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FI Financial Accounting

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Presentation on theme: "FI Financial Accounting"— Presentation transcript:

1 FI Financial Accounting
Quarles: Flya Kite

2 Financial Accounting External Accounting Cash Flow Profit & Loss
Balance Sheet Profit & Loss Cash Flow Stockholders Bankers, Lenders IRS, Taxing Authority External Auditors SEC Quarles: Flya Kite

3 FI/CO Organizational Structure Elements
Client Company Code Chart of Accounts Fiscal Year Variant Credit Control Area Quarles: Flya Kite

4 Client Highest hierarchical level in an SAP system
A complete database containing all the tables necessary for creating a fully integrated system Master records are created per client Quarles: Flya Kite

5 A COMPANY CODE IS... A BALANCED SET OF BOOKS Quarles: Flya Kite

6 Company Code A required structural element
A legally independent entity The smallest organizational unit for which accounting can be carried out Where business transactions are processed Where accounts are managed Where legal individual financial statements, such as the balance sheet and the profit and loss statement, are created Quarles: Flya Kite

7 Chart of Accounts A listing of the accounts
A chart of accounts must be assigned to every company code Several company codes can use the same chart of accounts A different chart of accounts can be used if a different grouping of the chart of accounts is required Flya Kite uses FICH Quarles: Flya Kite

8 Fiscal Year Variant Used to define the fiscal year for the company
Standard year = 12 periods Special periods = up to four Allow additional closings of the books during or at the end of the year Quarles: Flya Kite

9 Credit Control Area An organizational unit or area of responsibility created to control customer credit limits A company code is assigned to one and only one credit control area Multiple company codes can be assigned to one credit control area Quarles: Flya Kite

10 CHART OF ACCOUNTS - FICH
CLIENT CHART OF ACCOUNTS - FICH CREDIT CONTROL AREA = FIFL COMPANY CODE FIFL Quarles: Flya Kite

11 Master Data Describes items or objects used in a business such as accounts, materials, vendors, customers The information usually remains unchanged over an extended period of time Each master data record is unique in name or number Quarles: Flya Kite

12 GL AR AP FI Master Data MASTER DATA G/L ACCOUNTS CUSTOMERS VENDORS
Quarles: Flya Kite

13 G/L Master Records A master record must be created for every G/L account Business transactions are posted to G/L accounts Line items are displayed by G/L account Account number 10000_ _ _ Bank Account Account number Accounts Payable Quarles: Flya Kite

14 G/L Master Records Chart of Accounts information G/L account number
G/L account name Account type: Balance sheet or Income Statement Account group: Info that controls creation of the master record in the company code Account number Chart of accounts Balance sheet account P&L statement acct type Account group Quarles: Flya Kite

15 Account Group Identifier that controls which fields must be entered when the account is created Can determine a valid number interval for the G/L account Must be created before creating G/L master records - configuration data Quarles: Flya Kite

16 Account groups Chrt/accts Acct group From acct To account Description
FLCH BSA Balance sheet FLCH PLA P & L accounts FLCH RAA Reconciliation Quarles: Flya Kite

17 G/L Master Records Contains Company Code information Account Currency
Tax Category Used for country specific taxes during pricing Reconciliation Account for Account Type Open Item Management Whether each item in an account must be used to clear other line items in the same account –each line must zero out before it can clear Line Item Display Quarles: Flya Kite

18 Company Code Information
Sort key Necessary when Line Item display is selected Determines the field that will be used to sort the line items Posting date Document date Cost center Others Quarles: Flya Kite

19 Company Code Information
Reconciliation account Accounts receivable, Accounts payable, Fixed Assets, etc. When you post to an account in the sub-ledger, the system automatically posts to the corresponding reconciliation account The general ledger is automatically updated Quarles: Flya Kite

20 Reconciliation Account
Customers Subledger 1000 2000 Customer1 Customer2 Accounts Receivable 3000 Reconciliation Account Quarles: Flya Kite

21 Reconciliation Account
Vendors Subledger 3000 Vendor2 5000 Vendor1 Accounts Payable 8000 Reconciliation Account Quarles: Flya Kite

22 Company Code Information
Field status group An identifier which controls which fields appear on a G/L document which uses this account - configuration data Sets screens for entering data so they are specific to the account or to the transaction Quarles: Flya Kite

23 Master Data GL AP AR MASTER DATA G/L ACCOUNTS VENDORS CUSTOMERS
Quarles: Flya Kite

24 Accounts Payable Master Records - Vendors
A master record must be created for every vendor Centralized data for both MM & FI General data Address Control data Payment transactions Company code data Account management Purchasing org data Purchasing Partner functions Quarles: Flya Kite

25 Vendor Master General data Address screen Address screen Control
Payment transactions Address screen Vendor Name Search Term Street address, City, Postal code Country Language Telephone, Fax, Data numbers Quarles: Flya Kite

26 Master Data GL AP AR MASTER DATA G/L ACCOUNTS VENDORS CUSTOMERS
Quarles: Flya Kite

27 Account Receivable Master Records - Customers
A master record must be created for every customer Centralized data for both SD & FI General data Address Control data Payment transactions Company code data Account management Sales area data Sales Shipping Billing ... Quarles: Flya Kite

28 GR/IR account: a suspense account
Purchase Requisition No Impact on Finance Purchase Order Integration MM- FI Via Automatic Account Assignment Goods Receipt Goods Receipt Dr Cr Inventory $150 Dr Cr Expenses $150 Dr Cr GR / IR $150 or Quarles: Flya Kite

29 GR/IR account Invoice Receipt Payment GR/IR Vendor Cash Dr Cr Dr Cr
$150 $150 $150 $150 $150 Quarles: Flya Kite

30 Customer Master Address screen Customer Name Search Term
Street address, City, Postal code Country Language Telephone, Fax, Data numbers Control data screen Marketing screen Unloading points screen Foreign trade screen Contact persons screen Sales screen Shipping screen Billing screen Taxes screen Output screen Partner functions screen Quarles: Flya Kite

31 FI Transactions Quarles: Flya Kite

32 Procurement Process Outline Agreement or Scheduling Purchase
Requisition Vendor Demand Accounts Payable Purchase Order Goods Receipt & Inventory Mgt. Invoice Verification Quarles: Flya Kite

33 Document Principle In SAP, transaction postings are
Document Principle In SAP, transaction postings are always stored in document form The document remains as a complete unit in the system until it is archived Only complete documents can be posted A document consists of a document header and at least two line items Quarles: Flya Kite

34 Tolerances Groups for Account Postings
Amount limits for your employees which control the maximum document amount the employee is authorized to post the maximum amount the employee can enter as a line item in a customer or vendor account the maximum cash discount percentage the employee can grant on a line item the maximum acceptable tolerance for payment differences for the employee Quarles: Flya Kite

35 Tolerance Group for A/R & A/P
Handles differences in payment and residual items which can occur during payment settlement Allocate a tolerance group to each vendor in the master record Tolerances up to which differences in payment are posted automatically to expense or revenue accounts when clearing open items Quarles: Flya Kite

36 Where the company “really” finds out what is going on!
Controlling CO Where the company “really” finds out what is going on! Flya Kite Quarles: Flya Kite 36

37 Cost centers => Products
Cost Element Accounting Which costs are incurred ? Product related costs (Direct , traceable costs) Material Labor Overhead costs (Indirect costs) Admin wages Depreciation Interest Product Costs Direct Traceable Overhead costs Indirect Cost centers => Products Must be allocated from cost centers to products Cost Center Accounting Where are the costs incurred? Product Cost Accounting Purchasing What for? Product Manufacturing Administration Quarles: Flya Kite Sales 37 37

38 Cost Elements Note: primary cost elements are same in CO and FI
General ledger accounts Revenue accts P & L accts Expense accts Bal. sheet accts Primary cost elements CO Secondary cost elements Note: primary cost elements are same in CO and FI Cost element Classifies organization’s valuated consumption of production factors within a controlling area Corresponds to a cost relevant item in the chart of accounts Quarles: Flya Kite 38 38

39 Primary Cost Elements A way to identify which type of cost - Salaries, utilities, selling expenses Cost that arise from consumption of goods/services from outside of the enterprise Must be created in the GL chart of accounts in FI Each posting to a cost element must be assigned either to a cost center or an order Primary Cost Elements The same in FI and CO = primary cost element is a general ledger account in FI Identify WHICH type of cost based on the nature of the cost in traditional financial accounting model Costs that arise from consumption of goods/services from outside the enterprise Quarles: Flya Kite 39 39

40 Secondary Cost Elements
Used exclusively in CO for allocations and settlements Internal cost allocations Created and exist ONLY in CO Cannot exist in FI The internal value flows such as allocations and overhead calculations Secondary cost elements are allocated to cost objects within CO Represent activity values produced in internal cost allocations Secondary Cost Elements Used only in CO for allocations and settlements Do not enter general ledger accounts or financial statements Used to allocate costs for internal activities Do not correspond to a G/L account in FI Used only in CO and cannot be defined in FI as an account Represents activity values produced in internal cost allocations Quarles: Flya Kite 40 40

41 Cost Centers and Cost Elements
Closely linked in SAP Each posting to a cost element is assigned either to a cost center or an order Data is subdivided between both cost centers and cost elements for analysis Cost Centers = where Cost Elements = which Quarles: Flya Kite 41 41

42 Distributions A method of allocating primary costs
Primary cost element is the same in the sender and receiver Cost element retains its character: same element in receiver as it was in sender Sender cost centers and receiver cost centers are documented in the CO document Quarles: Flya Kite 42

43 Distributions Identity of the cost is Identity of the cost
the same in the Receiver Cost Centers Identity of the cost in the Sender Cost Center Primary Cost Element Rent Expense $10,000 Cost center A060 Sales & Mktg Rent Exp $2,500 Distributed Rent Expense 780000 Mfg Rent Expense $5,000 Adm Rent Expense $2,500 Nature of cost (i.e., rent expense) comes across to receiver Quarles: Flya Kite 43

44 Assessments A method of allocating both primary and secondary costs
Iterative or hierarchical Primary costs are grouped together and transferred to receiver cost centers as a single secondary cost element Sender cost centers and receiver cost centers are documented in the CO document Primary and Secondary Cost Elements Costs grouped together and transferred as a single secondary cost element charge EX: IS Charges, Cafeteria Charges Useful when receiver does not care about elements of the transfer – only the total Quarles: Flya Kite 44 44

45 Assessments Primary cost element is lost to receiver
Secondary Cost Element Sender Cost Center Receiver Cost Centers Sales & Mktg IS Assessment $25,000 Information Systems Costs = $100,000 (wages, paper, depreciation, etc) Cost center A070 Mfg IS Assessment $50,000 Allocated IS costs 800000 Primary cost element is lost to receiver Primary costs grouped then sent as secondary cost Type types Hierarchical Specified by the user Iterative System determines sequence iteratively Admin IS Assessment $25,000 Nature of costs is unknown to receiver Quarles: Flya Kite 45 45

46 EXERCISE FI/CO01: CREATE GENERAL LEDGER B/S ACCOUNT
FI/CO Transactions EXERCISE FI/CO01: CREATE GENERAL LEDGER B/S ACCOUNT We will create a bank account manually. A bank account is an asset account located in the Balance Sheet EXERCISE FI/CO02: CREATE GENERAL LEDGER GR/IR ACCOUNT EXERCISE FI/CO03: CREATE P/L ACCOUNTS Now that the vendor account has been created, the corresponding rent expense account is to be created in your chart of accounts using a reference account. Also, a utilities expense account is to be created. Using a reference account copies much of the detail data from the reference account to the account being created thus saving time making repetitive entries. Quarles: Flya Kite

47 EXERCISE FI/CO04: CREATE GENERAL LEDGER P&L ACCOUNTS
FI/CO Transactions EXERCISE FI/CO04: CREATE GENERAL LEDGER P&L ACCOUNTS To process billing we will need Profit & Loss Statement accounts for Sales Revenue and Sales Discounts EXERCISE FI/CO05: RUN GL ACCOUNTS REPORT This report will give you a summary of all accounts assigned to your company code. EXERCISE FI/CO06: CREATE PRIMARY COST ELEMENTS Primary cost elements: are costs that arise through the consumption of goods and services that originate from outside the company. They represent the link between FI and CO. This exercise creates the linkage between FI cost elements (GL accounts in FI) and the cost element categories to which they will link in CO. Quarles: Flya Kite

48 EXERCISE FI/CO07: CREATE VENDOR MASTER RECORD
FI/CO Transactions EXERCISE FI/CO07: CREATE VENDOR MASTER RECORD Flya Kite has rented new office space. The accountant in charge is requested to create a new vendor account for the real estate company. EXERCISE FI/CO08: G/L DOCUMENT ENTRY You receive the utility bill for the month for the plant and it must be paid immediately. The bill is for $1, The expense must be recorded in the General Ledger. It will be initially charged to the Administration cost center and charged out to manufacturing cost centers later. EXERCISE FI/CO09: DISPLAY ACCOUNT BALANCES (OR LINE ITEMS) Quarles: Flya Kite

49 EXERCISE FI/CO10: POST VENDOR INVOICE
FI/CO Transactions EXERCISE FI/CO10: POST VENDOR INVOICE Ross’ Rockin Rentals has sent the invoice for the first month’s rent of $350. Please post the invoice using the accounts you have created in your Company code. EXERCISE FI/CO11: DISPLAY ACCOUNT BALANCES (AND/OR LINE ITEMS) EXERCISE FI/CO12: POST OUTGOING PAYMENT The invoice of Ross’ Rockin Rentals is due for payment now. You are requested to clear the invoice amount by posting an outgoing payment using the bank account (no _ _ _) of your chart of accounts. Quarles: Flya Kite

50 EXERCISE FI/CO13: POST OUTGOING PAYMENT
FI/CO Transactions EXERCISE FI/CO13: POST OUTGOING PAYMENT The invoice of Widgets & Things (created in the Procurement Logistics exercises) is due for payment now. You are requested to clear the invoice amount by posting an outgoing payment using the bank account (no _ _ _) of your chart of accounts. EXERCISE FI/CO14: RECEIVE PAYMENT FROM CUSTOMER A sale to a Crosby Trinkets was processed and billed in the Sales Logistics system. That customer has now received the invoice and sends you payment. The payment will be posted to his G/L account. Quarles: Flya Kite

51 EXERCISE FI/CO15: CREATE DISTRIBUTION CYCLE
FI/CO Transactions EXERCISE FI/CO15: CREATE DISTRIBUTION CYCLE Distribution accomplishes the charging of primary costs from a collection cost center to all of the cost centers that benefit from the incurrence of that primary cost. Periodically, usually at the end of the month, the primary cost element will be allocated (charged) to the receiving cost objects. The distribution process distributes the balance(s) from the original sender(s) to the receivers. The original sender account is credited and the original receiver account is debited by the distribution. In this manner the distributed primary cost retains its identity in the receiving cost object’s expense list. EXERCISE FI/CO16: REVIEW ACTUAL LINE ITEM REPORT This exercise allows you to see how the rent expense cost element has been distributed to the various receiving cost objects using the statistical key figure set up as the basis for the distribution. Quarles: Flya Kite

52 EXERCISE FI/CO17: CREATE ASSESSMENT CYCLE
FI/CO Transactions EXERCISE FI/CO17: CREATE ASSESSMENT CYCLE With assessment both primary and secondary postings can be allocated. You can define cost allocation by assessment if the composition of costs is not important for the receiver – for example, receiver cost centers rarely require detailed breakdowns of cafeteria costs. In our case, certain charges from the local utility company are known to be exclusively attributable to the Manufacturing cost centers. Therefore, once a month the utility charges are assessed from the Administration cost center to the Manufacturing cost centers. EXERCISE FI/CO18: REVIEW ACTUAL LINE ITEM REPORT Review how the utility expenses have moved from cost center to cost center as assessed costs with no indication as to coming from the utilities cost element Quarles: Flya Kite


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