Financial Accounting

Financial Accounting is one of the core modules of SAP and it’s the back bone of SAP implementation. It is used to store all financial data of an organization in real time and it enables to meet all the requirements of external reporting and financial statements by extracting data from sap standard report tools

SAP FI incorporates with other SAP modules such as Sales and Distribution (SD), Material Management (MM), Production Planning (PP), Plant Maintenance (PM), Controlling (CO) and Project System (PS) and through this integration, data is recorded in real time. It’s the most advantage of extracting financial data at any time

:Sap FI module includes the below functions

General Ledger Accounting

Accounts Payable

Accounts Receivable

Asset Accounting

Bank Accounting

Supply Change Management

 

 

Financial Accounting Organizational Structure

Organizational structures occur in all important functional areas of the SAP system. The most important organizational elements in Financial Accounting are the company code and the segment. The profit center is an additional reportable dimension. This means that you can create a fully-balanced set of financial statements for each profit center. These organizational elements are introduced here. The most important organizational element of the Controlling application is the controlling area

General Ledger Accounting

The central task of G/L accounting is to provide a comprehensive picture of external accounting and accounts. Recording all business transactions (primary postings as well as settlements from internal accounting) in a software system that is fully integrated with all the other operational areas of a company ensures that the accounting data is always complete and accurate. General Ledger Accounting is integrated with all application components of the SAP System that generate posting data of relevance to General Ledger

Accounting

Features

Post general ledger account documents

Display the document journal

Display G/L balances (list)

Perform recurring entries

Maintain accounts with automatic and manual clearing

Perform day-end closing

Perform month-end closing

Perform year-end closing

Recording all business transactions ensures complete and accurate accounting data

General Ledger Accounting automatically serves as a complete record of all business transactions. It is the central and up-to-date component for reporting. Individual transactions can be checked at any time in real time by displaying the original documents, line items, and monthly debits and credits at various levels such as

Account information

Journals

Totals/transaction figures

Balance sheet/profit and loss evaluations

Accounts Payable

Accounts payables is a sub module that captures all transactions with vendors and manages vendor accounts. Separate vendor accounts are maintained and when transactions are posted in customer accounts, reconciliation accounts in general ledger are updated with the figures in real time. Transactions in accounts payables include invoice posting, credit memo posting, down payments, invoice payment, automatic payment program and executing vendor reports

Features

How to Create a Vendor

How To Create a Vendor Account Group

How to Display Changes in Vendor Master

How to Block or Delete a Vendor

Create Vendor Master Data

One Time Vendor

Purchase Invoice Posting

Purchases Returns – Credit Memo

Outgoing Payments

Foreign Currency Vendor Invoice

How to Post Withholding Tax during Vendor Invoice Posting

How to Post Withholding Tax During Payment Posting

Outgoing Partial Payments By Residual Method

Outgoing Partial Payments By Partial Payment Method

Reset AP Cleared Items

Automatic Payment Run

How to Map Symbolic Account to G/L Account

Posting Rounding Differences

Accounts Receivable

Accounts receivables is a sub module that captures all transactions with customers and manages customer accounts. Separate customer accounts will be maintained and when transactions are posted in customer accounts, reconciliation accounts in general ledger are updated with the figures in real time. Transactions in accounts receivables include invoice posting, credit memo posting, down payments, invoice payment, dunning and executing customer reports

Features

Create a Customer Master Data

Change Customer Documents

How to Display Changes in Customer Master

How to Block or Delete a Customer

Create Customer Account Group

One Time Customer

How to post a Sales Invoice

Document Reversal

Sales Returns – Credit Memo

How to Post Incoming Payment

How to post a Foreign Currency Invoice

Incoming Partial Payments By Residual Method

Incoming Partial Payments By Partial Payment Method

How to Reset AR Cleared Items

Credit Control for the Customer

Asset Accounting

Asset accounting manages all transactions related to assets for an entity. When transactions are posted in asset accounts, reconciliation accounts in general ledger are updated in real time. Transactions in asset accounting include asset acquisition, asset retirement, asset sale, asset transfer, asset revaluation and asset depreciation

Features

Create asset master

Acquire assets

Retire assets

Valuate assets

Perform month-end closing

Perform year-end closing

Purchase asset from purchase order

Create legacy assets

Get a transparent view of asset acquisition

Provide efficient automated processing

Calculate values for depreciation

Record depreciation

Bank Accounting

Bank accounting captures all transactions with the banks. Bank reconciliation is done to reconcile all transactions recorded on bank statements comparing them to transactions in the system

All SAP FI sub-modules are integrated and transactions are updated in real time which means accurate financial statements can be extracted from the system at any time

Features

House bank

Vendor’s bank details

Customer’s bank details

Treasury business partner’s bank details

Currency

Payment method supplement

Check Management

Bills of Exchange Management

Financial Supply Change Management

The goal of SAP Financial Supply Chain Management is to predict cash flow, reduce working capital and operating expenses by increasing the number of timely customer payments and reducing the number of debtors, and integrating business processes throughout the financial supply chain. The product consists of different components: Credit Management, Biller Direct, Cash and Liquidity Management, Dispute Management, Collections Management, Treasury and Risk Management, and In-House Cash. These can be used independently or together

Features

Electronic Bill Presentment and Payment

Collections Management

Credit Management

Dispute Management

Last step integration with customers and vendors with minimal infrastructure requirements from customer or vendor side thus leading to higher adoption rate

Reduction in manual activities, communication and co-ordination efforts thus leading to reduction in overall cost of managing and doing activities in the receivables related process areas

Usage of business partners across multiple functionalities provide more flexibility as well as streamline the data maintenance across the landscape

Information available almost in real time to better manage the working capital and receivables thus reducing the cost associated with it

Controlling

SAP Controlling (CO) is another important SAP module offered to an organization. It supports coordination, monitoring, and optimization of all the processes in an organization. SAP CO involves recording both the consumption of production factors and the services provided by an organization

SAP CO includes managing and configuring master data that covers cost and profit centers, internal orders, and other cost elements and functional areas

The main purpose of SAP controlling module is planning. It enables you to determine variances by comparing actual data with plan data and thus enables you to control business flows in your organization

Both SAP CO and SAP FI modules are independent components in a SAP system. The data flow between these components takes place on a regular basis

Data flows relevant to cost flows to Controlling from Financial Accounting. At the same time, the system assigns the costs and revenues to different CO account assignment objects, such as cost centers, business processes, projects or orders

Sap CO module includes the below functions

Cost Center Accounting

Cost Element Accounting

Internal Orders

Product Costing

Profitability Analysis

Cost Center Accounting

SAP Cost center accounting is the important component of controlling module as it controls the costs that are incurred inside an organization. Cost center means the place where the costs are occurred. SAP CCA is used to track the costs as per organization departments wise. During creation of cost elements, you need to specify cost center category whether it is a production department or service department or Sales department

Features

Creation of cost center

Cost center categories

Cost center hierarchy

Cost center group

Set planner profile

Cost center planning

Cost center accounting planned documents

Plan distribution cycle

Cost Element Accounting

In SAP, cost element accounting (CO-OM-CEL) deals with the collection of costs and summarizes costs within controlling and posts to reconciliation ledger account. Cost Element Accounting is the area of cost accounting where you track and structure the costs incurred during a settlement period. In this case, the cost element represents the link between the account in Financial Accounting (FI) and the cost element in Controlling (CO). Further cost elements can be created specifically for allocating costs from Cost Center Accounting to Profitability Analysis

Cost element is an item in the chart of accounts, which is used in controlling area to record the values assigned consumption of production factors like raw material, utilities, etc. cost elements are divided in to two types i.e

Primary Cost / Revenue Elements

Secondary Cost Elements

Features

Determine Cost Element master data

Determine Cost Element categories

Determine Cost Element Groups

to provide a high-level overview of the costs within an organization

restrict the entry of cost data to part of the valuation differences and additional costs

identifying the costs incurred in subareas of the company and tracing the cost flows

reconciliation between internal and external accounting

Internal Orders

SAP CO internal order monitors the parts of the costs and in a few cases, it also monitors the revenues of the organization

You can create an internal order to monitor the costs of a time-restricted job or the costs for the production of activities. Internal orders can also be used for the long-term monitoring of costs

Investment cost related to fixed assets are monitored using Investment orders

Period-related accrual calculation between expenses in FI and the costing-based costs debited in Cost Accounting are monitored using Accrual orders

Costs and revenues incurred for activities for external partners or for internal activities that do not form a part of the core business for your organization are monitored using order with revenues

Features

Create internal order for R&D for other overhead costs or a statistical order for marketing

Post general ledger account documents

Create purchase order (consumable purchasing)

Post goods receipts (only for R&D order)

Post goods issues to R&D internal order (only for R&D order)

Create settlement rule with cost center

Settle orders (actual costs)

Order actual data reporting

Enable tracking of costs incurred for internal projects to facilitate cost control, return on investment calculations, and so on

Get a transparent view of outstanding internal orders, cost plan, and actual

Monitor internal jobs settled to cost centers (overhead orders)

Monitor internal jobs settled to fixed assets (investment orders)

Offsetting postings of accrued costs calculated in CO (accrual orders)

Display the cost controlling parts of Sales and Distribution customer not affect the core business of the company (orders with revenues)

Product Costing

SAP CO Product Costing module is used to find the value of internal cost of products. It is also used for profitability and management accounting for production

While configuring Product Costing, it involves two areas for setting

Product Cost Planning

Cost Object Controlling

Product Cost Planning (CO-PC-PCP) is an area within Product Cost Controlling (CO-PC) where you can plan costs for materials without reference to orders, and set prices for materials and other cost accounting objects. Product Cost Planning accesses master data in other components, such as BOMs, routings, and work centers in Production Planning, and cost centers, activity types, and business processes in Overhead Cost Controlling. Costing data within Product Cost Planning can also be made available to other applications. For example, you can update the standard price in the material master with the results of cost estimates, and valuate materials using this new standard

The Cost Object Controlling component is designed to answer the question: What costs have been incurred for which objects? For this purpose, the component assigns costs to the output of the company, such as materials manufactured in-house or individual orders

This component provides real-time cost management functions that measure the cost of goods manufactured in all plants. Cost Object Controlling accesses master data and transaction data in production Planning(PP), Material Management(MM), Sales and Distribution(SD) and Overhead Cost Controlling-CO-OM

Features

Material Cost Estimate With Quantity Structure

Product Cost Planning with Costing Run and Primary Cost Splitting

Product Cost Planning with Multilevel Unit Costing

Transfer of cost estimate results to the material master record and Profitability analysis

Analyze value added of a particular step in the production process

Analyze cost breakdown including primary costs or transfer prices

Analyze material, production, and overhead costs

Definition of procurement alternatives and mixing ratios for a mixed cost estimate

Define planning forms for Easy Cost Planning

Cost component split

Itemization by cost element

Costed multilevel BOM

to determine the cost of goods manufactured and the cost of goods sold.

Establish planned costs (budgeted costs)

Record actual costs for the cost objects

Compare actual costs with target costs and with planned costs, and analyze variances

Determine price floors for products or individual orders

Determine whether the actual costs of an order matched or exceeded the planned costs

Determine the production variances between actual costs and target costs, and why these occurred

Decide whether to accept a particular sales order (whether the sales order will be profitable)

Identify areas in your company where you have particularly low costs and therefore which cost objects you should concentrate on

Decide whether it would be more profitable to manufacture a cost object in-house or to outsource it

Determine whether and how the cost of goods manufactured can be reduced

Revaluate activities at actual prices

Allocate overhead using template allocation and by defining overhead rates for cost objects

Determine the work in process (the value of unfinished goods)

Determine the variances between target costs and actual costs

Transfer the calculated data to other objects and application components

Compile periodic reports on a regular basis

Profitability Analysis

Profitability Analysis (CO-PA) enables you to evaluate your company’s profit or contribution margin by market segment or by strategic business unit (such as a sales organization or business area). Your market segments can be classified according to products, customers, orders, or any combination of these. Profitability Analysis provides your sales, marketing, product management, and corporate planning departments with information to support internal accounting and decision-making

Profit Center Accounting (EC‑PCA) lets you determine profits and losses by profit center using either period accounting or the cost‑of‑sales approach. It also lets you analyze fixed capital and so‑called “statistical key figures” (number of employees, square meters, and so on) by profit center. Consequently, you can calculate all key figures commonly used in cost accounting (return on investment, cash flow, sales per employee, and so on)

A profit center is a management‑oriented organizational unit used for internal controlling purposes.

Features

Create characteristics and value fields

to evaluate (characteristics) and the categories in which you analyze values

transfer sales orders (only in costing-based profitability analysis) and billing documents from Sales and Distribution to CO-PA in real time

upload of external data by an interface program

create a sales and profit plan

transfer costs from cost centers, orders, and projects from CO to profitability segments

Transfer or settle costs and revenues from direct postings (in FI, MM, and so on) from CO to profitability segments

use automatic valuation to calculate planned revenues, sales deductions, and costs of goods manufactured based on the planned sales quantity

plan at a higher level, and have this data distributed downwards automatically

transfer planned sales quantities from (costing-based) CO-PA to Sales and Operations Planning (SOP)

determine profits and losses using either period accounting or the cost-of-sales approach

analyze your fixed assets by profit center

to analyze a number of key figures by profit center, including return on investment, working capital and cash flow

transfer the balances and balance changes of certain balance sheet accounts to profit centers in real time or periodically

Goods movements between profit centers can be valuated either at external prices, group‑internal prices or specially defined transfer prices