OTC-08

Control Description

SAP S/4HANA automatically posts the cost of goods sold to the appropriate general ledger accounts upon post goods issue (PGI), utilizing automated account determination (OBYC) and configured cost component splits to ensure accurate financial reporting.

Risk

Cost of goods sold could be posted incorrectly or omitted during inventory fulfillment, leading to misstated operational expenses and inventory balances on the financial statements.

Implementation Details

Account Determination Mechanism:
• Automatic Account Determination (OBYC) is a system configuration that maps material valuation classes and transaction keys to predefined general ledger accounts. Upon Post Goods Issue (PGI), SAP references the material master valuation class and the COGS configuration tables to automatically determine the correct GL account for posting without manual intervention

In SAP S/4HANA, it's configured via T-code OBYC (IMG → Financial Accounting → General Ledger Accounting → Periodic Processing → Materials Management → Automatic Account Determination), where you define the mapping between:

• Valuation classes (e.g Fininished Goods)
• Transaction keys (e.g., BSX for inventory posting, GBB for offsetting COGS entry)
• Target general ledger accounts for both balance sheet (inventory) and P&L (COGS) impact

Operational Levels:

• Valuation Class Assignment: Each material in the material master (MM03) is assigned a valuation class that determines which account determination group will be used for postings

• Initial Posting Upon PGI: Transaction key BSX (inventory posting) determines the balance sheet inventory account credited; transaction key GBB (offsetting entry) determines the initial COGS account debited

• Cost Component Split: Following the initial posting, a second automatic process uses Cost Component Structure (configured in Financial Accounting → Periodic Processing → Integration → Materials Management → Define Accounts for Splitting COGS) to split the intermediary COGS account into detailed expense accounts by cost component (e.g., Direct Material, Personnel Time, Variable OH, Fixed Overhead)

Test Procedures

Test of Design
1. Inspect Valuation Class to GL Account Mapping

Navigate to OBYC (Automatic Account Determination)
Filter for:
• Chart of Accounts (COA) used by the organization
• Transaction key BSX (inventory posting)
• Valuation Classes for semi-finished and finished goods

For each combination, confirm:
• A valid GL account is mapped for the inventory (balance sheet) posting

2. Inspect COGS Offset Account Mapping

In OBYC, filter for:
• Same COA
• Transaction key GBB (offsetting entry for goods issue)
• Account modifier VAX (for goods issues)
• Valuation Classes for semi-finished and finished goods

Confirm a COGS account is mapped

3. Inspect Cost Component Split Configuration

• Navigate to: Financial Accounting (New) → General Ledger Accounting (New) → Periodic Processing → Integration → Materials Management → Define Accounts for Splitting the Cost of Goods Sold

• Confirm that source account from step 2 is configured as the clearing account

For each cost component (e.g., Direct Material, Material Overhead, Variable OH etc. verify:
• A target GL account is mapped (e.g., 50301000 COGS Direct Material)
• Account type is P&L expense

B) Test of Operating Effectiveness
1. Retrieve Historical Sales Order: Using T-code VA03, display a completed sales order

2. Identify Post Goods Issue Document
• From the sales order, navigate to Document Flow
• Identify the corresponding Goods Issue document (goods movement type 601)

3. Drill into Accounting Postings

Display the goods issue document and Navigate to Accounting Postings
Identify all journal entries created upon PGI (there should be two: initial posting + split posting)

4. Verify Initial COGS Posting

Confirm the first accounting document posts between:
• Credit: Inventory GL account for the correct amount
• Debit: Intermediary COGS account

5. Verify Cost Component Split Posting

Confirm the second accounting document posts:
• Credit: Intermediary COGS account for the full amount (reversing step 4)
• Debits: Multiple COGS accounts (Direct Material, Personnel, Overhead, etc.) that tie to the material's cost estimate

6. Validate Cost Component Accuracy

• Access the material master (MM03) for the material tested
• Navigate to Costing tab or use T-code CK13N (Display Costing) to view the cost estimate
• Compare each cost component value in the estimate to the corresponding GL posting amount
• Confirm the split percentages/amounts align with the cost structure