SAP FI-CO Accounting Entries

Types of FI accounts
Before we actually start checking entries in the SAP system for various processes a
basic understanding is necessary on how the classification of the accounts in SAP is
done and its treatment which is quite universally known nonetheless revisiting it
again.

In Accounting there exists the following classification for all the accounts at a
broader level.

1. Real Accounts

Assets – Tangible, Goodwill - Intangible

2. Personal Accounts

Natural Persons – eg Customers, Vendors

3. Nominal Accounts

Temporary accounts like Expenses, Incomes or gains. Usually they go up

during the year and are not carried forward. Every year the balances are transferred
to the retained earning account and they start the next year with zero balances.

The three golden rules for account entries when transaction happen are as follows

Golden rule for real accounts

Debit what comes in

Credit what goes out

Golden rule for personal accounts

Debit the receiver

Credit the giver

Golden rule for nominal accounts

Debit all expenses & losses

Credit all incomes & gains

In SAP we do the following classification of the GL accounts on the functional basis

as below and also there is an account type configuration A-Asset D-Customer K-
Vendor M-Material S-GL which are further linked to document types. However from
a functional perspective the accounts are to be looked from a Balance sheet and P/L
statement perspective only.

 Asset accounts
 Liability accounts
 Expense accounts
 Income or Revenue accounts

Asset account:
An item of property owned by a person or company having value and available to
meet debts, commitments, or legacies.

e.g.: Land, Vehicle, Cash, Bank, Debtors etc.

Liability account:
An obligation, responsibility, or debt owned by a person or company.

e.g.: Loans, Creditors etc.

Expenses account:
The cost incurred in or required for something; an amount of money spent by a
person or company.

e.g.: purchases, costs, expenses, overheads

Income account:
Money received, especially on a regular basis, for work or through investments

e.g.: sales, revenue

To understand the accounting entries, we need to just follow the rules

Rules of debit and credit

INCREASE DECREASE

ASSET Debit Credit

EXPENDITURE Debit Credit

LIABILITY Credit Debit

REVENUE Credit Debit

Vendor Invoice Accounting Entry :

Purchase A/C …………………………….DR

Input Tax A/C……………………………..DR

TDS A/C……………………………………...CR

Vendor A/C………………………………...CR

Outgoing Payment Accounting Entry :

Vendor A/C………………………………...DR

Outgoing A/C……………………………..CR

Reconciliation Entry of Outgoing Entry :

Outgoing Bank A/C…………………….DR

Main Bank A/C……………………………CR

Customer Invoice Accounting Entry :

Customer A/C……………………………..DR

Output Tax………………………………….CR

TCS A/C………………………………………CR

Sales A/C…………………………………….CR

Customer Incoming Accounting Entry :

Outgoing Bank……………………………DR

Customer A/C……………………………..CR

Reconciliation of Incoming Payment :

Bank A/C……………………………………DR

Outgoing Bank A/C……………………CR

P2P (Purchase to Pay) cycle accounting entries

When we receive the goods in the plant inventory will increase and Liability will
increase. Hence Inventory account will be debited while the GR/IR clearing account
will be credited as we don’t know as of now who is the person who sold us the
goods.

INVENTORY……………………......DR

GR/IR A/C....................................CR
(being goods recvd),

When we receive the invoice we now know who had send the goods. Hence clearing
liability from GR/IR Goods receipts invoice receipts account to the actual vendor
liability account.

GI/IR A/C ……...DR

TAX A/C ………..DR

VENDOR (ACCOUNTS PAYABLE) A/C....CR

When we do the payments the liability is decreased and our cash is also decreased.

VENDOR A/C ……………………....DR

BANK CLEARING / CASH A/C...CR

If we use an intermediary bank account then this asset account is increased and the
actual bank account is decreased.

BANK CLEARING A/C…….DR

BANK A/C.......................CR

O2C (Order to Cash) accounting entries

The integration of O2C with FI starts from the delivery process when material is
moved for deliveries.

Delivery accounting entries as inventory decreases

COST OF GOODS SOLD A/c .......Dr

STOCK A/c ….……………………...CR

Here COGS comprises of all cost for manufacturing the product to picking packing
cost and discounts.

Once the goods are delivered we send an invoice in the form of a billing document
to the customer. The customer is a personal account and receives hence it will be
debited while the revenue account is nominal and increases the credit account.

CUSTOMER A/c ……….DR

DISCOUNT A/c…………DR

SALES REVENUE A/c…CR

TAX ACCOUNT…..…….CR

EXCISE/DUTY A/c…….CR

When we receive a payment from the customer through a bank doing Electronic
Banking Statement upload FF_5 or we receive an amount from the customer F-28. As
cash/bank account increases.

BANK ACCOUNT A/c ……… DR

CUSTOMER A/c ………………CR

The configuration for these settings are done under OBYC tcode where a transaction
key is assigned which finds depending on the movement type and valuation class or
on the basis of condition type and access sequence which GL account should be
automatically picked for journal entries.

Asset FI entries

Asset Acquisition with Vendor F-90

Dr. Fixed Asset – Acquisition Cost

Cr. Vendor (Accounts payable)

 Posting date of the document will be copied into the asset master as the
capitalization date.
 The depreciation start date of each depreciation area will also be determined
and updated in the depreciation area data tab page.
 Asset acquisition posting could also be done without PO from the MM
module.
 Posting could be done in FI posting only.

Asset Disposal – Sales to a Customer using F-92

An asset having a price of 10,000 Rs. And accumulated depreciation of 1000 Rs is
sold to to customer at a price of 11,000 Rs the following entries will be made by SAP
Dr. Customer account (A/R) 11,000

Cr. Revenue for asset disposal 11,000-

Cr. Fixed asset – acquisition cost 10,000-

Dr. Accumulated depreciation 1000

Dr. Clearing account for asset disposal 11,000

Cr. Gain/loss of fixed asset disposal 2000-

The posting date of the retirement posting will also be updated into the field
"deactivation date" in the asset master as the retirement date.

Asset Disposal – Scrap without Revenue using

ABAVN

A asset can be disposed as scrap without any selling value or it could not generate
any value. In this case, no revenue is expected and a loss will be realized in the P&L if
the fixed asset being scrapped still carries a net book value.

For the same asset with historical cost Rs 10,000 and accumulated depreciation of Rs
1000, the posting of the scrapping will be as follows:

Cr. Fixed asset – acquisition cost 10,000-

Dr. Accumulated depreciation 1000

Dr. Gain/loss of fixed asset disposal 9000

Asset Transfer within a Company – Reclassification

The Net Book Value (NBV) of an existing asset master record could be transferred to
another asset within the same company. The transaction could be used in the
following scenarios:

 Reclassify an existing asset to a new class or to correct an error

 Transfer an asset to a new one with the same class. This may be necessary to
execute the change of the remaining useful life of an asset but still spread the
net book value evenly throughout the remaining life without allowing the
system to catch up the postings of the missing or extra depreciation of the
past periods
 For an asset with historical cost Rs 10,000 and accumulated depreciation of
1000, the posting of the intra-company transfer posting will be follows:

Cr. Fix asset – acquisition cost (old asset) 10,000-

Dr. Accumulated depreciation (old asset) 1000

Dr. Fix asset – acquisition cost (new asset) 10,000

Cr. Accumulated depreciation (new asset) 1000-

The old asset being transferred will become a retired asset and the transfer posting
date will be updated as the retirement date in the asset master record.

For the new receiving asset, the transfer will be the same as if it is being
acquired. The transfer posting date will be used as the capitalization date.

Month End Processing – Depreciation Run AFAB

Dr. Depreciation expense

Cr. Accumulated depreciation

Note that the above posting to G/L will be done in a summary level by G/L accounts
and cost center levels because the depreciation expense has to be charged to cost
center in CO. However, the detailed depreciation amount of each asset will also be
stored in Asset Accounting such that each unique asset master record will also have
its unique posted depreciation amount. Besides, after each depreciation run, the
system will issue a report which list out the depreciation posting amount of each
individual assets as a record. It is advised that this report should be kept as an
additional audit trail.

Asset under Construction AUC configuration and

processing steps till settlement
Internal Order as Investment Measure:

1. Define the AuC Asset Class (with investment measure) - OAOA

2. Define the Asset Class – for Main Asset - OAOA

3. Define Investment Profile - OITA

a. Assign the AuC Asset Class (Step-1) in the investment profile

4. Assign Investment Profile to Model Order - OITA

5. Define Order Type (Investment) - KOT2

a. Settlement Profile - OKO7

b. Maintain Allocation Structures - OKO6

c. Planning Profile - OKOS

d. Budget Profile - OKOB

6. Create an Internal Order - KO01

a. With the Investment Profile (Step-2)

b. AuC automatically created by the system using Asset Class given in the Investment
Profile

7. Post the amounts to IO - FB01

Dr. Material supplied to Asset (Expenditure)

Cr. Cash account

8. Settle the amounts to AuC from IO (Prcg type: Automatic) - KO88

Dr. Asset under Construction account

Cr. Contra Capitalized

9. Create the Main Asset - AS01

10. Settle the amounts to Main Asset from AuC (Prcg type: Full) - KO88

Dr. Final Asset account

Cr. Asset under Construction account

Asset under Construction Line Item Settlement

Process
1. Define the AuC Asset Class (with Line Item Settlement) - OAOA

2. Define the Asset Class – for Main Asset - OAOA

3. Define Order Type (Overhead) - KOT2

4. Create an AuC-Asset (using Step-1 Asset Class) - AS01

5. Create an Internal Order - KO01

a. Assign the AuC – Asset in Settlement Rule in IO

6. Post the amounts to IO - FB01

7. Settle the amounts to AuC from IO - KO88

8. Create Main Asset (using Step-2 Asset Class) - AS01

9. Assign the Main Asset in IO (Step-5) - KO02

10. Settlement AuC – Line Item List - AIAB

11. Settlement AuC - Receiver – AIBU

Product Costing Accounting Entries

1. Material received against purchase orders (Raw Material). Asset and liability both
have increased in this case. (MIGO)

Inventory / Raw Material Stock A/c …............. DR (BSX Key)

GR/IR Clearing A/c …………………………....CR (WRX Key)

Entries for Payment to vendor according to P2P.

2. Material Consumption (Raw Material) Goods issue to Production order (MB1A)

Raw Material Consumption Stock A/c ……………...…..DR

Raw Material Inventory Stock A/c ……………………...CR

3. Activity is performed on this stock to manufacture the goods. Finished Material

Machine Allocation A/c …….DR

Labor Allocation A/c ……...DR

Overhead Allocation A/c …..DR

Cost Center A/c ………………..CR

4. Goods Receipt from Production Order to Inventory Stock (Goods receipt WE)
(MB31)

Finished Goods A/c ……….DR

Change in Inventory A/c….CR

PRICE DIFFERENCE A/c …..DR/CR depending on the difference

5. In case of Work In Progress Settlement

WIP Balance Sheet A/c ……………………DR

WIP Profit Loss A/c …………………………CR

The status of the order determines whether WIP calculation creates or cancels the
work in process. If the order has the status REL (released), the system can calculate
work in process.

Once the order receives the status DLV (Delivered) or TECO (Technically completed),
the work in process calculated in a previous period is canceled.
6. WIP Cancellation if the order status is DLV or TECO

WIP Profit Loss A/c …………………………DR

WIP Balance Sheet A/c ……………………CR

7. Goods Issue for Production Order to Inventory for stocks (Goods Issue WA) Tcode
- MB1A

Consumed Finished Goods A/c ….......…..DR

Finished Goods A/c ………………………CR

8. In case of direct Dispatch Delivery of goods to customer and then you have the
normal O2C Process.

Cost of Goods Sold A/c ………………….DR

Inventory A/c ………………………………..CR

In House Cash Management Accounting Entries

The basic usage of IHC is to minimize external bank transaction thus saving
transaction costs, utilizing available funds in a centralized treasury and add to
efficiency of liquidity management. With IHC it becomes easier to manage your intra
group and external payment transactions in an effective manner avoiding associated
risks. Consider the trigger of Business Partners delivering goods (Vendor) and
sending an invoice to the company.

The sap presented solution works along the following lines

 There are different unique independent companies (subsidiaries) which have

their own interaction systems.
 The head office has a main bank called as the In House Cash Center.
 Account management in the IHC Main is done via IDoc link to FI.
 IHC manages all the current a/c of its subsidiaries.

For intercompany payments

Company COMP01 does the payment to COMP02 through the In House Cash Center.
The In House Cash Center posts the payment to relevant accounts in both these
company accounts and sends back the bank statements as well.All the data transfer
is managed via IDoc (PAYEXT for payment order and FINSTA for bank statements)

 COMP02 sends invoice

EXPENSE OR GR/IR ACCOUNT A/c ….DR

IHC COMP02 A/c …………………………...CR

Payments using F110 where the company COMP01 pays the invoice amount to the
COMP02. The F110 record posts to the clearing account in IHC. The PAYEXT IDoc is
generated and sent to the IHC. F111 can be used to perform the payment requests
that are generated.

IHC SUSBSIDIARY CLEARING COMP02 A/c …………………..…DR

IHC SUSBSIDIARY CLEARING COMP01 A/c ….………………....CR

IHC does the payment job to company 02 which in this intercompany is the vendor
to the company 01 and sends an FINSTA or bank statement

COMP01

IHC MAIN COMP01 A/c ……………….…..…DR

IHC SUSBSIDIARY CLEARING COMP02 A/c ….………………....CR

COMP02

IHC SUSBSIDIARY CLEARING COMP01 A/c ….………………....DR

IHC MAIN COMP02 A/c ……………………....CR

Payments order generated by IHC in form of FINSTA can be accessed in the payment
browser transaction code IHCO. The order contains two payment items as pointed
out above one which debits the ordering party and one which credits the payment
recipient. Transaction FEBP can then be used to create these postings.

Central Outgoing Payments with In-House Cash

Several currencies are used for payments to suppliers by the companies under a
group. The central payments features allows to combine these payments and creates
a centralized payment process execution mechanism. In House cash handles all the
payments of its subsidiaries to the external world.

EXTERNAL VENDOR sends goods and invoices COMP01

EXPENSE OR GR/IR ACCOUNT A/c ….DR

IHC BUSINESS PARTNER A/c …………………………...CR

Payments using F110 where the company COMP01 pays the invoice amount to the
external Vendor. The F110 record posts to the clearing account in IHC. PAYEXT IDoc
is generated and sent to the IHC and with F111 these payment request instructions
to the IHC can be viewed.

IHC BUSINESS PARTNER A/c …………………..…DR

IHC SUSBSIDIARY CLEARING COMP01 A/c ….………………....CR

IHC does the payment job to external vendor after netting or taking into
consideration various currencies and sends an FINSTA or bank statement back to the
COMP01

IHC MAIN COMP01 A/c ……………….…..…DR

EXTERNAL VENDOR A/c ….………………....CR

IHC SUSBSIDIARY CLEARING COMP01 A/c….DR

IHC MAIN COMP01 A/c ……………………....CR