Omfed Sap Fico BBP

SAP Implementation Project
Business Blue Print

Document
SAP (ERP) Implementation PROJECT
Odisha State Cooperative Milk Procedure’s Federation Ltd.
D-2, Saheed Nagar,

Bhubaneswar-07
Odisha, India
Business Blueprint Document
FINANCE & CONTROLLING

(Draft Version)
Last Updated: 03-10-2016
Author:
Odisha Small Industries Corporation Limited
ISO 9001-2008 Certified Company
Filename: OASYS_SAP_FI_BBP_V1.0
Status: Draft Created on : 05 OCT. 2016
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Contents
1. DOCUMENT HISTORY........................................5
2. EXECUTIVE SUMMARY........................................8
3. ORGANIZATION STRUCTURE SOLUTION............9
3.1 Organisation Structure.................................................................................................9
3.1 Chart of Account segment..........................................................................................10
3.1 Company Code Segment.......................................................................................11
3.2 Controlling area..........................................................................................................11
3.2.1 Profit Center Hierarchy and Profit Centers...................................................12
3.2.1 Cost Center hierarchy and Cost Centers..............................................................13
3.2 Cost and Revenue Element Accounting.....................................................................16
3.3 Currency......................................................................................................................18
3.5 Fiscal Year and Fiscal Year Variant..........................................................................18
3.6 Posting Period Variant and Posting Period.................................................................20
4 . GENERAL LEDGER...........................................20
4.1 General Explanations..................................................................................................20
4.2 GL Document Types and Number Ranges.................................................................23
4.3 Posting Key................................................................................................................24
4.4 Account types.............................................................................................................26
4.5 General Ledger Master Data.......................................................................................26
4.6 Naming/Numbering Conventions...............................................................................27
4.7 GL Account Groups....................................................................................................27
4.8 Field Status Group.....................................................................................................30
4.9 General Document Posting.........................................................................................30
4.9.1Manual Journal Accounting Entry........................................................................31
4.9.2 Process & Flow Chart of Journal Posting (TO-BE in SAP)..............................32
4.9.3 Recurring Entries................................................................................................34
4.9.4 Sample Documents.............................................................................................34
4.9.5 Document Reversal Entry...................................................................................34
4.10 General Ledger Payment Methods...........................................................................35
4.10.1 Cheque Payment Method..................................................................................35
4.10.2 Electronic Payment Method..............................................................................36
4.10.3 Full and Partial Payment...................................................................................36
4.10.4 Open Items Clearing........................................................................................36
5. ACCOUNTS PAYABLE......................................37
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5.1 General Explanations.................................................................................................37

5.2 Document Type and Number Ranges.......................................................................38
5.3 Vendor Master Data...................................................................................................38
5.4 Vendor Account groups naming conventions............................................................39
5.5 Vendor Account Groups and Number Ranges..........................................................41
5.6 Payment terms..........................................................................................................41
5.7 Accounts Payable Process Flow.................................................................................42
5.7.1 Vendor Master Data Management......................................................................42
5.7.2 Vendor Invoice and Parking..............................................................................43
5.7.3 Vendor Procurement..........................................................................................43
5.8 Vendor Payment Process..........................................................................................46
5.9 Payment Methods.......................................................................................................48
5.9.1 Manual Payment................................................................................................49
5.9.2 Automatic Payments.........................................................................................50
5.9.3 Vendor Advance Payments/Down payments......................................................52
5.9.4 Payments for Special Transactions...................................................................52
5.10 Vendor Document Reversal Entry.........................................................................53
5.11 FI-MM Integration:...............................................................................................53
6. ACCOUNTS RECEVIABLE................................55
6.1 General Explanations............................................................................................55
6.2 Document Type and Number Ranges........................................................................55
6.3 Customer Master Data..............................................................................................56
6.4 Customer Account groups and Number Ranges.......................................................56
6.5 Accounts Receivable and Process Flow....................................................................57
6.6 Customer Master Data Management........................................................................59
6.7 Customer Payment Terms...........................................................................................59
6.8 Customer Invoice and Parking...................................................................................60
6.9 Customer Payment Process........................................................................................60
6.9.1 Normal Payment/Cheque Payment.....................................................................60
6.9.2 Full or Partial Payment.......................................................................................61
6.9.3 Post Dated Cheques (PDC)................................................................................62
6.9.4 Customer Advance Payments /Down Payments................................................62
6.9.5 Direct deposit by customer in bank account......................................................62
6.9.6 Customer Cheque Payment Bounced................................................................62
6.10 Customer Document Reversal Entry.....................................................................63
6.10.1 Single Reversal................................................................................................63
6.10.3 Mass Reversal...................................................................................................63
7. ASSET ACCOUNTING.....................................63
7.1 Summary....................................................................................................................64
7.2 Chart of Depreciation.................................................................................................64
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7.3 Depreciation Area.....................................................................................................64

7.4 Depreciation Keys and Rules.....................................................................................65
7.5 Asset class..................................................................................................................65
7.6 Asset Depreciation Key and Rate.............................................................................66
7.7 Asset Master Data Management...............................................................................67
7.8 Document Type / Number Ranges............................................................................68
7.9 Asset Accounting Business Processes......................................................................69
7.10 Asset Acquisition.....................................................................................................69
7.11 Asset under Construction (AUC).............................................................................69
7.12 Direct Purchase and Capitalization.........................................................................70
7.13 Asset Retirement.....................................................................................................72
7.14 Post Capitalization..................................................................................................73
7.15 Low Value Assets...................................................................................................74
7.16 Depreciation Run – Month End/ Period End Operation..........................................74
7.17 Year End Process – Close fiscal year....................................................................77
7.18 Fiscal Year Change................................................................................................77
7.19 Asset Balances........................................................................................................78
8. CASH AND BANK ACCOUNTING........................78
8.1 Summary...................................................................................................................79
8.2 Bank Master Data.....................................................................................................79
8.4 Business Process - Bank Reconciliation...................................................................82
8.4.1 Step 1: Receiving Bank statement copy............................................................84
8.4.2 Step II – Bank statement uploaded in system..................................................85
8.4.3 Step III– Reconciliation in system...................................................................85
8.4.4 Step III – Manual posting for un-reconciled items..........................................85
8.5 Accounting of Bank Charges and interest income...................................................86
8.6 Cash Journal for Cash transactions..........................................................................86
9. Taxation..........................................................88
9.0 Value Added Tax (VAT).........................................................................................89
9.1 Entry Tax.................................................................................................................89
9.2 Withholding Tax........................................................................................................90
9.2.1 Withholding Tax for Domestic Services......................................................91
9.3 Service Tax................................................................................................................91
9.4 Excise Duty................................................................................................................91
10. MONTH-END & YEAR-END CLOSING................92

10.1 Month-End Closing................................................................................................93
10.1.1 Post Accruals..................................................................................................93
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10.2. Reverse Accruals.................................................................................................94

10.3 Foreign Currency Valuation for Open Items.........................................................94
10.4 Open Items Clearing...............................................................................................95
10.5 Enter Recurring Entry............................................................................................96
10.6 Year-end closing..................................................................................................96
10.7 Closing of Open Periods (Monthly and/or Yearly)..................................................97
10.8 Post Accruals & Deferrals.....................................................................................97
10.9 Reverse Accruals/ Deferral.....................................................................................97
10.10 Close Asset Fiscal year..........................................................................................98
10.11 Asset Year End Closing.........................................................................................98
10.12 Balance carry forward to subsequent year.............................................................99
11. Budgeting :-..............................................100
12. Standard Reporting Requirements............100
12.1.1 Cost Center Level Reporting......................................................................101
12.1 General Ledger Account Reports........................................................................101
12.2 Accounts Payable Reports..................................................................................103
12.3 Accounts Receivable Reports.............................................................................103
12.4.1 Open Item Report........................................................................................104
12.4.2 Cleared Item Report....................................................................................104
12.4.3 Parked Item Report.....................................................................................104
12.4.4 Special General Ledger Transactions Report.............................................104
12.4.5 Clearing Item Report..................................................................................104
12.4.6 Other Reports..............................................................................................104
11 ACRONYMS USED........................................105
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1. DOCUMENT HISTORY
This document is prepared based on the discussion held with Finance and Accounts
department during business process understanding phase. Study including AS-IS
process study and Business Blue Print of the SAP FICO Module for “Orissa State
Cooperative Milk Producers' Federation (OMFED)”.
Revision History
Revision Revision Date Summary of Changes Changes
Number Marked
01 First draft of document version 1
02
03
Preparer
Name Designation Signature Date
ARIJIT BHUINYA SAP FICO Consultant
Odisha Small Industries Corporation LTD. Reviewer

CA Pradeepta Kumar Sahoo SAP Project Manager
Pradeepta Kumar Mohanty Managing Director
Client Approver / Signoff

After sign off has been obtained from the relevant parties involved, a copy of the
Business Blue print will be maintained centrally. This document will be updated and
signed-off again when there are key changes to the document later in the
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Deploy/Develop stage.
2. EXECUTIVE SUMMARY
Business Blueprint document is main deliverable of Orissa State Cooperative Milk

Producers' Federation (OMFED) Design Phase. Blueprint document is a framework for
understanding business goals of OMFED and processes required to support business
goals. The purpose of this document is to verify that a proper understanding of
requirements has been communicated and finalize detailed scope of project.
The source of blueprint document is based on business process provided by
Orissa State Cooperative Milk Producers' Federation (OMFED)
The objective of ‘AS-IS’ and “TO-BE” Business Blueprint document is to

conceptualize how the business organization intends to work in future with SAP R/3 in
production operation environment. In preparing Business Blueprint document, several
factors were taken into account as follows:
1. The foundation for SAP R/3 configuration and set up during development phase
of project.
2. Will meet business requirements within the boundaries of project scope agreed
with business.
3. OMFED will adopt SAP standard processes (which will be described in the
remaining sections of this document) in SAP system.
4. Includes roles and functions around transactions and SAP R/3 system
through business process flowcharts with an appropriate explanation. Business
Blueprint document will not detail the user procedures.
5. Lists standard SAP reports available in SAP system as guidance for users.
Orissa State Cooperative Milk Producers' Federation (OMFED) Head Office is located in
Bhubaneswar
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Operations
Location Kind of Operation
( Company Name)
OMFED®'s main activities includes promoting,

Orissa State
production, procurement, processing and
Cooperative Milk Bhubaneswar,
marketing of milk & milk products for economic
Producers' Federation Odisha
development of the rural farming community in
(OMFED)
Orissa.
About this document:
This document explains different organizational elements in SAP, their use and the use
of these elements for corporation. Transaction data flow and Reporting in SAP depend
upon the Organization structure elements. Every module in SAP has their own
Organization elements; this document explains organizational elements relevant for
Financial & Controlling Accounting.
Following modules in Finance and controlling shall be used by Corporation.
Finance Accounting (FI)
 General Ledger
 Accounts Receivable
 Accounts Payable
 Assets Accounting
 Cash & Bank
Controlling (CO)
 Profit Center Group
 Profit Center
 Cost Center Group
 Cost Center
 Cost Element
3. ORGANIZATION STRUCTURE SOLUTION

3.1 Organisation Structure
SAP Finance and Controlling Organization Structure is defined to ensure reporting at

different required levels. OMFED as a corporation have several external and internal
reporting requirements e.g. financial statements, Trial balances reporting etc. that can
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be catered using available organization elements within Finance & Controlling module
of SAP.
Finance and controlling Structure comprises of following elements:
1. Company Name
2. Company Code
3. Group Chart of Account
4. Operating Chart of Account
5. Controlling Area
6. Credit control Area
7. Profit Center standard hierarchy and/or Group
8. Profit Center (master)
9. Cost Center standard hierarchy and/or Group
10. Cost Center
11. Cost element
12. House Bank and account ID
13. Cash journal
14. Asset class
15. Depreciation area
Definition of Organizational Unit
In this section, definition of various organizational objects used in SAP has been
explained. OMFED organization structure shall be mapped to these organizational
objects to manage the Financial & Controlling Accounting related requirements.
3.1 Chart of Account segment
In this segment, specifications that apply to the entire G/L account master record are
captured. These include:
 The G/L account number and G/L account name.

 Whether the account is a balance sheet account or an income statement
account.
 Data that controls the creation of a master record in a Company code, such as
the account group.
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Chart Of
Company Name Account Description
Code
Orissa State Cooperative OMFED GROUP - OPERATING CHART OF

Milk Producers' Federation ACCOUNT
(OMFED) 1000
Orissa State Cooperative
Milk Producers' Federation
(OMFED) 1000 OMFED GROUP - GROUP CHART OF ACCOUNT
3.1Company Code Segment
The information, which is specific to a particular Corporation, is maintained in the

Company code segment of the General Ledger Master record. This data controls how
one enters and processes business transaction data in the appropriate account as well
as how the account is managed within a Company code.
The following are some of the specifications which will be made for each G/L
account:
 Account group – for G/L grouping purposes.

 P&L statement or Balance sheet – The G/L pertaining to profit & loss account or
balance sheet in nature.
 Currency-account currency
 Tax category – Whether input tax or output tax or all tax category or no tax
allowed.
 Reconciliation Account for Account Type - to specify the control accounts for the
sub ledgers.
 Open Item Management-will be maintained for accounts that require open item
management.
 E.g. Bank sub-accounts, GR/IR clearing account etc., are maintained in
Open Item Management.
 Line Item Display - will be retained for accounts for which line items
are to be stored separately.
 E.g. Bank main accounts, all expense accounts, all balance sheet accounts,
excepting accounts which are of the nature of reconciliation accounts.
 Field status group – It controls each fields per G/L whether suppress or required
or optional.
Company code Name
Orissa State Cooperative Milk Producers' Federation
1000 (OMFED)
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3.2 Controlling area

The cost accounting system uses controlling area as an organizational unit. Controlling
area delimits the corporation’s managerial accounting operations. Organization
structure is replicated in the controlling system. Cost centers, and profit centers are
used to classify the controlling area. All inter organizational allocations refers to
objects within the same controlling area.
OMFED has only one entity, situated in Bhubaneswar, so only one controlling area
would be in place as per their currencies and legal requirement.
Controlling
Company code Controlling area Name
area
OMFED GROUP CONTROLING AREA
1000
1000
The controlling area settings are defined here. The deciding factor for setting basic
data is the organization of cost accounting, meaning the assignment of Company codes
to a controlling area. This decision is irreversible as soon as master data is created.
The way Company code and controlling area are assigned affects the currency settings,
meaning currency type, currency, and currency updating, in addition to the controlling
area chart of accounts and the fiscal year variant.
Further basic data of the controlling area are the standard hierarchy and the logical
system, if ALE (Application link Enabling) is used for data distribution in cost
controlling. The control indicators activate or deactivate certain CO components or
functions according to fiscal year. Controlling area is the second highest node in
organization structure which is next to operating concern.
3.2.1 Profit Center Hierarchy and Profit Centers
Profit center hierarchy represents the group of profit centers. Profit center represents
the profitability for each line of business. A trial balance, P&L and Balance sheet can be
generated for each profit center. From SAP terminology profit center are where cost
and revenue exists and as such profit margin can be determined. A profit center can
go across corporation and cost center. Therefore it will be possible to work out
profitability by line of business.
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As Is:
Presently in OMFED there is no profit center accounting.
To Be:
In OMFED, standard hierarchy is assigned to each controlling area and profit centers
are created considering the corporation’s overall management structure.
Profit center hierarchy

 “1000: OMFED CATTLE FEED PLANT HIERARCHY” is the highest
node of the profit centers for cattle feed division in controlling area
1000.
 “1000P: OMFED CATTLE MILK UNIT HIERARCHY” is the highest node
of the profit centers for cattle feed division in controlling area 1000.
Chart of Account: 1000

Controlling Area: 1000
Corporation: OMFED
Company code: 1000
The next node for Profit center hierarchy under which the entire sub node to be defined
as 1000D: Orissa State Cooperative Milk Producers' Federation (OMFED)All nodes:
Masking Hierarchy code Hierarchy Description

OMFED Cattle Feed Profit Centre
1 1000
Standard Hierarchy.
OMFED Milk Division Profit Center
1.1 1001
Hierarchy.
The list of profit centers at OMFED cattle feed plant and HO level : -
Profit Ctr
Profit center Controlling area Long Text
Hierarchy
1000BBSR01 1000 OMFED BBSR Head Office 1000
1001CATT01 1000 OMFED Cattle Feed Plant 1001
1000 DUMMY
DUMMY 1000
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3.2.1 Cost Center hierarchy and Cost Centers
Cost center hierarchy represents the group of cost centers. Cost centers are responsible
areas for costs within the organization. Cost centers are logical units or functional areas
or locations or organizational hierarchy of a corporation. Cost centers are grouped
together into decision, control, and responsibility units.
Each cost center group in SAP can have one or more than one cost center for different
purposes. The cost center groups are defined for allocation cycle and report purposes.
Cost center groups that are setup in the standard hierarchy area. Cost center assigned
to the respective hierarchy area will be in the corresponding cost center groups.
You use cost centers for differentiated assignment of overhead costs to organizational
activities, based on utilization of the relevant areas and for differentiated controlling of
costs arising in an organization.
The definition of a cost center can be based on following: Functional requirements;

Allocation criteria; Physical location; and Responsible for costs.
As Is:
Presently in OMFED there are few cost centers in accounts.
To Be:
In OMFED, standard hierarchy is assigned to each controlling area and cost centers are
created considering the corporation’s overall management structure.
Cost center standard hierarchy“1000: OMFED GROUP STANDARD HIERARCHY” is the

highest node of the cost centers in controlling area 1000.
Chart of Account: 1000

Controlling Area: 1000
Corporation: OMFED
Company code: 1000
The next node for Cost center hierarchy under which the entire sub node to be defined
as 1000: OMFED
All nodes:
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Hierarchy
Masking
area Long Text
1 1000 OMFED Group Cost Centre Hierarchy.
1.1 HO OMFED Head Office
1.1.1 10BBFI10 Head Office-Finance
1.1.2 10BBSA11 Head Office-Sales &Marketing
10BBPR12
1.1.3 Head Office-Procurement
1.1.4 10BBHR13 Head Office-Human Resource
1.1.5 10BBCS14 Head Office-CSS
1.1.6 10BBPD15 Head Office-Project & Dairies
1.1.7 10BBMM16 Head Office-MM
1.1.8 10BBMI17 Head Office-MIS
1.1.9 10RACM18 Cattle Feed Plant Mineral Mixture
1.1.10 10RACF19 Cattle Feed Plant General
1.1.11 10BBTC20 OMFED Training Centre
1.1.11 10BBPC21 OMFED Food Processing Centre
Cost enters:
Cont Cost
Standard
rollin Depart Center Profit
Cost center Long Text Hierarchy
g ment Categor Center
Area
area y
10BBFI1099 10BBFI10
1000 Head Office- Manager Finance 1000BBSR01
Finance-Common
10BBSA1199 Head Office-Sales & Sales & 10BBSA11
1000 Marketing – Manager Marketin 1000BBSR01
Common g
10BBPR1299 Head Office- 10BBPR12 1000BBSR01
Procure
1000 Procurement- Manager
ment
Common
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10BBHR1399 10BBHR13 1000BBSR01

1000 Head Office-Human Manager HR
Resources-Common
10BBCS1499 10BBCS14 1000BBSR01
1000 Head Office-CSS – Manager CSS
Common
Head Office-Project 1000BBSR01
10BBPD1599 1000 Manager P&D 10BBPD15
Dairies –Common
Head Office- 1000BBSR01
Material
10BBMM1699 1000 Manager MM 10BBMM16
Management –
Common
Head Office-MIS – 1000BBSR01
10BBMI1799 1000 Manager MIS 10BBMI17
Common
Cattle Feed Mineral C. F min
10RACM1899 1000 Manager 10RACM18 1000CATT01
Mixture mix
Cattle
10RACF1999 1000 Manager 10RACF19 1000CATT01
Cattle Feed Plant feed
10BBTC2099 1000 OMTDC Manager OMTDC 10BBTC20 1000BBSR01
10BBPC2199 1000 OMPAC Manager OMPAC 10BBPC21 1000BBSR01
Note:
 BBSR stands for Bhubaneswar.

 CATT stands for Cattle feed plant.
There might be additional cost center at the time realization phase or product costing
along with production planning module implementation.
3.2 Cost and Revenue Element Accounting
Cost and revenue element form the link between financial and cost accounting.
Cost element is the area of cost accounting where you track and structure the costs
incurred during a settlement period. It is thus not an accounting system as such, but
rather a detailed recording of data that forms the basis for cost accounting. Below is the
detail of cost element used in cost accounting.
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Primary cost elements
The primary cost elements reflect in controlling of a financial accounts forms part of
profit and loss accounts, used to assure the instant reconciliation of the postings. Each
primary cost element corresponds to a cost-relevant item in the chart of accounts. All
expense related G/L accounts in FI will get updated in primary cost elements in CO.
 Primary cost element is a cost element whose costs originate in FI. E.g. Salaries,
raw material consumption, electricity etc.
 Primary cost elements must be a GL Account and of Profit & Loss in nature.
 No primary cost elements can be created without creation of FI GL code.
 All expenditure incurred in primary cost elements flow from FI to CO.
Controlling C. Elem
Cost element Long Text
area category
4701002100 1000 Depreciation on Building 01
4701002200 1000 Depreciation on Plant & Machinery 01
4701003100 1000 Depreciation on Vehicle –Light 01
4701004100 1000 Depreciation on Vehicle –Heavy 01
4701004200 1000 Depreciation on Furniture And Fixtures 01
4701005100 1000 Depreciation on Computers 01
4701005200 1000 Depreciation on Library 01
4701006100 1000 Depreciation on Bottle Cooler 01
4701006200 1000 Depreciation on Low value asset 01
Revenue cost elements
The revenue cost elements reflect in controlling of a financial accounts forms part of
profit and loss accounts, used to assure the instant reconciliation of the revenue
postings. Each revenue cost element corresponds to a revenue-relevant item in the
chart of accounts. All revenue related G/L accounts in FI will get updated in revenue
cost elements in CO.
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Controllin C. Elem
g area category
3101000000 1000 Sales 11
Statistical cost element
In this step, you set up the asset balance sheet accounts as statistical cost elements for the
account assignment of asset transactions to an internal order or a WBS element.
Controllin C. Elem
g area category
2101001100 1000 Land 90
2101002100 1000 Building 90
2101002200 1000 Plant & Machinery 90
2101003100 1000 Vehicle – Light 90
2101004100 1000 Vehicle – Heavy 90
2101004200 1000 Furniture And Fixtures 90
2101005100 1000 Computers 90
2101005200 1000 Library 90
2101006100 1000 Bottle Cooler 90
2101006200 1000 Low value asset 90
2101007100 1000 Assets Under Construction 90
3.3 Currency
Currency is defined in SAP for posting transaction in the system. In OMFED there would
be one currency in system.
 Local currency / Company code currency (Indian Rupees - INR)

 Foreign trading or export is done in foreign currency. But, for financial reporting
all currencies are converted into local currency (using the exchange rates
maintained in exchange rate table). Exchange rate table will be maintained by
OMFED team on periodical basis as per OMFED accounting policy.
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3.5 Fiscal Year and Fiscal Year Variant
To separate business transactions into different periods, a fiscal year with posting
periods has to be defined. The fiscal year is defined as a variant which is assigned to
the Company code. Standard fiscal year variants are already defined in the system and
can be used as templates. The fiscal year variant contains the definition of posting
periods and special periods. Special periods are used for postings which are not
assigned to time periods, but to the process of year-end closing.
A fiscal year will consist of maximum of 12 posting periods and maximum 4 special
periods.
For OMFED Bhubaneswar, fiscal year shall be same as financial year with 12 normal
posting period and 4 special periods, starting from April 1st to March 31st of the next
year. 4 special periods will start from at the end of the fiscal year. Special periods (i.e.
four) allow finalization of books of accounts using various cut-off dates by using 4
special periods. SAP generates trial balance for each period including special periods.
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FYV Company code Name

V3 - April - March, 4 Orissa State Cooperative Milk
1000
special periods Producers' Federation
3.6 Posting Period Variant and Posting Period

Posting period variant controls the posting period account type wise. We have different
account type for asset, customer, vendor, material and general ledger where period can
be controlled means open or close using the variant.
Posting
Company
Period PPV Name Corporation Name
code
Variant
Orissa State Cooperative Milk
1000 PP Variant – OMFED 1000 Producers' Federation.
4 . GENERAL LEDGER
4.1 General Explanations
The central task of G/L 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 corporation ensures that the accounting data is
always complete and accurate. Essentially, the SAP general ledger serves as a complete
record of all business transactions. It is the centralized, up-to-date reference for the
rendering of accounts. It enables the following:
 Automatic and simultaneous posting of all sub-ledger items in the appropriate

general ledger accounts (reconciliation accounts).
 Simultaneous updating of general ledger and controlling modules for
internal accounting purposes.
 Real-time evaluation and reporting of current accounting data, in the form of
account displays, financial statements with different financial statement versions
and additional analyses.
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 Actual individual transactions can be checked at any time in real-time processing

by displaying the original documents, line items, and transaction figures at
various levels.
General Ledger Accounting module shall contain all the data related to financial
accounting.
Type Accounts Description

GL account long
GL acc code of Group(SAP of Account
description
a/c ) Group (SAP)
11010000 Share capital L 1101 Share Capital
New GL with Parallel Accounting and Document Splitting:
The new GL functions include “Parallel Accounting”; it’s an SAP feature where you can
maintain different sets of books to satisfy all different requirements of Financial
Statement users accurately, efficiently and effectively. Standard reports are already
available and readily available to use.
How does parallel accounting works in SAP (FICO)? Requirement is; a leading ledger is
created in the system (0L – ledger = GAAP). Then another ledger should be created
and classified as non-leading ledger (1L – ledger = TAX).
All financial transactions in the system are posted to both ledgers if no ledger is
specified in the transaction. If you generate a financial statement or GL account report,
both ledgers contain the data of the transaction posted.
To post only to specific ledger (e.g. 0L – ledger), the Ledger Group field in the header
should be filled-up with 0L – ledger. The transaction won’t affect the other ledger (1L –
ledger).
Advantages in new general ledger are:
1. The new General Ledger in my SAP ERP 2004 has the following advantages over the
classic General Ledger in R/3 Enterprise:
a. In the new General Ledger, you can display the parallel accounting using
parallel accounts (as in R/3) or using parallel ledgers. The FI standard functions
and reports are available for all parallel ledgers.
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b. The ‘Segment’ entity and the relevant reporting that are required for segment
reporting according to IAS and U.S. GAAP are available in the new General
Ledger.
c. In addition, you can enhance the new General Ledger flexibly, that is, you can
enter user-defined fields and update the relevant totals. Many standard reports
can evaluate the information from the user-defined fields.
d. When you use the new ‘Document Splitting’ function (online split), you can
create financial statements at Company code level and, if required, for entities,
such as the segment. For each document, the system then creates a zero
balance for the relevant entity, for example, for the segment.
e. As a result, you no longer have to carry out time-consuming reconciliation tasks
between FI and CO for the end of period since cross-entity processes are
transferred in real-time to the new General Ledger in Controlling. Furthermore,
you can, for example, navigate from the financial statements report results or
the profit and loss statement report results to the relevant CO report.
f. The new General Ledger uses the same interfaces as the General Ledger in R/3.
As a result, users do not require any additional training.
g. Due to the new ‘multi-dimensional’ aspect in the General Ledger, all data that is
relevant for the General Ledger is stored in one environment. As a result,
reconciliation tasks, for example, between the general ledger and Profit Center
Accounting or the consolidation staging ledger, and processing steps that have
to be carried out repeatedly
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 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.
Define Document Splitting Characteristics for General Ledger Accounting
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Here you specify to which document splitting characteristics document splitting applies,
for example, profit center. OMFED requires drawing the P&L and Balance sheet based
on Profit centers. To take care of this business requirement profit center is considered
as scenario which required to be mapped.
OMFED follows one accounting principle, i.e. IFRS (in SAP terms, this is called a
‘Leading Ledger’ and for OMFED the ledger number would be “0L”). Trial balance shall
be produced not only at Company code level but at profit center level too.
4.2 GL Document Types and Number Ranges
Document types are used to differentiate business transactions and control document
posting. Below is the detail of document types used for posting transaction for GL
document. Document types are defined at the client level and are therefore valid for all
Company codes.
Document number range used in SAP to identify the different business transaction by
the number range assigned to them.
Standard SAP allows a single Document Number range for each document type only at
the Company code level.
Doc Number Reverse

Type range ID Description doc typ From To
AA 10 Asset Posting AA 1000000000 1099999999
AB 11 Accounting Document AB 1100000000 1199999999
AF 12 Depreciation Postings AF 1200000000 1299999999
CJ 13 Cash Journal CJ 1300000000 1399999999
DA 14 Customer Document DA 1400000000 1499999999
DG 15 Customer Credit Memo DG 1500000000 1599999999
DR 16 Customer Invoice DR 1600000000 1699999999
DZ 17 Customer Payment DZ 1700000000 1799999999
KR 51 Vendor Invoice KR 5100000000 5199999999
KZ 18 Vendor Payment KZ 1800000000 1899999999
PR 20 Price Change PR 2000000000 2099999999
RA 21 Sub. Cred. Memo Stlmt RA 2100000000 2199999999
RE 22 Invoice – Gross RE 2200000000 2299999999
RV 23 Billing Doc. Transfer RV 2300000000 2399999999
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SA 24 G/L Account Document SA 2400000000 2499999999

WA 52 Goods Issue WA 5200000000 5299999999
WE 52 Goods Receipt WE 5200000000 5299999999
ZA 32 Bank Reconciliation ZR 3200000000 3299999999
More document type can be added during realization phase if needed.
4.3 Posting Key
Posting Key controls Debit or Credit account indicator for each line item. The posting
key also describes the type of transaction that is entered in a line item and allowable
account type, which will be entered for the respective line item.
SAP provides predefined posting keys. These predefined posting keys will be
used wherever applicable. For every posting key, properties control the entry of the
line item.
For each Posting Key, a reversal-posting key may be defined. The reversal-posting key
is used to reverse a document posted in financial accounting .
SAP Standard Posting Keys are:

PK Name Debit/Credit Account type
01 Invoice Debit Customer
02 Reverse credit memo Debit Customer
03 Expenses Debit Customer
04 Other receivables Debit Customer
05 Outgoing payment Debit Customer
06 Payment difference Debit Customer
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07 Other clearing Debit Customer

08 Payment clearing Debit Customer
09 Special G/L debit Debit Customer
0A CH Bill.doc. Deb Debit Customer
CH Cancel. Cred. Memo
0B D Debit Customer
0C CH Clearing Deb Debit Customer
0X CH Clearing Cred Debit Customer
0Y CH Credit memo Cred Debit Customer
0Z CH Cancel. Bill Doc Deb Debit Customer
11 Credit memo Credit Customer
12 Reverse invoice Credit Customer
13 Reverse charges Credit Customer
14 Other payables Credit Customer
15 Incoming payment Credit Customer
16 Payment difference Credit Customer
17 Other clearing Credit Customer
18 Payment clearing Credit Customer
19 Special G/L credit Credit Customer
1A CH Cancel. Bill. Doc De Credit Customer
1B CH Credit memo Deb Credit Customer
1C CH Credit memo Deb Credit Customer
1X CH Clearing Cred Credit Customer
1Y CH Cancel. Cr. memo C Credit Customer
1Z CH Bill.doc. Cred Credit Customer
21 Credit memo Debit Vendor
22 Reverse invoice Debit Vendor
24 Other receivables Debit Vendor
25 Outgoing payment Debit Vendor
26 Payment difference Debit Vendor
27 Clearing Debit Vendor
28 Payment clearing Debit Vendor
29 Special G/L debit Debit Vendor
31 Invoice Credit Vendor
32 Reverse credit memo Credit Vendor
34 Other payables Credit Vendor
35 Incoming payment Credit Vendor
36 Payment difference Credit Vendor
37 Other clearing Credit Vendor
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38 Payment clearing Credit Vendor

39 Special G/L credit Credit Vendor
40 Debit entry Debit G/L account
50 Credit entry Credit G/L account
70 Debit asset Debit Asset
75 Credit asset Credit Asset
80 Stock initial entry Debit G/L account
81 Costs Debit G/L account
83 Price difference Debit G/L account
84 Consumption Debit G/L account
85 Change in stock Debit G/L account
86 GR/IR debit Debit G/L account
89 Stock inward movement Debit Material
90 Stock initial entry Credit G/L account
91 Costs Credit G/L account
93 Price difference Credit G/L account
94 Consumption Credit G/L account
95 Change in stock Credit G/L account
96 GR/IR credit Credit G/L account
Stock outward
99 movement Credit Material
4.4 Account types

Account type controls nature of accounts. Based on account type many features of SAP
can be controlled like reconciliation accounts, posting periods.
Standard Account Types in SAP are as follows:
 S-General Ledger
 A-Assets
 K-Vendors
 D- Customers
 M- Materials
OMFED group will use the Standard Posting Keys and the Account Types.
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4.5 General Ledger Master Data
Transactions will be processed in the FI module using G/L accounts grouped under
Chart of Accounts. OMFED will use ‘1000’ Chart of Accounts.
The following points have to be considered with respect to G/L accounts:
Master records for each G/L account will be created and maintained at Corporate.
 The master record contains information and controlling parameters which control
the entry and processing of business transactions in that G/L account.
 G/L accounts will also be used for posting transactions from other modules of
SAP
There are two segments in the General Ledger Master record:
1) Chart of Accounts Segment and
2) Company code segment
4.6 Naming/Numbering Conventions
GL Numbering convention should be able to accommodate any change due to adding

new business, new geography or new organization. It is covered in below section.
4.7 GL Account Groups
It is the summary of characteristics that control the creation of Master records. Number
ranges are determined based on Account group. Accounts that require the same master
records fields and use the same number interval are created with the same number
group.
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Account
Account Group Description From To Range
Group
1000 Liability Accounts 10000000 1999999 9999999
2000 Asset Accounts 20000000 2999999 9999999
3000 Income Accounts 30000000 3999999 9999999
4000 Expenses Accounts 40000000 4999999 9999999
5000 Upload Accounts 50000000 5999999 9999999
GL
Account
Group Description From To
I. SOURCES OF FUNDS
1101 Share Capital 11010000 11019999
1201 Reserves and surplus 12010000 12019999
1301 Grant/S Fund 13010000 13019999
1401 Secured Loan 14010000 14019999
1501 Unsecured Loan 15010000 15019999
TOTALS
II.APPLICATION OF FUNDS
(1) Fixed assets
2101 Gross Block 21010000 21019999
1901 Less: Depreciations(accumulated) 19010000 19019999
Net Block
2201 Investments – OTCS, SHARE CAPITAL 22010000 22019999
CURRENT ASSETS, LOANS &
ADVANCES
2301 Trade Debtors 23010000 23019999
2302 Loan & Advances 23020000 23029999
2303 Cash and Bank balances 23030000 23039999
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2304 Term Deposits 23040000 23049999

2401 Capital WIP 24010000 24019999
Total (A)
CURRENT LIABILITIES &
PROVISIONS
1601 Trade Creditors 16010000 16019999
1701 Provisions 17010000 17019999
1801 Statutory Liabilities 18010000 18019999
Total (B)
NET CURRENT ASSETS (A-B)
(1) INCOME
3101 Sales 31010000 31019999
3201 Other Income 32010000 32019999
3301 Other Misc. Income – Indirect. 33010000 33019999
3401 Transfer in stocks 34010000 34019999
3501 Prior Period Income 35010000 35019999
Total Income
(2) EXPENDITURE
4101 Purchase of Materials 41010000 41019999
Processing &Procurement Expenses –
4201
Direct exp. 42010000 42019999
Selling &Distribution Expenses – Direct
4301
exp. 43010000 43019999
4401 Employee Cost 44010000 44019999
4501 Administrative & Other misc. Expenses 45010000 45019999
ADVT & SALES Promotion Expenses
4601
46010000 46019999
Audit/Professional Fees
4701
47010000 47019999
Technical Input/Training Expenses
4801
48010000 48019999
Total Expenditure
Profit (Loss) from Operations
before Interest, Depreciation ,
Provision & Subsidy
4901 Interest & Guarantee Fees 49010000 49019999
4911 Depreciation 49110000 49119999
4912 Provisions 49120000 49129999
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Profit (Loss) before Subsidy

Prior Period Expenses
4913
49130000 49139999
Net Profit/Loss for the year
4.8 Field Status Group
Field status group is a logical grouping of various field status combinations. The field
status influences the appearance and creation of an account's master data.
S. No Field Status Function

1 Suppressed No Display
2 Display Display only (Not changeable even in
change mode)
3 Required Entry is mandatory
4 Optional Entry can be made if required
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4.9 General Document Posting
General FI postings are mainly in the nature of adjustment, provisions, accruals,

recurring expenses, day to day operational expenses. Since profit center defined as
zero balancing cost Center will be mandatory for all expense related accounts.
In OMFED, Company code will have GL postings through the following Modes:
Manual Entry: Manual Method of GL Entry will be followed for business transactions as
illustrated below:
1. Manual Journal Accounting entry
2. Process & Flow Chart of Journal Posting (To-Be in SAP)
 Document Parking & Posting

 Hold a Document
3. Document Reversal Entry
 Single Reversal
 Mass Reversal
4. General Ledger Payment Methods
Automatic Entry: GL’s accounts updated automatically by purchase and consumption

of inventory (From MM module and PP module once implemented), Sales accounts
updated automatically from sales (From SD module) and payroll postings updated
automatically from HR (from HR Payroll modules).
4.9.1Manual Journal Accounting Entry
In SAP manual accounting entry is required for direct entry into FI Module wherever it
is not possible to post accounting effect of the transactions from other module(s). E.g.
 Periodic accrual of expenses.

 Rectification of accounting entries, change in account head
 Periodic clearing of GL accounts
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AS-IS process: OMFED follows below steps for Journal Entry:
 The accounts clerk, financial accountant or financial controller shall identify an

error for instance when one debits an account which ought to be credited
 The accounts clerk shall raise a journal a journal entry to correct the error and
forward to the financial accountant or financial controller.
 The financial accountant shall receive, verify and sign forward to the data entry
department for inputting.
 Data entry operator shall input and return the journal to the financial
accountant
 The financial accountant shall receive and forward the journal to the financial
controller
 The financial controller shall receive and approve the journal and forward it to
the managing director
The GM Finance shall authorize the journal and return it back to the financial
accountant through the financial controller
 The financial accountant shall receive and send the journal to the accounts
clerk
 The accounts clerk shall finally fill the journal in the journal file
TO-BE process covered up below in next sub-points.
4.9.2 Process & Flow Chart of Journal Posting (TO-BE in SAP)
4.9.2.1 Document Parking & Posting
Following process will be followed for parking and posting documents in General Ledger
module of SAP. All documents to be entered manually shall require a maker/checker
steps; this will be carried out in two steps i.e. parking of documents and then second
step is to post the document.
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Note:
Documents to be manually entered in General Ledger shall be subject to one level of

check before system updates the books of accounts. User will enter the accounting
document with all the relevant details; this document shall be in parked state. User
entering the document will not be able to post this document which is controlled by
Authorization.
Once document is parked, the person created the document should not have
authorization for posting transaction code. The person who has the authorization he or
she will post the same.
4.9.2.2 Hold a Document
With hold Document, data which has been entered can be saved temporarily in order to
continue the entries at a later point of time. Documents held by the system need not
necessarily have all the details. No account balances are updated and the data of the
document is not available for financial evaluation in books. The document number
assigned to it is external in nature. The person making the entries is asked by SAP
to number the document after selecting the Hold document function. The
document can be found under this number at a later time.
Held documents can be completed and posted or deleted at a later point of time. There
is a risk of forgetting held documents and therefore not posting them completely.
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4.9.3 Recurring Entries
For postings the transactions which occur on a regular basis, such as payments for rent
or interest, legal fees and property taxes, the recurring entry program can be used to
have the necessary documents generated automatically.
 The recurring business transactions must be stored in the system as recurring

entry original documents.
 Each recurring entry original document contains the date of the first and last
posting, the frequency at which posting should be made, and the date of the
next planned posting.
 The recurring entry program must be started at regular intervals within a
specified period. The program selects all recurring entry original documents in
which the date of the next posting falls within the specified period, and then
generates a batch input session.
 When the session is processed, an FI document that corresponds to the original
document is posted, and the date of the next posting is changed accordingly in
the recurring entry original document.
4.9.4 Sample Documents

This is a template accounting entry. This helps the user in having a pre- entered
accounting entry. The Document and Posting dates can be changed at the time of
posting the document. Such sample transactions may be used for repetitive kind of
transactions like conveyance expense to save time at user level. For OMFED, similar
entries can be identified for using this sample document feature in SAP.
4.9.5 Document Reversal Entry

For every accounting transaction in SAP, document is posted. Once a document is
posted, GL Account, Amount cannot be edited. Any wrong entry cannot be deleted but
can only be reversed. Documents posted in other module will be reversed in the
respective modules only. Documents posted in FI module can be reversed in FI module.
For any reversal, system creates a new document and it maintains information in new
document referencing the old document i.e. system will always maintain information of
reversed document separately. There are two methods of reversing a document
4.9.5.1 Single Reversal
Document reversal for posted documents, allows the user to reverse the
documents based on the document numbers as opposed to making a manual entry
and neutralizing the effect of unwanted entry.
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The original document is updated with the information of the reversal doc and both of
them can be viewed sequentially through the established link.
A document can only be reversed if:
 It contains no cleared items

 It contains only customer, vendor, and G/L account items
 It was posted within Financial Accounting
 Transactions posted in financial accounting due to process in other modules shall
be corrected in respective module only e.g. if there is error in receiving goods
against a purchase order that error shall be fixed in goods receipt section only
and accordingly accounting entries shall be created by the system.
4.9.5.2 Mass Reversal

There might be situations where documents have been entered in with wrong data and
a facility is required to reverse documents collectively. Authorization for mass reversal
shall be provided to only a few persons in Accounts department.
4.10 General Ledger Payment Methods
In SAP payment of different GL like VAT and withholding taxes will be done with the
help of GL payment clearing method.
4.10.1 Cheque Payment Method

Cheque payment method will be used in case of Cheque payment of GL. Printing of
Cheque on Bank pre-printed Cheque (Customization required for each Cheque).
Payment Method in
Payment Method description
country/ Company code
C Cheque Payment
4.10.2 Electronic Payment Method
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Electronic payment method will be used in case of online payment. Following method of
payment done in
 Real time gross settlement systems (RTGS),

 National Electronic Fund Transfer (NEFT),
Bank charges should be posted to AUC in case of assets (applicable for Inventory too)
else it will go to normal bank charges account, again it is OMFED accounting policy to
be followed.
Payment Method in
Payment Method description
country/ Company code
R RTGS Payment
T National Electronic Fund Transfers
4.10.3 Full and Partial Payment
A full and partial payment can be released as per requirement of different GL .In case
of full payment all the open line item will be cleared and system post a clearing
document. Partial payment is a payment that is posted to an account without any open
items being cleared. You assign this partial payment to an open item. When you post
the partial payment, the system marks the document number of the original open item
in the line item for the partial payment. The original open item and the partial payment
remain open.
4.10.4 Open Items Clearing
The clearing function is required for all accounts of vendors, customers and GL
Accounts so that transactions can be tracked by their status as "open" or "cleared". This
enables amongst other things analysis of outstanding from or to parties and linking
payments /credit debit memos (SD & MM) form or to parties with the relevant invoicing
and billing transactions.
For other GL accounts like bank receipt clearing and bank payments clearing accounts
which would receive offsetting entries at the time the bank statement is being
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uploaded. In case of GR/IR, Accounts a standard transaction is required to be run which

automatically clears the open items.
The basic prerequisite for clearing is that the accounts must be kept on an open item
basis. Customer and Vendor accounts are by default open item managed. This allows
monitoring of outstanding receivables and payables at any time. The open item
management option, however, must be defined for general ledger accounts.
Open items in GR/IR Clearing Account needs to be evaluated and cleared as at month
end. Automatic Clearing Program shall be used for clearance of GR/IR Clearing account
and the common item for clearing of transaction is purchase order and its item number.
Any un-cleared items in GR/IR Account shall be reversed after a fixed duration, this
may be necessary maintain the GR/IR Account and check the reason of the difference
before reversing any entry.
5. ACCOUNTS PAYABLE
The Accounts Payable application component of SAP ECC System records and manages
accounting data for all vendors. It is also an integral part of the purchasing system,
Deliveries and invoices are managed according to vendors. Payables are paid with the
payment program. The payment program supports all standard payment methods (such
as checks and transfers) in printed form as well as in electronic form.
Postings made in Accounts Payable are automatically updated in the Creditor Control
General Ledger based on the transaction involved (On account payments and advances,
for example). The Accounts Payable application offers the functionality of due date
forecasts and other standard reports that you can use to monitor open items. There are
balance lists, journals, balance audit trails, and other internal evaluations available for
documenting transactions in Accounts Payable. The base for this document is the
Accounting Manual / Functional Requirement based on the understanding during the
plant visit and discussions.
5.2 Document Type and Number Ranges
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posting. Below is the detail of document type used for posting transaction for vendor
transaction.
Document number range used in SAP to identify the different business transaction by
the number range assigned to document type.
Revers
Nmbr e doc
Type range ID Description typ From To
KA 51 Vendor Document KA 5100000000 5199999999
KG 51 Vendor Credit Memo KG 5100000000 5199999999
KR 51 Vendor Invoice KR 5100000000 5199999999
KZ 17 Vendor Payment KZ 1700000000 1799999999
5.3 Vendor Master Data
Vendor Master Data ensures that all the necessary details about the vendors are
captured to facilitate smooth transactions pertaining to Financial Accounting avoiding
data redundancy and data inaccuracy. An individual vendor master record is created for
every vendor (apart from one-time Vendors).
The master record is used not only in Accounting but also in Materials Management.
Vendor master data will be maintained centrally and sharing will be throughout the
organization so that data need to be entered only once. This will prevent inconsistencies
in master data.
Below is the process of maintaining vendor master data in SAP system.
 Creation of vendor groups.

 Proper grouping of vendors.
 Vendor customer relationship.
Below is the detail of process of maintaining the vendor master data to be followed at
OMFED in SAP. A vendor master record contains:
 Vendor’s name, addresses, language, currency, telephone number, email

address and other details.
 Bank details.
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 Account control data such as the GL reconciliation account for the vendor
account.
 Payment methods and terms of payment set up with the vendor.
 Purchasing data (Through MM module)
 Withholding tax or VAT information.
Vendor master data is subdivided into three different data areas.
a. General data:
This data is at the client level. The general data includes information such as the
vendor’s address and telephone number and the address of the vendor. All Company
codes can use this information.
b. Company code data:
A large amount of accounting information is kept at Company code level. This includes
payment transaction data and the number of the relevant control (reconciliation)
account. Currency used, payment terms, reconciliation account (a vendor is a creditor
of the enterprise).
c. Purchasing Organization data:
Data that is relevant for purchasing say delivery terms, GR/ Service based invoice
verification; PO payment terms, PO currency and Contact person are maintained in the
purchase organization data.
5.4 Vendor Account groups naming conventions
Every Vendor master will be created under one Vendor account group. Vendor Account
group determines the number range; whether a vendor is one time vendor or not,
which fields are ready for input or must be filled when creating and changing master
records (field status). A vendor’s account group cannot be changed after the master
record is created.
A/C Main SAP Recon SAP Recon Vendor Sp No From To

Group Group A/c for A/c for Recon GL range
Payables advances Account GL reco ID
( SPGL) n
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Acco
unt
Creditors Domestic
reconciliatio Vendor
Domes
n account- Advance
tic
ZDOM Domestic Z1 11000000 11999999
vendor
s vendors
1701300100
Creditors Domestic
Servic
n account- Advance
e
ZSER Service Z2 12000000 12999999
Vendor
s Vendors
1701300200
Creditors Domestic
Emplo n account- Advance
ZEMP yee Employee Z3 13000000 13999999
Vendor Vendor
1701300300
Creditors Domestic
One n account- Advance
ZONE Time One Time Z4 14000000 14999999
Vendor Vendor
1701300400
Vendor Accounts Groups are created to group vendors according to certain criterion
and can be used as a filter for online queries or generating standard Financial
Accounting reports. Account groups are also used to determine field statuses, i.e.,
Required, Optional, Display or Suppressed in vendor master record.
5.5 Vendor Account Groups and Number Ranges
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In this activity the number ranges for vendor accounts will be created. Number range is
a two-character key which define the following:
 A number interval from which the account number for the vendor accounts is to
be selected
 The type of number assignment (internal or external number assignment)
 Assignation of the number ranges to the account groups for vendors.
The number range assignment for each account group will be covered in MM BBP
document.
5.6 Payment terms
The payment terms represent the typical agreements you have with your customers
and vendors. When a purchasing document is entered for a supplier, SAP automatically
copies the information on the payment period, price list, and total discount in the
document. This information is used, to calculate the prices for the items, the due date
of an invoice, or the total discount allowed etc.
You can also change the payment term data manually in the transaction itself if a
special agreement was made for that transaction.
The following are some of SAP standard Payment terms
Pay terms Description

0001 Payable Immediately Due net
Payable after 30 days
0002
Payable after 60 days
0003
Payable Immediately 90% Rest

0004 after installation
5.7 Accounts Payable Process Flow
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This process flow signifies step by step approach for accounts payable
5.7.1 Vendor Master Data Management
To post transactions in Accounts Payable module, vendor master is required. Vendor

master data also covers the following steps relating to vendor master:
 Create the vendor master

 Change the vendor master
 Display the vendor master
 Block / Unblock vendor master (access to be restricted by Basis team)
 Display changes in vendor master
 Set deletion indicator for vendor master (access to be restricted by Basis team)
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5.7.2 Vendor Invoice and Parking
All documents entered manually shall require a maker/checker step; (parking and
posting) this will be carried out in two steps i.e. parking of documents and then second
step is to post the document. Normally in parking and posting it becomes a strong
internal control check.
5.7.3 Vendor Procurement
In SAP, Vendor Payment process can be categorized into:
 Non PO based procurement.

 PO based procurement for Services and Materials
 Employee settlements other than those covered by HR Module (employee is also
created as vendor, off cycle payments).
 Although, as far as the physical payment is concerned there is no difference
between PO based and Non PO based procurement but process related to
recognizing vendor liability shall differ.
A vendor master record is mandatory for all the transactions.
5.7.3.1 Non PO Based Procurement
As a matter of practice, Purchase order should be raised for all goods and services
procurement and vendor payments without a purchase order should be only on
exceptional basis. There are invoices of a purely financial nature, which are not
generated by Materials Management module (MM) e.g. payment of utility bills, payment
of insurance charges etc.
Insurance amount should be captured for a specific period and it should be calculated
only until the end of the month. Prepaid insurance amount is an asset (current asset)
In this case, there will not be any three way match and expense will be posted directly
from the vendor invoice itself. This process shall be applicable to the following
scenarios:
 Insurance
 Electricity Bills
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 Rental Payments
 Telephone/ Mobile Phone bill charges.
Following shall be the process flow for vendor non purchase order invoice:
5.7.3.2 PO Based Procurement
Material purchases and other Purchase order related invoices are automatically posted
to A/P and G/L from transactions affected in the MM. Invoice Verification is a part of
Accounting (FI) and is closely integrated with Material Management (MM). Invoice
verification depends upon Purchase order and Goods or Service Receipts. Goods or
services procured shall be received and accepted at the respective location. Following
shall be the process flow for vendor invoice verification process:
Process highlights:
Purchase order (whether against tender or quotation shall be created in

Materials Management module). Purchase order shall be approved (i.e. released) by
competent authority. Once Purchase order is approved and released to the vendor,
goods can be received from the vendor.
Goods or Services shall be received at the place indicated in the purchase order.
In the case of goods received, there is a facility in SAP to perform 3 ways matching of
Purchase Order, Goods Receipt and Invoice. A three way check shall be performed by
the system before payment is released to the vendor (before posting the invoice).
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Goods Receipt shall be done by the stores person. At this time, system will post an
accounting document for creating a generic/ provisional liability (not specific to a
vendor)
Debit Respective Inventory Account (RM/SFG/Trading/Stores & spares)
Credit GR/IR Account
If Management decides stores & spares in the nature of consumables can be expensed
off directly. In that case accounting entry will be:
Debit Spares/Consumable expenses Account
In case of Service Procurement, Service Entry sheet shall be used to acknowledge the
services rendered. Once service entry is accepted, Expense shall be posted (as service
can’t be kept as Inventory)
Debit Relevant Expense Account
After receiving all the documents, invoice verification shall be done in the system, at
this time system will post following accounting entry:
Debit GR/IR Clearing Account
Debit VAT Input Account (if input credit available)
Credit Vendor Account
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5.8 Vendor Payment Process
AS-IS Process
 The accounts clerk shall receive Goods Received Note duly approved by the user
department attached with delivery notes from stores department and files
 Accounts clerk shall also receive copies of Local Purchase Orders from the
purchasing department and files, pending preparation of purchase bills
 Accounts clerk shall also receive invoices from the supplier and file them
in readiness for preparation of purchase bills
 Accounts clerk shall sort out documents relating to each respective supplier and
tally them with the Local purchase order
 Accounts clerk shall prepare purchase bills and forward the same to the accounts
supervisor for checking and if the documents are not tallying i.e. if there is a
variance in invoice and local purchase order price, then checks with the
purchasing department for clarification
 Accounts supervisor shall check the purchase bills and forward it to the financial
accountant for checking and authority
 The financial account through the account supervisor shall send bank payments
for the purchase bills after authorizing to the clerk for payment.
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 Accounts Clerk shall upon receipt of purchase bills prepare bank payments for
the respective supplier along with the cheques and remittance advice and
records all the cheques in a cheque register and forward the same to accounts
supervisor
 Accounts supervisor shall then check the documents presented to him to
ascertain the correctness of the bank payment made before sending the same to
the financial accountant
 The financial accountant shall sign on the cheque register and also on the bank
payment voucher before forwarding to the financial controller for an approval
 Financial controller shall receive the documents and approve before taking them
to financial director / general manager and managing director for signature of
the cheque and final approval on the bank payments
Accountant shall forward the signed cheques to the secretary for dispatch to
their respective suppliers and the secretary in turn sends the bills and bank
payments to accounts for storage.
MM Division
Collect Invoice from Verify CMR copy & Penalty & Rebate
Receives CMR with
Supplier invoice copy value determine
Challan from CFP
Invoice copy
Finance Dept. audit Approved by Payment advice will
forward to Finance
the invoice with PO competent authority be prepared
Dept.
Payment will be
done through RTGS
TO-BE Process:
In SAP, there are two ways to make the payment to vendor – single payment to a
vendor for one or multiple invoices and payment to multiple vendors for single or
multiple invoices in one step.
For single payment to vendor, SAP has provided different transaction codes.
Authorized persons shall select the vendor and the invoice to be paid; bank from
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which money needs to be paid and the payment method. Once all the selections are
made, partial or full payment can be made to vendor.
In case of single payment, user has discretion to enter the payment amount at the
time of making the payment. SAP works on open item basis and once payment is
made, Invoice amount gets cleared i.e. system creates a pairing between invoice
and payment document, if payment has been made in full. Whereas in case of
partial payment, system treats both the items as open and once item is fully paid, it
is cleared in the system.
In case of bulk payment to vendor(s), automatic payment program can be used to

process bulk payments in one step. In this, user will have to enter vendors, due
date up to which invoice should be selected, payment method and bank account
from where the payment will be made. In subsequent section(s), details of the
process have been explained.
Following process will be followed for vendor payments:
 Manual Payment
 Automatic Payments
 Advance Payment
 Cash Payment
5.9 Payment Methods
A vendor can be paid by using various payment methods e.g. by Cheque or

electronically. In Vendor master data, preferred payment method for the vendor is
maintained. If vendor is to be paid electronically, Vendor’s Bank account details need to
be maintained in vendor master data.
For OMFED, following payment methods shall be used for making payment to vendors:
 Payment by Cheque – In this case, a Cheque shall be issued to the vendor from
a particular bank account. In SAP, Cheque details shall be updated when the
payment is made.
 Printing of Cheque on Bank pre-printed Cheque (Customization required)
 Electronic Fund Transfer – This payment method normally works using direct
bank transfer to Beneficiary bank account like vendor, employee etc. Below is
the detail of methods for fund transfer.
a. RTGS (Real Time Gross Settlement Systems)
b. NEFT (National Electronic Funds Transfer)
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 Cash payment will be handled with the help of Cash Journal functionally of SAP.
User can enter complete cash transaction in one single screen .
5.9.1 Manual Payment
Following process shall be followed for making single payment by Cheque:
Process highlights:
For manual payments, user will have to specify the amount to be paid, vendor and the
invoices to be paid. After posting the payment, system will update Cheque register and
will also print Cheque.
 Printing of Cheque on Bank pre-printed Cheque (Customization required)
Payment voucher and Cheque shall be presented to authorized signatory for signatures.
Park and Post functionality shall not be used in this case.
If rejected, payment document shall be reversed and Cheque shall be cancelled.
Following accounting entry will be made for outgoing payments:
 Debit Vendor A/c

 Credit Respective Bank Outgoing Payment Clearing Account
Following information is required for making payment:
 Document date and Posting date

 Currency – Indian Rupees (INR)
 Bank from which payment will be made
 Vendor to whom payment to be made
 Select the invoices to be paid.
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5.9.2 Automatic Payments
Following is the process flow for the same for single and/or multiple payments.
SAP provides automatic outgoing payment functionality for single or large number of
payments and the frequency depends more on the due dates, it is recommended then
to utilize SAP’s automatic outgoing payment. In this manner, offsetting entries i.e.
outgoing payments (bank) are automatically posted. This will be used to process the
vendor payments in batch and open items are automatically cleared.
For RTGS and NEFT customization required based on bank format.
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Process highlights:
The automatic payment program processes open items in the following steps:
 It determines the open items to be paid based on the vendor accounts entered
and the due items as at payment run date and creates a proposal list. The
proposal list can be processed on-line. The user can change payment methods or
banks, block items for payment, or put payment blocks on vendors.
 The payment run includes only the open items contained in the proposal list.
 You can select or deselect individual open items and modify the payment bank if
needed and continue with the payment process
 The payment program posts documents and provides the data for the form print
out and for creating the data carriers, the payment advice notes and the
payment summaries.
 Restricting access to payment program will be given based on authorization.
 Payment run generates output based on the selected payment method. If the
payment method is ‘C’ (Cheque), system will print Cheques from SAP on Bank
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pre-printed Cheque (Customization required). Post printing of Cheques, same

shall be presented to authorized signatory for necessary approvals.
5.9.3 Vendor Advance Payments/Down payments
In case of any advances required to be given to vendors, the respective user

department, based on the supporting documents, may raise an advance payment
request to the finance department. In SAP, advance payments are not balanced with
other receivables or payables and are displayed separately on the balance sheet.
The system will prompt the user about existing unadjusted down payment(s), so that
advance payment(s) is (are) cleared against the invoice. There are two ways to create
advance payment requests:
 With a link from Purchase order – User can specify in the purchase order itself
about the advance payment to be made to vendor. Upon approval of the
purchase order, a program needs to be executed to generate the advance
payment request. This request shall follow the normal approval path and once
approved, same shall be available for payment during next payment run.
 Without a link with Purchase order – In this case, manual advance payment
request can be sent to approver for necessary approvals. Once approved, same
can be included in automatic payment program or manual payment.
All the vendor payments are made in the corresponding currency defined in the vendor
master, but it can be changed as well. Approval of request is manual and controlled by
transaction code only.
5.9.4 Payments for Special Transactions
Payments for special transactions (other than invoice payments e.g. employee advance
etc.) will be made using special GL Indicators. Special GL Indicators will be used for
Advance Payments, Employee Advances etc. In case of special G/L transaction, the
posting will be made to an alternative reconciliation account instead of the normal
payable account. The alternative reconciliation account is stored separately in the
system for special G/L transaction.
5.10 Vendor Document Reversal Entry

For every accounts payable transaction in SAP, document is posted. Once a document
is posted, vendor account and amount cannot be edited. Any wrong entry cannot be
deleted but can only be reversed. For any reversal, system creates a new document
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and it maintains information in new document referencing the old document i.e. system
will always maintain information of reversed document separately.
If vendor payment cheque is cancelled, automatically both payment and cheque should
be reversed (it’s a standard SAP functionality using FCH8 t-code)
5.11 FI-MM Integration:
Integration between FI-MM will allow the data flow from MM module to FI module so
that corresponding accounting entry will get posted.
Transaction
BSV BSX GBB GBB PRD
key
BSA INV
Offsetting
Offsetting
Change in entry for
entry for
Stock Stock
Stock
Valuation Valuation Account Posting (for Price Diff
Valuation Inventory Posting
Grouping class ( SAP expenditure on
Class Posting (for initial
code Description Subcontract / income Purchase
entry of
- Final from
stock
mat ) inventory
balances)
differences)
OMFED Raw 2301003000 110199999 3401000000
3000
1200 Materials 9 4301000200
OMFED 2301003050 110199999 3401000000
1200 4000 Engineering & 9
Maintenance 4301000200
OMFED Packing 2301003100 110199999 3401000000
4100
1200 Materials 9 4301000200
OMFED 2301003150 110199999 3401000000
1100 4200 Consumable 9
Materials 4301000200
OMFED 2301003150 110199999 3401000000
1200 4200 Consumable 9
OMFED Semi 2301003200 110199999 3401000000
7900 Finished 9
1200 Materials 4301000200
OMFED 2301003250 110199999 3401000000
1200 7920 Finished 9
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Transaction
DIF FRL WRX FR1 FR2
key
External Freig Freigh

Rounding
Valuation Valuation Valuation class Activity-SAP ht t
off GR/IR Clearing
Grouping code Class Description Subcontracti Clear Provisi
differences
ng – Service ing on
OMFED Raw 1701400000

3000
1200 Materials
OMFED 1701400000
1200 4000 Engineering &
Maintenance
OMFED Packing 1701400000
4100
1200 Materials
OMFED 1701400000
1200 4200 Consumable
Materials
OMFED 1701400000
1100 4200 Consumable
Materials
OMFED Semi 1701400000
7900 Finished
1200 Materials
OMFED 1701400000
1200 7920 Finished
Materials
6. ACCOUNTS RECEVIABLE
The Accounts Receivable (AR) application component records and administers accounting
data of all customers. It is also an integral part of sales management. All postings in
Accounts Receivable are also recorded directly in the General Ledger. Different General
Ledger accounts are updated depending on the transaction involved (for example,
receivables, or advance payments). The system contains a range of tools that can be used
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to monitor open items, such as account analyses, due date lists etc. The Accounts
Receivable acts as a sub ledger to FI- GL for managing the balances of Customers. The AR
stores all the information and balance details for each customer. Data is updated from AR in
real time to the FI-GL module.
This document explains the process of maintaining the customer master data to be followed
at OMFED in SAP.
Customer master data is subdivided in to three different data areas.
a. General data:
This data is at the client level. The general data includes information such as the customer’s
address and telephone number. All Company codes can use this information.
b. Company code data:
A large amount of accounting information is kept at Company code level. This includes the
number of the relevant control data, currency used, reconciliation account etc.
c. Sales Organization data:
In Sales and Distribution, there are additional fields required to be maintained. These fields
contain information and control data that are necessary for processing the business
activities in the Sales area.
6.2 Document Type and Number Ranges
posting. Below is the detail of document type used for posting transaction for customer
transaction.
Document number range used in SAP to identify the different business transaction by the
number range assigned to document type.
Reverse
Type Description doc typ Nmbr range ID From To
DA Customer Document DA 14 1400000000 1499999999
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6.3 Customer Master Data
The Customer Master Data ensures that all the necessary details about the costumers are
captured to facilitate smooth transactions pertaining to financial accounting avoiding data
redundancy and data inaccuracy. An individual customer master record is created for every
customer (apart from one-time Customers).
This process is applicable only for customers required in SAP system for which billing is done
in SAP. Like billing of Oil, Fat and Soap sale etc. shall be from the system.
The master record is used not only in Accounting but also in Sales and distribution module.
Customer master data will be maintained centrally and sharing will be throughout the
organization so that data need to be entered only once. This will prevent inconsistencies in
master data.
To achieve this, it is essential that one customer should have only one master record in the
system and to have one customer master record for one customer, it is essential to manage
this process centrally.
Following are the prime requirements or expectations from the new system as far as
customer master data maintenance is concerned:
 Creation of customer groups

 Proper grouping of customers
 Customer vendor relationship
Customer Group functionality shall be used to identify customers of different types.
6.4 Customer Account groups and Number Ranges
Every customer master will be created under one customer account group. Customer
Account group determines the number range; whether a customer is one time customer or
not, which fields are ready for input or must be filled when creating and changing master
records (field status). A customer’s account group cannot be changed after the master
record is created. Customer Accounts Groups are created to group customers according to
certain criterion and can be used as a filter for online queries or generating standard
Financial Accounting reports. Account groups are also used to determine field statuses, i.e.,
Required, Optional, Display or Suppressed in customer master record.
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A number interval from which the account number for the customer accounts is to be
selected. Number range is a two-character key which define the following:
 The type of number assignment (internal or external number assignment)

 Assignation of the number ranges to the account groups for customers
 Customer Account Groups are designated by 4 character identifiers.
SAP Recon
A/C SAP Recon Sp GL No
Main A/c for Recon
Grou A/c for recon range From To
Group advances ( Account
p Receivables Account ID
SPGL)
Customers
reconciliation
2302000100 Z1 100000 199999
Milk account- Milk Customer
ZOMU Unions Unions- SP Advance
Customers
reconciliation
2302000100 Z2 200000 299999
Milk account- Milk Customer
ZOMC Unions Unions -SH Advance
Customers
reconciliation
account- 2302000200 Z3 300000 399999
Govt. Govt. Customer
ZOGA Agencies Agencies Advance
Customers
reconciliation
2302000300 Z4 400000 499999
PVT. account- Pvt. Customer
ZOPA Agencies Agencies Advance
Customers
reconciliation
2302000400 Z5 500000 599999
CFPR account- Customer
ZOCS Sales CFPR Sales Advance
6.5 Accounts Receivable and Process Flow
All business transaction are posted and managed through accounts. Within SAP
customer masters are created to book all the required business transaction. Customer
master has information related to address of the customer and reconciliation account is
mapped to it.
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Invoice copy Send to Adjust

prepared at Concern Milk Payment form
CFP Dairy Milk Bills
CFP account Dairy inform to

Section update CFP about
in the records deductions
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6.6 Customer Master Data Management
For all the financial transaction posted and managed, SAP will require a customer
masters. The master record contains data that controls how business transactions are
recorded and processed by the system.
Process Highlights:
 Customer master data management shall be a central activity.

 User will have to fill up a form and submit this to approving authority. Approving
authority shall approve or reject the form.
 If rejected, approving authority shall inform the user and suggest a solution. If
approved, new account will be opened in SAP by authorized person.
 User will be informed of the new account added.
Accounts Receivable Customer Master Data Maintenance consists of three sub-

processes, which will be centrally controlled:
It also covers the following steps relating to customer master:
 Create the customer master

 Change the customer master
 Display the customer master
 Block / Unblock customer master
6.7 Customer Payment Terms
 Terms of payment are conditions established between business partners to settle

the payment of invoices. The conditions define the invoice payment due date and
the cash discount offered for early settlement of the invoice.
 Within SAP, some common payment terms have been predefined; new payment
terms may be created as required.
 Payment terms enable the system to calculate a cash discount and invoice due
date.
 In order to perform this calculation, the system needs the following three data
elements i.e., Baseline date, cash discount period and cash discount percentage
rate.
 When processing a document, the payment term is entered in order for the
system to calculate the required conditions of payment.
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 The payment term will be defaulted if it has been assigned on the master record,
or can be entered or changed by the user during transaction processing.
 Payment terms will be defined in SAP and assigned to individual customers.
6.8 Customer Invoice and Parking
While processing the invoice, if invoice needs to be approved from senior authority, we
can use parking and posting processing for the same.
6.9 Customer Payment Process
Incoming Payment process can manage following type of payments
6.9.1 Normal Payment/Cheque Payment
The Cheque payment from customer usually comes with payment advice. On receipt of
payment, the open invoice dues of the customer is compared so as a match can be
found. On a match, the customer due is cleared and financial books of account is
updated with entry, bank account debit and customer account credit.
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Process highlights:
 Customer pays by Cheque and provides information against which payment has
been made.
 Payment is accounted first and then Cheque is deposited in bank account.
 Customer’s invoice shall be partially or fully cleared upon receipt of payment.
6.9.2 Full or Partial Payment
Payment received from customer can be of full or partial amount. When full payment
received from customer, would apply the same and clear the costumer account in
situation where partial payments are received against the open invoice in the system.
System keeps the status of the invoice as open since partial amount has only been
received; till the amount received is not complete, status does not change to cleared by
the system.
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6.9.3 Post Dated Cheques (PDC)
Cheques received from customer can be of post-dated for future payment or advance
payments. Since PDC can’t be considered as payment received till it is due SAP
standard functionality supports this feature using noted item.
On the receivables side on the day of cheque due for clearing reverse the noted item
and do the regular posting and send the cheque to Bank for clearing. You can take a
daily report to check the due dates of noted items.
6.9.4 Customer Advance Payments /Down Payments
Advance Payment received from customer will be posted against advances from
customer account and cleared of against invoice raised to customer. A separate GL
account will be mapped to record the advances received from customer.
6.9.5 Direct deposit by customer in bank account
The direct deposit by customer in the bank account of the organization comes to the
knowledge on receipt of bank statement. It is possible to upload the bank statement in
SAP (need customization). Upon upload, the deposits in the bank accounts are shown
as “Incoming payment”. The account receivable clerk gets in touch with customer
relating to the direct debits in bank account, to clarify the invoice against which such
payment was made. Once this is confirmed, the bank is debited with credit posted to
customer.
Process highlights:
 Customer directly deposit in bank account.

 Open item posted in Incoming Payments Account crediting customer account.
 Clear the payment against the invoice due to show the net receivable.
6.9.6 Customer Cheque Payment Bounced
In case of cheque is bounced, Transaction need to be reversed manually and bank

charges invoice need to be created from SD Module with penalty to the customer
corresponding to invoice check bounced. This scenario is covered in SD document.
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In Finance, Bank charges (income) will go into “Bank Charges” GL account (this account
is same for all other bank charges), this will have 0% VAT and should reflect in VAT
report.
6.10 Customer Document Reversal Entry

6.10.1 Single Reversal
Document reversal for posted documents, allows the user to reverse the
documents based on the document numbers as opposed to making a manual entry
and neutralizing the effect of unwanted entry. The original document is updated with
the information of the reversal doc and both of them can be viewed sequentially
through the established link. This access need to be restricted for few users only.
6.10.3 Mass Reversal
There might be situations where documents have been entered in with wrong data and
a facility is required to reverse documents collectively. Authorization for mass reversal
shall be provided to only a few persons in accounts receivable department.
7. ASSET ACCOUNTING
The Asset Accounting (FI-AA) component is used for managing and supervising fixed
assets. In Financial Accounting, it serves as a subsidiary ledger to the General Ledger,
providing detailed information on transactions involving fixed assets.
To make it easier to create, manage and evaluate master data in the Asset Accounting
module of SAP, the data is structured according to its use and function in SAP. The
asset master record consists of two data areas:
 General data containing the Company code, cost center, plant, etc.
 Valuation data for depreciation
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7.1 Summary
The control for creation and maintenance of asset master records would involve
correct maintenance of the required information in the masters so that the transaction
details are proper. There will only be two depreciation areas for OMFED.
Assets will be maintained according to asset classes and each asset class will have a
separate number range. Each asset class shall be mapped to a different set of GL
accounts. Depreciation shall be charged from the day of capitalization to the day of
retirement.
7.2 Chart of Depreciation
Chart of depreciation is used in order to manage various legal requirements for the
depreciation and valuation of assets. Each Company code defined in Asset Accounting
should be assigned to exactly one chart of depreciation. Depreciation rules are
maintained at chart of depreciation level and same rules can be used by any Company
code using same chart of depreciation.
Chart of
Company
depreciatio Name
code
n
1000 Chart of depreciation OMFED Group 1000
7.3 Depreciation Area
A depreciation area in Asset Accounting is an area showing the valuation of a fixed

asset for a particular purpose (for example, depreciation as per corporation law, or as
per Tax Laws etc.). To enable the user to make these specifications, the master record
contains an overview of the depreciation areas. Depreciation terms can be maintained
in the asset master record for each depreciation area in the chart of depreciation. For
OMFED, there would be one depreciation areas.
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Depreciatio Company
Depreciation Area Description
n Area code
01 Book depreciation. 1000
15 Income tax depreciation. 1000
7.4 Depreciation Keys and Rules
OMFED will follow below method for charging depreciation. Depreciation Key would be
in place as per different depreciation rate.
The information needed for the setting the rules are Depreciation Key, Description and
Useful Life. Depreciation shall be charged from the date of capitalization to the date of
retirement for all asset classes.
7.5 Asset class
Asset classes are the most important means of structuring fixed assets. An unlimited
number of asset classes can be defined in the system. The asset classes are used to
structure assets according to the requirements of an enterprise.
These asset classes contain certain control indicators. It controls the number range and
the field control for the asset master records.
Asset Class Asset Class Description

1100 Land
1200 Building
1300 Plant & Machinery
1400 Furniture & Fixture
1500 Computer Installation
1600 Vehicles (Two Wheeler, jeeps etc.)
1700 Heavy Vehicle - Road Tanker/Van
1800 Library
1900 Bottle Cooler/FRP Tank
2100 Low value asset
2200 Assets Under Construction
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7.6 Asset Depreciation Key and Rate
In SAP depreciation key represents per depreciation rate means each rate of
depreciation requirement you can define one depreciation key. There is multiple
calculation method available in SAP, like base method, written down value (WDV)
method, Multi-Level method and period control method. But OMFED uses WDV method.
Calculation methods to be assigned to depreciation key which need to be assigned to

depreciation area in asset class. Depreciation on assets is taken for the entire fiscal
year as long as the asset is not sold or scrapped in that fiscal year. (Pro-rate calculation
is done for during the year sale or scrap or acquisition).
Depreciation
Multi
Asset Asset Class Dep Usefu level Multi level
Class Description Dep % Key l life Dep Key Desc method method Desc
99 OMFED WDV – OMFED –
1100 Land 0.00 % DK01 years 0.00% Z01 0.00%
OMFED WDV - OMFED –
1200 Building 10.00% DK02 10.00% Z02 10.00%
1300 Plant & Machinery 25.00% DK03 25.00% Z03 25.00%
1400 Furniture & Fixture 15.00% DK04 15.00% Z04 15.00%
Computer OMFED WDV - OMFED –
1500 Installation 60.00% DK05 60.00% Z05 60.00%
Vehicles(Two
Wheeler, jeeps OMFED WDV - OMFED –
1600 etc.) 20.00% DK06 20.00% Z06 20.00%
Heavy Vehicle - OMFED WDV - OMFED –
1700 Road Tanker/Van 40.00% DK07 40.00% Z07 40.00%
1800 Library 20.00% DK06 20.00% Z06 20.00%
Bottle Cooler/FRP OMFED WDV - OMFED –
1900 Tank 20.00% DK06 20.00% Z06 20.00%
2100 Low value asset 100 % DK08 100.00% Z08 100.00%
Assets Under OMFED WDV – OMFED –
2200 Construction 0.00% DK01 0.00% Z01 0.00%
7.7 Asset Master Data Management
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Asset master creation requires correct selection of asset class, units/ quantity, units of
measurement, plant, location, cost center and other parameters as it has a direct
impact on accounting of not only capitalization value but also of depreciation. Following
points need to be considered while creating an asset:
For a completely new asset, first determine the correct asset class. Enter the asset
class and the Company code in the initial screen of the master data transaction.
Another option is to use an existing asset as a reference when creating the new asset.
If we are adding to an already existing asset, first identify the asset main number of the
existing asset. Create a new asset sub-number for this asset. The system uses the main
asset number to determine the asset class for the new asset.
Maintain the relevant master record information on the tabs as needed:
 General data (description, capitalization date, inventory date)

 Time-dependent assignments (cost center)
 Allocations (evaluation groups)
 Information on the origin of the asset
Maintain depreciation and valuation information:
 Depreciation key
 Useful life in years/periods
 Start date for depreciation calculation
Using AW01N T-Code, you can view assets history in different forms. Below screen
shorts show the available forms in SAP to view the assets. It can be by asset name,
asset class, cost center, etc. Sample screen shot given below.
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7.8 Document Type / Number Ranges
posting. Below is the detail of document type used for posting transaction for Asset
transaction.
The number ranges for the particular Company code are used for main asset numbers.
In the asset class, you can specify the number range for the assignment of numbers for
that asset class. As a standard SAP practice the number ranges are maintained as
internal number range.
Each asset master created under a specific asset is identifiable by the unique number
assigned to the asset class. The number range is a two digit numeric key defined at the
Company code level and is assigned to the asset class. Each asset class will be assigned
an individual number range.
Reverse Nmbr
Doc doc range
Type Description type ID From To
AA Asset Posting AA 01 1000000000 1099999999
AF Depreciation Postings AF 12 1200000000 1299999999
7.9 Asset Accounting Business Processes
This section explains the business processes related to assets during the lifecycle of an
asset.
7.10 Asset Acquisition
There would be one type of asset capitalization in OMFED under the external asset
acquisition i.e. direct purchase and capitalizations.
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7.11 Asset under Construction (AUC)
Costs can be accumulated under purely technical aspects in an Asset under

Construction. The later creation of the fixed asset has not to be considered at this point.
During the acquisition phase, all acquisitions for an investment in a single asset can be
accumulated. These acquisitions include
External activity (acquisition from vendor)

Internal activity () or
Stock material (withdrawal from warehouse)
When using this collective management of assets under construction, it is

possible to manage the individual acquisitions as open items over the course of
several fiscal years. At completion, the line items must be cleared and then distributed
to the various receivers. (Cost center, asset).
Separate Asset Classes will be used for Assets or Tools under Construction. These Asset
Classes are basically defined in the same way as the other Asset Classes, with the
major difference that they are assigned the depreciation key 0000, so that no
depreciation is calculated or posted for the AUC.
Specific transaction types will be defined for the settlement of AUC.
The AUC will be designed with line item management, so that the settlement to the
final receivers (expense accounts or fixed assets) can be managed individually as open
items for settlement.
7.12 Direct Purchase and Capitalization
In case of direct purchases like computers, tables, chairs, water purifiers etc. that are
in ready to use form will be capitalized from the date of acquisition. While using the FI-
AA component in conjunction with the Materials Management (MM) component, we can
post an asset acquisition within the framework of the ordering process in purchasing.
In direct purchase of assets there are different scenarios by which an asset is

capitalized in the system;
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Following is the process flow for direct capitalization cases;
Process highlights:
These will constitute those purchases, which are identifiable and ready to use. All the
items which can be put to use immediately without any further improvements or
modifications. Detailed process is as below:
 In case of direct capitalization Purchase order is used with account assignment

type A (Assets).
 The purchase will be based on CAPEX sanctions/approvals.
 Before creation of the Purchase order the asset code to be created by the
Finance in the system without quantity, since quantity get updated through PO
cycle.
 At the time of PO creation the asset code should be mentioned in the PO for
tracking purposes.
 Purchase order shall be created and all the pricing conditions shall be entered in
PO.
 For all PO with account assignment “A” the asset code would be a mandatory
field without which PO cannot be created.
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 A PO is raised in the MM Module against the asset master created. On receipt of

the asset, GR is made in MM module.
Below is the accounting Entries:
a) At the time of goods/asset receipt;
The system will not post any entry at this stage.
b) At the time of invoice receipt;
The system will post an entry at this stage
Debit Asset Account
Credit Vendor Account
Depreciation start date will be the first day of the capitalization date of the asset.
An external acquisition is a business transaction resulting from the acquisition of an

asset from a business partner (in contrast to an “acquisition from internal production").
You can post the acquisition of a purchased asset in several different ways, using
different components of the R/3 System:
 In Asset Management (AM) in integration with Accounts Payable

 In Asset Management without direct posting to Accounts Payable (posting to a
reconciliation Account).
 In Materials Management (MM) at goods receipt or invoice receipt.
We will be using the last option for OMFED at invoice receipt.
7.13 Asset Retirement
Asset retirement is the removal of an asset or part of an asset from the asset portfolio.
This removal of an asset (or part of an asset) is posted from a bookkeeping perspective
as an asset retirement. Depending on organizational considerations, or the business
transaction, which leads to the retirement, the following types of retirement can be
distinguished;
 An asset is sold, resulting in revenue being earned. The sale is posted with
customer.
 An asset is sold, resulting in revenue being earned. The sale is posted against a
clearing account.
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 An asset has to be scrapped, with no revenue earned.

 Following is the process flow for retirement of assets:
Process highlights:
Assets to be retired are selected and confirmed.
In this step, one can generate the list of the assets to be retired by retirement date,
which is entered in the system in the first step of the process.
The assets approved by the competent authority will be considered for retirement
process (approval process shall not be part of SAP process). Sales team can make sale
order and billing for asset sale.
Following accounting entries will be posted in SAP depending upon the scenario;
 An asset is sold, retirement with Revenue:
Debit Accumulated Depreciation
Debit Loss on sale of Asset (if there is a loss)
Debit Customer Account
Credit Asset Account
Credit Profit on sale of Asset (if there is a profit)
 An asset is sold, resulting in revenue being earned. The sale is posted against
a clearing account.
Debit Accumulated Depreciation Account
Debit Loss on sale of Asset (if there is a loss)
Debit Asset Clearing Account (revenue account)
Credit Profit on sale of Asset (if there is a profit)
 An asset has to be scrapped, with no revenue earned
Debit Accumulated Depreciation Account
Debit Loss on sale of Asset
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7.14 Post Capitalization
Post-capitalization represents subsequent corrections to the acquisition and production

costs of a fixed asset. If related expenditures or costs linked with the acquisition or
construction of an asset have been missed in its APC booking in a closed fiscal year,
system posts gross post-capitalizations, meaning with historical depreciation amounts.
The system newly calculates depreciation from closed fiscal years on the basis of the
capitalization date entered in the asset master record.
7.15 Low Value Assets
Assets having a low value are termed as Low Value Assets. In contrast to fixed assets
of greater value, low value assets (LVAs) are completely depreciated in the year in
which they are acquired. This is achieved by using the special depreciation key and the
expected useful life of one year.
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The low value assets can be categorized based on value. When the acquisition is
posted, the entire acquisition and production costs of the asset are compared with the
LVA maximum amount after divided by quantity. The amount will be up to Rs. 5,000/-
per asset which is prevailing accounting policy of OMFED and fixed by India
government.
For quantity when the acquisition is posted, the entire acquisition and production costs
of the asset, divided by the total quantity, are checked against the LVA maximum
amount. When you make your first posting, you must also post the quantity or put at
the time of creating master.
7.16 Depreciation Run – Month End/ Period End Operation
Depreciation is normal wear and tear of the asset. Every asset transaction in the SAP
Asset Accounting (FI-AA) component immediately causes a change of the forecasted
depreciation. However, it does not immediately cause an update of the depreciation and
value adjustment accounts for the balance sheet and profit and loss statements. The
planned depreciation is posted to the general ledger when you run the periodic
depreciation posting run. In OMFED depreciation run will happen on monthly basis.
The calculation and scheduling of depreciation are automatically controlled by keys in

the system with depreciation keys, or you can control them manually using a special
posting transaction. In both cases, planned depreciation from Asset Accounting must be
periodically posted to the corresponding asset and expense accounts of the general
ledger. When the system posts depreciation, it creates collective documents. It does
not create separate documents for each asset.
Following process shall be followed for posting deprecation in SAP
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Sn Transaction
Transaction Description
Code
Asset Master Creation/ Maintenance
1 Create Asset Main Number AS01
2 Create Asset Sub Number AS11
3 Create Asset Group Number (For Income Tax) AS21
4 Create Group Asset Sub Number (Income Tax) AS24
5 Change/Edit Asset Master AS02
6 Display Asset Master AS03
CWIP Transactions
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1 Distribute CWIP to Assets AIAB
2 Settlement of CWIP Assets AIBU
Asset Procurement
1 Create Purchase Order ME21N
2 Goods Receipt MIGO
3 Capture Excise invoice Part II J1IEX
4 Invoice verification MIRO
5 Asset procurement- non-PO-Pure Finance F-90
Asset Transfer
1 Asset Transfer within Company code ABUMN
Asset Sale/Disposal
1 Asset Sale Without Customer(Invoice will be ABAON

generated in S&D module and Asset discard in FA
module)
2 Asset Retirement with revenue with customer F-92
3 Asset Retirement by Scrapping ABAVN
Depreciation Run
1 Depreciation Posting run AFAB
2 Re-run of Depreciation AFAB
3 Unplanned Depreciation ABMA
Period end closing
1 Fiscal year Change AJRW
2 Execute AJAB
3 Account Reconciliation ABST2
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7.17 Year End Process – Close fiscal year
The year-end closing program is used to close the fiscal year of Company code from an
accounting perspective. Once the fiscal year is closed, user can no longer post or
change values within Asset Accounting (for example, by recalculating depreciation). The
fiscal year that is closed is always the year following the last closed fiscal year. We
cannot close the current fiscal year.
The system only closes a fiscal year in a Company code if
 The system found no errors during the calculation of depreciation (such

as, incorrectly defined depreciation keys).
 Planned depreciation from the automatic posting area has been completely
posted to the general ledger.
 Balances from depreciation areas that are posted periodically have been
completely posted to the general ledger.
 All incomplete assets (master records) have been completed.
 The system lists any assets that do not meet the above requirements in the log
of the year-end closing.
7.18 Fiscal Year Change
From the point of view of the system, a 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 using value dates in the new fiscal
year. At the same time, you can continue to post in the previous fiscal year.
The system carries out the fiscal year change for all assets, even if the assets have
errors. The system provides statistics per Company code for the assets that have been
changed. The system writes assets with errors to an error log. Fiscal year change
required on the first day of new fiscal year irrespective of previous year books closure.
You can have a maximum of two fiscal years open for posting at one time.
7.19 Asset Balances
Below is the sample screen short of how Asset Balances screen look like
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8. CASH AND BANK ACCOUNTING
This section covers processes related to cash and bank transactions. For cash, this
section primarily covers the process relate to allocation of cash for petty expenses and
settlement thereof.
8.1 Summary
In SAP, banking transactions are managed with the help of multiple GL accounts.
Various GL accounts are used to capture business transactions related to incoming,
outgoing payments and other banking charges. SAP also manages bank reconciliation
process with the help of these bank accounts.
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8.2 Bank Master Data
For every bank account, 3 new GL accounts shall be required to be created to post any
transactions with the bank. Apart from 3 GL accounts, a house bank and account ID
shall be required as well. As master data is part of central master data management
activities, this master data element too, will be controlled centrally, similar to GL
accounts, cost centers etc.
Process highlights:
 House bank represents the bank branch where OMFED has a bank account.
 Account ID represents a bank account within a house bank e.g. SBI could be
a house bank and different bank accounts within that branch shall be treated
as Account ID’s.
 GL Account needs to be mapped to house bank and account IDs; this helps in
uploading bank statements.
 Bank master data management shall be a centrally controlled activity.
C C
A u
Sl Hou / r IFSC code / GL A/C
Bank
. se Accou C Bank r Bank Swift Account Number
Nam Address
N Ban nt ID C Key e BIC / Bank Number for Main
e
o k / n Id Bank A/C
S c
B y
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AXIS I Nangalia
BANK, C N Complex,J 7180120000011
1 JATNI AX01 CA144 A 0718 R UTIB0000718 atani 44 2303200100
BANK I
OF C N Saheedna 5551201000000
2 INDIA BI01 CA036 A 5551 R BKID0005551 gar, BBSR 36 2303200200
KHARAVE
INDIA I LA
N C N NAGAR,
3 BANK IN01 CC484 C K157 R IDIB000K157 BBSR. 753452484 2303200300
KHARAVE
INDIA I LA
N O N NAGAR,
4 BANK IN02 OD376 D K157 R IDIB000K157 BBSR. 922440376 2303200400
INDIA KHARAVE
N I LA
BANK( C N NAGAR,
5 RKVY) IN03 CA129 A K157 R IDIB000K157 BBSR. 968487129 2303200500
INDIA
N KHARAVE
BANK( I LA
NPDD C N NAGAR,
6 ) IN04 CA146 A K157 R IDIB000K157 BBSR. 6376323146 2303200600
I Cuttack
ICICI C N road,
7 BANK IC01 CA516 A 1500 R ICIC0001500 BBSR 150001000516 2303200700
Panja
b BAPUJI
Nation I NAGAR,
al S N BHUBANE 3221000100070
8 Bank PN01 SB277 B 2100 R PUNB0322100 SWAR 277 2303200800
Union
Bank
of I OMFED
India( S N Square, 4505020500002
9 RKVY) UN01 SB216 B 8893 R UBIN0558893 BBSR 16 2303200900
Union
Bank
of I OMFED
India( C N Square, 3808020500001
10 RKVY) UN02 CA193 A 8893 R UBIN0558893 BBSR 93 2303201000
Union
Bank
of I OMFED
India( S N Square, 4505020500001
11 CSS) UN03 SB182 B 8893 R UBIN0558893 BBSR 82 2303201100
Union
Bank I OMFED
of C N Square, 4505050100001
12 India UN04 CC118 C 8893 R UBIN0558893 BBSR 18 2303201200
13 IOB, IO01 CA582 C 0159 I IOBA0000159 21/122, 1590100000858 2303201300
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NEW
STATION
BBSR. N SQUARE.,
8582 A R UNIT-III, 2
SBI, IDCO
IDCO I TOWER,
TOWE C N JANPATH,
14 R SB01 CA090 A 7891 R SBIN0007891 BBSR. 10835305090 2303201400
SBI, IDCO
IDCO I TOWER,
TOWE C N JANPATH,
15 R SB02 CA374 A 7891 R SBIN0007891 BBSR. 10835305374 2303201500
SBI,M
ain I Unit .1
Branc C N BHUBANE
16 h SB03 CC568 C 0041 R SBIN0000041 SWAR 35664885568 2303201600
SBI,M
ain I Unit .1
Branc C N BHUBANE
17 h SB04 CC519 C 0041 R SBIN0000041 SWAR 10872145519 2303201700
Syndi I
cate C N Vanivihar, 8004101000004
18 Bank SY01 CA045 A 8004 R SYNB0008004 BBSR 5 2303201800
IDBI
HOUSE,
2ND
FLOOR,
JANAPATH
,
I BHUBANE
IDBI C N SWAR -
19 BANK ID01 CA029 A 0042 R IBKL0000042 751022. 4212000030029 2303201900
159,
ALLAH I BAPUJI
ABAD C N NAGAR,
20 BANK AL01 CA972 A 0329 R ALLA0210329 BBSR.-9 20042511972 2303202000
BUDHESW
ANDH I ARI ,COL
RA C N ONY,BBSR 7451101100055
21 BANK AN01 CA557 A 0745 R ANDB0000745 -751006 7 2303202100
ANDH I
RA C N ,POKHARI 1751111000012
22 BANK AN02 CA237 A 1751 R ANDB0001751 PUT 37 2303202200
MAIN
BANK BRANCH,
OF I BAPUJI
BARO C N NAGAR,B
23 DA BB01 CA175 A HEED R BARB0SAHEED BSR-9 6880200000175 2303202300
24 OSCB OS01 CA001 C 0093 I YESB0000093 SAHID 002029000001 2303202400
A N NAGAR,S
R UPER
BAZAR
COMPLEX,
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BBSR
I Cuttack
C N road,
25 OSCB OS02 CA270 A 0093 R YESB0000093 BBSR 9030200270 2303202500
UNITE
D
BANK I SAHID
OF C N NAGAR,
26 INDIA UB01 CA828 A N468 R UTBI0SDN468 BBSR 614050008828 2303202600
H.B
I COLONY
HDFC C N BARAMUD 2457762000005
27 BANK HD01 CA058 A 2457 R HDFC0002457 A, BBSR 8 2303202700
I SAHEEDN
HDFC C N AGAR, 0122035000015
28 BANK HD02 CA155 A 2457 R HDFC0002457 BBSR,. 5 2303202800
I
HDFC C N JANPATH- 5020000500531
29 BANK HD03 CA313 A 0122 R HDFC0000122 1, BBSR 3 2303202900
Note : These bank accounts are for the OMFED head office only. There are
many bank accounts which are at the different dairy level. So we have to
integrated all those bank accounts in SAP.
8.4 Business Process - Bank Reconciliation
AS-IS Process:
 The financial controller shall receive the bank statements on timely basis and
counter check the balances before forwarding the statement to the financial
accountant
 The financial accountant upon receipt of the documents shall take them to the
accounts supervisor for reconciliation
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 The accounts clerk shall carry out the reconciliation process, and then
take the reconciling statements back to that Financial accountant
 The Financial accountant shall check and approve the reconciled statement, then
take it back to the accounts clerk for filling
TO-BE Process:
The bank Reconciliation Statement is to be carried out by using the manual bank
statement or Electronic bank statement functionality of SAP. The usage of Electronic
Bank statement depends on receipt of the Bank statement in the electronic form in a
specified format.
For every Bank account, four General Ledger accounts shall be created.
Main
Outgoing Account
Account
Incoming
Account
Bank Reconciliations
 One Main Account – will represent Bank Statement balance, Bank Statement will be
entered in this account with other side of the entry going to one of the other 2
accounts.
 One Incoming clearing account – All collections will be recorded in this account. For
all collections deposited with bank, this account will be debited.
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 One Out-going clearing account – all payments shall be recorded in this account. For
all outgoing payments, this account will be credited.
Bank statement shall be uploaded in full i.e. no transaction appearing in bank

statement shall be missed. In any bank statement, there can be debits for Cheques
issued or bank charges and credits for Cheques deposited interest etc. In SAP, entry of
bank statement creates an accounting document i.e. one account will be debited and
another account will be credited. One account (whether debit or credit) shall be the
bank statement account and other side of the entry goes to any of clearing accounts.
Process highlights:
 All day to day postings such as incoming and outgoing payments shall be carried
out using clearing accounts.
 At the time of receipt of Bank Statement from the bank, the same will be posted
to the accounts using Manual Bank Statement / Electronic Bank Statement
functionality of SAP.
 Clearing accounts will have open item management and therefore the Debit and
Credit items after posting the Bank Statement can be cleared using automatic
clearing or manual clearing.
 Un-cleared items in the clearing account would reflect the non-reconciled items
such as Cheques issued but not presented by the Vendor or Cheques deposited
but not credited by Bank, for follow up actions.
Following are the process steps in detail
8.4.1 Step 1: Receiving Bank statement copy
Accountant will collect soft copy; the bank statement shall give following details.
Note –Electronic Bank reconciliation through system is possible only if soft copy in
prescribed format is provided else manual can be uploaded using excel for which BDC
need to be developed.
Overall Closing balance as per bank statement

requirement/Header Period of bank statement– From date To date
requirements
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Line item requirement Date

Text(particulars)
Transaction type (DR/CR)
Transaction code
Reference number(Cheque no)
Amount
8.4.2 Step II – Bank statement uploaded in system
The bank statement will be uploaded in system and posted in the system.
8.4.3 Step III– Reconciliation in system
After uploading bank statement in system, line item of bank account (SAP) and bank
statement will be reconciled/ matched with each other.
 for all reconciled/ matched line items accounting entries will be passed
automatically in system.
 In case of unmatched line items display rules will be defined in system
as to which side of reconciliation statement, unmatched line item will be
displayed.
8.4.4 Step III – Manual posting for un-reconciled items
For the items, which could not be reconciled, manually the items will have to
reconciled/posted – E.g. Bank charges, wrong reference items etc.
Following is the scheme of accounting entries during Cheque deposit and payment
activities:
 At the time of Cheque deposits:
Debit Incoming Clearing Account
Credit Customer Account
 At the time of payment:
Debit Vendor account
Credit Outgoing Clearing A/c
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The scheme of accounting entries during bank reconciliation will be as follows:

 For outgoing Cheques presented in bank:
Debit Outgoing Clearing Account
Credit Main Bank Account
 For incoming Cheques credit given by bank:
Debit Main Bank Account
Credit Incoming clearing Account
8.5 Accounting of Bank Charges and interest income
If bank charges debited by bank or interest credited by bank and appearing in bank
statement, it will be booked through Transaction Id at the time of upload of bank
statement. Alternatively it can be posted directly to main bank account.
Accounting entry for bank charges:
Debit Bank charges Account
Credit Main Bank Account
Accounting entry for interest income:
Debit Main Bank Account
Credit Interest income Account
8.6 Cash Journal for Cash transactions
AS-IS Process:
 The cashier shall receive a document dully approved by the general manager
 The cashier shall produce a cash payment voucher and sends to GM for approval
 The cashier shall make payment to the authorized person who shall sign for the
receipt of cash
 The cashier shall submit the voucher to the financial accountant for checking for
proper entries and authority
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 Financial accounts shall submit the voucher to the financial controller for
approval, and return to the clerk for filling
 The clerk shall produce a petty cash statement at the end of the week
 The clerk shall write a cheque in the name of the cashier and a cover letter, and
send them to the financial accountant
 The financial accountant shall verify the financial controller for approval
 The financial controller shall take the cheque and the authority letter to the
Financial Director and Managing director for final approval and signature
 The Cashier shall receive the cheque and the authorization letter from the
Financial Accountant and then take them to the drawer bank to withdraw cash
TO-BE Process:
Cash Transactions are managed in banking module through Cash Journals. For OMFED,
Cash journal functionality will be introduced for maintenance of operation cash, cash
journal is a compact double entry journal managed in account form that records the
posting for cash transactions. The cash journal results in postings to the cash GL
account in the general ledger automatically.
The following calculation is available online at any period of time, which facilitates
analysis of cash position: -
Opening Cash balance INR A

INR
Add: Total cash receipts (+) B
Less: Total cash payments INR (-) ©
Closing Cash balances INR =A+B-C
The transactions done can be stored and not allowed to get deleted depending on
Authorization; this makes cash transactions transparent within an organization. The
cash journal will be linked to a cash account that can be posted only automatically by
the system. This restricts manual posting to the cash account. The cash journal will
allow following transaction types
Transaction Type Description

E Expenses
R Revenue
B Cash deposit with bank
C Cash withdrawal from bank
D Customers- Incoming and outgoing
payment
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K Vendors- Incoming and outgoing payment

S Salary Payable
For each of these transaction types, multiple individual transactions will be defined, that
cover the typical cash transactions in the organization. These predefined transactions
will ensure the automatic ascertainment the kind of business transactions that are to be
carried out through cash journal. Individual transactions under transaction type
expense can be office supplies, conveyance expense, telephone and other
miscellaneous expenses. These transactions will always post to the configured account
in the general ledger.
In OMFED Cash journal will be maintained at HO level. There is about one cash account
will be identified at the time of this document. There will be one main cash account
from where all cash expenses will take place .The authorization to access that cash
journal account will be at OMFED HO level.
Each cash journal assigned to a number range ID to generate internal cash document.
Based upon cash document type used accounting document get posted.
Cash N
Compa G/L
Journal o
ny Description G/L Code Descriptio No from No To
Numbe I
code n
r D
Cash
Journal-
1000000000 1099999999
OMFED-BBSR- OMFED- C
1000 OM01 ID ACCOUNTS 2303100100 BBSR- 01 1
Cash
Journal-
2303100200 OMFED- 2000000000 2099999999
OMFED-CFP- Cattle C
1000 CF01 ID ACCOUNTS Feed- 01 2
9. Taxation
Below are the details of taxation aspects involving various business processes. This
document covers Withholding tax, VAT on Sales and purchase. In SAP, tax procedure
carries the calculation steps; tax calculation depends upon Tax code which in turn
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carries the rate or percentage of tax. New tax codes need to be created as and when
the rate of tax changes. It is recommended not to change tax codes if already used.
9.0 Value Added Tax (VAT)
VAT is tax on sales or purchases. As per government rule VAT to be charged in invoice
at prescribed rate for sales as well as VAT input credit need to be availed on purchases
and to be netted off against liability. In SAP you will have one general ledger for VAT
output and one general ledger for VAT input. While making the payment you need to
combine the balance of both and pay the net liability payable.
 Check the tax on sales/purchases in the document.

 Calculate the amount of tax on sales/purchases automatically.
 Check if a tax account with tax type (input or output tax) can be posted to
 Determine the tax account
VAT Tax codes are:
Tax
codes Tax code description Nature
A0 VAT INPUT TAX 5% INPUT
A1 VAT INPUT TAX 14.5% INPUT
9.1 Entry Tax
Tax
codes Tax code description Nature
E1 ENTRY TAX 1% INPUT
E2 ENTRY TAX 2% INPUT
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9.2 Withholding Tax
Withholding tax is applicable based on type of Services rendered or accepted.

Withholding tax needs to be deducted, at the time of Invoice posting or payment,
whichever is earlier, accounted & deposited into Government Treasury on the stipulated
Dates. Different Withholding tax rates are applicable based on Legal Status of the
recipient & Type of Services received.
Withholding Tax is applicable at two stages; these two stages/transactions are to be

distinguished for withholding tax:
a) Advance Payment
b) Invoice entry
At the time of advance payment, tax amount is calculated from the base amount and
based on tax code assigned to Vendor Master. System reduces the amount paid to
Vendor by the Withholding tax amount and is accounted to Tax payable account.
Accounting entry will be:
Debit Vendor A/c
Credit Withholding tax Payable A/c
Credit Bank A/c
At the time of adjusting Vendor invoice with Advance Payment, second entry is
automatically cleared and has to be remitted to Tax Authority within due dates.
Withholding Tax Certificate need to be printed where ever applicable (Customization

needed).
At the time of withholding tax payment, one cheque should be printed for the entire
payment for government authorities. You need to create one vendor code for tax
authorities, transfer the liability to vendor and do the payment entry from vendor
account.
9.3.1 Withholding Tax for Domestic Services
The above scenario follows.
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Invoice Payment
Sectio Type of
Nature Type Code Rate(%) Type Code Rate(%)
n Vendor
Payment to
corporate
194C partnership. Resident C1 C1 2.00% C1 C3 2.00%
Payment to
Individual
194C partnership. Resident C2 C2 1.00% C2 C4 1.00%
Payment To
Professional
And Technical
Fees.
194J Resident I1 I1 10.00% I1 I3 10.00%
9.3 SERVICE TAX
Tax codes Tax code description Nature

S1 SERVICE TAX 15% INPUT
9.4 EXCISE DUTY
There are some excisable product procurement for the making some
finished products. So the CIN implementation will be done at OMFED HO
level.
Tax codes Tax code description Nature

E1 SERVICE TAX @2 % INPUT
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10. MONTH-END & YEAR-END CLOSING
The closing operation supports the preparation and carrying out of activities required
for closing and extracting various report for period end. Closing operations can be
carried out in a manner that reduces manual monitoring and supports MIS generation
in time. For this purpose, the system provides various standard reports that you can
use to generate evaluations and analyses directly from the posted account balance.
Closing operations recur periodically and can be subdivided as follows
 Month-End Closing
 Year-End Closing
Following is a high level overview of the steps to be followed for month end closure:
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10.1 Month-End Closing
Note: Here settle project means s or other expenses which supposed to be capitalized
not thorough project system in SAP till project system is implemented which is a
separate module.
10.1.1 Post Accruals
As at month end, expense accruals can be posted for all known liabilities. This shall be
a manual activity, calculation for the amount to be accrued and the postings to the GL
accounts shall be done by accountants only.
Expense accruals from the pre payments done (e.g. Rental or Insurance charges paid in
advance) shall also be done at the end of the each month. Whenever a prepayment
shall be made, user will have to set up an accrual document with all relevant
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information e.g. when to charge, how much to charge and for what duration expense is
to be charged.
10.2. Reverse Accruals
As at month end, previous month’s accrual postings need to be reversed. While creating
an accrual, we can specify a date of reversal (which should ideally be 1st day of the
next month). User can run reversal program anytime it is required, however, it should
be part of month end activity too.
SAP supports Foreign Currency postings to General Ledger and Sub Ledgers, these
foreign currency amounts are converted into local currency based on exchange rates
maintained in the Exchange rate table. Exchange rates are predominantly used for the
following:
 Translate foreign currency amounts when posting or clearing or to check

exchange rate entered manually.
 Determine the Gain or Loss from exchange rate difference.
 Evaluate open items in foreign currency Balance Sheet Accounts.
The exchange rates are defined by period ("valid from").
The system uses the type “M” using the current exchange rates for foreign currency
translation when posting and clearing documents. In this activity, enter the Exchange
Rate. An entry must exist in the system for this exchange rate type. The exchange
rates apply to all Company codes. Normally, it is maintained on daily basis.
OMFED shall be maintaining exchange rates using “M” Rate types only as and when
required. There are not many transactions in foreign currency and a daily update may
not be required considering the current stage of operations.
10.3 Foreign Currency Valuation for Open Items
In case of foreign exchange transactions, all open line items will be analyzed at period
end and invariably at the Fiscal Year end for any revaluation on account of Foreign
Exchange rate fluctuations. In this procedure, SAP valuates items in foreign currency at
the end of a period in order to post gain or loss from foreign currency fluctuations.
Profit/Loss from revaluation of foreign currency is posted accordingly.
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If the program for all open items in foreign currency is executed, all items posted to
accounts that are open item managed would be included for valuation. The individual
valuation principle determines the way valuation is carried out: only individual items
that are still open on the key date are considered for valuation. System will be
configured for ‘always valuate’ option i.e. any open items shall always be revalue as at
month end date.
The system will post any Gain / Loss on account of Foreign exchange rate fluctuation in
a specified GL P&L Account. For expense from currency valuation, the posting is:
Debit Gain / Loss on A/c of Currency Valuation (in case of Loss)
Credit Foreign Customer / Vendor Account/ GL Account
Posting of gains or losses on foreign currency fluctuations is reversed next month.
10.4 Open Items Clearing
The clearing function is required for all accounts of vendors, customers and GL
Accounts so that transactions can be tracked by their status as "open" or "cleared". This
enables amongst other things analysis of outstanding from or to parties and linking
payments /credit debit memos (SD & MM) form or to parties with the relevant invoicing
and billing transactions.
For other GL accounts like bank receipt clearing and bank payments clearing accounts
which would receive offsetting entries at the time the bank statement is being
uploaded. In case of GR/IR, SR/IR Accounts a standard transaction is required to be run
which automatically clears the open items.
The basic prerequisite for clearing is that the accounts must be kept on an open item
basis. Customer and Vendor accounts are by default open item managed. This allows
monitoring of outstanding receivables and payables at any time. The open item
management option, however, must be defined for general ledger accounts.
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Open items in GR/IR Clearing Account needs to be evaluated and cleared as at month
end. Automatic Clearing Program shall be used for clearance of GR/IR Clearing account
and the common item for clearing of transaction is purchase order and its item number.
Any un-cleared items in GR/IR Account shall be reversed after a fixed duration, this
may be necessary maintain the GR/IR Account and check the reason of the difference
before reversing any entry.
10.5 Enter Recurring Entry
Recurring entries are business transactions that are repeated regularly, such as rent or
Insurance. Transactions such as rent payments, insurance payments, or regular
monthly costs are usually posted with the recurring entry program.
10.6 Year-end closing
Apart from the activities specified above, following are the additional activities that
need to be carried out during year end closing operations;
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10.7 Closing of Open Periods (Monthly and/or Yearly)
OMFED can open and close these posting periods for posting. As many periods as you
require can be open for posting simultaneously. Usually, only the current posting period
is open for posting and all other posting periods are closed. At the end of this posting
period, the period is closed, and the next posting period is opened. For every Company
code these periods can be opened through the dedicated posting period variant.
Special periods can be open for adjustment and closing activities during the period-end
closing. This access has to be restricted at very high level in OMFED.
10.8 Post Accruals & Deferrals
As at year end, expense accruals can be posted for all known liabilities. This shall be a
manual activity, calculation for the amount to be accrued and the postings to
the GL accounts shall be done by accountants only.
Expense accruals from the pre payments done (e.g. Rental or Insurance charges paid in
advance) shall also be done at the end of the year end. Whenever a prepayment shall
be made, user will have to set up an accrual document with all relevant information e.g.
when to charge, how much to charge and for what duration expense is to be charged.
Note:
Accruals - an accrual is any expenditure before the closing key date, which represents
an expense for any period after this date.
Deferrals - Deferred income is any receipts before the closing key date that represent
revenue or any period after this date.
Accrual/deferral documents are created and have a ‘reversal date’. The accruals can be
reversed automatically.
10.9 Reverse Accruals/ Deferral
As at month end, last month’s accrual postings need to be reversed. While creating an
accrual, we can specify a date of reversal (which should ideally be 1st day of the next
month). U ser can run reversal program anytime it is required, however, it should be
part of month end activity too.
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10.10 Close Asset Fiscal year
This transaction close the previous fiscal year and no further postings can be done in
asset accounting, even if FI periods are open. This process is normally followed after
ensuring that all transactions related to capitalization have been carried out.
Following is the flow chart of activities to be carried out during financial year close.
10.11 Asset Year End Closing
Use this procedure to close the financial year for assets. After this is run, it is not
possible to post to assets in the old financial year. It is possible to reverse the year-end
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close (transaction OAAQ) and re-open the year for posting if necessary. Perform this
procedure when all postings, including all depreciation runs, in the financial year are
completed, and the general ledger accounts have been reconciled with the asset
reports. This is generally before the general ledger is closed for posting to the old
financial year.
Prerequisites:
 The asset fiscal year change (transaction AJRW) should have already been run.
 Asset history report reconciled with general ledger asset accounts.
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 using value dates in the new fiscal year.
Year-end closing is a technical step once the fiscal year is closed, you can no longer
post or change values within Asset Accounting (for example, by recalculating
depreciation). The fiscal year that is closed is always the year following the last closed
fiscal year. You cannot close the current fiscal year.
10.12 Balance carry forward to subsequent year
In this process, balances from previous year get carried forward to next year. This
program is executed at the end of the year, normally as at end of the fiscal year.
Any transactions posted in previous financial year automatically update the opening
balance in next year, if the balances have been carried forward. When the fiscal year
changes, you can carry forward actual values from the previous fiscal year(s) to the
new fiscal year using the Balance carry forward function.
Balance carry forward program updates balances of all balance sheet accounts to the
new financial year and for P&L Accounts, net balance of all P&L accounts is taken to
Retained Earnings Account.
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11. Budgeting :-
SAP has provided the budget system to control and to track the cost
of business in various levels. By proper budgeting system we can track and we can
assume the statistical value of a certain cost.
Through that We can track any kind of expenses and we can restrict that expenses if
the budget allocation amount is over. We can define a budget profile to track the
expenses and restrict the expenses in Cost center level. A cost center budget separates
the company into different cost centers. Each cost center represents a unit within the
company, such as an individual department or a separate facility. The manager of that
cost center maintains responsibility for developing the budget for her area. Companies
can classify cost centers in several ways. These include geographic location, individual
product line or function.
12. Standard Reporting Requirements
12.1 CONTROLLING REPORTS
Node Name Report Description

Interactive Reporting 1.Profitcenter: Plan/Actual/Variance
1. Profit center group: Plan/Actual/Variance
2. Profit center comparison: Plan/Actual/Versions
3. Comparison of profit center groups: Current
Period/Aggregated/Year
4. Profit center: Balance sheet accounts:
Plan/Actual/Variance
5. Profit center groups: Balance sheet
accounts: Plan/Actual/Variance
6. Profit Center Group: Compare Actual
Quarters over 2 Years
List Oriented Report 1. Profit center lists: Plan/Actual
2. Profit center group: Plan/Actual/Variance
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Line Item Reports 1. Profit center: Actual line item report

2. Profit center: Plan line item report
3. Open items report– Profit center receivables, Profit
center payables
4. Balance sheet items transferred periodically– Profit
center Customer, Profit center vendors, Profit center
assets, Profit
Special Functions center materials
1. Profit center: Totals records
2. Profit center: Master data index
12.1.1. Cost Center Level Reporting

Node Name Report Description
Cost center accounting -Plan/actual CCtr: Actual/Plan/Variance
comparisons Area: Cost centers
Area: Cost elements
CCtr: Current Period/Cumulated
Cost center accounting –Additional Area: Activity types
Characteristics
Cost center accounting –Planning reports Cost centers: Planning overview
Cost center accounting –Line items Cost centers: Commitment line
items
Cost centers: Plan line
items CO documents:
Cost center accounting –Master Actual
data Cost costs Master
elements: CO plandata report
indexes Activity Types: Master data report
Cost center accounting –More reports Cost centers: Currency translation
Area: Act./plan
Cost centers: Current/Cumulative/Total
year
CCtr: Period drilldown Actual/Plan
Area: Orders
Activity types: Period drill-down
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12.2 General Ledger Account Reports
General Ledger Postings are reviewed and analyzed by the accounts department on a
regular basis; this process is called as General Ledger Account Analysis. The following
tools are available in SAP for GL Account Analysis.
 Line item Display

 Balance Display
 Various reports based on GL Accounts (GL Evaluations)
Day Book General (Voucher type wise / All)
Journal Book
Bank Book
Cash Book
All available GL Account Analysis as provided in standard SAP shall be available. In

addition to the above SAP has the functionality to maintain accounts on open item
management basis. This enables segregation of transactions based on their status as to
open or cleared. GL Line Item Display is provided for all GL Accounts except
reconciliation GL Accounts. Since Posting entries are coming both from FI as well as
other SAP modules, the drill down facility would also be possible whereby a user will be
able to drill down to the base document. The user would be able to view all the entries
posted to any General Ledger Account through this functionality.
All the customer & vendor accounts are by default Line Item as well as open item
managed. Line items can be displayed as follows:
 Open items
 Cleared items
 Parked items
On the basis of General ledger report SAP Standard GL Balance Analysis will be done for
all GL's. The summary of Postings made during a posting period can be analysed using
this functionality. Yearly Closing procedure and balance transfer activity will have to be
run for transferring closing balances from one fiscal year to the next. The account
balance displays the following:
 The opening balance (the balance carried forward from the previous year)
 The total of all transactions for each posting period, broken down into debit and
credit postings (transaction figures)
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From these figures the system also calculates the following for the account balance
display:
o The balance per posting period

o The accumulated account balance
Below is the SAP standard GL report that can be used for different reporting purposes.
 Balance sheet / P&L statement: This report will give you balance sheet / P&L
 Cash flow report: This report will give you cash flow but it needs customization
based upon format
 GL Balances: This report can be used to display GL balances
 Document Journal at summary level: This report is useful to extract information
of GL entries
 Document Journal at line item level: This report is useful to extract information
of GL entries
 Statement of customer / vendor / GL Accounts: This report will give you
statement of customer wise / Vendor wise / GL wise accounts.
12.3 Accounts Payable Reports
As per the discussion, standard reports are sufficient to fulfill the requirement. Below is
the detail for the same.
 Vendor Balances (Suppler Ledger)

 Vendor Line Items
 Due Dates Analysis for Open Items
 List of Vendor Open Items Due Date Forecast
 Vendor Payment History
 Vendor information system
 List of Vendor Cleared Line Items
 List of Down Payments open at key date
 Vendor Statement (Supplier Statement)
 Vendor Ageing Analysis – Summary / Product Wise
 Vendor Ageing Analysis – Invoice wise
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12.4 Accounts Receivable Reports
An account balance shows the:
 Opening balance (carry forward balance from the previous year).

 Total of all transactions per posting period, broken advance into debits and
credits (transaction figures).
Using these figures the system also calculates the:
 Balance per posting period

 Accumulated account balance
Further these balances can be drill advance to line items. Following different line items
can be displayed in SAP.
12.4.1 Open Item Report
Open items refer to the customer invoices posted at the time of billing for which
payment has not been received or invoice has not been cancelled. Sum of all open
entries in a customer accounts forms the balance outstanding with customer.
12.4.2 Cleared Item Report
Cleared items refer to the closing of the receivable balances through payment received
or adjusted against advances and debit/credit note (SD & MM).
12.4.3 Parked Item Report
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Parked documents are those which are yet not posted in the system i.e. no financial
transaction posted. These are used for maker – checker approval process. These parked
documents can be separately identified in the system.
12.4.4 Special General Ledger Transactions Report
Special General ledger transaction covers transactions like advance payment receipt
request, advance payment received, etc. These transactions can be separately
identified for customers in the system, whereas General Ledger updates are normally
done in a separate GL account.
12.4.5 Clearing Item Report
During clearing, the system enters a clearing document number and the clearing date
in these items. In SAP clearing of open items can be done in two ways:
 Manual clearing
 Automatic clearing
12.4.6 Other Reports
As per the discussions we had, below list of reports provided by SAP is meeting the
requirements. Any additional reports may need some customization.
11 ACRONYMS USED
The following abbreviations and acronyms have been used in this document:
Abbreviation & Acronym Description

Asset Accounting (Fixed
AA Assets)
ALE Application Link Enabling
AP Accounts Payable
AR Accounts Receivable
AUC Asset under Construction
CA Controlling Area
CAPEX Capital Expenditure
CCA Cost Center Accounting
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CCtr Cost Center

CEA Cost Element Accounting
CO Controlling
COA Chart of Accounts
COD Chart of Depreciation
CR Credit
DR Debit
FI Finance
FICO Finance and Controlling
GL General Ledger
Goods Received / Invoice
GR/IR
Received
HR Human Resource
IO Internal Order
INR Indian Rupees
LC Letter of Credit
LVA Low Value Assets
MM Material Management
P&L Profit and Loss
PCA Profit Center Accounting
PO Purchase Order
Real time gross settlement
RTGS
systems
SD Sales and Distribution
T. Code Transaction Code
TT Telegraphic Transfer
VAT Value Added Tax
WIP Work in Progress

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SAP Implementation Project

Business Blue Print

SAP (ERP) Implementation PROJECT

Odisha State Cooperative Milk Procedure’s Federation Ltd.

D-2, Saheed Nagar,

Business Blueprint Document

FINANCE & CONTROLLING

Last Updated: 03-10-2016

Odisha Small Industries Corporation Limited

ISO 9001-2008 Certified Company

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5.1 General Explanations.................................................................................................37

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7.3 Depreciation Area.....................................................................................................64

10. MONTH-END & YEAR-END CLOSING................92

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10.2. Reverse Accruals.................................................................................................94

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Odisha Small Industries Corporation LTD. Reviewer

Pradeepta Kumar Mohanty Managing Director

Client Approver / Signoff

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Business Blueprint document is main deliverable of Orissa State Cooperative Milk

The source of blueprint document is based on business process provided by

Orissa State Cooperative Milk Producers' Federation (OMFED)

The objective of ‘AS-IS’ and “TO-BE” Business Blueprint document is to

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OMFED®'s main activities includes promoting,

About this document:

Following modules in Finance and controlling shall be used by Corporation.

Finance Accounting (FI)

3. ORGANIZATION STRUCTURE SOLUTION

SAP Finance and Controlling Organization Structure is defined to ensure reporting at

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Finance and controlling Structure comprises of following elements:

Definition of Organizational Unit

3.1 Chart of Account segment

 The G/L account number and G/L account name.

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Orissa State Cooperative OMFED GROUP - OPERATING CHART OF

3.1Company Code Segment

The information, which is specific to a particular Corporation, is maintained in the

 Account group – for G/L grouping purposes.

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3.2 Controlling area

3.2.1 Profit Center Hierarchy and Profit Centers

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Presently in OMFED there is no profit center accounting.

Profit center hierarchy

Chart of Account: 1000

Masking Hierarchy code Hierarchy Description

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3.2.1 Cost Center hierarchy and Cost Centers

The definition of a cost center can be based on following: Functional requirements;

Presently in OMFED there are few cost centers in accounts.

Cost center standard hierarchy“1000: OMFED GROUP STANDARD HIERARCHY” is the

Chart of Account: 1000

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10BBHR1399 10BBHR13 1000BBSR01

 BBSR stands for Bhubaneswar.

3.2 Cost and Revenue Element Accounting