense accounts and the price differences accounts. For more details on the standard scenario variant, please see this blog.