Third-Party Postings to CO-PA

If you use third-party orders in SAP, then you may be aware of a certain nuance in the system that relates to CO-PA postings. To be clear, third-party orders are also called “drop-ship”, “drop-shipment” or “direct-shipment” orders. It is when a product is bought from a vendor, but is directly shipped to the customer. This transaction has a specific purchasing account assignment category “S”, as well as a designated sales document item category “TAS”. However, I am not going to go into the specifics of the logistics settings for third-party transactions. Instead, I will focus on what happens with the cost of the product and how it is reported in CO-PA.

Since a third-party product is shipped immediately when it is purchased, it means that it is never stored in inventory and hence the standard cost of that product is irrelevant. This may seem obvious, but it could get confusing since there is a standard cost for that product in the material master, and it is not really apparent whether a product is for third party transactions or not (the designation for third-party transactions is normally on the sales and purchase order and not the product). The cost of the product is simply the cost on the purchase order.

When the goods receipt posting is made, the system credits the GR/IR account (as normal) and debits the cost of sales account (actually, it debits the account that is assigned to whatever Account Modification key is set up in the account assignment category of the “Third Party” account assignment category). As mentioned before, since the product is not received into inventory, the inventory account is not posted. The billing document contains the cost condition (normally VPRS) with the purchase cost as its value. This means that if you map the VPRS condition to a value field in CO-PA, then this value will be equivalent to the value that was posted to the cost of sales account.

The posting described above seems logical as the cost of a third-party sale should be the purchase order cost. However, what happens if the vendor sends an invoice which has a value that is different from the goods receipt value. Let us say the goods receipt value described above (which was also posted to CO-PA from billing condition VPRS) was $100, but the vendor invoice came in at $120. In a normal scenario (using standard costing) the $20 difference will go to a variance account (or to the product if it was valued at Moving Average Price). However, since the goods receipt transaction went to the Cost of Sales account, then it makes sense that the difference of $20 also goes to the Cost of Sales account.

Now here’s the nuance. Since CO-PA always has to be in sync with the general ledger, then the $20 also needs to go to CO-PA. If you are knowledgeable about (Costing-based) CO-PA, then you will know that the cost of sales general ledger account never gets updated in parallel with the cost of sales value field. This is because the general ledger account for cost of sales is updated during the Goods Issue posting, while the CO-PA value field is updated during the Billing document posting. In fact the sales condition that is mapped to the CO-PA value field does not have a general ledger assigned to it (unlike other sales conditions). However, with third-party postings, when there is an Invoice-receipt difference, the system posts a CO-PA-only posting with this difference, and inherits all the characteristics from the original billing document.

If you are not aware that this CO-PA-only posting takes place, it is not very easy to detect because it looks like just another billing document posting to CO-PA. However, the only value field that is populated is the Cost of Sales value field.

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