1. Appendix: Variations in Purchasing – A/P
Contents:
Freight and Landed Costs
Purchasing assets and expense items
Purchasing for multiple locations
A/P Reserve invoice
Effects of adjusted purchase prices

2. Variation in Purchasing: Purpose
In this unit, you will:
Explore alternate versions of the purchasing process
Understand the consequences of each step on inventory and accounting

3. Purchasing Variations – A/R: Business Example
In your business, the purchasing process has variations. There are business needs which are better handled by different document types and require different types of accounting.
For example, you often receive items that have additional costs such as freight and customs amounts which must be allocated across multiple items in the order.
You like to group purchases for a single vendor into one purchase order even though the items may need to be shipped to multiple warehouses.
Besides purchasing inventory items, you also purchase assets or expense items.
Some times you need to use a reserve invoice to pay in advance before a vendor will ship an item
Additionally, purchase prices are sometimes adjusted in the final invoice and this may affect the cost of goods.

4. Freight and Landed Costs: Unit Overview Diagram
Variation in Purchasing – A/R
Topic 1: Freight and Landed Costs
Topic 2: Purchasing for multiple locations
Topic 3: Purchasing Assets and Expense Items
Topic 4: A/P Reserve Invoice
Topic 5: Effects of Adjusted Purchase Prices

5. Freight and other additional expenses/revenues
Sales or Purchasing Document
Activated by Form Settings, enter manually
General Information (Header)
Contents
Item
Quantity
Total
Freight
A1000
100
600 10
A2000
200
300 20
Add. Exp./Rev. on Header Level: 30
General Information (Footer)
Freight 60
When you enter a purchasing document, you can enter additional expenses that the system adds to the document total. When you enter a sales document, you can enter additional revenues that the system adds to the document total. The fields that hold this information are called Freight, because that is the most common additional expense or revenue in marketing documents.
You can enter these freight items on either line level or header level. The field in the document footer always displays the total of all freight charges. On the figure there is a total of 30 on line item level and a total of 30 on header level that results in an overall total of 60 that is displayed in the document footer.
To be able to use freight, you must activate this functionality under Administration  System Initialization  Document Settings. Select the Manage Freight in Documents indicator on the General tab.
Then, in Administration  Setup  General  Freight you can define the categories for freight and other additional expenses/revenues that you want to use. The definition contains the following entries:
Name: Enter a name for this category of freight.
Revenues/Expense Account: Enter a revenue account if you want to define an additional revenue for sales documents. Enter an expense account if you want to define an additional expense for purchasing documents. The system will post the additional expenses/ revenue to this account.
Output/Input Tax Group: Enter an output tax group for additional revenues in sales documents and an input tax group for additional expenses in purchasing documents.
Fixed Amount – Revenues / Fixed Amount – Expenses: Enter a default revenue or expense amount. The system uses this default only on header level.
Note: You can also create documents that contain no line items, but only freight charges on header level.
Activated and Defaulted from Document Settings

6. Copying Freight with the Draw Document Wizard
Parameters
Lines Items and Line Expenses/ Revenues
Header Expenses/ Revenues 1 2 3
Exchange Rate
Take rate from Row
Take rate from Doc and Row
Take from exchange rate table
Copy:
Copy all data
Copy partially (Customize)
Line Items
Select Line Items
Change Quantity
Change Price or Total
Line Freight and Expenses/ Revenues
Change Total
Change Base Method
Header Freight and Expenses/ Revenues
Select Header Freight & Expenses/ Revenues
Change Total
Change Base Method
When you create a new sales or purchasing document based on an existing document, the draw document wizard allows you to specify which line items and which freight amounts you want to copy from the base document into the target document.
After you have selected the base document, the draw wizard opens. On the first step you can decide if you want to use the exchange rate used in the base document (at the row or document and row level) or if the system will retrieve the current exchange rate from the exchange rates table. Furthermore, you can decide if you want to copy all data from the base document into the target document or if you want to copy only some of the data (customize). If you select to copy all data, the system closes the draw wizard and copies all line items and all freight and additional expenses/revenues from the base document into the target document. Otherwise, the draw wizard proceeds with the next step.
On the next step, you can select the line items that you want to copy from the base document to the target document. Here, you can also change the quantity and the price per line item. If the base document contains freight or additional expenses/revenues on line item level, these also display here. You can change the total and the base method.
The last step only appears if the base document contains freight or additional expenses/revenues on header level. Here you can select the additional expenses/ revenues that you want to copy from the base document into the target document. You can also change the total and the base method.

7. The Drawing Method Contents xxx 10 20 General Information (Header)
Quantity
Total
Add. Exp.
Contents
xxx 10 20
General Information (Header)
Contents
Sales or Purchasing Document
Quantity
Total
100
200
300
600
Add. Exp. 10 20
All
Quantity
Total
Add. Exp.
Contents
xxx
None
Quantity
Total
Quantity
Total
Add. Exp.
Contents
xxx
150
2,5 10
Quantity
Total
Add. Exp.
Contents 50
xxx 5
The drawing method determines how the system copies the freight expenses or revenues from the base document to the target document in case you only partially copy the line items.
None If you only partially copy a line item, the system does not copy the freight and additional expenses or revenues to the target document at all. Only if you finally copy all outstanding line items does the system copy the complete additional expenses or revenues.
All The system copies the entire amount of freight and additional expenses or revenues the first time you copy any partial amount of the line item. Later when you copy the outstanding line items, the additional expenses and revenues are already closed and cannot be copied anymore.
Quantity If you only partially copy a line item, the system copies the freight and additional expenses or revenues in proportion to the quantity you copied. When you copy the outstanding line items, the system copies the remaining additional expenses and revenues.
Total If you copy a line item only partially, the system copies the freight and additional expenses or revenues in proportion to the total you copied. When you copy the outstanding line items, the system copies the remaining additional expenses and revenues.
Freight and expense/revenue amounts on header level are always copied either in full (if the drawing method is all, total, or quantity) or not (if the drawing method is none).
You can enter a default drawing method in the definition of each type of freight.

8. Influence of Freight on the Stock Price1 2
Stock Account
Vendor 1
1200
1250 2 2 50
Allocation Costs Account
Expense Clearing Account
In the definition of the freight, you can decide per freight type whether these expenses affect the stock price or not. Select the Stock indicator if you to add the freight amount entered, either at the row level or total level, to the item’s cost calculated when working with perpetual inventory.
When the system posts a goods receipt PO, it adds the total amount of the freight to the stock posting of the item and through this the freight also influence the stock price. The system posts the offsetting entry of the freight to the credit side of an expense clearing account. You can enter the expense clearing account in the G/L account determination.
When you post the A/P invoice, the system clears the allocation cost account and the expense clearing account. If the A/P invoice contains a different amount of freight than the goods receipt PO, the system posts the difference to the stock account to adjust the stock value.
The system also includes the freight in the Last Purchase Price list if you have selected the Last Purchase Price indicator in the definition of the freight. 2
1000
1000 1 2
200
200 1

9. Distribution Method 10 20 Distributed Amount 10 20 Contents Item A100010 20
Distributed Amount 10 20
Contents
Quantity
Total
Item
A1000
A2000
100
200
300
600
Freight on Header Level: 30
None
Quantity
Volume
Weight 10 20
Equally
Row Total 15 20 10
With the distribution method, you define how the system distributes freight to the individual line items. This is especially important when these expenses affect the stock.
You can enter the following distribution methods into the definition of the freight:
None The expenses are not distributed to the line items at all.
Quantity The expenses are distributed to the line items according to the relation of the quantities per line item.
Volume The expenses are distributed to the line items according to the relation of the volumes per line item.
Weight The expenses are distributed to the line items according to the relation of the weights per line item.
Equally The expenses are distributed to the line items equally.
Row Total The expenses are distributed to the line items according to the relation of the row totals of the line items.

10. Credit Memo with Expense Differences1 2 3
Stock Account
Vendor 1
1200
1200 3 3
1000
1200 2
Allocation Costs Account
Expense Clearing Account
Expense Variance Account 2
1000
1000 1 2
200
200 1 3
200
An A/P credit memo can also include freight expenses. If the freight amounts included in the A/P credit memo are different then the freight amounts in the A/P invoice on which it is based, the system posts the difference to an expense variance account.
The figure shows the postings of a goods receipt PO, followed by an A/P invoice. After you have posted the A/P invoice, you notice that the goods are not as expected and you contact the vendor to tell him that you will send the goods back. The vendor agrees but insists that you have to pay for the freight. You enter an A/P credit memo, refer to the A/P invoice but delete the freight costs. The system credits the full amount to the stock account, posts the value of the goods to the debit side of the vendor account, and posts the freight costs to the expense variance account.
You can enter the expense variance account in the Expense and Inventory Account field on the General sub tab on the Purchase tab under Administration  Setup  Financials  G/L Account Determination.
In case you have not posted the A/P Invoice yet, you can return the goods by posting a goods return.
In case of a Goods Receipt PO with freight expense that is fully drawn (including also the freight on header level) to Goods Return, the Goods Receipt PO is closed, so you have to create an independent A/P Invoice for the freight expense.
In case of a Goods Receipt PO with freight costs, in which only the items, without the freight costs on header level, are fully drawn to a Goods Return, you can create A/P Invoice for the freight costs on header level based on the Goods Receipt PO.
In case of a Goods Receipt PO with freight costs that are partially (partial quantity and partial expenses/partial quantity without expenses/partial quantity and full expenses) drawn to Goods Return, you can draw the remaining quantity and expenses from the Goods Receipt PO to A/P Invoice. The expense variance account is not used in this scenario.

11. Landed Costs Journal Entry to adjust inventory valuation Supplier
Transport
Company
Customs
Insurance
Shipping
Storage
Tax ….
Ex-Factory Price
FOB Price
Journal Entry
to adjust inventory
valuation
Freight
The Landed Costs functionality allows companies that import goods, to allocate additional costs, such as customs, transport, insurance fees, or taxes, to the imported items.
The Landed Costs document is based on one or more Goods Receipt PO documents. The Landed Costs document is designated for updating the items' cost price, which is required for calculating the inventory valuation, the gross profit or any other inventory related calculation.
When a company is running perpetual inventory, creating a landed costs document automatically posts a journal entry. The journal entry updates the moving average and the FIFO price of the imported items.
When a company is running non-perpetual inventory, creating a landed costs document will not post a journal entry.

12. Purchasing Process with Landed Costs: Landed Costs Document
Supplier
Transport
Company
Sales
Process
Sales Order
Purchase Order
GRPO
Delivery
Landed Costs
Journal Entry
Purchasing Process
Goods Receipt PO is used as the base reference for the landed cost process.
Item prices in the Goods Receipt PO are the vendor prices ex-factory or FOB, excluding the additional costs which are allocated later for the entire shipment.
The total amount of the Goods Receipt PO is the amount that the vendor charges, without the additional charges that are paid to other parties like a transport company or customs broker.
Make sure that you specify quantities and prices in the Goods Receipt PO correctly.
To allocate your landed costs, create a landed costs document based on the goods receipt or another landed costs document.
Usually the landed costs document is created after you receive invoices from the transport company or customs broker; however you can create a landed costs document earlier to estimate landed costs prior to official documents being received.
Costs are distributed based on predetermined factors such as quantity, weight or volume.
You can update or cancel the Landed Costs Document any time as long as it is not closed. You can only assign a Goods Receipts PO as long as the document is not added. Goods Receipts PO can now be partially assigned to Goods Returns or contain negative rows.
You should add the landed costs document before a quotation or a sales order for the item is entered since it affects the price and the gross profit calculation.
A/R Invoice
A/P Invoice

13. Landed Costs Process: Journal Entry to Allocate Costs to Inventory
Supplier
Transport
Company
Sales
Process
Purchase Order
Sales Order
GRPO
Delivery
Landed Costs
Journal Entry
A/P Invoice
For companies using perpetual inventory, an automatic journal entry associated with the landed costs document updates the Cost Price.
The journal entry debits the stock account in order to increase the inventory value. You should select an offsetting G/L account for example the Liability account of the transport company.
The customs fees can be excluded optionally from the cost price.
After the landed costs document is added to the system, SAP Business One creates the journal entry. If the landed costs document is based on another landed costs document, then the posted value is only a delta.
A/R Invoice

14. Setting up Landed Costs
Set up and assign G/L accounts for :
Customs Allocation Account
Customs Expense Account
Landed Costs Allocation Account
Set up units of measure for weight and item dimensions
Create entries for each type of landed cost with a distribution method
The menu path to set up landed costs is: Administration  Setup  Purchasing  Landed Costs.
Create an entry for each type of landed costs such as insurance, transportation or storage.
The specify how the distribution will be made. Options include:
Cash Value before Customs: related costs are distributed by the share of an item of the total FOB price of the delivery minus customs.
Cash Value after Customs: the same as above, but with customs added.
Quantity: distribution based on the quantity of an item in proportion to total quantity.
Weight: distribution based on the weight of an item in proportion to total weight.
Volume: distribution based on the volume of an item in proportion to total volume.
Equal: costs are distributed equally.
In companies using perpetual inventory, you must also specify a landed costs allocation account. This G/L account is used to clear non-customs expenditures (reposted through the landed costs document) between the service-type A/P invoice and the landed costs document.
In addition, a customs allocation account and a customs expense account must be set up in Administration  Setup  Inventory Customs Groups.
If you want to allocate landed costs based on weight or volume, you will need to specify the item dimensions. Units of measure for these dimensions (length and width UOMs and weight UOMs) must be set up in Administration  Setup  Inventory.

15. Freight and Landed Costs Exercises

16. Purchasing for Multiple Locations: Unit Overview Diagram
Variation in Purchasing – A/P
Topic 1: Freight and Landed Costs
Topic 2: Purchasing for Multiple Locations
Topic 3: Purchasing Assets and Expense Items
Topic 4: A/P Reserve Invoice
Topic 5: Effects of adjusted purchase price

17. Split Purchase Order Split PO Ship to: Berlin Ship to: Hamburg
Purchase Order Blanket
Item Quantity Warehouse A A
Logistics
Split PO
Purchase Order Blanket
Purchase Order
Purchase Order
Ship to: Berlin
Ship to: Hamburg
Item Quantity Warehouse A
Item Quantity Warehouse A
Business One allows you to split a single purchase order containing items from several warehouses, into a child purchase order created for each separate warehouse. This option might be of great necessity when the company's warehouses are located in different cities or even in different states.
The default setting for splitting purchase orders is made via Administration  System Initialization  Document Settings on the Per Document tab page. Choose Purchase Order in the Document field and check the Split PO box.
You can also check or clear the Split PO box manually while you create a new purchase orders.
A new field containing a secondary numbering segment will be added to the purchase order number. In a blanket purchase order this segment contains the digit 0. For every child purchase order this segment will contain a successive number starting in 1.
Note: You cannot split a purchase order containing items from one warehouse only.

18. Purchasing for Multiple Locations Exercises

19. Purchasing Assets and Expenses: Unit Overview Diagram
Variation in Purchasing – A/P
Topic 1: Freight and Landed Costs
Topic 2: Purchasing for Multiple Locations
Topic 3: Purchasing Assets and Expense Items
Topic 4: A/P Reserve Invoice
Topic 5: Effects of adjusted purchase prices

20. Postings in Purchasing Process for Assets
Purchased Item
Fixed Assets
Inventory Item
Sales Item
Vendor
Asset Account
100
A/P Invoice
A/P Invoice
100
Special Control Account
You can define an item as a fixed asset by selecting the Fixed Assets indicator. Because the asset is intended for continuous use and not for sale and because you do not place it in stock, the system automatically deselects the Sales Item indicator and the Inventory indicator.
The A/P invoice amount is posted on the debit side of an asset account and on the credit side of the vendor account. In the general ledger, the system posts to a special control account, which belongs to the Assets Account transaction type.
Although the item is not an inventory item, the Inventory tab does not disappear from the item master record because the system needs it for the G/L account determination.
If the vendor is located in the same country, the account in the Expenses Account field is used as the asset account.
If the vendor is located in an EU country, the account in the EU Expenses Account field is used as the asset account.
If the vendor is located in a non-EU foreign country, the account in the Foreign Expenses Account field is used as the asset account.
Usually, you do not distinguish the assets by vendor location. Therefore, you should enter the same asset account in all three fields.
You can configure the G/L account determination on asset item level and enter a separate asset account for each asset item or you can configure the G/L account determination on item group level to gather similar assets on one collection account.

21. Postings in Purchasing Process for Non-Inventory Items
Item Category:
Purchased Item
Fixed Assets
Inventory Item
Sales Item
Expenses Account EU Expenses Acc. Foreign Expenses Acc.
Vendor
100
100
When you buy items that you do not manage as warehouse items (for example, items that are directly consumed), the system does not trigger a posting for the goods receipt PO even if you create one.
The A/P invoice amount is posted on the debit side of an expense account because it goes directly into expenses. The credit side is posted on the vendor account. Although the item is not an inventory item, the Inventory tab does not disappear from the item master record because the system needs it for the G/L account determination. The expenses account is retrieved from the default warehouse on the Inventory tab of the item master record.
If the vendor is located in the same country, the account from the Expenses Account field is used.
If the vendor is located in an EU country, the account from the EU Expenses Account field is used.
If the vendor is located in a non-EU foreign country, the account from the Foreign Expenses Account field is used.
This graphic does not cover tax postings or postings of additional revenues and expenses.

22. A/P Reserve Invoice: Unit Overview Diagram
Variation in Purchasing – A/P
Topic 1: Freight and Landed Costs
Topic 2: Purchasing for Multiple Locations
Topic 3: Purchasing Assets and Expense Items
Topic 4: A/P Reserve Invoice
Topic 5: Effects of Adjusted Purchase Prices

23. General Ledger (Value)
A/P Reserve Invoice
Purchase Order
A/R Reserve Invoice
Goods Receipt PO 1 2 3
Warehouse (Quantity)
General Ledger (Value)
You use A/P reserve invoices to create a pro forma invoice.
1) The available quantity is increased by the purchase order quantity.
2) You post an A/P reserve invoice before you create a goods receipt PO. Unlike standard A/P invoices, reserved A/P invoices do not change the In Stock quantity. The available quantity increases by the ordered quantity, if you create it without a purchase order as a base document. Reserve invoices create value-based postings.
3) You post the goods receipt PO afterwards with reference to the reserve invoice. This affects your stock situation.

24. Effect of Adjusted Purchase Price: Unit Overview Diagram
Variation in Purchasing – A/P
Topic 1: Freight and Landed Costs
Topic 2: Purchasing for Multiple Locations
Topic 3: Purchasing Assets and Expense Items
Topic 4: A/P Reserve Invoice
Topic 5: Effect of adjusted purchase prices

25. Posting Price Differences1
Goods Receipt PO 2
A/R Delivery 3
A/P Invoice
Stock Account
Vendor 1
1000
400 2
1100 3 3 60
Allocation Costs Account
Cost Account
Price Differences Account 3
1000
1000 1 2
400 3 40
The price in the A/P invoice may differ from the price originally entered in the goods receipt PO. In this case, the system posts the difference to the stock account to adjust the stock value.
If the A/P invoice contains a larger amount of items than there is on stock, because you already sold some items from the goods receipt PO, the price difference is posted to a price difference account. This is explained in the graphic:
You receive a goods receipt PO with a total of The system posts the goods receipt PO with a value of 1000 to the stock account and to the allocation costs account.
You sell 40% of your stock and post an A/R delivery. The system posts 400 to the credit side of the stock account and the debit side of the cost account.
You receive the A/P invoice for the goods receipt PO. The invoice total is 1100, which results in a difference of 100. The system clears the allocation costs account and posts the document total to the credit side of the vendor account. Because the A/P invoice is about a larger number of items than you have on stock, the system cannot post the whole price difference to the stock account. 60% of the goods on the A/P invoice you have on stock. Therefore, the system post 60% of the price difference to the stock account and the remaining 40% to the price difference account
You can enter the price difference account in the G/L account determination.

26. Purchasing – A/P Variations: Unit Summary
You are now able to:
Enter freight and landed costs
Split a purchase order between warehouses
Describe how purchasing assets differs from purchasing stock items
Create an A/P reserve invoice
State the effect of adjusting purchase prices