“A” Account Assignment in PO Document




SAP MM Tutorial: Account Assignment “A” in PO Documents
Account assignment field in the SAP R/3 Purchase Order document determines how the accounting journals will be posted in the case of Goods Receipt/GR (if the GR-valuated indicator was set in the PO) or Invoice Receipt/IR (if the GR-valuated indicator was not set in the PO).

It determines the G/L account for debit entry in the accounting journal for GR or IR transaction. You can read our previous post to understand more about accounting journal basic concept.

Account assignment in a PO item can be adopted from Purchase Requisition (PR) item or can be entered by buyer/purchaser if the PO item does not refer to PR item.

The possible entries for account assignment field in a PO or PR item:

1. “A” for Asset
2. “K” for Cost Center
3. “ “ for Inventory

Account Assignment “A” (Asset)

We use “A” account assignment to order a fixed asset item. A Fixed asset is a long-lived asset that is not expected to be fully consumed within one-year period or to be converted into cash within that period, such as: property, plant, equipment, etc.

In SAP R/3 system, PO or PR item with “A” account assignment will need additional data to be entered, that is “Asset Number”. Asset Number is a code to identify a single fixed asset in SAP. It must be generated first before we can create a PO or PR item with “A” account assignment. Asset number is created in FICO module of SAP R/3.

Asset number is linked with a fixed asset G/L account in the company’s balance sheet. The G/L account is a reconciliation account, means that it reconciles several asset numbers.

If the GR-valuated indicator was set and GR is done for a PO item with “A” account assignment, the accounting journals are:

Fixed Asset Account

GR/IR account
1000



1000





And then when invoice receipt transaction is done, the accounting journals are:

GR/IR account

Account Payable
1000



1000





If the GR-valuated indicator was not set and GR is done, there is no accounting journal posted, and then when invoice receipt transaction is done, the accounting journals are:

Fixed Asset Account

Account Payable
1000



1000





Account payable is also a reconciliation account, means that it reconciles several vendors.

The fixed asset will be consumed (expensed) periodically according to company’s policy by depreciating process. Usually FI module will run depreciation program every month. There are several methods in depreciation, such as: Straight-Line Depreciation; Accelerated Depreciation the Accelerated Cost Recovery System and the Modified Accelerated Cost Recovery System.

Straight Line Depreciation is a depreciation method where equal amounts of depreciation expense will be taken in each period of the asset’s useful life. Although it may not provide the most realistic assessment of the asset’s value over time, this method has the advantage of simplicity.

Depreciation expense for one period = (Cost of the asset – Estimated salvage value)/Estimated useful life

For example:
Cost of asset = 1000
Estimated salvage value = 40
Estimated useful life = 2 years = 24 months
So, the Depreciation expense for one month = (1000-40)/24 = 960/24 = 40

The accounting journals for the depreciation transaction per month are:

Depreciation Expense

Fixed asset account
40



40





A company usually has an accounting policy regarding the capitalization of fixed assets, for example: all fixed assets costing $100 or more are capitalized and depreciated. Fixed assets costing less than $100 are fully-expensed immediately (at the end of the month).


One thought on ““A” Account Assignment in PO Document

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