Valuation area: it is the organization unit in the hierarchy at which the inventories of

materials are valuated for the balance sheet purpose. There are two valuation areas
available in sap.
1. Company code
2. Plant
Of the company code is taken as the valuation area, we have to use same procedure to
valuate the materials of all the plant assigned to the company code. In this case we do
not have the flexibility and we can have the uniformity in the material valuation.
If the plant is taken as the valuation area, then we can use different procedures to
valuate the materials of different plant assigned to the company code. Here we can have
flexibility, but we cannot have the uniformity in valuation of the materials. SAP
recommends to use the plant as valuation area.
 Integration of FI with MM

Step 1: Define / Create Plant

Plant: it is the organizational unit in MM where the manufacturing process is carried
on or from where the goods and services are rendered. Plant is responsible for planning,
procurement and maintaining of the inventories of materials and services
Path: SPRO – Enterprise Structure – Definition - Logistics- General – Define, Copy, Delete,
Check Plant
Double Click on “Define plant”
Click on “New entries”
Plant =
Calendar = 01 (Factory Calendar) Click on “Save”
Name =
Country = Click on “Enter”
Step 2: Define / Create Storage location
Storage location: It is the place within the plant where the inventories of materials are
kept. The storage locations are defined with reference to the plant. A plant can have any
number of storage locations. We define one storage location for each type of materials.
The storage location will have an address.
Path: SPRO – Enterprise Structure – Definition - Material Management – Maintain Storage
location T.code OX09
Plant = Click on “Enter”
Click on “New entries”
Storage Location =
Description = Click on “Save”
Select the Line and
Double Click “Addresses of storage location”
Click on “New entries”
No. = 01 Click on “Save”
Name =
Country = Click on “Save”
Step 3: Maintain Purchase Organization
Purchase organization: it is the organization unit in MM which is responsible for all the
procurement activities and inventory management activities and negotiating prices of
materials. The purchase organisation completely process one purchasing business
transaction.
Path: SPRO - Enterprise Structure – Definition – Material Management – Maintain purchase
Organization
Click on “New entries”
Purchase Organization =
Description = Click on “Save”

Step 4: Assignment of Plant to Company Code

Path: SPRO – Enterprise Structure – Assignment – Logistics-General – Assign Plant to
Company Code T.Code OX18
Click on “new entries”
Company code =
Plant = click on “save”

Step 5: Assign Purchase Organization to Company Code

Path: SPRO – Enterprise Structure – Assignment – Material Management – Assign Purchase
Organization to Co. Code T.Code OX01
Click on “position”
Purchase organization = click on “enter”
Company code = click on “save”

Step 6: Assign Purchase Organization to Plant

Path: SPRO – Enterprise Structure – Assignment – Material Management – Assign Purchase
Organization to Plant T.Code OX17
Click on “new entries”
Purchase organization =
Plant = click on “save”
Step 7: Creation of Plant parameters
Path: SPRO – Material Management – Consumption based planning – Plant parameters –
Carry out overall maintenance of Plant parameters T.code OM18
Click on “Copy”
From Plant = 0001
To Plant = Click on “Copy” and Enter.
Step 8: Maintain Posting Periods for Material Management
Path: SPRO – Logistics-General – Material Master – Basic settings – Maintain Co. Codes
for Material Management T.code OMSY
Click on “Position” button,
Company Code =
Year = Period =
Click on “Save”.
Note: T.code OMSY is used for opening Posting period for the first time only. For
subsequent opening / closing of posting periods, we need to use T.Code MMPV.
Step 9: Valuation Grouping Code
Valuation grouping code: it is the collection of valuation areas which have same
account determination. Since the valuation area can be either the company code or
plant, the valuation grouping code represents the group of plants or company codes for
which we can use the same account determination.
Path: SPRO – Material Management – Valuation and Account assignment – Account
Determination – Account Determination without wizard – Group together valuation areas
T.code OMWD
Click on Position Button
Valuation Area = clikc on “enter”
Valuation Grouping Code = 0001 Click on Save.

Step 10: Purchase Order Tolerance Group

Purchase order tolerance grou; these are the upper limits below which or equal to which
difference in the purchase order price and material master record price is acceptable. at the
time of creating the purchase order, the system compares the PO price with price in the
material mater record for the item. If the difference is within the acceptable limit, then we
generate purchase order. Otherwise it have to be released by next higher level employee in
MM
Path: SPRO – Material Management – Purchasing – Purchase order – Set tolerance limit for
price variance
Select “PE” and “SE” tolerance groups of Company code. 0001
Click on “copy” button
Company code = click on “enter”
Company code = click on “enter” and Click on “save”.

Step 11: Goods Receipt Tolerance Group T.code OMC0

Goods receipt tolerance group: these are the upper limits below which or equal to
which the differences in the invoice price, PO price an material master record prices are
acceptable. At the time of posting the invoice, the system compare the invoice price with
PO price and the price in the Material master record price. If the differences are within
the acceptable limits, the user can post the purchase invoice. Otherwise we can
configure the system to issue warning message of error message.
Path: SPRO – Material Management – Inventory Management and Physical inventory –
Goods Receipt – Set Tolerance limits
Select “B1”, “B2” and “VP” Tolerance groups of Co. Cd. 1000
Click on “copy as” button
Company code = click on enter
Company code = click on enter
Company code = click on enter
Click on “save”.

Step 12: Vendor specific Tolerance Group

Path: SPRO – MM – Logistics Invoice verification - Incoming invoice – Configure Vendor
specific Tolerances
Select Co.Cd. 1000
Click on “copy as” button
Company code = click on enter and save..

Step 13: Parameters for Invoice verification

Path: SPRO – MM – Logistics Invoice verification – Invoice verification in back ground –
Define automatic status change
Select Co.Cd. 0001
Click on “copy as” button
Company code = click on enter and save..

Step 14: Maintain Plant Parameters for Inventory management & physical inventory
Path: SPRO – Material Management – Inventory management & Physical inventory – Plant
Parameters
Select Plant 0001
Click on copy as button
Plant = click on enter and save
Step 15: Default Values of Tax Codes for Invoice verification
Path: SPRO – Material Management – Logistics Invoice verification – Incoming invoices –
Maintain default values for tax codes
Select Co.Cd. 0001
Click on “copy as” button
Company code =
Tax code = V0 click on enter and save.

Step 16: Define Attributes for Material Type

Path: SPRO – Logistics-General – Material Master – Basic settings – Material types –
Define Attributes for Material types T.Code: OMS2
Click on “Position”,
Material type = ROH,
Click on enter
Select the ROH line
Double Click on “Quantity/Value Updating”
Click on “Position”,
Valuation Area = (Plant Name), click on enter
Select “Quantity Updating” and “Value updating” Click on “Save”.

Step 17: Maintain AN and ST Tolerance Limits T.Code:OMR6

Select “AN” & “ST” of 1000
Click on “copy as” button
Company code = click on enter
Company code = click on enter and save.
Step 18: Creation of Vendor Master Record
Path: SAP Easy Access – Logistics – Material Management – Purchasing – Master data –
Vendor – Centrally – Create T.Code XK01

Company Code =
Account Group =
Purchasing Organization = Click Enter

Title = Company
Name =
Country =

Click “Next Screen” button thrice

Reconciliation Account = (Sundry Creditors A/c)
Sort Key = 012 (Vendor Number)
Cash Management Group = A1 (Domestic Vendors)

Click “Next Screen” button

Payment terms = 0001 (Payable immediately due net)
Tolerance group = Blank
Select “Check Double Invoice”

Click “Next Screen” button,

Order Currency = INR Click Save
Step 19: Creating Material Master Record
Path: SAP Easy Access – Logistics – Material Management – Material Master – Material –
Create – General – Immediately T.Code MM01

Material =
Industry =
Material type = Click on “Select Views”,
Select the following views
Basic Data 1
MRP 1
Purchasing
Accounting 1
Costing 1
Costing 2
Click on “Organizational levels”,
Plant =
Storage location = Click on “Enter”
Material =
Base unit =
Material Group = Click on Enter
Purchasing Group = Click on Enter
MRP Type = ND (No Planning) Click on Enter
Valuation class =
Moving price = Click on Enter
Select “With Quantity Structure” check box Click on Enter
Observe all Fields Click on “Save”.
Step 20: Creation of GL account’s in FI T.code FS00

1. Creation of inventory of raw material account

GL Account Number =
Company Code =
Go to Menu, G/L Account, Create

Account Group =
P&L Statement Account
Balance Sheet Account

Short Text =
Long Text =

Go to Control Data tab,

Account Currency =
Only balances in local Currency
Line item display
Sort Key =

Go to Create/Bank/Interest tab,

Field Status Group = G006

Select “post automatically only” click on “save”.

2. Creation of GR/IR clearing account

GL Account Number =
Company Code =
Go to Menu, G/L Account, Create

Account Group =
P&L Statement Account
Balance Sheet Account

Short Text =
Long Text =

Go to Control Data tab,

Account Currency =
Tax category =*
Only balances in local Currency
O select “open item management”
Line item display
Sort Key =

Go to Create/Bank/Interest tab,

Field Status Group = G045

Select “post automatically only”. Clikc on “save”.

3. Creation of Raw material consumption Account

GL Account Number =
Company Code =
Go to Menu, G/L Account, Create

Account Group =
P&L Statement Account
Balance Sheet Account

Short Text =
Long Text =

Go to Control Data tab,

Account Currency =
Only balances in local Currency
Line item display
Sort Key =

Go to Create/Bank/Interest tab,

Field Status Group = G003

Select post” automatically only” clikc on save
Click on “edit cost element”
Click on enter
Cost element category = 01
Step 21: Creation of Number Ranges for material documents
T.code: FBN1
Company code =
Click on “insert interval”
No =
Year =
From no. =
To number =
Click on enter

Click on “insert interval”

No =
Year =
From no. =
To number =
Click on enter

Click on “insert interval”

No =
Year =
From no. =
To number =
Click on enter
Step 22: Assignment of Accounts for automatic postings (Integration)

Path: SPRO – Financial Accounting – GL Accounting – Business Transactions – Integration

– Material Management – Define Accounts for Material Management
T.code OBYC
OR
Path: SPRO – Material Management – Valuation and Account Assignment – Account
determination – Account determination without wizard – Configure automatic postings
T.code – OBYC
Double Click on “BSX”,(inventory posting)
Chart of Accounts =
Select “Valuation Class”, Click on “Save”
Valuation Class =
Account =
Click on “Save”. Click on back arrow
Double Click on “WRX”,(GR/IR clearing account)
Click on “Save”
Account =
Click on “Save”. Click on back arrow
Double Click “GBB”, (off setting entry for inventory posting)
Select “Valuation modifier”, “General Modification” and “Valuation Class”
Click on “Save”
Valuation Modification =
General Modifier =
Valuation Class =
Account =
Click on “Save”.
Step 1: Define Tax Calculation Procedure for country
Path: SPRO – Financial Accounting – Financial Accounting Global Settings – Tax on Sales /
Purchases – Basic Settings – Check calculation procedure
Double Click on “Define Procedures”
Click on “New Entries”
Procedure = ITAX
Description = Tax Procedure for India Click on Save
Select the procedure line “ITAX” and double click “Control Data”
Click on “New Entries”
Step Condition Type Description From To Account Key
1 BASB Base Amount
2 MWVS Input Tax 1 1 VST
3 MWAS Output Tax 1 1 MWS Save
Step 2: Assign country to calculation procedure
Path: Same as above
Click on “Position” button, Country = IN - Enter,
Procedure = ITAX Save

Step 3: Define tax codes for Sales and Purchases

Path: SPRO – Financial Accounting – Financial Accounting Global Settings – Tax on
Sales/Purchases – Calculation – Define Tax Codes for Sales and Purchases
T.code: FTXP
Country = IN Enter,
Tax Code = V0 Enter
Tax Code = 0% Input Tax,
Tax Type = V (input tax) Enter
Input tax percentage = 0, Output tax percentage = Click on “Deactivate Line” – Save
Tax Code = A0 Enter
Tax Code = 0% Output Tax, Tax Type = A (Output tax) Enter
Output tax percentage = 0, Input tax percentage = Click on “Deactivate Line” – Save

Step 4: Creation of Tax Payable Account T.Code – FS00

Number = 100510
A/c Group = Current Liabilities
Text = Tax Payable
A/c Currency = INR
Select “Open item management”
Select “Line Item Display”
Sort Key = 001
Field Status Group = G001 Click on Save
Step 5: Assignment of Account for Automatic posting T.code – OB40
Double click on Transaction – VST Line
Chart of Accounts = Enter and Click on Save
Account = 100510 Click on Save
Double click on Transaction – MWS line Click on Save,
Account = 100510 Click on Save

Step 23: Creation of purchase order

Path: SAP Easy Access – Logistics – Material Management – Purchasing – PO – Create
T.Code ME21N
Vendor Number =
Payment terms =
Raw Material =
PO Quantity =
Delivery date =
Net Price =
Currency =
Plant =
Storage Location =
Go to Org. Data tab
Purchase Organization=
Purchase Group =
Company Code =

Click on Enter and Save. Note the PO Number.

To Display Purchase Order, go to T.code ME23N, Click on “Other Purchase Document”

Icon and give the PO Number.
Step 24: Creation of Goods Receipt T.Code MIGO

Path: SAP Easy Access – Logistics – Material Management – Inv. Management – Goods
Movement – GR for PO

Enter PO Number after “Goods receipt” and “Purchase Order” fields

And Click on “Enter”

Scroll down and Select “Item OK” and Click on “Check” button on the tool bar.

Click on “Post” button.

“Note” the Document Number.

To display MM Document, go to T.Code MB03

Enter the Document Number and Click on “Enter”.

To see the corresponding Accounting Document (created automatically because of

Integration), keep the cursor on the document
And click on “Accounting Document” button in the tool bar and observe this document:

Inventory Raw Material A/c Dr

To GR/IR Clearing A/c

Step 25: Invoice verification T.Code MIRO

Invoice date =
Amount =
Go to Payment tab,
Baseline date =

In PO Reference tab,
Enter PO Document Number Click Enter

Click on “Save” Note the Document Number,

Go to Menu, Click on Display Document,
Click “Follow on Documents” button and Observe the following document:

GR/IR Clearing A/c Dr

To Vendor a/c

Step 26: Goods issue to Production T.code MB1A

Path: SAP Easy Access – Logistics – Material Management – Inventory Management –

Goods Movement – Goods issue

Movement type =
Plant =
Storage Location =

Click on “Enter”

G/L Account =
Cost Centre =
Material =
Quantity =
Storage Location =
Click on “Save”. Note the Document Number
Go to T.code MB03, display your document and observe the following Accounting
document:

Raw Material Consumption A/c Dr.

To Inventory of RM A/c