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Unit 3: Financial Accounting

FI Focuses on:
- G/L
- Processing of Receivables
- Asset Accounting
Major Processes:
A/R – O2C – Customer
A/P – P2P – Supplier
Parties and Factors Involved:
- Bank
- Treasury
- FSCM
- Asset Management
- Bank Ledger – supports booking of cash flows
Important Tasks of FI:
- Recording of monetary and value flows
- Evaluation of inventories
The General Ledger
- Contains records of all accounting-relevant business transactions via G/L Accounts 
in a business perspective
- Is structured according to a Chart of Accounts
o Contains Definitions of all G/L accounts
 Account #
 G/L Account Designation
 Categorization of G/L Accounts as I/S or B/S
- Often contains ONLY collective postings
o Subledgers pass data in compressed form to G/L via Reconciliation Accounts
- Managed at CC level
o B/S & I/S complied from this
- Transactions entered into Subledgers, MM (material stock) and Treasury flow into B/S
in real-time
- The component ‘Treasury (TR)’ focuses on functions such as:
o Payment means
o Treasury Management (financial means, Forex, derivatives, bonds)
o Loans
o Market Risk Management
- One Leading Ledger in each Client for New G/L Accounting
o Other ledgers can exist within the G/L
SAP FSCM:
- Helps enterprises to optimize their cash flows
- Improvements in invoicing, reconciliation, preventing arrear and process related
delays in payments (printing + sending invoices)
- Represents a major area of process innovation and improvement in a broad range of
industries
Four Key Functionalities:
1. Evaluate the Customer (SAP Credit Management)
2. Helping to contact customers
3. Dispute management

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Collect Cash 7. SAP Dispute Management a. allows vendors to interact w/ customers 2. SAP Treasury and Risk Management a. classify. minimize receivables owed 4. Collaboration w/ customers supported by correspondence with them via internet (using SAP Biller Direct) d. Provides companies w/ large customer base the opportunity to monitor total liabilities of customers. Set of functions for managing financial transactions and risk FI vs. SAP Cash and Liquidity Management a. SAP In-House Cash a. SAP Credit Management a. Customers access info via internet c. CO Audience Objective FI External Legal Reporting Requirements Level Determined by Law Defined by Law CO Internal Internal Management of Costs and Revenues Up to company Costs and Revenues at a higher level than FI *costs and revenues from FI used in CO FI – Organizational Levels 2 . Reconcile FSCM Components: 1. Forecast Cash 4. Resolve Disputes 6. SAP Collections Management a. System support for processing payment deductions b. Finance Working Capital 5. Different Distribution Channels use same data to check credit worthiness 5. Send and receive invoices electronically b.4. using appropriate credit lines b. In-house cash center is a virtual bank within the corporate group c. Reduces media fragmentation. Effectively manage liquidity and currency risk b. All corporate sectors operate on unique and consistent database 6. Improves receivables management and speeds up invoice settlement 3. Settle and Pay 8. SAP Biller Direct (Electronic Bill Presentment and Payment) a. Issue Invoice 3. Redundant data entry eliminated c. Saves on costs of external netting services + gives flexibility when processing payment netting transactions 7. Check credit worthiness 2. Eliminates risk of customer exceeding credit limit d. Allows diversified companies to optimize intra-group payment transactions by opening an in-house bank b. Cross-departmental resolution of dispute cases c. Advantage of centralized and company-wide management of credit lines c. Collections Process Steps in FSCM: 1. Structure.

Company Code .Usually created based on geographic considerations . improve forecasting and better anticipate risks and opportunities . generates revenue.Aim is to provide insight into different business activities of a diversified company and info about the general environment . with risks and revenue that differ from other segments o Geographical Segment – risks and revenues that differ from other geographic segments in terms of economic or political factors . involving manufacture of product or provision of service. other FI criteria .Represents a separate unit of cost accounting .0) .IAS Definition o Business Segment – is a sub-activity of a company.Chart of Accounts Segment o Description of account o Type: B/S I/S o Account Group (controls CC segment fields) o Consolidation Account # .Self-contained Organizational Structure for which costs and revenues can be managed and allocated .Should create based on tax law. can be used as a dimension for reporting purposes . commercial law.Company Code Segment o Details how specific CC will manage account  Account control  Account management  Bank/financial details  Joint ventures 3 .Purpose is to provide a better overview of the company’s economic performance. has own financial data w/ regard to profit + resource consumption Controlling Area .Assign multiple CC’s to carry out Cross-CC cost accounting o Same operating COA and fiscal year required General Ledger Accounting Chart - - Represents a company’s set of books of Accounts each G/L set up according to a COA contains definitions of all G/L accounts in an ordered form consists of o Account # o Account Name o Type of G/L Account (B/S or I/S) Can specify an unlimited # of COA’s GL Account Master Record Comprised of: .CC key is a 4 digit alphanumeric code Segment .Available as of SAP ERP 2004 (ECC 5.In New G/L.US GAAP – part of a company that incurs costs.

Since SAP ERP 2004 (ECC 5.0). address.Purchasing Organization o Data specific to purchasing in VMR must be entered before supplier’s master record can be used Document Splitting .Define exactly which accounts appear in which line items of the financial statements Profit Centers (previously CO only.Classify G/L accounts into user defined segments (cash/asset/material/PL/liabilities.Used for internal control .Account type/Debit or Credit/Field Status Accounts Payable (P2P) PO GR IV Payment Vendor Master Record .Contains data that controls how transaction data is posted and processed .Ensures real-time integration of subledger accounts with G/L Financial Statement versions . function as a dimension for reporting o Financial statements can be created for PCs .Field status (Supress/Required/Display/Optional) Reconciliation Accounts and Subledgers .Can represent: o An organizational unit (plant) o A line of business o A geographical location . etc o any CC will have access to Vendor General Info . are now an integral part of G/L .Helps to meet various reporting requirements . a ‘profit’ area of responsibility] .Like CC’s.  Interest calculation Document control Account Groups .Client Level o Vendor specific info o Name.Still considered master data G/L Account Posting – page 68 Posting Key .etc) .Determine # range of accounts that will fall into those segments .Used because corporate groups are required to create a B/S at segment level Vendor Payment 4 .Company Code .Includes all info about a vendor needed to do business w/ them .

2. 3.Invoice received in Logistics invoice verification . 5. take account of cash discount periods Post payment document Print payment medium If Automatic 1.At the same time.System checks quantity of goods received vs.At the same time. Prepare data for printing Purchase to Pay Process (Accounting View) . limit calculations [Role UKM00 (Credit Mgt Bus Post) used to maintain data] SO .1.No accounting documents generated GR .Includes all information about business partner required for monitoring credit risk . 4.Credit Profile o Contains data related to scoring. Clear open items 3. Credit Bank Reconciliation when payment made .Vendor invoice posted (PO history updated) . Credit A/P) Payment . Debit Bank Reconciliation. Post payment document 2.Once payment verified. Select Payment Method and Bank Select items for payment Calculate payment amount.Sales Order Created (No FI document) Delivery 5 . FI document generated (Debit GR/IR.Debit A/P. Credit GR/IR) IV .CC .Maintained in a separate data basis in SAP Credit Management .Accounts are processed on the basis of Credit Segment in the CMR o Credit segment data contains all data required for checking credit when sales order is accepted and for resulting order-related credit decisions o Data updated from Sales and FI  SD  Sales Order  outbound delivery (ECC 6.Vendor invoice checked for correctness .Material document created to update stock .Sales Area (Sales Org + Distribution Channel + Division) o Sales area-specific settings o Must be defined before it can do business Credit Management (SAP Credit Management) . FI Document created (Debit Materials. Credit Bank Account Accounts Receivable (O2C) SO Delivery Billing Payment Customer Master Data .Client .Purchasing organization MUST create purchase specific data in VMR before that can use Supplier Master record PO .0)  Billing Document  FI – Transferred in report UKM_TRANSFER_ITEMS . Order quantity .

Can also assign assets to CO Objects (Cost Center/Internal Order/Activity Type/Logistics Org.Can also create for intangible and leased assets .Expenses incurred when services procured outside company and provided internally . FI – Invoice (A/R Customer Debit/Revenue Credit) *Revenue Recognized Payment . retirements) .At the same time.Each asset MUST be assigned to one .At least 1 special asset class for assets under construction and low value assets (4000. w/o reference to a PO o Via MM using MM functions (PO.Application Component TR (Treasury) used for managing Financial Assets Asset Transactions (acquisitions. Units) . internal services posted with an account assignment to Cost Center performing activity (personnel expenses) Customer Payments .Each asset belongs to a Company Code and Business Area (postings made for asset change both) . Invoice Receipt) 6 .Outbound delivery document created (SD) .Any larger deal with manually o Partial payment – item doesn’t clear o Residual Item – open invoice cleared o New open item (Residual Item) in amount of payment difference is created Fixed Asset Accounting Allows - organizations to: Manage asset info Post transactions during life of an asset Calculate asset depletion Asset Master Record .External services posted without.FI – (Credit A/R customer/Debit Bank) Service O2C . 5000) .At the same time. invoice sent to customer .Assets  Business Area = 1 – 1 // Business Area  Assets = 1 – many Asset Class .SD – Billing document created.Application Component PM (Plant Maintenance) used for technical management of assets .Costs that don’t appear on same line item of B/S have to be assigned to different ones .Maximum amount that constitutes a minor payment difference is defined in tolerance group settings . FI – Goods Issue (COGS Debit/Inventory Credit) Billing .Can be posted in various ways: o w/o a vendor or PO  offsetting entry made to a G/L clearing account o to a vendor. GR.Goods delivered posted as Goods Issue (MM) ..

Offers overview of activity for an asset .Data stored in Asset Master Record Depreciation Run 7 .Often asset balances need to be valuated differently for various purposes . because it specifies exactly where the asset posting is listed in the asset history sheet .An addition to Posting Keys 70(debit) and 75(credit) .Must be included when posting to an asset account . perform simulations Depreciation Areas . cost objects.Possible to branch master data.Transaction Type . depreciation areas are kept in SAP .Can drill down details to FI transactions .Necessary.To keep more than one valuation basis.Details the distinguishing characteristics of various asset postings which include: o Buying and Selling o Credit Memos o Acquisition from Internal Production o Adjustment Postings o Retirement w/o Revenue o Depreciation and Appreciation Asset Explorer .

- - Depreciation only posted into asset accounting and G/L after depreciation run Posted to corresponding depreciation accounts in G/L and to assigned CO Cost object assigned to Asset Master Can be run in direct or batch mode 8 .