Accounting

Accounting, or accountancy, is the measurement,

processing and communication of financial information
about economic entities to external and internal users.
The operation which records financial transactions i.e.
storing, sorting, retrieving, summarizing, and presenting
the information in various reports and analyses.
The central task of G/L accounting is to provide a comprehensive picture for
external accounting, which is achieved by recording business transactions in all
the other operational areas of a company code. Integration with other
operational areas ensures that the accounting data is always complete and
accurate.
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FI/CO Org. Units

Company - Consolidation
Controlling Area Internal reporting
Co.Code External reporting
Credit control area credit control
FM area Cash and finance
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FI Org. Structure

2008 by SAP AG. All rights reserved.

Chart of Accounts (COA)

COA is a list of all G/L accounts used by one or several company
codes.
In the SAP R/3 system, each transaction that has a financial
impact is recorded in a general ledger (G/L) account or sub-ledger
accounts (Vendor, Customer, Fixed Assets and Contractor
Receivables/Payables-FICA) that are posted to the G/L via
reconciliation accounts. This is achieved through use of COA
(Chart of Accounts). Chart of Accounts consists of GL accounts,
group wise. GL accounts are master data created under GL
account groups.
Each GL account group controls fields of GL account master data.
Charts of accounts can have three different functions in the system
- Operating Chart of Accounts
- Group Chart of Accounts
- Country Specific Chart of accounts
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Account Groups
controls which fields must be entered when a GL
account master is created
determines a valid number interval for the G/L account
master
Must be created before creating G/L master records
Account groups can be defined freely. But normal
classification can be made
- General GL accounts
- Bank accounts
- Expense accounts
- Revenue accounts
- Reconciliation accounts
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G/L Master Records

Contain:
Chart of Accounts
Company Code
G/L account number
G/L account name
Account type: Balance sheet or Income
Statement
Account group
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G/L Account-Features
The SAP FI General Ledger has the following features:
Automatic and simultaneous posting of all subledger items in the appropriate general ledger
accounts (reconciliation accounts)
Simultaneous updating of general ledger and cost
accounting areas
Real-time evaluation of and reporting on current
accounting data, in the form of account displays,
financial statements with different financial
statement versions and additional analyses.
2008 by SAP AG. All rights reserved.

G/L Accounts-Usage
All individual transactions posted to GL accounts can
be checked at any time, in real-time, by displaying the
original documents, line items, and transaction figures
at various levels such as:
Account information (Ledger Balances)
Journals (Vouchers)
Totals/transaction figures (Voucher totals)
Balance sheet/profit and loss evaluations

Master Data
Master Data describes items or objects used in a
business such as GL accounts, materials, vendors,
customers and assets that remains unchanged over an
extended period of time.
GL accounts are identified as P&L account or B/S
account in its master data.
The profit/loss is posted to a specific GL account called
Retained Earnings account. The value posting to this
account happens on yearly basis.
Transaction data is data that is used for relatively short
periods of time, usually to record business transactions
(sales orders, purchase orders, production orders,
payroll amounts).

T Codes: FS00-GL account, XK01-Vendors and XD01-Customers.

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Reconciliation Accounts
Reconciliation account

Accounts receivable, Accounts

payable, Assets
When

you post to an account in the subledger, the system automatically posts to

the corresponding reconciliation account
The general ledger is automatically
updated
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Reconciliation AccountExample
Each Master data object will have
a account group to control master
data fields like either to suppress,
mandatory ,optional or to display
the field entry.
Here the asset master data linkage
to GL accounts Is depicted.

2008 by SAP AG. All rights reserved.

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Account Determination
When a transaction occurs (inventory receipt,
withdrawal etc.), SAP automatically determines the
correct GL accounts and other account assignment
objects with reference to nature of transaction and
other parameters. This is achieved through account
determination, which is configured in IMG.
Account determination is configured for MM, SD, Asset
accounting, Taxation and Cost objects.

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Account determination
objects
Allows the same account determination rules
to be used in multiple plants
Assign a valuation grouping code to the
valuation area, then use the valuation grouping
code in automatic account assignment

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FI-MM Account
Determination

Account determination happens at COA

level
Account determination for FI-MM happens
on below parameters
Plants/Valuation

grouping code
Movement type and Transaction/Event Key
Material type and valuation class

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FI-MM Account Determination

2008 by SAP AG. All rights reserved.

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FI-SD Account
Determination

FI Account determination is guided by

condition tables defined in SD.
Generally, FI Account determination with SD
happens on the parameters of

Application - V
Account determination type-KOFI/KOFK
Chart of accounts INT or CAIN etc.
Sales organisationDistribution ChannelCustomer account assignment group- 01 or 02 etc.
Materials account assignment group- 01 or 02 etc.

Account key-ERL,ERV etc.

Custom access keys

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FI-AA account determination

Using the Asset Accounting (FI-AA) component, transactions are
automatically updated to the general ledger. These include all
accounting transactions that are posted to assets, and all changes to
asset values that are automatically calculated by the system
(particularly depreciation).
This update takes place immediately online for the master depreciation
area. For all other depreciation areas, this update is either direct or
takes place during periodic processing.
When you post with account assignment to an asset, the system
determines the G/L accounts that are posted based on: the chart of
accounts valid in the company code, the depreciation area, and the
account determination key.
2008 by SAP AG. All rights reserved.

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FI-AA account determination

2008 by SAP AG. All rights reserved.

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Finanacial Statement
Version
All the Gl accounts identified as B/S or P&L
accounts are presented as below; T.Code: FSE2
Liabilities

-Share Capital
- Equity
- Preference
-Loans
- Short term
- Long term
-Current liability and provisions

Assets
- Fixed Assets
- Investments
- Current assets
- Debtors
- Bank
- Cash
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Finanacial Statement
Version
All expenses are debits
All incomes are credits
Difference is the profit/loss.
Profit/loss is posted to Retained Earnings A/cat the end
of year.
Carry forward balances of B/S accounts to new fiscal
year happens at the end of the year.
T.Code FAGLGVTR:
Note: This transaction do not post any accounting document.

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Controlling (CO)
While there are different requirements for internal and
external users of accounting data, the underlying data
is usually the same for both purposes and is captured
while recording business transactionspurchase
orders, goods receipts, material withdrawals, etc. The
data can then be presented in different ways for
different users.
Info system in FI is standard for external reporting
Info system in CO is flexible for internal reporting

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Controlling (CO)
CO

FI

Controlling
Internal Accounting
Cost Accounting
Managerial Accounting
Management Information
Flexible Non-standard
Financial Accounting
External Accounting
Financial Statements
Legal Requirements
Standard
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Cost Elements
Primary Cost Elements

Expenses in FI that are relevant to cost accounting are

recorded in CO using primary cost element.
Primary cost elements can only be created when a G/L
expense account exists. Thus, there is a one-to-one
relationship between primary cost elements and G/L
expense accounts.
When an FI posting occurs in a G/L account for which
a primary cost element has been defined, a valid
controlling object (cost center, order, etc.) is required
before posting.
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Cost Elements
Secondary Cost Elements

Secondary Cost Elements are used exclusively for

certain types of CO transactions.
Secondary cost elements have no corresponding
G/L account.
Secondary cost elements can be used in
transferring costs from one cost center to other cost
centers. Primary costs are grouped together and
transferred to receiver cost centers using a
secondary cost element.
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Cost Centers
Cost centers are used to track WHERE costs
incurred in the organization. As costs are
incurred, they are assigned or posted to the
appropriate cost center.
The posting and assignment of costs to cost
centers is a critical step in using the CO
module.
Cost centers are organized in a Standard
Hierarchy.
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Cost Center Standard

Hierarchy
The cost center standard hierarchy organizes cost
centers and provides the ability to organize reports at
different levels in the organization:
FS-CC-## (Standard Hierarchy)
##HQ (Cost Center Group / Hierarchy Area)
HQ Cost Centers
A010 Finance
A020 H/R
A030 Sales
A040 Marketing
A050 Purchasing
A060 - Administration

##MFG (Cost Center Group / Hierarchy Area)

MFG Cost Centers
P010 Production
P020 Warehouse
P030 Receiving

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Cost Center Groups

Cost Center Groups can also be defined
to support additional reporting
capabilities:
##HQ (Cost Center Group / Hierarchy Area)
HQ Cost Centers
A010 Finance
A020 H/R
A030 Sales
A040 Marketing
A050 Purchasing
A060 - Administration

## Sales group
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Cost Allocation
Frequently, costs like rent, computer expense,
utilities, etc. have to be allocated to cost
centers to provide accurate cost reporting.
Costs can be allocated using a statistical key
figure, which defines some measurable value
related to the cost center, like square footage,
head count, CPU hours, etc.
Costs can also be distributed using fixed
percentages.
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