Purchase order price calculation in very simple terms


When purchase order is created, purchase price gets calculated automatically. Question is how purchase order price is automatically calculated?

Below picture explain purchase order price determination process:

purchase order price calculation

When goods receipt (GR) and invoice receipt (IR) is performed, this purchase order price is used in posting corresponding accounting document.

Let’s understand amount calculation in good GR & IR one by one:

When good receipt (GR) is performed, below accounting document gets generated:

accounting document for MIGO

Inventory account is always posted with standard price of material maintained in material master.

GR/IR clearing account is always posted with PO price.

In case of any difference in amount between inventory account and GR/IR account, difference is posted to account depending upon price control maintained in material master.

price difference account at the time of MIRO

When good receipt (GR) is performed, below accounting document gets generated:

Price difference account at the time of MIRO

In case of any difference in amount between accounts payable and GR/IR account, difference is posted to account depending upon price control maintained in material master.

price difference account at the time of MIRO

NotePrice control is maintained in material master. Material is either maintained at price control "standard" or "moving average".