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Enterprise Structure

You need to define your organization's structure as an enterprise structure, you do so by

defining the required organizational units (or elements) and to define there independencies
by assigning them to each other, try to keep everything simple and configure only what is
required, this is very important because it can be extremely difficult to correct a structure
that is already operational.

SAP ERP already comes delivered with a number of standard organizational units to reflect
the requirements of an enterprise in such areas as accounting and logistics, try to use the
SAP units before creating your own and if you do need to change any of SAP units copy
them first and use the copy.

An enterprise structure will consist of organizational units pertaining to FI, SD, MM, CO
an so on, since values flows across all these applications, I will be only covering FI (and a
bit of CO as they are linked together) in the FI section but will cover CO in more detail in
the controlling section, hopefully I will add SD and MM sections at a later date when my
SAP knowledge has grown.

Organizational Units

Firstly lets briefly recap on what a client is which I have also covered in detail in my SAP
basis section, a client is an obligatory organizational unit, a client (field name MANDT) is
a commercially organizationally and technically self-contained unit within the SAP system,
having its own master records and tables, you can have one or more clients in a SAP
system. Because the client is at the top of the SAP system hierarchy any specification that
you make or data that you entered at this level is valid for all company codes and for all
other organizational structures within that client.

Used for external reporting purposes the organizational units are designed to fulfil your
business requirements and meet the legal or statutory regulations of external parties. You
will assign these organization units to each other in order to build a framework for
processing business transactions by transferring data automatically between the individual
components. The table below shows the obligatory and optional organizational units in FI

Obligatory Optional
 Company
 Business Area
 Client
 Functional Area
 Company Code
 Financial Management Area
 Credit Control Area
 Profit Center
 Segment
I will be covering all organizational units in my FI section regardless if they are optional
but before we start configuring them, we need to meet the country-specific requirements by
completing the localization organizational units supplied by SAP.

Localize Organization Units

The SAP supplied organizational units are country independent, before copying the units to
define you own organization structure you will need to localize them in client 001 (my
backup to client 000), using the installation program and selecting the appropriate country
template, the country installation program makes changes in the chart of accounts, account
determination, financial statement version, tax procedures, payment methods and others to
the standard organizational units and creates sample organizational unit for a particular
country, if you want to localize for more than one country you simply repeat the country
installation using other country templates. The standard SAP system includes a country
template for each of the 40 country versions, each country version consist of generic system
functions, country-specific functions and a country template. The country versions do not
constitute separate application components rather the country specific functions are
contained in the various application components.

Lets take a look at completing the customizing of country installation, first login to client
001 (or client 000) then use transaction code O035, select the country version button

Now we can specify the desired country, lets choose the US (note that SAP uses a two-
character ISO code to represent a country (field name LAND1 table T005 in the system),
make sure that the test run checkbox is selected, once you are happy after the test run then
you can re-run without the test run checkbox selected.

The results will be displayed and this covers many pages, notice that no changes have been
made (simulated) as this was a test run, I am showing the first two pages below, make sure
you check for any errors and fix them before running for real.
When you do the run for real, you will be asked to create a workbench request which can
be transported to other clients, the below screenshot is the Indian country customizing.

Some of the important changes that have happened are detailed below

Most of the default settings of the global company 0001 are changed by the SAP
system into a new sample company code, corresponding to the country you have
selected. The system also attaches the relevant document entry screen variant, field
status variant, tax codes for non-taxable transaction, currency, etc to the newly
Company Code
created company code.

Do not directly customize any localized sample company code, instead copy and
create company code and work with that.
The country installation program assigns controlling area 0001 to countries
working with the generic chart of accounts (INT), for others (working with there
own chart of accounts) their own controlling areas are assigned. For example in the
Controlling Area case of Germany two controlling areas are provided DE01 for the Joint Standard
Accounting System and DE02 for the Industry Standard Accounting System.

Unlike the company code you do not need to copy the sample controlling area, but
can work directly with the area that is localized, unless you need two controlling
areas and want two separate areas.
The only change the installation programs makes is changing the currency of the
Credit Control Area
default credit control area (0001) to the currency of the localized country
Financial The country installation changes the default language, currency and fiscal-year
Management Area variant
Storage Location and
Purchasing only the description is changed
Plant The changes include calendar, address and currency
The changes that are made are to the shipping point 0001 include calendar, country
Shipping Point
and currency
Sale Organization The changes made to the default sales organization 0001 are calendar and currency
The changes that are made to the calendar to match the localized country.
Planning Point

The country specific functions for the US relate mostly to Financial's and HR which
including these may be different when you localize other countries, you should be able to
obtain this from the web or SAP.

 Asset Accounting
 Bank Accounting including check management and lockbox procedure
 Localized version of Payroll (PY) component, Payroll US (PY-US)
 Sales and use Tax
 Withholding Tax (including reporting)

Be careful of the country installation program as you can overwrite import data, never run it
in a production client otherwise you will overwrite any settings for all the organization
units named 0001.

Model Company

To learn SAP FI/CO I have created a fictitious company so that we can learn many of the
features with the FI/CO module, the company is based on Mobility appliances for the
disabled, there will be two companies which manufactures and distribute mobility products,
now I will be keeping things very simple and I will expand on this company in the future to
later include HR, Sales and Distribution, Material Management as my experience of SAP
grows, but for the time being I will focus only on Finance and Controlling.

I have broken out the details of the company in its own section which can be viewed at the
Datadisk Mobility section, this allows you to print the section off and keep it handy while
we progress.

A client is by definition an organizationally and technically self-contained unit within SAP,
all clients in the system shared the same repository objects (programs, tables, etc) as known
as cross-client data, the customizing settings and system master data are largely client-
specific. As a result clients are used to keep data separate to comply with commercial or
corporate law requirements.

For more information on SAP clients see the Basis administration section, I have already
created a client 800 that I will use to demonstrate the Datadisk Mobility company.


A company is the organizational unit in SAP in which you can draw individual financial
statements according to legal requirements of the country where it is incorporated, you can
designate legally dependant branches as companies and join them together as legal units by
consolidation. A company is generally used in the legal consolidation module to roll up
financial statements of several company codes, acompany can consist of one or more
company codes. The client sits at the top underneath is the company which includes one or
more company codes, if a company has more than one company code, all company codes
need to be assigned with the same operative chart of accounts and fiscal-year variant even
though that can have all different local currencies for their day-to-day transactions.

Firstly we are going to the create two companies (or trading partners), we will use
transaction code OX15, select new entries (if the new entries button is missing you need to
select the change button which is the glass and book button or select ctrl-F1) and fill in the
details below as per the Datadisk Mobility company

 company (RCOMP) - SAP uses a six character company ID to denote the company
 company name - you can enter up to 30 characters for the company name
 name of company 2 - this is an alias for the company, this is optional
 address details - these are self explaining
 country - this is a required field, select a two character country from the drop down
 language key - this helps to display the correct language, we will use English
 currency - this is the local currency of the company, transactions will use this
currency, it is know as the company code currency or country currency, with the
ledger concept in place in new G/L, all the local ledgers are maintained using this
currency, note that the local currency must be translated into the group currency, if
the local currency is not the same as the group currency.

Currencies are part of the international ISO standard, each currency is represented by a
three-character ISO code (USD, GBP, etc) and stored in a few tables the main table being
TCURC (use transaction code SE16 to view), decimals places are configured using OY01
(Country Global parameters) and OY04 (decimal places for company codes), becareful
when changing decimal places as you can corrupt the system.

When you save the company details, a transport request will appear, now I have already
created a project and attached a transport request to the project, see projects for more details
on this. I will assign this to the mobility project. This will happen everytime you create an
object so I will not mention it again, just assign any changes to this transport or to different
transports within the project.

As you can see below here is the start of the mobility project with the transport request
assigned, this will then allow me to transport the changes to another SAP system.
Now we setup the second company (trading partner), fill in the details below and save

Once completed you can view the companies from the change/view screen of transaction
code OX15

All the configuration is saved in a table called T880, which can be viewed using transaction
code SE16, notice the RCOMP column which we mentioned above.

Company Codes
The company code is the smallest organizational unit of external accounting for which you
can create a complete and self-contained set of accounts for transaction posting, besides the
statutory financial statements (balance sheet, profit and loss). You should create a company
code according to tax law, commercial law and other financial accounting criteria
representing a legally independent company. You can also use the company code to
represent a legally dependant operating unit abroad, if there are external reporting
requirements including segment reporting, for that unit in the local currency of that country.
All the FI-related business transactions and evaluations are represented at the company-
code level.

You have to create at least one company code per client to implement the FI component for
your organization. We will be setting up a number of company codes in our example in the
same client. All company code data is stored in a table called T001 in the system.

The SAP system will create assignments between the company codes and other
organizational units to ensure that data is transferred between them, I will highlight this at
the end of each section as we will view the table that links them together, for example one
or more company codes need to be assigned to a company, a credit control area, a
controlling area, etc.

There are a number ways to create a company code,

 from scratch
 copy an existing company code and make necessary changes

I will show you both ways, first lets start by creating a company code from scratch, we will
use transaction code OX02, the first screen displays all the currently setup company codes,
select the new entries button, then filling the details below

 company code - this is a four-character alphanumeric identifier

 company name - the company name
 additional data - is all self explaining

When you save the details an address screen pops up, complete as much as you want
Once you save it you are taken back to the company code view screen, here you can see our
company code

If you double-click on the company code you will be taken to the change screen, you can
amend the existing details or you can select the address button (or Shift + F5) to change the
address details
Lets have a quick peak at table T001 using transaction code SE16, I filtered on BUKRS
using DD13, you can see the newly created company code.

Lets create company code DD11 (House Fixtures) and DD22 (Lifts and Hoists) and we will
use DD11 as a template later to create DD12 and DD21 after we configure it as it will save
as sometime, basically follow the above, the screenshot's are below

Code DD11
Code DD22

Hopefully you should have the following, three companies setup DD11, DD13 and DD22.
As I mentioned above we will create DD12 and DD22 later after we have fully configured
DD11 (see company code global parameters section on how to do this).

Lastly we need to assign our company codes that you want to include in the group
accounting to a company, firstly we need to assign both the fiscal year variant and the chart
of accounts, for this we use transaction code OBY6, this screen has many options, I cover
each option as we configure the company code (see company code global parameters for a
detailed description for each parameter), for the time being all we need to change is the
chart of accounts (also known as the operational chart of accounts) and fiscal year variant
as per the red boxes below's, for this we will use SAP standard ones, do this for all three
company codes and save each one. You can also use transaction code OB62 to assign
company codes to chart of accounts.
Once we have completed the above we now assign each company code to a company using
transaction OX16, simply use the drop down list to select the company, you can also use
transaction OBY6 to assign the company code, see above screenshot, notice the company

When you try and save DD13 and DD22 you may get the below warning message, this is a
warning not a error, just hit return and your entry will be saved, its making sure that you
know that the company and company code currencies are different.

You can now see in table T001 the relationship between the company and the company

We are pretty much done for the company codes for the time being, you will see the
company codes being linked into the organization units as we create them.

Credit Control Area's

Credit Control Area's are used in both FI-A/R (Accounts Receivable) and SD functional
areas, the credit control area provides a method of granting and monitoring credit for a
customer. A client can have a number of credit control areas which can be attached to one
or more company codes, but a company code can only be assigned to one credit control
area. By default SAP comes with one credit control area 0001, that you can use as a
template, you use a four-character alphanumeric code to denote a credit control area. Credit
limits are normally specified in the customer master records, if you have a customer with
more than one company code with the company code assigned to different credit control
areas you need to provide separate credit limits on each of their areas for the same
customer. The credit limits and credit exposure are managed both in the credit control area
and at the customer level.

When you have a 1:1 relationship between a credit control area and a company code, then
the currency of the credit control area is usually the same as that of the company code.
However when you assign more than one company code to the same credit control area, the
currency of the credit control area may be the local currency of any of the participating
company codes or a different currency. When the currencies are different then the
receivables are converted into credit controls areas currency.

There are three types of credit control management

caters to all the participating company codes, the customer is provided with a single cred
Centralized Credit serviced by more than one company code. It is possible that the company codes have dif
Management credit control area, the system will convert all such receivables into the credit control are
each company code has its own credit control area which has a currency defined (which
company code currency). A customer can have separate limits in each of the credit contr
overall credit limits on all the credit control areas and you can specify a limit to a individ
this below


Mixed Credit It is also possible to have a balance of centralized and decentralized credit management
Management another section which also discusses risk managment.

We will configure three credit control areas DD10, DD13 and DD20 as per the diagram
We will use transaction code OB45 but before lets have a look at the field details

 Cred.control.area - enter a four-character alphanumeric identifier

 Currency - self explaining
 Update - we will discuss this next
 FY Variant - this helps to determine the posting period from the posting date and
fiscal year entered in any accounting document
 Risk category - the risk category is copied to the credit master record that is
automatically created when a customer is created in a company code, I will be
discussing in detail risk management in another section.
 Credit Limit - self explaining
 Rep group - known as credit management representative group this denotes the
group of employees who will be in charge of the credit management for a group of
customers again I will cover this in detail in another's section.
 All co codes - you will indicate to the system that postings from any company code
can be made to this credit control area, here we leave as we only want our company
codes to post to this credit area, we assign specific companies codes to our credit
control areas.

Before we create the credit control area I just want to explain the update field a little more,
SAP provides four credit update groups (blank, 000012, 000015 and 000018), the least
stringent is when you leave the field blank, when blank the system ignores SD documents
when determining the credit availability and the credit limit equals the accounts receivable
(A/R) balance. Even when you specify an update group for default processing of the sales
orders, the system will determine the next possible group when it is not possible to process
further using the default group. The open-order value is only updated for schedule lines that
are relevant for delivery, for example suppose that an item in the sale order is not-delivery-
relevant and the default update group is specified as 000012, this update group is required
to increase open-delivery and reduce open-order value from delivery schedule lines of the
order. Because one of the items is not delivery-relevant, the system skips the update 000012
but uses 000018, which will increase the open-delivery value of the order item by using the
confirmed quantity of delivery-related schedule lines up to the order value.
Now lets create the first credit control area DD10 using transaction code OB45, you will be
taken to the view/change screen, select the new entries button and fill in the details below

The credit control area will be created but we don't have a name for it yet, you can set this
by using the back button, notice there is no description

Simply fill in the description for the credit control area and save.

Now just repeat the steps above for the remaining credit control areas DD13 and DD20
Again you will need to complete the description for each credit control area, hopefully you
should end up with something like below

Now lets assign the company codes to the credit control area's, we will use transaction
OB38, just select the credit control area from the drop down box and then save. If you don't
want to overwrite the credit control area defaulted during document posting (based on the
company code credit control area assignment) you should not select the overwrite CC area

If you are interested in the table that contains the credit control areas then you need to look
at T014
Table T001 details the relationship between the company code and the credit control area,
you can see for example that company code D11 is assigned to credit control area DD10.

As I mentioned before I will have another section covering risk and credit management
going into further details, see accounts receivable credit management to continue from this
section and how to configure the system to use credit management.

Business Area's

Business area's help you draw financial statements for internal management purposes, you
define the business area with a 4-character alphanumeric key in the system. Business areas
are organizational units representing external accounting corresponding to a specific
business segment or business area of responsibility in a company, you can define reporting
elements based on products, product lines or geographical areas.

Independent of any other FI enterprise structure business areas are used to differentiate
transactions that originate from different points, product lines or locations in the business,
you only enter a business area during transaction processing enabling consolidation of G/L
transaction values per business area. However you can call all Balance Sheet items such as
fixed assets, receivables, payables and material stock as well as the entire P&L statement
(Profit and Loss) directly to business areas. You can only manually assign banks, equity
and taxes to business areas indirectly. Since business areas are used to define areas of
responsibility or area of operation, it is normal that a single business area cuts across
several company codes even if they operate with different chart of accounts, you just need
to use the same business area with the same name in all such company codes. In case of
cross-company code transactions the system only creates one document when you post to
more than one business area spread across many company codes.

You can also link business areas to plant or valuation areas and divisions because single
plants usually produce products for one business areas, which what we have in our
example. You can link business areas to sales areas to ensure that revenue postings are
made to correct business areas when your sale organizations sells a single grouping of
products. When you enable the business area balance sheet indicator in the company code,
then the business area becomes a required field for transactions in FI-AA.

You can also use profit center accounting, profit centers are areas of internal responsibility
for achieving profits or productivity targets, where as business area reporting is internal
reporting, the profit centers jobs is to analyze areas of responsibility in order to delegate
authority and responsibility to decentralized units for effective management and control. It
is possible to use only profit center accounting but this decision should be made early in the
design phase.

To see what is required to be setup see the Datadisk Mobility, lets create the business areas,
for this we use transaction code OX03, you will be taken to a view/change screen first,
select the new entries button and fill in the details as per the below, don't forget to save the

The table for the business areas is TGSB, it is difficult to filter on this table so I am only
showing you a couple of entries


A segment is another account assignment object that you can use to describe your financial
position and performance by line of business or by geographical area. You can create
balanced books for each segment and use them for segment reporting requirements of IFRS
and US GAAP, you can populate the segment information either manually or automatically.

Segment reporting allows you to

 give detailed insight into different business activities of a diversified company

 offer information about the general environment
 better understand enconomic performance
 better forecast the potential of revenue and financial back-up
 better anticipate risks and opportunities

So what is a segment in business terms, according to IAS, a business segment is a

component of an entity that provides a single product, a service or a group of related
products and services and that is subject to risks and returns that are different from those of
other business segments. A geographical segment may be based on either on the location of
the entities assets of its customer.

An entity must look to its organizational structure and internal reporting system to identify
reporting segments. For example IAS-14 presumes that segmentation in internal financial
reports prepared for the board of directors and CEO should normally determine the
segments for external reporting purposes. The entities reportable segments are its business
and geographical segments where a majority of revenue is earned from sales to external
customers. Segments deemed too small for business reporting may be combined with each
other if related, but they may not be combined with other significant segments for which
information is reported internally.

We will need to complete the following to make sure of the segment, some of the tasks we
will do now and others later

 Define Segments - we will do this in a moment

 Derive the Segments - you can assign a segment field in the profit center master
data to derive segment automatically, if you don't want to use profit center master
data, then you can define custom derivation rules using BAdI
FAL_DERIVE_SEGMENT and still derive the segment automatically, lastly you
can also manually update the segment information at the time of the financial
 Maintain the Field Status group in the FI accounts - you will find segment field
under the group additional account assignments. Maintain the field status for the
corresponding posting key.
 Maintain scenarios - you will define segmentation scenario in the corresponding

To see what is required to be setup see the Datadisk Mobility, lets create the segments
areas, we use the IMG to define segments

You will be taken to the view/change screen, select the new entries button and fill in the
details below
The table for segment areas is FAGL_SEGM, here you can see the segments that I have

Financial Management Areas

A Financial Management Area (FM) is an accounting organizational unit used in funds

management to structure your business organization from the perspective of cash budget
management and funds management, you will need to maintain separate functional
characteristics for each of the FM areas, for both cash budget management and funds
management. To take full advantage of integration link the FM areas to other organization
applications within SAP. You use a four-character identifier for a FM, also the SAP system
is delivered with a FM area 0001.
To see what is required to be setup see the Datadisk Mobility, we will only define the FM
area and will maintain other FM parameters such as fiscal year variant (FYV) later, we
again use the IMG

You will be taken to the view/change screen, select the new entries button and fill in the
details below

Now we will configure the control parameters for the FM areas, we will use transaction
code OF01, you will be taken to the view/change screen, double-click the FM areas and
then you will be taken to the parameter screen

 No purch orders - this is to track purchase orders in cash management as payment

flows only
 No parked docs - parked documents can also be treated as commitments in cash
management, this can be done if the park document subsequently becomes a real
accounting document by which the original entry for the parked document is zeroed
out and the actual document is posted too. As DD has indicated that parked
documents are not to be treated as commitments we will select checkbox to track
them as payment flows only as with purchase orders.
 FMA ledger only - when selected, the data is recorded in FM area currency field
only, even if the company code currencies are different. This is required for both
FM areas as there is at least one company code with a different local currency.
 Bank posting date - The transaction date in cash budget management and value
date in the G/L posting may be different, while this may give a correct view of the
payments, but it also means that you cannot match the totals of the transaction data
in cash budget management with the account balances in accounting. However you
overcome the problem by selecting this check-box to record financial transactions
with posting key 80/90 in cash management as of the posting date, select this for
both M areas.
 Summarize E/R - When selected the system summarizes all commitment items
with the transaction 30, though this may help in reducing the number of lines items
at the database level, you may miss certain information about G/L account, CO
objects, etc. Do not select this.
 Clear in Batch - we enable this to allow batch processing of clearing items, though
this will mean there is no link between the process involved between cash budget
management and accounting, as a result the payment is shown in a clearing
document commitment item, and the invoice commitment remains in place, you will
need to run program RFFMRP18 to process linked events, periodically. The
advantage is that this will ease the processing load on the system.
 FI Update off - this checkbox helps record the transaction data from documents
posted in FI, we will deselect this option.

You can assign more than one company code to a single FM area, the currencies can be
different, but once posting has began you will not be allowed to change the FM currency.
For creating budgets you may group company codes with different currencies, operational
charts of accounts and fiscal year in a single FM area. We assign the company codes and
also assign DD12 and DD21 later when we have created them, we will use transaction code

When we configure company code DD11 we will have no problems

However when you configure company codes DD13 and DD22 you will get the the below
error message, we will have to use transaction OBY6 (global company code parameter) to
configure the FM
The company code parameter screen contains a FM area field, simply select the FM area
from the drop down list

Hopefully using transaction OF18 you should end up with the below configuration.

The table for financial management areas is FM01, here you can see the financial
management areas that I have created and the currency (WAERS)

In table T001 you can now see the link between the company codes(BUKRS) and the
financial management areas (FIKRS)
Functional Areas

Functional Areas in an organization are used to meet the cost of sales accounting (COS)
requirements because they enable you to classify the expenses by functions such as
administration, sales, marketing and production. You can segregate and classify different
type costs within one expense account. For example you could determine what amount of
labor spent directly on production as compared to sales and marketing, R&D, etc. You can
define a financial statement version by assigning functional areas to P&L items to create
financial statements in accordance with cost-of-sales accounting. You can also use
functional areas in fund management to represent the global targets and goals and in
particular the expenses of your organization.

The purpose of cost of sales accounting is to create a profit and loss statement, organized
according to functional area, the reasons organizations choose to implement cost of sales
accounting in addition to period accounting is as follows

 Operating expenses are often allocated differently in financial accounting than in

cost of sales accounting
 It is a flexible way to control financial areas using a hierarchic model
 cost of sales accounting identifies where costs originate in a company

The core master data object of cost of sales is the the functional area, all of the trnasactions
flow to these functional areas, allowing you to generate cost of sales accounting reports.
The typical cost of sales accounting process flow is as below

 Posting
 Month-end corrections
 Financial statement reporting for cost of sales accounting

The following master data objects can be assigned a functional area

 general ledger account

 cost element
 cost center
 orders
o order type
o internal order
o sales order for make-to-order production and requirements data
o maintainance, service and QA order
o production order, production cost controller and cost object hierarachy
 WBS (work breakdown structure) elements
o project profile and project definition
o WBS elements

You can directly post a document with a functional area, these areas can be deteremined
from the chart of accounts, posting key and cost centers and can also be derived from a host
of other master data objects. Sales processing (sale-from-stock scenario) functional areas
also are determined based on the assignment made when you create a sales order and go
through delivery and billing functions. Posting vendor invoices also triggers posting to a
functional area, based on cost object assignment.

Process Step Business Condition Expected Result
Posting general ledger You post a general ledger The document is posted with
accounts documents with document with a cost assignment FB50 which were derived from the
functiona area object to derive the functional area account item or substitution
The document is posted to th
You post a customer invoice with
Posting a customers ledger account and customer
the object to derive the correct VA01/VF01
invoice updated, the appropriate func
functional area
The document is posted to th
You post a vendor invoice with a
ledger account and customer
Posting vendor invoice cost assignment object to derive the FB60
updated, the appropriate func
functional area

At the month-end corrections are made to incorrect postings to the functional areas
(postings that were not derived correctly), also postings with no functional areas a dummy
functional area can be derived. This is done using line item reposting of cost object
assignment to derive the correct functional area.

Process Step Business Condition Expected Result
Line item reposting treatment of unassigned functional You have manually reported
(cost object areas and/or wrong derivation of KB61 assigned cost centers to appro
reassignment) function areas at period-end reposting the appropriate fun

You must complete the following before you can generate your cost of sales financial

 Preparatory postings for the balance sheets and profit and loss statements
 Valuation of the foreign currency balance sheet accounts and open items in foreign
 Inclusions of any new functional areas in the financial statement version
 Reconciliation of financial accounting with controlling.

The transaction codes for generating the financial statement for cost of sales account are

Process Step Business Condition Expected Result
Balance sheets and need to generate a reconciled S_PL0_86000028 The report for creating balance sheets
P&L statements period-end balance sheet and not make any postings, it only calculat
P&L statement P&L results and displays this in the ba
Cost of sales need to generate a P&L
accounting - P&L statement in the cost of sales GR55 The P&L statement is shown in the co
statements accounting format

First you must assign scenarios and customer fields to ledgers and then acticate the cost of
sales accounting all of which I have already discussed in my Ledgers for G/L accounting

The functional areas I will use my Datadisk Mobility company as an example, If you are
using a older version of SAP you can use transaction OKBD to create the functional areas,
in ECC 6.0 we need to use transaction code FM_FUNCTION, on the first screen which is
a view screen enter the first functional area and then click on the create button, then fill in
the rest of the details, I just filled in the text, and the validity periods, you could also fill in
a authorization group to limit access.

Once one functional area has been setup we can use it as a template to create the other ones,
thus reducing some time, select the create with template button and you we see the below
dialog box appear, just enter the next functional area and select continue. You will return
back to the create screen just change the text and save.

Hopefully you will end up with the below, which was taken from the drop down list
The table for functional areas is TFKB, here you can see the functional areas that I have

I have broken out a managing functional areas sections as this section is getting to large.

Controlling Areas

The controlling area is the central organizational structure in the controlling component
(also known as CO), and is used to subdivide your business organization from the cost-
accounting viewpoint. Like a company code it is a self-contained cost accounting entity
useful for internal reporting. You can have one or more controlling areas in a single client,
you will assign one or more controlling areas to an operating concern. Assigned to one or
more company codes the CO areas ensures that internal business transactions such as
primary costs are transferred from external accounting (FI) and classified according to
managerial account (CO) perspectives. The primary costs (direct costs) are assigned to cost
objects (projects) and the secondary costs (overheads) are assigned to costs centers or
overhead costs orders, which are then allocated using internal allocation techniques
according to their source. This is the same for FI-AA which are also passed to CO. All
revenue postings in FI would result in postings in CO-PA and also in EC-PCA, SD, MM
and PP have many integration points in CO.

To see what is required to be setup see the Datadisk Mobility, We will use transaction
OX06 to create the controlling areas,

 controlling area - self explaining

 name - self explaining
 person responsible - this is the person for creating and maintaining the CO area
 CoCd -> CO area - this field determines the relationship between the CO area and
company codes, we select cross company as we will be using DD11, DD12 and
DD13 for CO area DD10
 currency type - I will discuss below
 currency - self explaining
 diff ccode currency - automatically selected by the system
 curr/var prof - used to assign the respective valuation profiles but only when you
plan to have multiple valuations stored in the system
 active - used to indicate whether a CO area allows transfer prices for company
codes or profit centers, to active this you need to customize the settings for active
transfer prices
 chart of accts - self explaining (see chart of accounts for more details)
 fiscal year variant - self explaining (see fiscal year for more details)

The currency type in SAP is a key that describes a currency terms of its role within the
system, the following are the different types

Type Currency Description

The national currency of a country in which you maintain the accounts or ledgers in
10 Company Code
company code, this is also know as local currency or transaction currency
20 Controlling Area You can make any currency the controlling area currency
this is defined at the client level, it also enables cross-company postings in CO for c
30 Group
using different company code currencies.
used for subsidiaries in countries with a lot of inflation, it allows you to valuate tran
40 Hard
inflationary economic environment
used for statutory reporting purposes for subsidiaries in some countries experiencin
50 Index-Based
60 Global Company this is the currency defined for the company or consolidated company

Because my client is using a different currency (group currency) I will use type 20, also
create CO area DD20 as per below
Now we need to assign the CO area to the company codes, there are two types of
assignment possible

the financial and cost accounting views are identical, this kind of assignment to represen
1:1 Company Code
settled transactions across company code in CO-PA where you can assign more than on
= Controlling Area
concern and intercompany processes when producing and delivering plant are the same.
you will assign more than one company code to the same CO area, all CO data is collec
1:n Cross-Company internal allocation is used to allocate costs or revenues across the participating company
Code Controlling kinda of assignment for a global organization with several independent subsidiaries usin

In the case of the 1:n assign note that

 Automatic creation of tax invoices is not possible as SAP system posts the
reconciliation postings only without taxes across company codes
 A detailed authorization concept needs to be in place to prevent cross-company
code postings in CO
 The period-end closing needs to be executed at the same time in CO for all the
company codes to avoid laborious and lengthy individual period-end closures
 Only one operating concern can be used with a single CO area
 The fiscal year variants of company codes should match those of the CO area
Lets now assign the the CO areas to the company codes using transaction OX19, on the
change/view screen select the controlling area and then double-click on the assignment of
company codes from the controlling area dialog box on the left

Select the new entries button, (if it does not appear then select the change -> display
button), then enter the company codes, the screenshot's for both CO areas is below

We must define the CO areas before we define the profit centers, note that profit centers
have been included under FI enterprise structure only with the introduction of the New G/L,
earlier this was part of the CO organizational units, however you can still define the profits
centers as a part of profit center accounting (CO-PCA) in CO.

The table for the controlling areas is TKA01, here you can see the controlling areas that I
have created, just for reference I had completed the profit centers below when this
screenshot was taken hence you can see the profit center hierarchy in the last column
(PHINR), also notice the profit center dummy areas
The table that links the company codes to the controlling areas is TKA02, here you can see
what company code (BUKRS) is linked to what controlling area (KOKRS)

Profit Centers

Profit centers are responsible for revenues and expenses that reflect a management-oriented
structure of your company for internal control, you can analyze the operating results using
either the cost of sales approach or the period accounting approach. Besides expenses and
revenues you can use profit centers for assets and liabilities. By analyzing the fixed capital
you can use your profit centers as investment centers. You will need to create a standard
hierarchy to depict all the profit centers coming under a controlling area. The profit centers
can be modeled based on functional divisions, geographical divisions, product lines, etc.

Made up of profit centers, Profit Center Accounting (EC-PA) is primary used for
performance reporting of responsibility areas to generate P&L statements under period
accounting. Representing transaction data from other components from the view of a profit
center, all the postings in EC-PA are of statistical nature as original or additional postings,
the profit center itself is not an account assignment object in CO. The integration in the
SAP system makes it possible to post profit-relevant data to EC-PA automatically as soon
as the transaction is posted.

You have two options for implementing profit center accounting

 You can implement profit center accounting with SAP general ledger application
components, this is done using the profit center update scenario which we had a
look at in parallel accounting.
 You canl also implement using the classic profit center accounting application
component which runs parallel to the SAP general ledger, you can use transaction
code OKKP (see below), also you can include the profit center update and
segmentation scenarios in SAP general ledger, which I dicuss in my ledgers for G/L
accounting section.
If you decide to use cost of sales accounting you must also active the cost of sales
accouting scenario which I have explained in my standard fields section. You can migrate
from classic profit center accounting to perform profit center accounting in the SAP general
ledger both can be run in parallel, it is not ideal but is ok in the interim.

If you use the new profit center accounting within SAP general ledger you have the
following advantages

 You can use document splitting to display payables and receivables specific to the
profit centers where they occurred, you can also create the balance sheets at the
profit center level.
 There is no need for any reconciliation when performing profit center accounting in
SAP general ledger.

Profit center master data and heirarchies still apply in the SAP general ledger profit update
scenario and every profit center is assigned to the controlling area organizational unit. All
profit centers of a controlling area are assigned to a standard profit center hierarchy that
reflects the organizational structure of profit center accounting in your company.

The below table summerizes the key differences between the classic profit center
accounting component and the profit center update scenario

Classic Profit Center

Areas of Difference Profit Center Update Scenario i
Transaction FAGL3KEH
Setting proposal profit center for line PCA transactions:
items 3KEH/3KEI
Derivation of the partner profit center 8KER/8KES SA recommends that you do not u
Displaying receivables and payables for Standard report groups 8A98
F.50 and F.5D when document sp
each profit center and 8A99
Dummy profit center on P&L accounts 3KEH and 3KEI See Notes 820121 and 832776
Subsitution of profit centers in sales
0KEL and 0KEM 0KEL and 0KEM
Creating the profit center standard
0KE5 V_FAGL_PC_STHR using SM30

There seems to be a confusion between profit center accounting, profitability analysis and
the special purpose ledger, the table highlights the key differences

Parameters Profit Center Accounting Profitability Analysis

Focus Internal External

Responsibility and person focused Market oriented
 Special case of special
purpose ledger (classic Based on a different concept that the PCA and specia
Technology profit center accounting) purpose ledger. Profitability analysis use characterist
viewpoint  Integrated with SAP general and value fields that allow you to slice and dice the
ledger customer facing information

Integration with
Separate from and independent of highly integrated, profitability segment is a key accou
account assignment objects assignment object

Again you can see the Datadisk Mobility on how we will setup the profit centers, first we
will need to define the standard hierarchy's by using transaction code 0KE5, the first screen
will ask what CO area that you what to define the profit center in

Then we can create the hierarchy using the details below, also do the same for the DD20-
H1 hierarchy

 Standard Hierarchy - self explaining

 Elm. of Int. Business Vol - lets you eliminate internal business volume in you
controlling area
 PCtr Local Currency Type - you can choose between group currency (30)
controlling area currency (20) and a special profit center currency that you can
define (90), if you choose 30 or 20 the below field should remain blank, as the
system will determine the currency automatically as data is posted
 Profit center local currency - see above field for details
 Store Transaction Currency - lets you decide whether that system should also
update the transaction data to profit center accounting in the transaction currency,
this is only possible if you select the Legal Valuation view, deactivating the store
transaction currency reduces data volume but you will not be able to analyze your
data in the transaction currency.

We then need to create a dummy profit center which will ensure completeness of data in
EC-PA, the dummy profit center receives all the postings in your system to objects which
are not assigned to a profit center, we will use transaction code KE59, below you can see
the dummy profit center for DD20, type in the dummy profit center name, then select basic

Fill in the details as below

Once saved you get the below message, don't for to create a dummy profit center for the
DD10 profit center hierarchy

Now we will create the profit center groups, now this did take a bit of working out, we will
use transaction code KCH1, firstly we select the controlling area then in the create profit
center group we will create the top part of the hierarchy, select the green tick

Once you have created the top hierarchy we can now add the structure using the same level
or lower level buttons, basically select the button and enter the details creating the
structures below for both controlling area's.

DD10 (Controlling Area) DD20 (Controlling Area)

Lastly we now create the profit centers themselves and link it with the hierarchy above and
a segment area, for this we use transaction KE51, notice the profit Ctr group and Segment
fields at the bottom of the screenshot, once the details have been filled in you select the
active button, the Name field is what name you will see in the heirarchy and the long text
field is self-explaining.

Once activated if you look in the company codes tab you will see the assignments.
Unfortunately you now have to repeat the above transaction (KE51) for the remaining
profit centers for both controlling areas DD10 and DD20, if you make a mistake you can
use transaction code KE52 to change an existing profit center. After you should have a
complete structure like below which includes all the profit centers (in white labels).

DD10 DD20
(Controlling Area for DD1000) (Controlling Area for DD2000)

Lastly you can see the profit center details in table CEPC, you can also see the hierarchy
links (KHINR)

In this section we covered a lot of configuration, as I mentioned at the start of this section
organizational units are linked together and hopefully you know have a better
understanding of this and although it may still not all be very clear at the moment in later
sections we will touch on posting and reporting and you will start to see where all the hard
work will be used, below is a screenshot of a report and as you can see, you can select the
various organizational units. Hopefully using the organizational areas you can obtain the
reports will detail the information that is required for the managers and directors of the
Now this section probably will take a number of groups of people to design, it does require
a bit of thinking and it best not to make too many changes after you have started posting as
it may be difficult to do.