Organizational structure

and business transactions

in SAP R/3

Structure of the SAP R/3 System in

commercial terms

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• Accounting Area
– Financial Accounting (FI)
– Controlling (CO)
– Asset Accounting (FI AA)
• Human Resources
– HR
• Logistics
– Production Planning (PP)
– Materials Management (MM)
– Sales and Distribution (SD)
– Quality Management (QM)
– Service Management (SM)
– Plant Maintenance (PM)

Overview of the organization structure in SAP

R/3

Client = Group

Company Code1 Company Code2

Production Department Plant

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 Organizational units in the
Financial accounting module
• Client
• Company Code
• Business Area
• Company
• Credit Control Area
• Funds Management Area
• Dunning Area
• Chart of Accounts
• Controlling Area

Client
• Central organizational element
• Top-level structural element of a company
• Separate unit with its own separate master records
and complete group of tables
• To spesify the client in which the user want to
work they have to enter a Client Code when they
logs into the R/3 system

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 Organizational structure of a client

Client

Company Code1 Company Code 2 Company Code 3

Company Code
• Client can be subdividet into one or more
Company Codes
• Represent legally independent companies
• Several Company Codes in each client allows you
to manage accounting data for different
independent companies at the same time

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Organizational structure of a Company Code

Company Code (Group)

Business Area 1 Business Area 2

(North) (South)

Business Area
• One company code can be divided into several
business areas
• One business area may also be used in multiple
company codes
• Only used to provide in-house information in the
SAP R/3 system

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 Company
• The smallest organizational unit for which legal
financial statements can be prepared
• Can include one or more company codes
• Each one of a company’s company codes must use
the same Chart of Accounts

Organizational structure of a Company

Company

Company Code 1 Company Code 2 Company Code 3

Chart of Chart of Chart of

accounts1 accounts1 accounts1

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 Credit Control Area
• Organinzational unit in which all account
receivable from a customer are totaled
• Can be defined in such a way that it can be used in
several Company Codes

Organizational structure of a Credit Control

Area

Credit Control Area

Company code 1 Company code 2

(Subsidiary) (Subsidiary)

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 Funds Management (FM) Area
• Used to plan the deployments of Funds
• Identical to the Company Code in broad terms
• Controls budget management in an independent
unit that draws up its own accounts
• You can assign several Company Codes to one
FM Area

Organizational structure of FM Area

FM Area

Company Code 1

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 Dunning Area
• Dunning procedures are usually managed in the
accounts receivable and accounts payable
departments
• If dunning is managed independently in several
organizational units you must create Dunning
Areas

Organizational structure of Dunning

Area

Company Code
(Subsidary)

Dunning Area 1 Dunning Area 2 Dunning Area 3

(Division A) (Division B) (Division C)

Dunning Dunning Dunning

Procedure 1 Procedure 2 Procedure 3

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 Chart of Accounts
• Contains all of a company’s General Ledger
accounts
• Used by both the Financial Accounting and the
Controlling modules
• 1-1 relationship between Chart of Accounts and
Company Code or Controlling Area

Organizational structure of Chart of Accounts

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Single-code system:
– internal and external accounting form one unit
– all the postings are accountable
– you can only calculate a company’s net income after
determining the neutral expenditure and the neutrale
income
• Dual-code system:
– financial accounting and operating accounting are
carried out in two separate settelment areas
– each settelment is a closed unit
• The information in a Chart of account controls
how master records are created in the Company
Code

Controlling Area
• Organizational unit in the Controlling module
• The information in Financial Accounting is
directed towards interested parties from outside
the company.
• Controlling does not have to comply with the legal
regulations for financial accounting.

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 Organizational structure of Controlling Area

Organizational units in the

Logistics modules

• The Plant and Sales Organizations organizational

elements within the Logistics modules are
assigned to spesific Company Codes

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 Overview of the organizatinal structures of
Logistics elements

Client =Group

Company Code 1 Company Code 2

Production Department Plant

Plant and Storage Locations

• Company’s productions locations and branch
offices are represented by Plants
• One Company code may contain several Plants
• The plant is the location at which goods are
manufactured or a service is performed
• A plant may consist of several physical Storage
Locations

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Organizational structure for plants and storage
locations

Company code 1

Plant 1 Plant 2 Plant 3

Production Dept/Division Distribution

Warehouse 3 Warehouse 3 Warehouse 3 Warehouse 3 Warehouse 3

Sales Organization Distribution

Channel and Line
• Sales organization is the top organizational unit in
the Sales and Distribution module
• You can assign one or more Distribution Channels
to the same Sales Organization
• You can assign several Lines to the same
Distribution channel
• Lines represent various product groups

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 Organizational structure for Sales
Organization, Distribution Channel and Line

Sales Organization
(In-Plant Sales Organization)

Distribution Channel Distribution Channel

(Wholesale) (Retail)

Division 1 Division 2 Division 1 Division 2

The structure of the Financial

Accounting module
• The task of financial accounting department
– is to record all business transactions systematically and
comprehensively
– enter all these transactions in the system, and document
them

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• Financial Accounting is subdivided into
– General Ledger
– Extended ledger
– Accounts payable
– Accounts receivable
– Asset accounting
– Consolidation
– Financial contolling
– Investment
– Funds monitoring
– Travel management

Components of the Financial Accounting

module

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 Connecting to other SAP modules
• The Financial accounting module is linked to
almost all the others in SAP
• Business transactions are recorded as they occur in
the form of documents, and stored in a shared
database

The document principle

• All postings are always stored in the form of
documents
• Each document must be complete before it is
posted
• Each document must contain specific minimum
information (document date, document type,
posting key, account numbers, amounts)
• Incomplete or inconsistent Documents cannot be
posted

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 Real-Time posting
• Ensures that all employees at different levels have
continous access to a current and uniform dataset
• SAP R/3 supports Real-Time processing by using
a combination of batch processing and dialogue
processing

Double-Entry Accounting
• Ensures that all the business transactions recorded
in subledgers are also posted to the relevant
reconsiliation account in General Ledger
accounting
• You can post data in the Controlling application
component at the same time

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 General Ledger Accounting
• Provide a comprehensive picture of the external
accounting process and the accounts involved in it
• Provides the following functions:
– Atomatic and simultanious posting of all subledger item
to the coresponding ledger accounts
– Simultaneous updating of the general ledger and
controllig data
– real-time evaluation and reporting of current posting
data in the form of account displays and closing
accounts with different financial statement versions

General ledger accounts

• Contain the increases and decreases that correspond
to the flows of goods and services used in the
Logistics module
• contains master records that controls how business
transactions are recorded and posted to the account
• The Master data record identifies whether an
account is a reconsiliation account
• Reconsiliation accounts groups together the value
items from the accounts of individual subledgers

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 Documents in Financial Accounting
• Document type is an importent control elememt in
the SAP R/3 system
• Document type is used to:
– identify different business transactions
– control how account types are posted
– assign document numbers
– determine whether a ’gross’ or ’posting’ is involved
• Posting key controls how documents are recorded

Financial statements
• Divided by time into daily, monthly and annual
financial statements
• Daily financial statements:
– can be created immediately without any extra steps
– is sorted chronologically in a posting journal
• Monthly financial statements:
– carry out a number of closing tasks to create it
• Annual statments:
– The annual accounts is designed to provide information
for internal and external recipients
– Business transactions need to be entered in
chronological order

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• Structure of the Balance Sheet and the P&L
account:
– In SAP R/3 system you can create Balance Sheet and
P&L statements in various language and currencies to
meet the requirements of companies that operates
internationally
– you can select different classification schemes for
communications, tax and international reports

Subledgers
• Contain posting data information in detail
• The following subledgers are part of the R/3
system’s ledger:
– Account Receivable
– Account Payable
– Asset Accounting
– Inventory Accounting
– Personell Accounting
– Bank Accounting

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 Account Receivable
• Contains the accounting data for all the accounts
receivable that are present in the system
• Customer master data record:
– contains all the data that describes the commercial
relationship with a specific customer
– used by the Financial accounting component
– divided into a general section, a section for individual
campany codes and a section for sales data

• Outgoing invoices and credit memos:

– the system will automatically post invoice and credit
memos in the FI module when you create an invoice or
credit memo in SD
• Prcessing incoming payments:
– by computerized direct debiting or manually, by check
or bank order
• Dunning letters:
– to include a customer in the SAP R/3 system’s
automatic dunning process, you must first enter a
predefined dunning procedure in the customer master
data record

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• Customizing background for defining the
dunning program:
– Which company codes must always be included in
dunning
– Which dunning procedure is to be used
– Which dunning costs are to be charged
– The net data on which a specific dunning stage is
reached
– Which dunning letter is to be sent to the customer

Account Payable
• Manages all vendor accounting data
• Vendor Master data record:
– is created in the same way as the customer master data
record
– contains all the data required for handeling the business
relationship
• Incoming invoices:
– For MM and FI modules you enter this data in the
module’s Invoice Check Procedure function
– The Invoice Check Procedure checks the data of an
incoming invoice against the data of tha order and
delivery

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• Payments:
– SAP R/3 system can use the payment program to
handle cash transactions automatically
– Two-stage process
– The system uses the information in the documents and
master record to create a payment proposal list
• Customizing backgrund for defining the payment
program:
– Which company codes always take part in cash
transactions and which company codes are to handle
payments
– Which methods of payments are to be used in each case
– From which bank account the payment is to be made
– The form to be used for payment

Assets Accounts
• administers and monitors a company’s fixed assets
• The following functions are integrated in it:
– Asset accounting and valuation
– Leasing management
– Consolidation preparation
– information system
• Linked to a great many other modules of the SAP
R/3 system

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 Bills of exchange
• a contractual security whereby the person issuing
the bill places himself/herself or a therd party
under an obligatin to pay a certain sum within a
certain period
• Payee: recipient of the payer
• Drawee: person paying
• Anyone who signs a bill of exchange is liable for
the sum
• A bill of exchange merely documents the legal
aspects of payment claims

Bill of exchange strictness

• A bill oexchange can be written on any sheet of
paper, but only counts as a bill of exchange if it
meets the legal requirements:
– Must appear in the text of the document
– in the language in which it is issued
– it must consist of som other components (certain sum of
money, name of drawee, expiery data, place of payment,
to whom the payment is to made, day and place of issue,
signature of the issuer)
• The following variation can apply:
– The issuer can also be the drawee
– The issuer can also be the payee
– The issuer places itself under obligation

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 Accepting a bill of exchange
• The obligation of the bill only comes about with
acceptance
• At least two people are always required to create
an obligation

Causal debt versus bill-of-exchange debt

• Debt relatinship is referred to as abstract because
the bill of exchange does not imply its legal reason
• In crontrast to bill of exchange, the legal reason in
the case of claim, is already included
• The bill of exchange also requires a reason

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 Payment and fulfilment
• The owner of a bill of exchange can demand
payment on the due date
• Only payment to the legally entitled person counts
as fulfilment
• A bill of exchange protest is the formal
documentation stating that a bill of exchange has
not paid when due
• Regress (recourse) can be used in two cases:
– When the drawee does not pay
– When the drawee does not accept liability to pay

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