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HERO MOTOR CORP.

BUSINESS BLUEPRINT DOCUMENT


FINANCE

Version: V.02 Date: 9 March 2012


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Document Information
Document Name Title Document Purpose Key Words Document Status Contact for Enquiries Processing FI Business Blueprint_V2.doc BUSINESS BLUEPRINT

Document Change Control


Reviewed by Approved by

Relea se 1.0

Description

Created by

Date

Date

Date

FINANCE

FI Team

9 Mar 2012

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TABLE OF CONTENT
1. Introduction...4 2. Requirements/Expectations.4 3. General Explanations...7 4. Explanations of Functions and Events..13 5. Organizational Considerations..14 6. Process Diagrams................15 7. Changes to Existing Organization Process.......16 8. Description of Improvements..18 9. Solution in SAP................19 1. Master Data..21 2. Business Processes................21 10. Description of Functional Deficits.......49 11. Approaches to Covering Functional Deficits......49 12. Integration Considerations...50 13. Reporting Requirements...50 14. Authorization Requirements....50 15. File Conversion/Interface Consideration.51 16. Workflow Requirements51

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INTRODUCTION
Based on the discussions, business scenarios will be documented and need to be addressed by the configured ECC6 system. The purpose of this report is to confirm the understanding of these business scenarios, which will form the basis for system applications. The exact data on master data fields, their status, document types, number ranges used in individual transactions shall be determined during the Realization phase.

The Finance business blue print document details the Organization Structure and business process of the following entities to be mapped in SAP. 1) Hero Motors Corporation -> 1000 2) Hero Marketing -> 2000

Requirements/Expectations:
The General Ledger Accounting business blue print document details the Organization Structure of the following entities to be mapped in SAP. 1) Hero Motors Corporation -> 1000 2) Hero Marketing -> 2000

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It covers the business requirements gathered during the business requirement study phase and how the GL Accounts will be structured to meet the reporting and process requirements in addition to the following: Compliance Statutory & Legal requirements Periodic financials for different purposes Integration with other modules Internal controls. Eliminate data redundancy Automation of transactions to improve cycle time

Carry forward process at the year end


This process involves carry forward of balances to next fiscal year. This process has to be run common to carry forward the balances of Vendors, Customers, GL and Asset Accounts. This process has to be controlled at Company level and carried over by the head of accounting and control. The process of carry forward of all balances i.e. Vendors, Customers, GL and Asset Accounts st should be run on the first day of the next fiscal year (i.e. 1 April). If the balances undergo changes in the course of finalization, the carry forward balances are automatically updated in the new fiscal year.

Periodic Processing:
Maintain Posting Periods Maintain Exchange Rates Foreign Currency Valuations Auto Reversal of Entries

Clearing
Balance Sheet Accounts contains open transactions which need to be cleared from time to time either automatically or by a manual process. Accounts having large number of open items where it is manually difficult to clear each of them by matching debits and credits can be cleared off automatically based on some preset rules.

Provisions
Recurring entry for accounting and payment Clearing of open items management

Reversal of Documents
System to provide standard reason master and scenarios under which documents can be reversed. Separate authorization required for reversal.

Accounts Receivable
Accounts receivable should record and manage the accounting data relating to all customers. It should be closely integrated with the sales management and Project Systems. Any transaction in sales, which has a financial implication, should be automatically reflected in accounts receivables

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as well as the general ledger. Also, different G/L accounts should be affected based on the nature of the transaction. Capture of Check deposit list for checks collected and deposited. Account to be credited only after realization of the check. Settlement of Advances on account receipt Advance and Debtors account should show the un-cleared amounts Details of TDS, WHT and Provisions for doubtful debts are to be captured order wise and sales office wise Customer Return

Accounts payable
The payment terms are used for vendor payments are PT01 and PT02 (For all other). Supplier invoice Verification with reference to PO/GRN only with clear segregation of duties and control with regard to capturing of Taxation. Separate classifications for Vendor groups to identify balances for different business scenarios like domestic purchases, Import purchases and one time vendor. Auto / Manual payment process with covering letter giving details for payment. Vendor down payment should be based on payment request from MM. System can able to capture due date of delivery. System to pop up the advance at the time of accounting the vendor invoice Matching advances should automatically transferred vendor a/c based on PO/Invoice reference. Provision for adjustment of partial advances Monthly revaluation of forex liabilities and restatement of vendor liabilities on subsequent month Quantity discount offered by the vender to be captured and accounting entry to be generated

Asset accounting
Authorization levels for decentralized Control of Asset Monitoring. Assets Classification & Block of Assets as per Income Tax Act. Assets Capitalization. Depreciation calculations. Assets Location and identification. Assets Revaluation Change in depreciation method

TAX
Periodical return (quarterly, annually) Issue of TDS certificate through system for contractors, Consultants, Rents, Interest etc., Option of selecting date for printing TDS certificate. Automatic deduction of TDS at specified rate.

VAT
Automatic Calculation of VAT at the time of sales Automatic updation of VAT related GL Account when purchases and sales are made

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BANK
Computerized cheque printing along with payment advice to parties. Bank interest calculation. Report on Balances of all banks, credit limit (availed & sanctioned) Bank Reconciliation through system either Manual or automated.

General Explanations:
ORGANIZATION STRUCTURE
Financial statements will be drawn for each individual legal entity wise for external reporting and for the internal reporting at Profit Center wise. Profit center grouping by enabling the New GL functionality, online split with Zero balancing for scenario Profit Center and Segments. For internal monitoring purposes, individual responsibility centers have been identified against which operating profitability will be measured together with Accounts Receivable, Accounts Payable and Stock. Legal and reporting requirements - Financial Statements as per Schedule VI to the Companies Act 1956 Taxation Credit management Visibility and control of costs, revenues and measurement of profitability across the company code.

General Ledger
Logic for creation of GL account will be based on company code level. These GL accounts applicable for that company code under which these are created. The central task of G/L accounting is to provide a comprehensive picture for external accounting. Recording all business transactions 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. Essentially, the G/L-accounts serve as a complete record of all business transactions. It is a centralized, up- to-date reference for the rendering of accounts and their account information. Actual individual transactions can be checked at any time in real-time processing by displaying the original documents, line items and monthly debits and credits at various levels such as: Account Journals Summary of monthly debits and credits (balances) Balance sheet/profit and loss evaluations Other analysis

Carry forward process at the year end


Process of Carry forward of balances will transfer the end balances of balance sheet items from one fiscal year to the subsequent fiscal year. Process shall be activated only at the yearend and system should not allow to carry forward the balances for any other period.

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Posting Period
Posting period involves two periods Monthly Annual Monthly posting periods are closed on specified date Once in a year annual closing is carried out to enable to carry forward the opening balances to the next fiscal year. The system will only permit postings to open periods. Re-opening of posting period is allowed in case of monthly closure depending on the requirement. In case of annual closing, special periods are enabled to carry out the audit adjustments.

Automatic Clearing of accounts:


Accounts having large number of open items where it is manually difficult to clear each of them by matching debits and credits can be cleared off using this process based on some preset rules. GR/IR process to clear open transactions etc.

Foreign Currency Valuations:


The monetary items (open transactions) in the balance sheet accounts maintained in the currency other than the local currency can be revaluated at the end of the period Separate foreign currency master is maintained to carry out revaluation process. System will enable to transact at different rates where ever required Revaluation difference will be posted to the foreign exchange fluctuation - profit or loss account maintained separately for this purpose in GL.

Closure of Stock Ledgers:


Ensure closure of stock ledgers before periodic processing

GL accounts may contain open transactions due to the following process


Bill passing Rectification and auto reversal Recurring entries Provision entries

Following are the Open item transactions in GL which needs clearance


Bank Accounts GR/IR

Provisions
Provisions are made for the expenses which are related to/ incurred during the period but bill have not been submitted by the vendor/contractor or bill have been submitted by the vendor/contractor but not approved by the competent authority.
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In the case of expenses paid in advance then these expenses has to be posted to Prepaid account and a proportionate monthly amount transferred from the prepaid account to profit loss account is possible through recurring entries. Provisions made on monthly basis will be reversed by the auto reversal of transactions. Accounting entries: Following entries are generated for the General postings at various stages: Cash or Bank Voucher (Payments) Dr. Expense A/c Cr. cash/Bank Journal vouchers Dr. Expenses a/c Cr.Payables A/c & Dr. Receivables Cr. Income A/c Income entries (Receipts) Dr. Bank or Cash Cr. Income

Accounts Payable
Accounts payable maintains the records relating to all the vendors and it is closely integrated with the procurement and inventory management system. Any transaction in procurement, which has a financial implication, would have to automatically be reflected in accounts payable as well as the general ledger. It would also require settling payments against appropriate outstanding and settling advances against appropriate invoices. Revaluation facility to revalue supplier balances at month end & year end.

Different type of vendor categories exist which define nature of vendor. Currently, following categories existsSundry Creditors - Trade Sundry creditors Non-trade Presently, vendor code does not exist. Vendor master is maintained name wise in the case of vendor masters are maintained based on the above mentioned groups & they do have vendor codes (for local vendors there are separate codes (starting with 1) & foreign vendors there are separate codes (starting with 2). In case of Job work & Capital machinery erection, Service vendors are created at Plant level. For some service vendors like audit fees, consultancy charges, bill booking and payment is directly made by corporate office and expense is booked at corporate level.
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For expenses which are related to specific plants, and which are booked at corporate level, debit and credit note is raised to plants. On the basis of debit and credit note, plants book expense in their books of accounts. Head office petty cash reimbursement is prepared manually based on the amount of float already utilized, money is then withdrawn from the bank. In case of Import purchases, the transactions are done through LCs, Telex Transfers & Demand Drafts. Payment in foreign currency will be always made by HO. Payment & updating the document (payment voucher) with the bank rate. The payment voucher is posted in the system & later forex is generated by allocation (off setting the invoice with the payment) Payments to domestic vendors are made from the regional offices. Payment: All the payments are made at H level Payment terms vary from Vendor to Vendor & from Item to item.

Outgoing payment can be classified as belowRaw material payment: At present, payment for all the Raw material is paid through corporate office and is subsequently accounted in the books of Plant. The invoices of vendors are processed by the Purchase department after receiving the goods from the vendor, all the terms of PO is referred before the invoice is put for payment. All the payments are normally made by Cheques/Demand Drafts drawn in favour of Vendor

Service and contracts For services / contracts, payment is made by Plants or corporate office (on the basis of advice received from Plants). Debit note is raised by corporate to plants.

Cash payment: Cash payment is made for inward freight, outward freight, advance to employees, reimbursement of petty expenses, reimbursement of medical expenses, staff welfare, Octroi etc.

Accounts Receivable
Accounts receivable will record and manage the accounting data relating to all customers. It is closely integrated with the sales management component. Any transaction in sales, which has a financial implication, will be automatically reflected in accounts receivables as well as the general ledger. Generation of accounting document for receivables based on an invoice or credit memo. Receipt of advances Monitoring of outstanding in customer accounts. Collection from customers. Accounting of collection from customers against relevant outstanding. Credit Management for different customers. Maintaining customer correspondence
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The existing account groups at are LOCAL FOREIGN INTERNAL (INTER COMPANY) ONE TIME Local & Foreign

ASSET ACCOUNTING
The proposed Asset Classes should conform to such reporting requirements namely Schedule VI to the Companies Act, 1956 and the Income Tax Act, 1962 Depreciation for Schedule XIV to the Companies Act should not be determined at the Asset Class level, rather they should be defined at each asset level. For Income Tax Act, depreciation could be defined at Asset Class level. Depreciation to be calculated & posted to accounts automatically Plant wise Asset listing.

Assets Capitalization
Assets can be capitalized on completion based with installation date entered in the system by the controlling department. Assets are of 2 types, one asset which can be used immediately on receipt like. Furniture, computers, office equipments, vehicles etc. In all these cases capitalization will be done based on GRN date. In other cases, assets which cannot be used directly without additional activity like commissioning etc. In such cases cost will be accumulated in CWIP until completion and total cost will be capitalized.

Depreciation calculations Book Depreciation:


Depreciation to be calculated on monthly basis on the assets capitalized. Depreciation to be calculated from the date of installation to the period end date/sale of assets date. Depreciation in case of plant & machinery has to be calculated shift wise. Flexibility required in system for deciding the number of shifts for each asset. Depreciation will be calculated on the basis of SLM method & IFRS is required.

Depreciation as per IT Act:


Depreciation under Income Tax Act will be calculated for the Financial Year (1 April To 31 March). Calculate for whole year if the assets are installed for more than 180 days or for half year if st assets are installed for less than 180 days as on financial year end (31 March).
st st

Capacity enhancement to the existing assets


System to capture additional expenditure of Capacity enhancement by original asset and calculate depreciation at an accelerated rate so that the additional value will get charged off along with the original equipment value
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TAX
TDS deduction TDS is deducted at the time of payment or booking of invoice, whichever is earlier. TDS is deducted under following sections192 (salary) 194 A (interest) 194 C (Contractor) 194 J (Professional) 194 H (Brokerage / commission) 194 I (Rent) 195 (Payment to non resident)

TDS Challan ITNS 281 challan is deposited separately for companies. Challan also contains details of surcharge and education cess. TDS certificate TDS certificate (form 16A) is issued to each party from whom TDS is deducted

TDS return Each entity separately files TDS return. Following information is required for TDS returnTAN and PAN of entity.

It covers the business requirements gathered during the business requirement study phase and how the Taxation will be structured to meet the reporting and process requirements.

Cash Accounting
Cash withdrawal from the bank A petty cash book is maintained at the plant to meet the day to day expenses and cash payments to vendors and employees. Incase if cash is required the cashier has to create a request for the amount to be withdrawn from the bank, check will be prepared for the request with approval and Cash is withdrawn from bank. Payment towards reimbursements has to be made with approval of the department head. Payments for Expenses and Advances to be made after approval a. After approval of HOD and HR / Admin Department the documents will be forwarded cashier for cash payment / receipt. b. Cashier to verify the supporting, account and post the transaction c. Print cash voucher and attach supporting d. Makes the payment and obtain signature of the recipient of the money. e. Accounts supervisor check the document. Printing of withdrawal / Receipts Voucher from cash book. Printing of cash receipts and cash payments voucher is for getting the acknowledgement of payment & receipts. Cash Purchases Cash purchases are allowed to the extent of Rs1000

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Bank
For every bank a/c there is a set up table in the House Bank which would capture Bank Name, Currency, Type etc. & therefore the GL code does not attempt to capture this structure. Banking transactions are used to record o incoming payments from customers, o fund transfers, o parking of funds in deposit accounts, o make payments to vendors for goods & services.

All outgoing payments may be made using Cheque, Pay-order, Demand Draft, TT, EFT etc. Periodic reconciliation of differences, if any, between bank balance as per bank statement and that as per books of accounts will be necessary. Business Process Overview Bank Receipts and Payments Bank Reconciliation Cash Accounting

Explanations of Functions and Events


Explain what events and processes trigger this process

Periodic Processing following activities needs to be done


Maintain Posting Periods Posting of all parked documents GR / IR Clearing Foreign Currency Valuations Closure of stock ledgers

Clearing
Debits and credits that need to be cleared on a periodic basis. Criterions for clearing need to be identified for each of these GL accounts. GR/IR account may be cleared automatically by a. Purchase Order No., b. Delivery Challan No., c. Amount etc (both debit and credit items) so as to retain items for which Invoice has not yet been received. In the case of BRS transactions may be cleared based on the Cheque Number, reference number and amount.

Provisions
Provisions are made on 31 December annual basis for Companies Act purpose. st Provisions are made on 31 March annual basis for Income Tax Act purpose.
st

Accounts Payable
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For manual invoice verification process, invoice documents received from vendors and goods receipt document is necessary to proceed with invoice verification process for purchase order related invoices. For non-purchase order related invoices, invoice documents from vendor that are approved by relevant authority triggers the invoice verification process. While posting the invoice, the advances against the vendor to trigger for adjustment.

Accounts Receivable:
AR process will be trigger with Automatic Generation of accounting document for Revenue from SD.

Asset Accounting:
As and when the capitalization date will be mentioned in the system in respect of assets, system will alert for the capitalization of assets. System will calculate and generate the Accumulated Depreciation entry for checking & posting. System will square up the assets account and accumulated. Accumulated Depreciation after the sale of assets and automatically posting will be done for profit/loss on sale of assets.

Bank Accounting:
Withdrawals from bank will be done as and when required to meet the expenses. Bank Statements will be uploaded every week. Interest calculation on Cash Credits every month.

Organizational Considerations
Address any issues agreed in the workshop concerning the SAP organizational structure and this process. Posting period control needs to be decentralised at the company code level To use the functionality of Automatic Payment Program the payments needs to be scheduled Approval from the respective department heads is required before coming for payment process. Currently Electronic Bank Statements are not received from the Banks, but to be EBS need to be explored.

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Process Diagrams
Accounts Payable /Payment and Reporting Process

Start

Receive invoice from Vendor

Carry out Invoice verification & Enter Invoice into Vendor (payable)

Run Payment Proposal report in SAP. Attach invoice and submit to Accounts

Are there any data entry errors or payment to be stopped/held


NO

Yes Identify error(s)/and/ or payments to be stopped/held: submit to Accounts for correction in SAP

Approve Payment Proposal

Correct data entry erro(s) and/or flag payments to be stopped/held

Make" payment Run to process wire transfer transactions/check payment as needed: submit for approval and release of payment Checks Approve /reject wire transfer transactions paying vendors

Signe or put hold on check(s)

Receive conformation number after payment release

Notify vendor with payment

End

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Procurement and capitalization

Changes to Existing Organization Processes


General Ledger
Month/Quarter/Year end provisions are done automatically and the same are reversed automatically. Pending entries can be kept on hold in the system, only on completion the entry is posted Deletion is not possible in SAP system. This will discipline the accountant before posting a transaction. Grouping & regrouping done while preparing Balance sheet need not be done in excel, its automatic in SAP Balance sheet is generated online with different formats In SAP most of the transactions like excise accounting, capitalizing CWIP to assets, depreciation at year-end, etc are posted automatically from other modules. Faster closure of Books of Accounts by automating year end activities using various tools like recurring entries for provisions etc., Description based GL Accounts will be replaced by Numbers with coding logic for identification and more control, codification of GL Account helps in avoiding duplication of GL Accounts and also bring in discipline in creation of GL Accounts. Currently, each asset is defined as a GL account, but in SAP, asset master will be a sub ledger and will be linked to relevant GL account.

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Carry forward process at the year end


In the existing system balances can be carried forward only after finalization and approval of accounts by the Board. We commence the next fiscal year without opening balances and necessitate additional manual process of re-computing ledger balances for the purpose of payment, monitoring and reporting. This can be avoided in the SAP process.

Periodic Processing
Monthly closing is not enabled in the present system. Annual close is carried out depending on the completion of the statutory audit and approval of accounts by the Board. In the mean time transactions are carried out in the subsequent fiscal year without opening balance and manually merged in excel for reporting. Revaluation of Foreign Currency is carried out manually.

Provisions
Automatic creation & reversal of the monthly provisions in SAP Automatic posting is possible in the case of recurring entries (repeating the same entry every month like rent, prepaid exp. Etc.)

Accounts Payable
In SAP, vendor master will be maintained at company code level whereas currently, plant wise vendor masters are created. Using the concept of account group, data will be more organized. Coding of vendor masters will be done Display of vendor line items and drill down to originating documents would be available in SAP.

Accounts Receivable
In SAP, customer master will be maintained at company code level whereas currently, plant wise customer masters are created. Using the concept of account group, data will be more organized.

Asset Accounting
Calculation of Depreciation which is done manually in Excel is automated Asset register maintained manually will be automated System monitors the purchases on Account of CWIP instead of monitoring manually Working on Excel is reduced.

Tax
Entire TDS cycle from Deduction to generating returns is automated

VAT
Currently, separate voucher is passed for the purpose of booking of VAT and creating liability. However, in SAP, calculation of VAT will be automatically done by system on the basis of tax code defined.

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SERVICE TAX
Currently, separate voucher is passed for the purpose of booking of service tax and creating liability. However, in SAP, calculation of service tax will be automatically done by system on the basis of tax code defined. No Mismatch of balances between Service tax return and accounting books.

Bank
Currently, cheques are issued manually which will be through SAP. Interest calculation is done manually but it will be through SAP. Bank Guarantee register will be generated through system.

Description of Improvements
General Ledger
Recurring entries functionality Automated process which save lot of time due to elimination of manual process in creation of provisions, accruals on a monthly basis and eliminate manual process in merging opening balances in GL and Sub-ledgers for the purpose of reporting. Data for provision will be flow from the concerned module like from HR for employees related, from MM for services related and from SD for sales related e.g. freight outward, warranties etc. this will improve the accuracy and completeness of the provisions.

Accounts Payable
One vendor master will remove the duplicity of work. There will be uniformity in creating master data since this will be done at one single point only and authorization will be to limited persons. Vendor ledger can be analyzed at company code level and further it can be analyzed at purchasing organization level. Less Usage of calculation in Excel. The payment to vendors is automated in the system. The system capture the payables based on due date run the payment program. The payment can be made in multiple methods such Wire transfer, Automatic chq printing, Bank transfer etc All invoices received are uploaded into the system at the Accounting Centre. Invoice having exceptions are listed by. Simple resolution process with the help of interactive documents aid in resolving all exceptions in quick time. Material accounting to Vendor accounting will be done automatically. There will be a code for each Raw Material, Spares, Consumables and Semi Finished goods. All the transactions take place only through material codes only. It will reduce the duplication of material names.

Accounts Receivable
One customer master will remove the duplicity of work. There will be uniformity in creating master data since this will be done at one single point only and authorization will be to limited persons. Customer ledger can be analyzed at company code level and further it can be analyzed at Profit Center Level also. Due date analysis will be available from system.
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Interest calculation report will be available from system

Asset accounting
Online maintenance of asset details in system. Automatic calculation and posting, & asset wise depreciation in books of account. Detail for the purpose of income tax requirement & Companies Act, 1956 Cost center wise posting of depreciation.

Tax
Entire TDS cycle from Deduction to generating returns is automated. TDS deduction will be carried out automatically while executing the transaction depending upon the withholding tax details provided in vendor master

SERVICE
a) Since, system will calculate service tax amount at the time of booking of invoice, which will reduce the number of JVs passed by accounts department. b) Due to calculation of service tax by system, chances of manual error and omission will not be there. c) Reconciliation between Excise department and Accounts department is no more required.

Solution in SAP
Describe how this process will be addressed in the product. ORGANISATION STRUCTURE
COMPANY CODE
It is the smallest organizational unit for which a complete self-contained set of accounts can be drawn up for purposes of external reporting. The process of external reporting involves recording all relevant transactions and generating all items and supporting documents required for legal financial statements (Balance Sheet and Profit and Loss statement). Only a legally independent company is normally represented by a Company Code in the SAP system. In financial accounting, business transactions are always entered on the Company Code level and processed further. The costs are also managed at the Company Code level. By using internal organizational structures, it is possible to divide this up even further in Controlling. Tax and Legal requirements: ability to produce an auditable, fully balanced set of financial records. There will be two Company Codes 1000 & 2000, where the Statutory Profit and Loss and Balance Sheet will be generated under Schedule VI to the Companies Act, 1956. Company Code Description Hero Motor Corp Hero Marketing Company Code 1000 2000

FISCAL YEAR AND ACCOUNTING POSTING PERIOD


A Fiscal Year is generally a period of 12 months for which the company produces financial statements and takes inventory. It may or may not correspond to the calendar year. A Fiscal Year variant specifies the number of periods and special periods in a Fiscal Year and how the system is to determine the assigned posting periods.
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The fiscal year is April to March. The end of a period is the last day of the calendar month. Both the company codes 1000 & 2000 will use the Fiscal Year Variant V3 with 12 normal posting periods and 4 special periods to enable year end adjustment entries.

POSTING PERIOD VARIANT


Once a Fiscal Year is defined, it is possible to specify whether a period is allowed for posting or not. In order to standardize maintenance of accounting period especially across the group, SAP R/3 system allows the specification of open or close status to be maintained via a posting period variant. For 1000 & 2000 company codes, it is proposed that the Accountant or Finance Manager will centrally maintain the posting periods. Posting Period Variant 0001 Posting Period Variant Hero Motor Corporation Hero Marketing Co Code 1000 2000

CHART OF ACCOUNTS
The Chart of Accounts is a classification scheme consisting of a group of general ledger (G/L) accounts. It provides a framework for the recording of values, in order to ensure an orderly rendering of accounting data. The G/L accounts can be used by one or more Company Codes. Every Company Code must be assigned a Chart of Accounts. For each G/L account, the Chart of Accounts contains the account number, the account name and other technical information. A Chart of Accounts must be assigned to each Company Code and will be used in both financial accounting and cost accounting. Chart of Accounts is being structured as explained below. There will be one Chart of Accounts CA01 attached to the Client level ,which will be assigned to Company codes 1000 & 2000 Chart of Accounts Description COA for 1000 COA for 2000 Chart of Accounts CA01

CREDIT CONTROL AREA


A Credit Control Area can establish and monitor credit limits for customers assigned to one or several Company Codes. A Company Code is assigned to one Credit Control Area, which monitors its credit limits. Credit Control Area Description Hero Motor Corp Credit Control Area 1010 Hero Marketing Credit Control Area 2010 Credit Control Area 1010 2010

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GENERAL LEDGER
Master Data
This process is used in the creation of the account masters in the general ledger for which you post the documents. The Master records processing is divided into two broad areas. The first area is where the corporation as a whole where the number and description of the accounts are entered and this will be centrally maintained to maintain uniformity in across different legal entities in the organization and also to ensure ease of consolidation. The New GL is activated for online splitting and to attain the profit center balance sheet. The other area which is maintained for each legal entity will be maintained by the individual legal entity wise. This is where the fields for which entry is to be made when documents are entered will be decided upon. And other data like Whether or not the account should be open item managed Whether account has to be managed only on balances or on a line item display basis

Default entry to assignment field etc. is to be entered These entries are specific to the legal entity concerned and does not relate to other entries

Business Processes GENERAL LEDGER


The central task of GL accounting is to provide a comprehensive picture for 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. The SAP FI General Ledger has the following features: Free choice of level: corporate, group or company Automatic and simultaneous posting of all sub-ledger items in the appropriate general ledger accounts (reconciliation accounts) Simultaneous updating of general ledger, parallel ledgers and cost accounting areas

Real-time evaluation and reporting on current accounting data, in the form of account displays financial statements with different financial statement versions and additional analyses Essentially, the G/L-accounts serve as a complete record of all business transactions. It is a centralized, up- to-date reference for the rendering of accounts and their account information. Actual individual transactions can be checked at any time in real-time processing by displaying the original documents, line items and monthly debits and credits at various levels such as: Account Journals Summary of monthly debits and credits (balances) Balance sheet/profit and loss evaluations
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Other analysis

GL account master records contain the data that is always needed by the general ledger to determine the account's function. The GL account master records control the posting of accounting transactions to GL accounts and the processing of the posting data. The values posted to the G/L accounts appear in the financial statements, which provide the Balance Sheet, Profit and Loss Statement. Account Group The account group is a summary of characteristics that control the creation of master records. It can be used to determine which fields must or can be filled when creating the master record. In addition, it can be used to predefine a number interval, from which the numbers for the master records should be chosen. Accounts that require the same master record fields and use the same number interval are created with the same account group. The account groups proposed will be defined in the Chart of Accounts CA01. General Ledger Overview This section outlines the master data structures, business processes and related configuration parameters required for the General Ledger. However, General Ledger module is also heavily involved in other business process designs from other modules and how they post into the General Ledger. These issues are covered in the relevant sections in Account Payable, Account Receivable, Purchasing, Inventory Management and Logistic Invoice Verification Key improvements to be realized from this implementation includes:Reduction in data redundancy: The shared master data concept in SAP will inevitably reduce duplication of data stored and used in the business processing Greatly reduced administration: through the elimination of re-keying, reconciliation and manual collation of data. This gives the finance staff the time to analyze the figures rather than spending the majority of their time performing administration tasks Better control of data: through the validation of the data at point of entry. Seamless Integration: a complete integrated system will provide better control and reduce data entry errors and also provides a complete audit trail for the organization. The processes and its integration can be summarized in a diagram as follows:-

Sales Sales& & Distribution Distribution

SD SD

AR

Debtors Debtors

AP AP

Creditors Creditors

Asset Asset Accounting Accounting

AA AA

G GL General Ledger Ledger L General


ProfitCenter Center Profit CostCenter Center Cost

FI F I
Material Master Ma terial Master Material Inventory Inventory Management Management

PS

CO CO
Purchasing Purchasing

MM Document1

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GL Master Record Each account used for posting is defined in the general ledger and contains information that reflects or describes its function. This information is stored in the master record of an account. It controls how business transactions are entered and posted to the account as well as how posting data is processed. GL account master records are divided into two areas so that company codes with the same chart of accounts can use the same GL accounts. Chart of accounts area: This area contains information that applies to the complete master record (G/L account number, account name, profit and loss account, or balance sheet account, short text and long text). In addition, you use it to store data that controls the creation of a master record in the company code (account group and screen layout). Company code-specific area: This area contains data that controls the entry of business transactions for the related account and account management in the respective company code (currency; open item management, line item display). Maintenance of GL accounts in the Chart of Accounts will be centrally controlled at Group level. Account Balance Whenever documents are posted to an account, the system automatically updates the account balance. For GL accounts with line item display, it also indicates which items from a document are posted to the account. You can display the account balance and depending on the account attributes the line items for each account. The account balance offers an overview of transactions figures for each period by debits and credits. Possible differentiating criteria include account number, company code, fiscal year and currency. Reconciliation of Subsidiary Ledger The chart of accounts, with its primary asset and balance sheet accounts provides the central posting link between the general ledger and the related subsidiary ledgers (Assets, Customers & Vendors). The general principle of posting via reconciliation accounts is that each business transaction is simultaneously reflected in the subsidiary ledger as a line item and as a totals item in the general ledger via the assigned reconciliation account which is balance sheet account. As a result, updating is timely and automatic. Moreover, it ensures that: General ledger and subsidiary ledgers are always reconciled The effects of each posting on assets, liabilities and profit and loss are used immediately by the financial information system Note: The list of reconciliation accounts for Receivables, payables and assets are identified and documented in the respective blue prints. Open Item management Open item management can be activated for Balance sheet (Non Reconciliation) G/L accounts. It allows you to clear debit and credit postings by document either manually or through an automatic clearing program with a common attribute values. The vendor and Customer subsidiary ledgers by default are open item managed accounts.

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Line Item Display A line item display provides an overview of the open, cleared, and parked items from an account. You determine which information about the individual line items is to be displayed on the screen. However, you can also change the view dynamically after the list of items has been processed. Various sort options (by posting date, assignment, document number, or clearing data) allow you to interactively select, vary, total and the required documents on the screen. Search and summarization functions are available on the initial screen as well, so it is not necessary to display all items. Line item display functions are available for: An account in a company code You can enable the line item display from the document at any time. Note. The line item display indicator will not be set for reconciliation accounts. GL Account Posting Each transaction relevant to posting must be entered in the originating area of the company in compliance with all applicable posting rules. The precise, reliable, and complete recording and entering of all required data is only possible at the point of data origin. General ledger postings may be the result of: Operational transactions (for example, issue of goods causes material issue posting) if the SAP Logistics system is active and integrated Posting transactions in subsidiary ledgers (asset acquisition in fixed assets) if the SAP Asset Accounting (FI-AA) system is active and integrated Transactions originally assigned to the general ledger, if the General Ledger (FI-GL) system is active

At the same time, interrelationships with Controlling and its components can be taken into account. The extent and type of the integrated systems used determine how entries, account assignments, and updates are processed for business transactions. Post GL Documents In a manual process, ledger books are maintained to store accounting entries. In contrast, SAP uses document principle whereby accounting entries are kept in document database and can be referred to via document number. On data integrity side, SAP allows only balanced transactions to be posted. Additionally, changes are allowed for permitted fields such as text information. All related journal entries related to provisions, accruals, prepaid expenses, foreign exchange revaluation and other journal vouchers are posted through the following documents. The accounting document is the result of a posting in Financial Accounting. The accounting document represents the original document in the system. Every posting must therefore have a document. Documents are the link between the business transaction and the posting in accounting. Only complete documents can be posted. A document is complete when its debit and credit items balance to zero. The user must enter the minimum information, for example, document date, posting date, document type, posting key, account number, and amount. Data must also be entered in all other fields that were defined as required fields when making system settings according to field status groups. Recurring entry Recurring entries are business transactions that are repeated regularly, such as rent etc. Recurring entry document is a reference document in which contains data necessary for posting accounting documents, such as the amount, account number, and posting key. Control information such as Day of the first run, day of the last run, and scheduling dates are contained as part of the reference document.
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Using this document we can create the same entry at regular intervals (lowest interval is a month) as specified at the time of creating the entry. Account assignment model Large transaction are sometimes time consuming and where the same has to be posted every month for example distributing telephone expenses to cost centers, SAP provides for a solution, where in these transaction can be stored in a skeleton mode and can be called upon for posting. An account assignment model can contain any number of G/L account items and can be used for creating a GL transaction. It is a set of GL account codes which are captured and stored and will be used for posting transactions using the same as reference. Sample document Sample documents can be created which can be used as reference document for posting GL documents Minimum data normally required to post a G/L document are: Document header information e.g. posting date, document date, company code etc. G/L account number Cost object assignment (for profit and loss elements) Amount

Parked Document. Since sometimes not all the required data are immediately available, SAP also provides an option to temporarily keep the posting as statistical entry. Upon completion of all required data, the entries can be posted. This functionality is termed as Parking Document. Each company code will have both facilities to perform direct posting and document parking. Document parking is an optional functionality in SAP, which can be adopted by individual companies at their own discretion. It is recommended to use the Park document functionality to ensure that the document posting process will be monitored and postings are done after checking has been done. In addition, data from Park document can also be used for evaluation. New GL with Document Splitting Online Split and scenario assignment Document splitting enables a complex display of documents. Line items are split here for selected dimensions. This ensures that you can draw up complete financial statements for the selected dimensions at any time. Using the document splitting procedure, you can also create a segmented display of a (partial) balance sheet according to a legal requirement (for example, IAS) or according to areas of responsibility. In addition, you can allocate at the time of posting additional costs (such as realized or valuated exchange rate differences) to the CO account assignment objects that incurred the costs. Assets can also be subsequently capitalized at the time of posting. Define Zero-Balance Clearing Account Here you define a clearing account for account assignment objects for which you want to have a zero balance setting when the balance is not zero.

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Carry forward process at the year end Carry Forward Receivables/Payables The System calculates the balance carried forward for customers and/or vendors. The balances of the previous year are carried forward to the new year. If the account has not yet been posted in the new year and no balance carried forward has been carried out for this account, the account is opened in the new year with the 1st balance carried forward; otherwise, the balance carried forward of the account is stored in the new year if changes result. Carry forward should be run at the beginning of the new fiscal year. If the program is already run at the end of the last fiscal year, postings which are posted after this to the last fiscal year, do not result in automatic adjustment of the balance carried forward because it is not a "posting to a previous year". In such a case, it is necessary to let the program run again after these postings to carry forward the postings entered later. The program can be started as often as desired. Balance carry forward of GL Accounts Carry forward the balances of the general ledger to the new fiscal year. You can carry forward balances multiple times. You should always run it if there are discrepancies between the balances of the GL accounts in the previous and the current fiscal years. The GL balances are carried forward as follows: a) Balance sheet accounts are transferred with all additional account assignments to the same account numbers. b) P&L accounts are carried forward to the retained earnings account. Additional account assignments are not transferred. The transaction currencies are not transferred and are totaled in the local currency. Month End Processing Month-end closing comprises all activities involved in closing a posting/accounting period. Accounting period is a division of a companys fiscal year. The number of periods and definition of period are to be determined during configuration. Each posting into the system must be associated with an accounting period. This is to ensure that each transaction can be reported in the corresponding period. In the same token, periods must be controlled to ensure validity of the reports. The check list for month end process will be documented after the Realization Phase of this project. The below proposed flow for month-end processing shall be used as a guideline for this blueprint as the activities may not be finalized until Realization phase. Maintain Posting Periods Posting period variant will maintained each company code for which posting periods are open for posting. Two intervals are available for doing this (period 1 and period 2). For every interval, enter a lower period limit, an upper period limit and the fiscal year. You can specify separately G/L account number ranges (as well as sub ledger accounts). To do this, you specify the sub ledger account type, such as D or K, and the corresponding reconciliation account. In this way you can, for instance, close postings for customer accounts, but allow postings for vendors and GL accounts. At month end, after Assets, AP, AR and GL ledgers are ready to be closed, maintain this transaction accordingly. Specify the periods allowed for posting.

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Maintain Exchange Rates Exchange rates are defined in the system. Exchange rate is important because we have to: Translate foreign currency amounts when posting or clearing or to check an exchange rate entered manually Determine the gain and loss from exchange rate differences Evaluate open items in foreign currency and the foreign currency balance sheet accounts

The exchange rates are defined by period ("valid from"). An authorized user can define his own type of exchange rate (e.g. Buying Rate, Selling Rate, and Average Rate). Both the company code will uses the type M exchange rates for foreign currency translation when posting and clearing documents. An entry must exist in the system for this exchange rate type. The exchange rates apply to all company codes. Foreign Currency Valuations In order to create your financial statements, you have to carry out a foreign currency valuation. This process valuates all transactions posted in foreign currency per company code. To perform the valuation you should use an exchange rate for the end of the month. This valuation covers the following accounts and items: Foreign currency balance sheet accounts - the G/L accounts that you run in foreign currency. The balances of the G/L accounts in foreign currency are evaluated. Open items posted in foreign currency. The line items in foreign currency are evaluated.

You have the following options for the foreign currency valuation: You can carry out the valuation in local currency, (company code currency), You can valuate in parallel currency (for example, group currency). The posting of valuation is done by the batch input session. It is recommended that you run each valuation separately, so e.g. you will create a separated batch input for customer open items, then another one for vendors and another one for GL. Before year-end closing you need to perform a foreign currency valuation for GL, customer and vendor open items. To perform valuation of balances in GL (for GL accounts with no open item management) your have to change your selection to activate the related fields GR / IR Clearing Account Maintenance Quantity differences between goods receipt and invoice receipt for a purchase order result in a balance on the GR/IR clearing account. Criteria for GR/IR Clearing is Purchase Order Number. If the quantity invoiced is larger than the quantity received, the system then expects further goods receipts for this purchase order to clear the balance. If the quantity received is larger than the quantity invoiced, the system then expects further invoices for this purchase order to clear the balance. You can also clear differences for delivery costs. If no more goods or invoices are to be received, you must clear the balance manually. Clearing Open items of a vendor account can be cleared manually using the full clear, partial and residual clearing function, or they can be cleared automatically by the system. Vendor accounts are normally cleared automatically via payment runs. The clearing program clears open items from vendor accounts. This program uses predefined criteria to group together open items per account. If the balance of the group of open items equals zero, the items are marked as cleared.

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During clearing, the program enters a clearing document number and a clearing date in the line items. It uses the document number and posting date from the most recent document (with the highest document number) that is part of the clearing process.

The program groups together those items from an account that have the same matching values in the fields of the corresponding line items. Up to four definable criteria can be configured in the system. Automatic payment transaction management clearly represents the greatest advantage of SAPs R/3 Accounts Payable Accounting system. The system also supports manual or ad-hoc payment processing. The payment program initially creates a payment proposal list. The list is based on data in the documents, the vendor master record and your selection criteria. The payment proposal can be edited. The payment program creates payments using the corresponding posting documents based on the (revised) proposal. Payables are cleared and linked to the payments and advances. Forms are printed and the system logs the payment run so that you can review and monitor transactions at any time Balance Sheet Accounts contains open transactions which need to be cleared from time to time either automatically or by a manual process. Accounts having large number of open items where it is manually difficult to clear each of them by matching debits and credits can be cleared off automatically based on some preset rules.

Provisions Regular repeated provision will be posted with recurring documents.

ACCOUNTS PAYABLE
The Accounts Payable application component records and manages accounting data for all vendors. It is also an integral part of the purchasing system. Incoming deliveries and invoices are managed according to vendors. The system automatically triggers postings in response to the operative transactions. Payables are paid with the payment program. The payment program supports all standard payment methods (such as cheques and transfers) in printed form. Manual payments can also be made by standard functionality of SAP. Postings made in Accounts Payable are simultaneously recorded in the General Ledger where different GL accounts (such as payables and down payments) are updated based on the transaction involved. The system contains due date forecasts and other standard reports which can be used to help monitor open items. Master data creation Vendor Master data (General data, Company Code data, Sales Area/Purchase Org. data) will be created centrally. The vendor number range will be controlled by the Vendor account group. The following Vendor types & Vendor Account groups have been identified and number ranges are internal for all vendors under this groups The Vendor groups are maintained at Client level. Each Vendor account must be assigned to an account group. The account group ensures that only relevant screens and fields are displayed and ready for input for each of the Vendors. For example, the address, communication, and bank data fields are omitted for the account group for one-time Vendors accounts. They are filled up only at the time a posting is made to a one-time Vendor.

Account groups determine:


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The type of number assignment. A number range for assigning account numbers. Which fields are displayed and whether their entry is optional or required (field status) when you enter or change customer master data. Whether the account is for one-time Vendor

The following Vendor Account groups have been identified Vendor Group Code AIMV AIXV AIOV AIEV AIFV Master data Record The data in vendor master records controls how transaction data is posted and processed for a vendor. The vendor master record also contains all the data required to do business with vendors. The master record is used not only in Accounting but also in Materials Management. By storing vendor master data centrally and sharing it throughout the organization, data need only to be entered once. This will prevent inconsistencies in master data by maintaining it centrally. If one of the vendors changes their address, you only have to enter this change once and your accounting and purchasing departments will always have up-to-date information. Specifications you make in master records are used: Vendors name, addresses, language, and contact details As default values when you post items to the account. For example, the terms of payment you specify in the master record are defaulted for document entry. For processing business transactions. For instance, bank details and the payment methods (cheque or bank transfer) are required for automatic payments. For working with master records. You can prevent certain users from accessing an account by setting up authorization groups. In addition, line item display and open item management are defined automatically for each vendor account. Account control data such as the GL reconciliation account for the vendor account Purchasing data (Since Materials Management (MM) is implemented the purchasing data is required - in Materials Management. Withholding tax information Vendor Group Description Material Vendors Inter Company Vendors One Time Vendors Employee Vendors FI Vendors Recon Account Material Vendors Inter Company Vendors One Time Vendors Employee Vendors FI Vendors

Master records are divided into the following areas so that each company code and each purchasing organization can store its own information for doing business with vendors.

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General data This is client level data that applies to every company code and every purchasing organisation in the company. The general area includes, for example, the vendors name, address, language, and telephone number. Company code data This is data that is specific to an individual company code. Company code data includes, for example, the reconciliation account number and payment terms.

Purchasing organization data This is data relevant to the purchasing organization of your company. For example, requests for quotation, purchase orders, and invoice verifications are stored in this section.

Invoices and Credit Memos A special feature is available in SAP R/3 system that has integrated purchasing and financial accounting modules. With the Logistics invoice verification feature, you can enter incoming invoices. This feature references order and delivery data. The Accounts Payable module is integrated with the Purchasing (MM) module. The process of goods receipt, invoice verification is fully dealt with in SAP MM BBP document.

Company will follow the typical procurement flow. Supplier invoices will be posted using the Invoice Verification function in Materials Management. Invoice posting via Accounts Payable will be limited to invoices without Purchase Order for service-related procurements and other miscellaneous purchases (where the expense account is debited). In SAP invoices will be handled as below: For PO purchases

Use invoice verification function in MM. Perform 3-way matching (PO, GR, Invoice). Display PO; check quantity as per order and goods receipt. Check pricing. (This may involve Document Management functions). Check supporting documents. Determine any variances to quantity and/or price. Post invoice.

For Trade Vendors/One time Vendors Inventory RM A/c To GR/IR A/c Dr - (On receipt of goods)

GR/IR A/c Dr - (Recording of Invoice) To Vendor (Sundry Creditors) For Vendor types Service (Utility, Rent, Rates & Taxes, Insurance, Communication expenses, Advertisement & Sales promotion etc.) the services rendered are non-GRN related & invoices will not be recorded in MM For non-PO purchases

Use Invoice Posting function in Accounts Payable Check supporting documents and get necessary approval
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Post invoice (Dr Expense, Cr Vendor)

For Non-Trade/Service Vendors Expenses A/c Dr To Vendor (Sundry Creditors) Vendor Credit Memo Processing

- (Non GRN Purchases) (Relevant G/L Account)

In normal business transactions, there are instances whereby vendors will send credit memos in order to reduce invoices. Such cases might arise due to incorrect invoiced amount or rejection of goods. A credit memo is then required to substantiate the adjustment. Being an adjustment entry, credit memo shall affect Financial module only unless the adjustment is related to MM such as good return etc. Partial Payment, APP & Account Clearing Open items of a vendor account can be cleared manually using the full clear, partial and residual clearing function, or they can be cleared automatically by the system. Vendor accounts are normally cleared automatically via payment runs. The clearing program clears open items from vendor accounts. This program uses predefined criteria to group together open items per account. If the balance of the group of open items equals zero, the items are marked as cleared. During clearing, the program enters a clearing document number and a clearing date in the line items. It uses the document number and posting date from the most recent document (with the highest document number) that is part of the clearing process. The program groups together those items from an account that have the same matching values in the fields of the corresponding line items. Up to four definable criteria can be configured in the system. Automatic payment transaction management clearly represents the greatest advantage of SAPs R/3 Accounts Payable Accounting system. The system also supports manual or ad-hoc payment processing. The payment program initially creates a payment proposal list. The list is based on data in the documents, the vendor master record and your selection criteria. The payment proposal can be edited. The payment program creates payments using the corresponding posting documents based on the (revised) proposal. Payables are cleared and linked to the payments and advances. Forms are printed and the system logs the payment run so that you can review and monitor transactions at any time Period End Processing

Once all documents are completely posted and payments for the month are completed, the posting period for vendors can be closed. This is to prevent the occurrence of back posting invoices to the previous period after reports are generated. Before posting period can be closed, other month end processing activities such as executing the recurring program need to be performed if applicable. Opening the new period and closing the previous period are two parts of the closing procedure. Document Type and Number Ranges The document type classifies accounting documents. It is noted in the document header. These document types are: To differentiate business transactions To control what type of account can be posted to (customer, vendor, general ledger, asset or material)
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To control document number assignment As a search criterion for document information

Posting Keys The posting key describes the type of transaction, which is entered in a line item. Posting key controls document entry. The important properties that are derived from the posting key are: The account type The allocation to the debits or credits side The possible or necessary specifications which are to be entered in the line item

Supplier invoice Verification with reference to PO/GRN only with clear segregation of duties and control with regard to capturing of Taxation. Invoice Verification generally happens at the end of the material procurement process. The vendor presents an invoice for a delivery made on the basis of a purchase order. In SAP, the goods receipt and invoice receipt are managed via a GR/IR clearing account. When a goods receipt is entered, an open item is created in the GR/IR clearing account. The posting of invoice clears the GR/IR clearing account. If there are price differences between the purchase order and the invoice, the account movements vary depending on the sequence of goods receipt and invoice receipt. The stock account is posted with the receipt value based on the purchase order price. The purchase order price is different to the moving average price: At the time of posting the moving average price changes. Invoice Verification clears the GR/IR clearing account on the basis of the purchase order price. The offsetting entry is posted to the vendor account based on the invoice price. If the invoice price is different to the purchase order price, the variance between the purchase order value and the invoice value is posted to the stock account only for the actual stock at hand at the time of Invoice verification. The variance, to the extent of stock already consumed is posted to price difference account. The system corrects the value in the material master record, so the moving average price changes. Accounting entries: Following entries would be generated for the entire Procurement process at various stages: CREATION OF PURCHASE ORDER: No Accounting Entry would be generated. CREATION OF GRN (Goods Receipt Note): Following Entry would be generated Inventory Related: Inventory Raw Material/Pkg. Material/Stores ...............Dr. GR/IR Account (Clearing Account).....................Cr. Services Related: Expense Account ...........Dr. SR/IR Account (Clearing Account)..................Cr. POSTING OF VENDOR INVOICE: Following Entry would be generated
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Inventory Related: GR/IR Account (Clearing Account).....................Dr Vendor Account ...........Cr.

Services Related: SR/IR Account (Clearing Account).......................Dr Vendor Account .........Cr.

TDS Transactions
While carrying out any transaction (invoice booking or advance payment) involving TDS deduction, the user has to enter the respective section code. The system will prompt for TDS deduction whenever a transaction is done with a vendor whose master consist withholding tax code. System automatically calculates TDS based on the withholding tax type & code maintained in the master. The accounting entry generated while invoice booking is; Expense a/c Dr To Vendor a/c Cr To TDS payable a/c Cr Down Payment Posting At the time of posting the down payment, the relevant TDS tax code has to be given. This results in the posting of the following en Vendor A/C Dr To Bank A/c Cr To TDS payable A/C Cr

Separate classifications for Vendor groups to identify balances for different business scenarios like domestic purchases, Import purchases and procurement of services.

Each Vendor account must be assigned to an Reconciliation account group. The reconciliation account in G/L accounting is the account which is updated parallel to the sub ledger account for normal postings (for example, invoice or payment). For special postings (for example, down payment or bill of exchange), this account is replaced by another account (for example, 'down payments received' instead of 'receivables'). The replacement takes place due to the special G/L indicator which you must specify for these types of postings. In short the Reconciliation account is a control account in general ledger for Vendors. It ensures proper classification for financial statement disclosure such as Import Creditors, Domestic Creditors, Service Creditors and Creditors for Capital Assets.

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Purchase transactions with any Vendor types are mapped to GL through Account assignment keys. The GL accounts identified to record purchases from any Vendor types.

Vendor down payment based on payment request and matching advances should automatically be transferred to vendor a/c based on PO/Invoice reference In SAP, down payments are not balanced with other receivables or payables and must be displayed separately on the balance sheet. A payable is generated only after delivery of a tangible asset or the performance of a service. Once you have received the goods or services for which you made a down payment, you need to clear this payment for the final settlement either manually or using the payment program. The down payment must no longer be displayed as such. Normal payment to vendor is carried out against claim for goods delivered or services rendered i.e. payables. However sometimes vendors might request payment before delivery of goods or services. This type of payment is known as down payment and is shown on the asset side in the balance sheet. In the normal business flow, down payment should be cleared with the closing invoice upon delivery of goods or services. Down payment request facility to be activated. System to process down payment request based on authorization matrix. Down payment to be allowed without PO also. For Vendor Down payment Request, no entry will be passed For Advance payment to Vendor, the following entry will be passed: Vendor A/c (Advance from Vendor)Dr. To Bank However, a Special GL indicator will be used for the advances paid to vendors for segregation of Advance to Vendor A/c. Auto / Manual payment process with covering letter giving details for payment and Limitation for cheque payment Presently maximum chq limits is Rs. 20 lacs per chq. Manual Outgoing Payment Processing SAP R/3 uses document principle to store transaction entries. In the case of vendor, transaction of invoices will be stored as open items. Open items are in fact outstanding transactions. The open items of an account can only be cleared when an identical offsetting amount to the account is posted. The balance resulting from the items allocated to each other must therefore be zero. Correspondingly, the offsetting entry here represents outgoing payment to vendor (bank). SAP will handle to restrict manual / automatic check payment by giving maximum payment limit of Rs 20 lacs. In SAP, manual outgoing payment is generally performed for a small number of payments on ad-hoc basis. Payment made to vendors may not always be straightforward; therefore the system is configured to handle various scenarios as follow:

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Partial Payment, where the original open item and the partial payment remain as open documents on the account. When user posts the remaining amount for the invoice, both the partial payment and the invoice are cleared. Contra of vendor and customer balance is handled automatically by the system. In order to activate contra balance, vendor and customer have to be linked in the vendor and customer master record.

Automatic Outgoing Payment Processing For mass settlement of vendor accounts by check, the standard SAP Automatic Payment Program (APP) application will be used. The designation of bank accounts for payments, creation of House Bank for APP, loading of cheque for APP printing run etc. will follow standard SAP A/P process Payment modes Cash Cheque Bank Transfer Monthly revaluation of forex liabilities and restatement of vendor liabilities on subsequent month. Foreign currency valuation covers the following Vendor accounts and items: Foreign currency balance sheet account, that is, any vendor accounts that are run in foreign currency - the balances of the vendor accounts in foreign currency are valuated. The Vendor balances in Foreign Currency will be revaluated every month end or for audit period closing Revaluation should be done and the same to be reversed on the first day of the next month.

To carry out valuation, the following are defined in the system: The exchange rate in currency table The valuation method. Expense and revenue accounts for exchange rate differences from valuations For payables and receivables accounts, financial statements adjustment accounts are defined.

Valuation of Open Items in Foreign Currencies All vendor open items in foreign currency are valuated as part of the foreign currency valuation: The individual open items of an account in foreign currency form the basis of the valuation, that is, every open item of an account in foreign currency is valuated individually. The total difference from all the open items in an account is posted to a financial statement adjustment account - the account therefore retains its original balance. The exchange rate profit or loss from the valuation is posted to a separate expense or revenue account for exchange rate differences as an offsetting posting.

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The following accounts will be defined for valuation purposes: Expense and revenue accounts for the exchange rate differences from the valuation. A financial statement adjustment account.

Reversing exchange rate difference postings The user can define that any exchange rate differences posted are automatically reversed one day after the valuation run by an inverse posting. The user will, therefore, have the option of determining exchange rate differences at any point in time without this valuation being taken into account for the creation of financial statements or for payment clearing. The above process in SAP will help: Elimination of manual conversion of foreign currency transaction to local currency before entry to system. Ease of foreign currency valuation to capture unrealized gain/ loss on exchange. Automatic posting and reversal of exchange differences to GL.

ACCOUNTS RECEIVABLE
Accounts receivable accounting in SAP R/3 maintains and manages a customer accounting data. It is also an integral component of sales management. Sales and accounting have the same information requirements. If the customer order results in delivery and subsequent invoicing, then these transactions are posted automatically in the accounting system. The various stages of these processes are updated real time in the system. Customer Account Groups Each customer account must be assigned to an account group. The account group ensures that only relevant screens and fields are displayed and ready for input for each of the customers different partner functions. For example, the address, communication, and bank data fields are omitted for the account group for one-time accounts. They are filled up only at the time a posting is made to a one-time customer. Account groups determine: The type of number assignment. A number range for assigning account numbers. Which fields are displayed and whether their entry is optional or required (field status) when you enter or change customer master data. Whether the account is for one-time customers.

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A customers account group cannot be changed after the master record is created. The following Customer types & Customer Account groups have been identified Customer Group Code AISP AIHC AIPY AIBP AIXC AIFC Customer Group Description Sold to Party Ship to Party Payer Bill to Party Inter Company Customers FI Customers

Customer Master Record A customer master record contains all the information that a company needs for its business relations with a customer. The master record contains data that controls how business transactions are recorded and processed by the system. It also includes all the information about a customer that is needed to be able to conduct business with him. Both the accounting (FI-AR) and the sales (SD) departments use customer master records. By storing customer master data centrally, you enable it to be accessed throughout your organization, and avoid the need to enter the same information twice. You can also avoid inconsistencies in master data by maintaining it centrally. If the address of one of your customers changes, for example, you only have to enter this change once. The Sales and Distribution (SD) application component processes customer master records relevant to sales & distribution such as order processing, shipping, and billing. Data specific to the sales organizations are sales orders and billing type. This data is entered in the Sales & Distribution application component. A customer master record contains: Customers name, address, language, contacts details etc. Bank details. Account control data such as the GL reconciliation account for the customer account. Payment methods and terms of payment set up with the customer.

Master records are divided into the following areas so that each company code and each sales organization can store its own information for doing business with customers. General data This is client level data that applies to every company code and every sales organization in the company. The general area includes, for example, the customers name, address, language, and telephone number. Company code data This is data that is specific to an individual company code. Company code data includes, for example, the reconciliation account number and payment terms. Sales organization data This data is relevant to the sales organization of your company. For example, sales areas and customer partner details. Specifications made in the master records are used: As default values when you post items to the account. For example, the terms of payment you specify in the master record are defaulted for document entry.
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For processing business transactions - account control data, such as the number of the GL reconciliation account. For communication with the customer. For example, the address and telephone and fax number. For the sales department - order processing, shipping, and billing data. Central Accounts will be responsible for maintaining customer master records as follows: Creation. Changes (general data). Block. Mark for deletion. Deletion of a customer master record will be performed centrally.

Invoices and Credit Memos Invoices are created using deliveries for products. Once a billing document has been created, the values are posted to the relevant financials. When you post data in Accounts Receivable, the system creates a document and passes the data entered to the general ledger. General ledger accounts are then updated according to the transaction concerned (receivable, down payment, bill of exchange, etc.) The system carries out consistency checks before saving the data. When the debits equal the credits, and the data is complete, the document is posted. If errors exist, the data is not saved, and the system advises the basis of the errors. The system updates the document file and the GL account balances A credit memo may be created on the basis of a customer complaint. This reduces receivables in Financial Accounting. You may need to create credit memos for various reasons (for example, because of defective goods or because you have overcharged a customer). Similarly, you may need to create a debit memo, if, for example, you have not charged the customer enough. When a customer document (invoice) in foreign currency is posted, the system stores the amount in both local and foreign currency for each line item. To specify the foreign currency for a document, the appropriate currency key in the currency field in the document header is entered. There are several ways to enter an exchange rate: Enter a posting date and the currency key in the document header - the system automatically transfers the exchange rate valid on the posting date. Enter a translation date in the document header - the system then automatically takes the exchange rate valid on this translation date. Enter the exchange rate directly (manually) in the document header. Enter the amount in each line item in both local and foreign currency.

Special G/L Transactions There are certain business transactions that should be posted to the customer but not updated in the line item of receivables from goods and services in the general ledger. An example of this is advances from customers (down payments), Bills receivables. These are identified separately in the balance sheet. Special G/L indicator is used to identify such special G/L transactions. The following special G/L indicators are identified:Special GL Indicator A Description Advances from Trade Customers
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Account Clearing Process The incoming payment process can be done using a one step or two step methods: Posting without Clearing - The receipts will be posted using the normal document entry functions i.e. there will be no selection of open items available. At frequent intervals the customer account will be cleared whereby the payments document will be matched against the invoice document. A clearing document will be created. This method is only useful when at the point of entry, the user is uncertain for which open item the customer is paying. Otherwise, it is advisable that user adopt the second option. Posting with Clearing - Open items are cleared at the point of posting incoming payments. This results in the selected line items being cleared. All cleared items will not be available to knock off other open items. In other words, the incoming payment document is the clearing document of the customer invoice. Partial Payment - For processing partial payments from any Customer types the standard SAP Partial payment application will be used. Where the original open item and the partial payment remain as open documents in the account. When user posts the remaining amount for the invoice, both the partial payment and the invoice are cleared. However, the partial payment residual items rule for assigning the partial payment against an open invoice & creating a new open invoice for balance outstanding

Document and Account Display When business transactions are posted to an account, the system automatically updates the account balance. It also notes which items of a document have been posted to the account. Thus, the account balance and line items for any account can be viewed. The account balance offers an overview of the transaction figures per period, separated into debits and credits. Similarly, sales per period and special G/L transactions such as down payments for the fiscal year can be discerned at a glance. From here, you can go directly to the display of items. A line item display provides an overview of an accounts open and cleared items. While displaying account balances, document amounts posted in foreign currency in the respective local currency can also be viewed. The following line items are displayed: Open items. Cleared items. Parked items. Items with special GL transactions (in Accounts Receivable and Accounts Payable). Items with customer or vendor items (in Accounts Receivable and Accounts Payable).

Period End Processing


Each SAP R/3 module has its own period-end and year-end closing procedures. Opening the new period and closing the previous period are two parts of the closing procedure. Opening and Closing of FI period is usually given to the G/L users who will ensure that the previous period for each account types (A assets, D customers, K vendors, S G/L accounts) are closed first before generating the financial statements for the previous period. For transactions entered in Accounts Receivables, the system will check that the posting period entered for a customer transaction is open to posting as specified in the From period and To period fields for account type D (such as debit a customer) and account type S (such as credit a revenue account). Otherwise, the system will prompt an error message that the period is not open to posting.
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Document Type and Number Ranges Document type is used to categorize documents according to their distinguishing features. Each document type will have its own number range assigned internally or externally. Typical examples of document types are invoice, credit memo, debit memo and incoming payments. The document type is used: To differentiate business transactions To control what type of account can be posted to (customer, vendor, general ledger, asset or material) To control document number assignment As a search criterion for document information

Integration with SD Invoice posting via Accounts Receivable will be limited to recharge invoices, as all sales will be processed through the SAP SD invoice/credit memo application. Invoices for customers in SAP will be handled in the following way: In SD module when goods are shipped Cost of Goods Sold A/cDr (for Cost of Sales) To Finished Stock Invoices raised in SD for sale of goods Customer A/c (Sundry Debtors at GL) Dr (for Sales Value inclusive of Taxes) To Sales Revenue In case of Supplementary Invoices FI Invoice will be posted for difference amount Customer A/cDr To Sales Revenue A/c Sale of Fixed Assets When a Fixed Asset has been identified for retirement by way of sale & a customer identified for disposal thereof, a sale invoice will be generated from the SAP SD module. The account assignment & scheme of entry will be as under: Sundry Debtors SalesDr. (full value of consideration including Tax) To Sale of Assets Sale of Scrap/Waste Material Operations generate a lot of scrap/waste materials from its manufacturing operations like obsolete stock & assets etc. that may be disposed of at scrap value. When a scrap dealer is identified & rate fixed for the scrapped lot, invoice will be generated on the SAP SD module & will be recorded by passing the following entry: Sundry Debtor B2B salesDr. To Sale of Scrap/Waste Material

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Capture of Check deposit list for cheques (Check) collected at sales offices. Sales office collects and deposits the checks received from customer and a receipt will be generated, the checks will be posted in to the system as and when the checks are captured at the sales office. 1. Enter checks. Include clearing information in transaction FF68: clearing information chosen like Customer name and an invoice number (from SD Module). Create a batch input session or choose direct processing. 2. Run the sub-ledger session. Postings to bank sub accounts (incoming checks) and to sub-ledger accounting (customer clearing). 3. Print the check deposit list and give it to the bank, along with the checks. The postings can be done immediately or processed in the batch input sessions. The Post option generates postings immediately or the batch input sessions, including postings for sub-ledger accounts.

1. You can process the sessions individually or together, online or in the background (batch). 2. The log displays the processing statistics and any incorrect transactions. 3. Incorrect transactions, which were not processed due to inadequate clearing information, must be post processed: If you are using batch input sessions, you must run these again online. If you are using immediate postings, you need to use a transaction FEBA to clear the open items. Settlement of Advances on account receipt Advance payments from Customers will be recorded using standard SAP down payment entry & down payment clearing process using Special GL indicator. Customer Down payments are part of the full price, paid at the time of PO with the balance to be paid later. Customer Down payments are shown separately from other payables on the balance sheet. Customer Down payment can be created manually, without having to create a down payment request. When the final invoice is issued, this can be used to clear the down payment either manually or automatically. There is also the option to make a transfer posting of the down payment from the special GL (Advance Payments) account to the receivables account, without clearing it with an invoice. When Advance amount received from customer Bank Account .. Dr To Customer A/c (Advance from Customer at Alternate GL) Invoices raised in SD Dr Customer A/c (Sundry Debtors - Domestic Sales) Cr Sales Revenue Domestic Advance Adjusted against invoice Dr Customer A/c (Advance from Customer) Cr Customer A/c (Sundry Debtors - Domestic Sales)

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Advance and Debtors account should show the un-cleared amounts The checks received and deposited either by the sales office or central accounts office, identification is required whether the check is cleared by the bank. Unclear advance and other received open items can reviewed through bank clearing accounts Revaluation of Balances in Foreign Currency Foreign currency valuation covers the following Customer accounts and items: Foreign currency balance sheet account, that is, any customers accounts that are run in foreign currency - the balances of the customer accounts in foreign currency are valuate. The Customer balances in Foreign Currency will be revaluated every month end or for audit period closing Revaluation should be done and the same to be reversed on the first day of the next month. To carry out valuation, the following are defined in the system: The exchange rate in currency table The valuation method. Expense and revenue accounts for exchange rate differences from valuations For payables and receivables accounts, financial statements adjustment accounts are defined.

Valuation of Open Items in Foreign Currencies All Customer open items in foreign currency are valuated as part of the foreign currency valuation: The individual open items of an account in foreign currency form the basis of the valuation, that is, every open item of an account in foreign currency is valuated individually. The total difference from all the open items in an account is posted to a financial statement adjustment account - the account therefore retains its original balance. The exchange rate profit or loss from the valuation is posted to a separate expense or revenue account for exchange rate differences as an offsetting posting.

The following accounts will be defined for valuation purposes: Expense and revenue accounts for the exchange rate differences from the valuation. A financial statement adjustment account.

Reversing exchange rate difference postings The user can define that any exchange rate differences posted are automatically reversed one day after the valuation run by an inverse posting. The user will, therefore, have the option of determining exchange rate differences at any point in time without this valuation being taken into account for the creation of financial statements or for payment clearing. The above process in SAP will help: Elimination of manual conversion of foreign currency transaction to local currency before entry to system. Ease of foreign currency valuation to capture unrealized gain/ loss on exchange. Automatic posting and reversal of exchange differences to GL.
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Account Statement and Open Items List The account statement created for your customers is an extract from the customer account, which enables him to check the items there or for information purposes. The account statement displays the balance carried forward, all items in the chosen period and the closing balance of the account. The open items list is a special form of account statement. It is also sent to the customer for verification or information purposes. Occasionally, the list is also used as a reminder letter. The open items up to the chosen key date are displayed in this list. Both letters contain the document number or reference document number, the document date, the document type, the currency and the amount for every item as well as the balance of the open items at the key date.

ASSET ACCOUNTING
The Asset Accounting module provides most of the processes required for the management of fixed assets. The module is integrated with all other modules and data for all asset-related transactions is updated into GL online. Accounting for assets is done on the concept of sub ledger - all postings made to any asset are updated in the GL account and there is never any difference between the values as shown by the asset reports and the GL balances. The depreciation calculation process is also automatic, and depreciation is posted to the books of accounts at pre defined periodical intervals (generally monthly). Depreciation can be calculated according to different principles for the same asset, based on business requirements. For example, the depreciation rates for accounting purposes and for tax purposes can be different. The asset master contains all the important information required, and the depreciation calculation, postings to cost centers etc. depends upon the assignments made in the master data. In this section, the features of the FI-AA organizational objects (chart of depreciation, asset class) are defined. All assets in the system have to be assigned to these organizational objects.

Integration
Asset Accounting (FI-AA) transfers data directly to and from other SAP components. It is possible to post from the Materials Management (MM) component directly to FI-AA. When an asset is purchased or produced in-house, you can directly post the invoice receipt or goods receipt, or the withdrawal from the warehouse, to assets in the Asset Accounting component. At the same time, you can pass on depreciation and interest directly to the Financial Accounting (FI) and Controlling (CO) components. From the Plant Maintenance (PM) component, you can settle maintenance activities that require capitalization to assets.

Asset Class
The Asset Class is the most important criteria for structuring fixed assets according to operational and legal requirements. Asset Classes are used to segregate assets by type, such as land, building, machinery, etc. Each asset master record is assigned to one and only one Asset Class. The master data section of an Asset Class is defined once at the client level. The same Asset Class may apply to multiple company codes. Depending on the functions you want the Asset Class to have, the following criteria should be considered when defining the Asset Classes: One of the most important functions of the Asset Class is to establish the connection between the asset master records and the corresponding accounts in the general ledger in Financial Accounting. The account determination key in the Asset Class achieves this link. The screen layout and the field characteristics (required/ optional/ suppressed) of the asset master record can be specified at the Asset Class level. The Asset Class serves an important function in providing default values for the master
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records belonging to this class. In this way, the Asset Class can function as a sample master record, and makes it possible to create new asset master records simply and without errors. The assignment of asset numbers can be controlled at the Asset Class level. The Asset Class is a selection criterion in all standards reports in Asset Management. The Asset Class definition will be as follows: The Asset Classes are mainly based on Company Law requirements and / or other MIS requirements. However the default depreciation key and useful life are defined according to the current practice. One Asset Class is defined for each individual Asset account. The model includes Asset Classes for LVA (low value assets or nominal value assets) according to the Companies Act and those many Asset Classes for Assets under Construction for all Assets.

Chart of Depreciation
The chart of depreciation is a list of depreciation areas arranged according to business and legal requirements. The chart of depreciation enables all rules for the valuation of assets in a particular country or economic region to be managed. A chart of depreciation must be assigned to each company code that is defined in Asset Accounting. The chart of depreciation controls the calculation of depreciation on the assets. It contains depreciation key, calculation key etc. for depreciation calculation. The charts of depreciation are provided in the system in order to manage various legal requirements for the depreciation and valuation of assets. These charts of depreciation are defined independently of the other organizational units.

The following table shows the assignment of chart of depreciation to company codes. Description HERO MOTOR CORP HERO MARKETING Company Code 1000 2000 Chart of Depreciation CD01

The asset master record contains tracking and accounting information for each individual asset created within the FI-AM module (class, description, cost center, useful life, supplier name, supplier invoice no, supplier invoice date, rate of depreciation, date of capitalization, asset no, equipment serial no, etc.). The asset master record contains all information relating to an asset that remains unchanged over a long period. Asset related information. Organizational allocations (usually time-dependent). Depreciation terms.

The system stores all the values and all transaction data for each asset master record. The structure of the asset master record depends directly on the asset class. Numbering of assets and field controls at the asset master level are controlled by asset class. The asset master record contains all the important information required for doing transactions for an asset. The asset master record is divided into following parts:

General Master Data


This part of the master record contains concrete information about the fixed asset. The following field groups exist: General information (description, quantity, etc.). Account assignment.
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Posting information (for example, capitalization date). Time-dependent assignments (for example, cost centre, shift depreciation) Information for plant maintenance. Physical inventory data. Insurance data. User fields/evaluation groups.

Data for Calculating Asset Values


Depreciation terms can be specified in the asset master record for each depreciation area in the chart of depreciation. In order to make these specifications; the master record contains an overview of the depreciation areas. In addition, there is a detailed display available for each depreciation area. If there are depreciation areas that are not needed for a specific asset, it is possible to deactivate these depreciation areas at the asset level.

Master Data Maintenance


Master data maintenance in SAP will be centralized. Central authority will be responsible for creation and maintenance of asset master records. This will be restricted by authorization. Depending upon the nature of the asset class, field strategy will be decided. As stated earlier, this will be controlled by screen layout rules, a group of settings that specifies Which fields are displayed during master data maintenance? Whether entries have to be made (required entry fields) in these fields or not (optional entry fields).

Asset master record numbers will be internally generated; that is, sequentially assigned by the system. Screen layout rules will be defined according to requirements, except for the following set of asset master record fields, which will be defined as mandatory for all Asset Classes: Asset description Qty Cost center Date of Capitalization Depreciation rules (depreciation key and useful life) for areas 01 and 15

Document type for Depreciation posting


The SAP system adheres to the document principle. This means that each posting is always stored in the form of a document. In SAP - AM, a specific document type is required for depreciation postings. The number range assigned to this document type must be used for this document type only. It must be defined with internal number assignment. Document type AF has been defined for this purpose. Book Depreciation is to be posted Monthly and will have assignment to cost objects.

Additional Account Assignments


Each asset needs to be assigned to a Cost Center for capturing the depreciation etc., to be posted to the Cost Center. The asset also needs to be related to a particular Profit Center in order to generate the Profit Center wise financial statements. A Cost Center or Internal Order has to be entered in the asset master data of the asset (in the section for "time-dependent data"). The system also posts additional account assignment of the above business transactions to Profit Centers. The system determines the Profit Center to be posted by means of the Cost Center specified in the asset master record. The account assignment object (Cost Center), from which the Profit Center is to be derived, has to be assigned itself to a Profit Center.

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Closing Operations
Closing activities in Asset Accounting module can be divided into: Monthly activities Year end activities

Month-end closing in asset accounting will involve the depreciation run and posting of depreciation into the GL accounts through batch input posting. Following activities must be performed as year-end closing: Fiscal Year Change Fiscal year change is the opening of a new fiscal year for a company code. At the fiscal year change, the asset values from the previous fiscal year are carried forward cumulatively into the new fiscal year. Once the fiscal year change takes place, you can post to assets in the new fiscal year. At the same time, you can continue to post in the previous fiscal year. The fiscal year that is closed is always the year following the last closed fiscal year. Year End Closing The year-end closing program is used to close the fiscal year for one or more company codes from an accounting perspective. Once the fiscal year is closed, postings or changes in the values are not possible.

Asset Transactions
Transaction Types Transaction types represent classification of business transactions within Asset Management such as acquisition, retirements etc., for reporting and accounting control purposes. SAP provides several standard transaction types. Additional types may be defined, if required by the business. During configuration, transaction types may also restrict posting of transactions by Depreciation Area. Each transaction type is assigned to a transaction type group. The business transactions are subdivided on the basis of the transaction type group into: Transactions that influence the acquisition and production costs of fixed assets. These include: Acquisitions, retirements Manual depreciation

Assets Capitalization
Acquisition The primary business process in asset accounting is the purchase of assets and/or the capitalization of in-house produced goods or services. An external asset acquisition is a business transaction resulting from the acquisition of an asset from a supplier (in contrast to an acquisition from in-house production). Account Determination (Reconciliation accounts for asset transactions - automatic update of the general ledger) Account determination keys will be created according to the company law requirements. No further distinction is required for local accounting purposes. The asset transactions will be automatically posted to the general ledger accounts which are predefined at the class and therefore the users are not required to provide account assignment information when entering individual transaction. The Account determination is available in the GL
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Depreciation Keys
The depreciation key (valuation key) controls the valuation of the asset in the particular Depreciation Area Specifically; it controls the calculation of Book depreciation, Tax depreciation and by Depreciation Area. The depreciation key is defined by specifying an internal calculation key for the automatic calculation ordinary and tax depreciation and various control parameters. While calculation keys are valid globally for the entire client, the depreciation keys are only valid within the respective Chart of Depreciation. Therefore, if there is a need for any country-specific depreciation keys, they can be defined for each country. To differentiate the customized depreciation keys from those provided by SAP, any new depreciation keys should be defined with Y or X as their first character. FI team defined the depreciation keys XXXX. These keys should be adopted in the country-specific Chart of Depreciation.

Depreciation Calculation:
Depreciation Area A depreciation area is an area which shows the valuation of a fixed asset for a particular purpose (for example, for individual financial statements, balance sheets for tax purposes, management accounting values, and so on). Depreciation areas are used to calculate different values in parallel for each fixed asset for different purposes. For example, different types of values may be required for the balance sheet than for tax purposes. Depreciation terms and values necessary for this valuation in the depreciation areas are managed for of each asset. Two-digit numeric keys identify Depreciation Areas. The depreciation terms are defined in the Asset Class or directly in the asset master record of the particular asset for each Depreciation Area. These Depreciation Areas are assigned to a Chart of Depreciation, which is a directory of Depreciation Areas SAP delivers country-specific Charts of Depreciation, which contain the most commonly used Depreciation Areas. Dep Area 01 Dep Area Name Book Depreciation Description Book Depreciation

The Proposed Asset Classes are as follows Depreciation Rates Sl 1 2 3 4 5 6 7 8 9 Asset Class Land Lease hold Buildings Factory Buildings Others Plant & Machinery Computers Office Equipments Furniture & Fixtures Motor Vehicles Low Value Assets(< Rs. 5000) 16% 5% 6% 9% 40% 14% 18% 26% 33.33% 33.33% 33.33% 33.33% SLM Rate SLM WDV Rate WDV Useful life SLM

3% 2%

10% 5%

5% 5%

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Tax Depreciation Area A separate Asset Class will be created for a block of assets and the under mentioned block of assets will be created for computing the IT depreciation under WDV method DEPRECIATION AREA IT Block Part A - Tangible Assets I II III IV V VI VII VIII Building Factory Building Others Furniture Plant & Machinery Office Equipments Motor Car Computers (including Software) Technical Know-how AY 2010-11 onwards WDV

For the Tax Depreciation Area all the existing groups (Blocks) as defined above would be created as Group Assets, under a separate class Group Asset Class, and the Tax Depreciation Area would be activated for them. New Assets Held for Less Than 180 Days If you purchase an asset less than 180 days before the end of the fiscal year, you are only entitled to depreciate it at half of the normal rate of depreciation. The system handles this requirement by taking half the acquisition cost and calculating depreciation on that. Asset Retirements When you retire an asset, you are not entitled to calculate any depreciation on it in that fiscal year at all. Capacity enhancement to the existing assets: For enhancement the asset can be created with sub number giving the remaning useful life as base for calculating depreciation Assets Location monitoring Various Standard reports are available to identify the assets by its location, cost center, plant, employee personnel number. If the asset location is changed SAP has the functionality for changing from one location to another individually. Physical Verification The FI-AA component provides the following functions to support the physical inventory Inventory list The system provides an inventory list to assist with physical inventory. You find this list in the standard Information System for Asset Accounting. You adapt the structure and sorting of the list to meet your specific needs. You make these modifications using standard report. The list displays only those assets in which the inventory indicator is set in the asset master record

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BANK
Each bank transaction code will be mapped to the G/L account code and transaction type in the configuration setup. Following are the Methods of Payment identified and Forms needs to be generated Cheque Letter of advice for electronic transfer to Other Bank account Creation of House Bank Designated Branches & Payment accounts of different banks will be created as House banks for the purpose of APP. Accordingly, Bank ID & Account ID of each of the designated banks will be maintained in the Bank Master data. Pre-printed cheques will be used for vendor payment & pre-printed stationery will be used to print payment advice. Cheque number ranges of cheque lots need to be maintained for every House bank before commencing cheque printing on APP. Separate cheque lots may be maintained for APP & manual payments for better control & ease of operation.

Closing activities
The closing of period end and year end would be taken place at each module wise. The listing of closing procedure would be document during the realization phase.

Description of Functional Deficits


Voucher printing in the company Format Check Printing on the blank check

Approaches to Covering Functional Deficits


New Print program for Voucher printing New form for check printing

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Integration considerations
Integration with Assets Management
o The integration with Asset Module determines the reconciliation account at each asset class level. Individual accounts would be identified and assigned to the respective asset class.

Integration with Controlling


o The integration with controlling starts at the GL account level. account GL accounts would be created as primary cost elements. The profit and Loss

Integration with Material Management


o The integration with Material Management happens at the time of Goods receipt, Goods issue, Freight and Invoice etc., For all these process respective accounts would be triggered by automatic assignment of GL accounts.

Integration with Sales and Distribution


o The integration with Sales and Distribution Module happens during Post goods issue and at the time of Invoice. Each pricing condition is assigned to a respective GL account through an account key. The credit check would be customer specific and the same gets triggered at respective event during the process.

Integration with Human Resource


o Each wage type linked with respective GL master.

Reporting Requirements
The business still in finalizing the report layouts and reports for various functions in Finance module till to that time it is deemed that all reports which are in Standard SAP would be used for reporting purpose. If required development would be done accordingly.

Authorization Requirements
End user Core user Power user Corporate user
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File Conversion / Interface Considerations


All Master data templates have been released for data collection once it is completed the same would be uploaded into the system using the LSMW functionality.

Workflow Requirement:
It is similar like template for example: Parked Document

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