A German software company whose products allow businesses to track customer and

business interactions. SAP is especially well-known for its Enterprise Resource

Planning (ERP) and data management programs. SAP is an acronym for Systems,
Applications and Products
What is SAP
SAP stands for Systems Applications and Products in Data Processing
(English) and in German SAP abbreviation isSysteme, Andwendungen, Produkte in
der Datenverarbeitung (German).
SAP by definition is also an ERP (Enterprise Resource Planning) software. Founded by
Hopp, Hector, Plattner, Wellenreuther and Tschira in the year 1972, the SAP system
features numerous fully integrated modules. As you continue reading, you will learn to
define SAP and understand what SAP software is used for.
Organizational units are used to structure business functions and for reporting.
Theorganizational units of Financial Accounting are used for external reporting
purposes, that is, they fulfil requirements that your business is subject to from external
parties, for example, legal regulations

Important Organizational Units in SAP FI are

1. Company
2. Company Code
3. Business area

Name Three Distinct Characteristics of FI-GL

 Multi-currency capability
 Flexible real-time reporting
 Real-time transaction entries

The 'FI (Financial Accounting)' module of SAP is the back-bone, which records,collects,
and processes financial transactions or information on a real-time basis to provide the
necessary inputs for external (statutory) reporting. The module isintegrated with other
modules (such as Material Management (MM), Sales &Distribution (SD), Human
Resources (HR), Production Planning (PP), Controlling(CO), etc.). The module FI has
several sub modules that are tightly integrated.
What are the 'Sub modules' within FI ?

FI-AA Asset Accounting

Integrated with FI-GL, FI-AR, FI-AP, CO, MM, PP and PM, this modulemanages the
financial side (depreciation, insurance, etc.) of the assetsthroughout their entire life
cycle starting with procurement of assets and endingwith scrapping or sales.
FI-AP Accounts Payable
Integrated with FI-GL, FI-AA, FI-TR and MM, this sub module managesvendor
transactions by linking with material management, asset accounting,travel
management, etc. Notable is the 'payment program' for makingpayments to vendors.

FI-AR Accounts Receivable

Integrated with FI-GL, FI-AA, FI-TR, MM and SD, this sub module managescustomers
and receivables, and integrates with SD. It is well-known for creditmanagement
functionalities and the 'dunning' program.

FI-BL Bank Accounting

FI-FM Funds Management
FI-GL General Ledger Accounting
This sub module is integrated with all other sub modules within FI and outsideFI.

FI-SL Special Purpose Ledger

This sub module is used to provide the summary information from multipleapplications
at a level of detail that the user defines.

FI-LC Legal Consolidations

This sub module helps in the central task of combining the financial operatingresults of
the companies within a group to provide overall results for the group.

FI-TM Travel Management

………………………………..
The Important Organizational elements in SAP FI are as follows:

1. Company Code
2. Business Area
3. Chart of Account
4. Functional Area
 Company code is a Smallest Organization unit for which independent financial
statements can be carried out. Balance sheets and Profit & Loss statements,
can be created at the company code level as per required by law. Business
transactions are processed at each company code level.
 Business Area is a separate area of operations or responsibilities of
organizational units with in a company code and used for internal and external
reporting. Different divisions of each business with in a legal entity are created
as Business areas for reporting of each operational areas.
 The chart of accounts (COA) is a list of GL accounts master record that are
used by the organization. A chart of accounts must be assigned to each
company code.
 Functional Area is a organizational unit in accounting that classifies the
expenses of an organization by functions. The functional area is use to create
P & L A/C in Financial Accounting using cost of sales accounting. e.g. of
functional areas are
 1. Administration
2. Sales and Distribution
3. Manufacture
4. Production
5. Research & Development
Functional SAP ERP Modules
 Human Resource Management (SAP HRM), also known as Human Resource (HR)
 Production Planning (SAP PP)
 Material Management (SAP MM)
 Financial Supply Chain Management (SAP FSCM)
 Sales and Distribution (SAP SD)
 Project System (SAP PS)
 Financial Accounting and Controlling (SAP FIC
SAP Modules – SAP FI, SAP CO, SAP SD, SAP HCM and more
The SAP Certification exam is based on Enterprise Resource Planning solutions,
typically SAP software solutions. Enterprise Resource Planning (ERP) that allows an
enterprise to manage databases for different processes from a single unified system.
ERP system was developed initially for inventory control; however, over the years;
different software was developed for different processes in an enterprise for better data
management and workflow. In today’s world, there are many leading market providers
of ERP system, and SAP is one of the market and technology leaders in building
business software towards structured work and data management in organizations.
SAP AG is originally German multinational software which deals in software
development for business management and improved customer relations in
enterpriSystems Analysis and Program Development (SAP) was founded on June 1972
and since then, many SAP ERP operations modules have emerged that are designed
focusing on various different processes including SAP ERP sales and service, sales
and distribution, customer relationship, financial management, business intelligence and
more. Let’s get an overview of a few of the SAP development modules in this post.

 SAP Financial Accounting (FI)

 SAP Controlling (CO)

 SAP Sales and Distribution (SD)

 SAP Production Planning (PP)

 SAP Materials Management (MM)

 SAP Quality Management (QM)

 SAP Human Capital Management (HCM)

 SAP Financial Accounting (FI)

SAP FI module as the term suggests deals in managing financial transactions within
enterprises. This financial accounting module helps employees to manage data involved
in any financial and business transactions in a unified system. This module functions
very well for reporting requirements. The SAP FI module is very flexible and functions
well in any type of economic situation. Be it a smaller organization or a larger
organization; SAP implementation helps in consolidating data for diverse business
transactions and legal requirements. Financial Accounting module helps one to get the
real-time financial position of an enterprise in the market. SAP FI incorporates with other
SAP modules such as SAP SD, SAP MM, SAP PP, Payroll, and more for better work
results.

Functional SAP ERP Modules

 Human Resource Management (SAP HRM), also known as Human Resource (HR)
 Production Planning (SAP PP)
 Material Management (SAP MM)
 Financial Supply Chain Management (SAP FSCM)
 Sales and Distribution (SAP SD)
 Project System (SAP PS)
 Financial Accounting and Controlling (SAP FICO)
 Plant Maintenance (SAP PM)
 Quality Management (SAP QM)

. Sub Modules of ERP SAP FICO (FI and CO)

1. SAP General Ledger Accounting

2. SAP Accounts Payable
3. SAP Accounts Receivable
4. SAP Bank Accounting
5. Budgeting and Monitoring
6. Cash management
7. SAP Asset Accounting
8. SAP Funds management
9. SAP Treasury Management
10. SAP Special Purpose Ledger
11. Withholding Tax (TDS)
12. SAP cost element accounting
13. Cost center Accounting
14. SAP Product Cost Accounting
15. SAP CO internal orders
16. SAP Profit Center Accounting
 17. SAP Profitability Analysis

4……….=================================--================
The company code is the central organizational unit of external accounting within the
SAP System. ... The business transactions relevant for Financial Accounting are
entered, saved, and evaluated at company codelevel. You usually create a legally
independent companyin the SAP System with one company code.

Definition

Smallest organizational unit of external accounting for which a complete, self-contained

set of accounts can be created. This includes the entry of all transactions that must be
posted and the creation of all items for legal individual financial statements, such as the
balance sheet and the profit and loss statement.

The definition of the company code organizational unit is obligatory .

Use

The company code is the central organizational unit of external accounting within the
SAP System. You must define at least one company code before implementing
the Financial Accounting component. The business transactions relevant forFinancial
Accounting are entered, saved, and evaluated at company code level.

You usually create a legally independent company in the SAP System with one
company code. However, you can also define a company code according to other
criteria. A company code could also be a separate, but not independent, commercial
place of work. This is necessary for example, if the place of work is actually situated in a
different country and evaluations therefore have to be carried out in the appropriate
national currency and in accordance with other tax and legal specifications.

If you want to manage the accounting for several independent companies

simultaneously, you can set up several company codes in one client. You must set up at
least one company code in each client.

To define a company code, choose the following in Customizing for the Enterprise
Structure : Definition Financial Accounting Define, Copy, Delete, Check
Company Codes .

An organizational unit in SAP accounting software used to identify a business. The code
should be developed accordingly with tax laws, commercial laws, and other financial
 criteria. A company code in the SAP system shows a legally independent company and
can also represent a legally dependent operating system oversees if external reporting
is required.

Definition

A profit center is an organizational unit in accounting that reflects a management-

oriented structure of the organization for the purpose of internal control.

You can analyze operating results for profit centers using either the cost-of-sales or the
period accounting approach.

By calculating the fixed capital as well, you can use your profit centers as investment
centers.

Use

Profit Center Accounting at the profit center level is based on costs and revenues.
These are assigned statistically by multiple parallel updating to all logistical activities
and other allocations of relevance for a profit center.

The exchange of goods and services between profit centers can be valuated using the
same valuation approach as in financial accounting or another approach (see Multiple
Valuation Approaches/Transfer Prices ).

Structure

The master data of a profit center includes the name of the profit center, the controlling
area it is assigned to, and the profit center’s period of validity, as well as information
about the person responsible for the profit center, the profit center’s assignment to a
node of the standard hierarchy, and data required for communication (address,
telephone number and so on).

Every profit center is assigned to the controlling area organizational unit. This
assignment is necessary because Profit Center Accounting displays values in G/L
accounts.

The system transfers all the data to Profit Center Accounting together with the G/L
account to which the data was originally posted. You can only aggregate data that
shares the following:

 Same chart of accounts

 Same fiscal year variant

 Same currency

Time-Based Master Data

Like cost centers, profit centers are valid for a specific time period. This has the
following advantages:

 No complicated activities are necessary when a new fiscal year begins.

 You can enter future changes to the master data in advance.

Profit centers are time-dependent in two ways:

 First, you can enter a period during which actual or plan data can be posted to the profit
center.

 Second, you can define time-based fields when you customize Profit Center
Accounting.

Time-based fields let you change information in the profit center master record, such as
the person responsible for the profit center, at a specific point in time without having to
create a new profit center and without losing any information about the previous person
responsible.

Integration

Enterprise Organization

If you are using the enterprise organization, both profit centers and cost centers form
part of it. For more information, seeEnterprise Organization .

Note
You can only use the enterprise organization to portray relatively small hierarchies.
Trying to portray a larger hierarchy in the enterprise organization can lead to
performance issues.

The Standard Hierarchy

To ensure that your data in Profit center Accounting is consistent with that in other
areas, you must assign each profit center to the Standard Hierarchy .
The standard hierarchy is used in the information system, allocations, and various
planning functions. You can also assign your profit centers to alternative hierarchical
structures, called Profit Center Groups .

Copying Cost Centers

If the profit centers in your organization are closely linked to your cost centers, you can
simply copy your cost center master data to create your profit centers. For more
information on this function, see the Implementation Guide (IMG) for Profit Center
Accounting, under Master Data .

SAP CO Profit Center is used for managing internal controlling. When you divide your
company into profit centers, it allows you to delegate responsibility to decentralized
units and treat them as separate companies in a company. It also allows you to
calculate key figures in cost accounting like ROI, Cash flow, etc.
Profit Center is a part of Enterprise Controlling module and is integrated with a new
General Ledger Accounting.
Key Features of SAP CO Profit Center
Profit Center Accounting is used to determine profit for internal areas of responsibility.
It lets you determine profits and losses using either period accounting or the cost-of-
sales approach.
It allows you to analyze fixed assets by profit center, thus using them as investment
centers. It allows to expand profit centers to investment centers.
Why Do We Create Profit Center?
The main aim of creating a Profit Center in SAP CO is to analyze the cost of a product
line or a business unit.
You can also generate P&L accounts according to a Profit Center and also generate
balance sheets, however a Profit Center should only be used for internal reporting
purpose.
The key components of a profit center include – name of the profit center, the
controlling area under which it is assigned, time period, person responsible for the
profit center, standard hierarchy, etc.