1. Receive the PO with estimated landed cost calculatedReceiving Inspection a/c DR Estimated Landed Cost

AP Accrual a/c CRLanded Cost Absorption a/c CR @ (Estimated Landed cost – PO Price inclusive of Non-Recoverable tax) (This a/c is defined in Receiving options)

These entries get created in rcv_receiving_sub_ledger

2. Deliver the PO to Inventory destination

For Standard Costing organizationMaterial Valuation a/c DR @ Std CostPurchase Price Variance a/c DR @ difference between Std Cost and Estimated Landed Cost

Receiving Inspection a/c CR @ Estimated Landed Cost

For Average Costing organizationMaterial Valuation a/c DR @ Estimated Landed Cost

Receiving Inspection a/c CR @ Estimated Landed Cost

These entries can be viewed from Inventory > Material Transactions > DistributionsThese entries get created in mtl_transaction_accounts

Landed cost Adjustment – Receiving Receiving Inspection a/c DR @ difference between Actual LC and Estimated LC

Landed Cost Absorption a/c CR @ difference between Actual LC and Estimated LC

Purchase Price Variance a/c DR @ difference between Actual LC and Estimated LCReceiving Inspection a/c CR

These accounting entries can be viewed from Receiving Transaction summary > Transactions > Tools > View AccountingThese entries get created in rcv_receiving_sub_ledger

Landed Cost Absorption a/c DR @ difference between Actual LC and Estimated LCReceiving Inspection a/c CR @ difference between Actual LC and Estimated LC

@ PO Price inclusive of Non-Recoverable tax

These accounting entries can be viewed from Receiving Transaction summary > Transactions > Tools > View Accounting

3. Invoice validated and actual landed cost calculated

Once the Actual Landed Cost is calculated, LCM will populate this information in cst_lc_adj_interface with rcv_transaction_id corresponding to the receipt to which the invoice is matched. Then the adjustment entries would get created as given below on running the Landed Cost Adjustment Processor

Landed cost Adjustment – Delivery (Standard Costing)

@ difference between Actual LC and Estimated LC

Landed cost Adjustment – Delivery (Average Costing)

Average Cost Update (Average Costing)

- Material Valuation a/c DR @ difference between Actual LC and Estimated LC- Landed Cost Absorption a/c CR @ difference between Actual LC and Estimated LC

Material Valuation a/c DR @ 0Landed Cost Variance a/c DR @ difference between Actual LC and Estimated LC (This a/c is defined inventory > Set up > Organization > Parameters)

Landed Cost Absorption a/c CR @ difference between Actual LC and Estimated LC

These entries can be viewed from Inventory > Material Transactions > DistributionsThese entries get created in mtl_transaction_accounts

4. Create accounting for item invoice

AP Accrual a/c DR @ PO PriceTax a/c DR @ tax rateLCM:Invoice Price Variance a/c DR @ difference between PO Price and Invoice Price (This IPV a/c is defined in Receiving options)LCM:Exchange Rate Variance a/c DR @ difference between receipt exchange rate and Invoice exchange rate (This ERV a/c is defined in Receiving options)

Liability a/c CR @ Invoice Price including tax

5. Create accounting for charge invoice

Default Charge a/c DR @ invoice price (This charge a/c is defined in Receiving options)Liability a/c CR @ invoice price

6. Perform Return transaction or negative correction after invoice is accounted and actual landed cost is calculated

Return to Vendor /Negative CorrectionAP Accrual a/c DR @ PO Price + Non-Recoverable TaxLanded Cost Absorption a/c DR (Actual Landed Cost – {PO Price+Non-Recoverable Tax})

Receiving Inspection a/c CR @ Actual Landed Cost

These accounting entries can be viewed from Receiving Transaction summary > Transactions > Tools > View AccountingThese entries get created in rcv_receiving_sub_ledger

Receiving Inspection a/c DR @ Actual Landed CostMaterial Valuation a/c CR @ Std CostPurchase Price Variance a/c CR

If this Average cost update happens for updating the item cost with the difference between Actual and Estimated landed cost for an item which has 0 or negative on-hand quantity, then the accounting entries would be as follows:

The link between the Receiving transaction and Average Cost update is done through txn_source_line_id. Rcv_transaction_id of deliver transaction is stamped as txn_source_line_id in mtl_material_transactions for the LCM adjustment transaction which has the transaction type as Average Cost Update.

Return to Receiving/Negative Correction (Standard Costing)

@ difference between Std cost and Actual Landed Cost

Return to Receiving/Negative Correction (Average Costing)

Receiving Inspection a/c DR @ Actual Landed CostMaterial Valuation a/c CR

These entries can be viewed from Inventory > Material Transactions > DistributionsThese entries get created in mtl_transaction_accounts

7. Raise a Debit Note

- AP Accrual a/c CR @ PO Price- Tax CR @ tax rate- Liability a/c DR @ Invoice Price including tax- Invoice Price Variance a/c CR @ difference between PO price and Invoice Price

Note:

1. Estimated and Actual Landed Cost are always inclusive of PO price and Non-Recoverable tax.2. Landed Cost Absorption account need not be having zero balance at the end of this procure to pay cycle in LCM enabled organization. It will be zero only if default charge a/c defined in Receiving options is same as the landed cost absorption a/c and Actual landed cost is same as the Estimated landed cost.3. Accounting entries for Expense POs and Shopfloor destination POs has no impact as Landed Cost Management is not applicable for Purchase Orders with Expense and Shopfloor destination.4. Landed Cost Management has no impact on the Encumbrance Accounting as the PO gets reserved at PO price and it gets reversed at PO price only even though the actual charge account get hit at landed cost.5. Retroactive Pricing is not supported in LCM enabled organization and hence retroactive price update program will not create the retroactive price adjustment entries in Receiving subledger for the receiving transactions created.

@ Actual Landed Cost

@ (Estimated Landed cost – PO Price inclusive of Non-Recoverable tax) (This a/c is defined in Receiving options)

@ difference between Std Cost and Estimated Landed Cost

@ difference between Actual LC and Estimated LC@ difference between Actual LC and Estimated LC

@ difference between Actual LC and Estimated LC

These accounting entries can be viewed from Receiving Transaction summary > Transactions > Tools > View Accounting

@ difference between Actual LC and Estimated LC@ difference between Actual LC and Estimated LC

@ PO Price inclusive of Non-Recoverable tax

These accounting entries can be viewed from Receiving Transaction summary > Transactions > Tools > View Accounting

Once the Actual Landed Cost is calculated, LCM will populate this information in cst_lc_adj_interface with rcv_transaction_id corresponding to the receipt to which the invoice is matched. Then the adjustment entries would get created as given below

@ difference between Actual LC and Estimated LC

@ difference between Actual LC and Estimated LC (This a/c is defined inventory > Set up > Organization > Parameters)@ difference between Actual LC and Estimated LC

@ difference between PO Price and Invoice Price (This IPV a/c is defined in Receiving options)@ difference between receipt exchange rate and Invoice exchange rate (This ERV a/c is defined in Receiving options)

@ invoice price (This charge a/c is defined in Receiving options)

6. Perform Return transaction or negative correction after invoice is accounted and actual landed cost is calculated

(Actual Landed Cost – {PO Price+Non-Recoverable Tax})

These accounting entries can be viewed from Receiving Transaction summary > Transactions > Tools > View Accounting

If this Average cost update happens for updating the item cost with the difference between Actual and Estimated landed cost for an item which

The link between the Receiving transaction and Average Cost update is done through txn_source_line_id. Rcv_transaction_id of deliver transaction is stamped as txn_source_line_id in mtl_material_transactions for the LCM adjustment transaction which has the transaction type as

@ difference between Std cost and Actual Landed Cost

2. Landed Cost Absorption account need not be having zero balance at the end of this procure to pay cycle in LCM enabled organization. It will be zero only if default charge a/c defined in Receiving options is same as the landed cost absorption a/c and Actual landed cost is same as the Estimated landed cost.3. Accounting entries for Expense POs and Shopfloor destination POs has no impact as Landed Cost Management is not applicable for Purchase Orders with Expense and Shopfloor destination.4. Landed Cost Management has no impact on the Encumbrance Accounting as the PO gets reserved at PO price and it gets reversed at PO price only even though the actual charge account get hit at landed cost.5. Retroactive Pricing is not supported in LCM enabled organization and hence retroactive price update program will not create the retroactive price adjustment entries in Receiving subledger for the receiving transactions created.

2. Landed Cost Absorption account need not be having zero balance at the end of this procure to pay cycle in LCM enabled organization. It will be zero only if default charge a/c defined in Receiving options is same as the landed cost absorption a/c and Actual landed cost is same as the Estimated landed cost.

5. Retroactive Pricing is not supported in LCM enabled organization and hence retroactive price update program will not create the retroactive price adjustment entries in Receiving subledger for the receiving transactions created.