SAP ERP

Goal of Financial Accounting (FI)

Financial Accounting is designed to collect the transactional data that provides a foundation for preparing the standard portfolio of reports.
In general, these reports are primarily, but not exclusively, directed at external parties. Standard reports include:
- Balance Sheet - Income Statement - Statement of Cash Flows

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Target Audience

Internal
Executives Senior Management Administrative Staff Employees

External
Legal Authorities Banks Auditors Shareholders Insurance Taxing Authorities Media Financial Analysts

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FI Organizational Structure

Represents the legal and/or organizational views of an enterprise

Forms a framework that supports the activities of a business in the manner desired by management Permits the accurate and organized collection of business information Supports the development and presentation of relevant information in order to enable and support business decisions

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FI Organizational Structure

Client
An independent environment in the system

Company Code
Represents an independent legal accounting unit Balanced set of books, as required by law, are prepared at this level. A client may have more than one company code
United States Germany United Kingdom Australia

Assets

Liabilities & Owners Equity

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FI Organizational Structure

Chart of Accounts
A classification scheme consisting of a group of general ledger (G/L) accounts Provides a framework for the recording of values to ensure an orderly rendering of accounting data The G/L accounts it contains are used by one or more company codes.

Credit Control Area

An organizational entity which grants and monitors a credit limit for customers. It can include one or more company codes

Business Area
An organizational unit that represents a separate area of operations or responsibilities within an organization and to which value changes recorded in Financial Accounting can be allocated Financial statements can be created for business areas, and these statements can be used for various internal reporting purposes.

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GBI 2.0 Structure for Financial Accounting

Global Bike

Client

Global Bike Inc.

Global Bike Germany GmbH

Company Code

Global Bike Chart of Accounts

Chart of Accounts

Bikes

Business Area

Global Credit Control

Credit Control Area

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Chart of Accounts

A listing of the accounts (assets, liabilities, equity, revenues, and expenses) that are contained in the General Ledger A chart of accounts must be assigned to every company code in order to create the General Ledger for that company

Several company codes can use the same chart of accounts

We generally we want the same chart of accounts for consolidations All the decision you are going to make of how you want to conduct business

Chart of Accounts
This is a list of all G/L accounts used by one or several company codes. For each G/L account, the chart of accounts contains the account number, account name, and the information that controls how an account functions and how a G/L account is created in a company code.

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Chart of Accounts

The foundation for the General Ledger is the Chart of Accounts A Chart of Accounts contains a complete list of all of the accounts utilized in the General Ledger for a given company Financial accounting reports are prepared from the balances contained in the General Ledgers Chart of Accounts

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Chart of Accounts (continued)

There are five types of accounts contained in a Chart of Accounts - Assets - Liabilities - Equity - Revenues - Expenses There are two primary accounting reports prepared from the General Ledger Chart of Accounts - Balance Sheet - Income Statement

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FI Master Data

General Ledger (G/L) Accounts

- The unique combination of Company Code and Chart of Account creates a data storage area called a General Ledger. - The General Ledger contains a listing of the transactions effecting each account in the Chart of Accounts and the respective account balance. - It is utilized in the preparation of financial accounting statements.

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FI Master Data

Customer and Vendor Master Data

Customer and vendor account balances are maintained in FI through fully integrated accounts receivable and accounts payable sub-modules. Financial postings for customers and vendors are made directly to their respective individual accounts and accompanied by a concurrent automatic posting to the General Ledger.

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Customer Accounts

Accounts Receivable Sub-Module (FI-AR)

Information with respect to customers who purchase the enterprises goods and services such as sales and payments made Substantive and important integration between Sales and Distribution (SD) and Financial Accounting (FI) Billings in SD generate FI journal entries for sales activity

Customer 189

Customer 142

100

300

Accounts Receivable (General Ledger)

950
Customer 135 Customer 123

400

150

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Vendor Accounts

Accounts Payable Sub-Module (FI-AP)

Information with respect to Vendors from whom the enterprise purchases goods and services such as purchases and payments made Substantive and important integration between Materials Management (MM) and Financial Accounting (FI) Purchase and goods receipt activities in MM generate FI journal entries

Vendor 100234

Vendor 100435

200

250

Accounts Payable (General Ledger)

850
Vendor 100621 Vendor 100846

100

300

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FI Processes

Posting a G/L Entry

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FI Reporting

G/L Account Summary

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FI Reporting

Balance Sheet
- Presentation of an organizations Assets, Liabilities, and Equity at a point in time - Assets: What the company owns - Liabilities: What the company owes - Equity: The difference between Assets and Liabilities - Assets = Liabilities + Equity

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FI Reporting

Balance Sheet Example

Assets Cash Accounts Receivable Equipment Total Assets Liabilities Accounts Payable Taxes Payable Total Liabilities Equity Common Stock Retained Earnings Total Equity
Total Liabilities and Equity

1,000 3,000 500 4,500

750 250 1,250

2,000 250 2,250

4,500

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FI Reporting

Income Statement
- Presentation of an organizations revenues and expenses for a given period of time (e.g. monthly, quarterly, or yearly) - Revenues, in a simple sense, are inflows of cash as a result of selling activities or the disposal of company assets. - Expenses, in a simple sense, are outflows of cash or the creation of liabilities to support company operations. - Revenues - Expenses = Net Income

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FI Reporting

Income Statement Example

Revenue Sales Deductions Total Revenue Operating Expenses Cost of Goods Sold Operating Expenses Total Expenses Net Income Before Taxes Taxes Net Income

11,000 750 10,250

4,500 3,750 8,250

2,000 750 1,250

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FI Reporting

Statement of Cash Flows - Considers the associated changes, both inflows and outflows, that have occurred in cash arguably the most important of all assets over a given period of time (e.g. monthly, quarterly, or annually)

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Accountants and Audit Trails

Audit trails allow an auditor to begin with an account balance on a financial statement and trace through the accounting records to the transactions that support the account balance.
Audit trails enable an auditor to trace individual transactions to the effected account balance(s) on a financial statement.

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SAP Document Principle

Each business transaction impacting FI writes data to the SAP database creating a uniquely numbered electronic document.
The document number can be used to recall the transaction at a later date. It contains, for example, such critical and necessary information as:
Responsible person Date and time of the transaction Commercial content

Once written to the SAP database, a financial document (one impacting the financial position of the company) can not be deleted from the database.

It can be changed to some degree.

The SAP document principle provides a solid and important framework for a strong internal control system a requirement of law for companies that operate in the United States and in most other countries in the world.

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SAP Document Principle

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Goal of Controlling (CO)

Managerial Accounting also termed Controlling is designed to collect transactional data that provides a foundation for preparing internal reports that support decision-making within the enterprise.
These reports are exclusively for use within the enterprise and include:
- Cost center performance - Profit center performance - Budgets analyses

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CO Organizational Structure

Represents the legal and/or organizational views of an enterprise

Forms a framework that supports the activities of a business in the manner desired by management Permits the accurate and organized collection of business information Supports the development and presentation of relevant information in order to enable and support business decisions

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CO Organizational Structure

Client
- An independent environment in the system

Company Code
- Represents an independent legal accounting unit - Balanced set of books, as required by law, are prepared at this level. - A client may have more than one company code
United States Germany United Kingdom Australia

Assets

Liabilities & Owners Equity

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CO Organizational Structure

Chart of Accounts
- A classification scheme consisting of a group of general ledger (G/L) accounts - Provides a framework for the recording of values to ensure an orderly rendering of accounting data - The G/L accounts it contains are used by one or more company codes.

Controlling Area
- A self-contained, organizational unit for which the management of revenues and expenses can be performed - May include one or more company codes; therefore, an enterprise can perform management accounting analyses and reports across several companies - A way to identify and track where revenues and costs are incurred for evaluation purposes

Operating Concern
- Represents a part of an organization for which the sales market is structured in a uniform manner Page 7-27 SAP AG - A operating profit for the individual market segments can be

SAP ERP

GBI 2.0 Structure for Controlling

Global Bike

Client

Global Concern

Operating Concern

Controlling North America Global Bike Inc.

Controlling Europe Global Bike Germany GmbH

Controlling Area

Company Code

Global Bike Chart of Accounts

Chart of Accounts

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CO Master Data

Profit Center
- Responsible for revenue generation and cost containment - Evaluated on profit or return on investment - Enterprises are commonly divided into profit centers based on
Region Function Product

Cost Center
- Responsible for cost containment, not responsible for revenue generation
One or more value-added activities are performed within each cost center. Unit that is distinguished, for example, by area of responsibility, location, or type of activity
Copy center Security department Maintenance department
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CO Master Data

Internal Order
- Temporary cost center responsible for cost containment, not responsible for revenue generation - It is used to plan, collect, and monitor the costs associated with a distinct short-term event, activity, or project
Company picnic Trade show/Fair Recruiting campaign

Revenue Element
- A one-to-one linkage (mapping) between General Ledger revenue accounts and CO revenue elements is established to permit the transfer of FI revenue information to CO. - Posting in FI that impact revenue accounts lead to a posting in CO to a revenue element. - In other words, revenue account = revenue element just different words depending on whether FI object or CO object. Page 7-30 SAP AG

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CO Master Data

Cost Element
- A one-to-one linkage (mapping) between General Ledger expense accounts and CO cost elements is established to permit the transfer of FI expense information to CO. - Postings in FI that impact cost accounts lead to a posting in CO to a cost element. - In other words, expense account = cost element just different words depending on whether FI object or CO object.

Primary Cost Element

- Originate in the General Ledger within FI and are automatically transferred to CO when an FI transaction is recorded in the General Ledger

Secondary Cost Element

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- Used exclusively in CO for allocations and settlements between and amongst cost centers Page 7-31

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Primary vs. Secondary Cost Elements

Managerial Accounting (CO)

Financial Accounting (FI)

Aggregated Cost Elements

General Ledger Accounts

Income Statement

Balance Sheet

Secondary Cost Elements

Primary Cost Elements

Expense Accounts Revenue Accounts

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CO Master Data

Statistical Key Figures - Provide the foundation for accurate and effective cost allocations between cost objects - Utilized to support internal cost allocations involving allocations, assessments, and distributions - Examples: number of employees,square footage,minutes of computer usage

6 Hours Copy Center Activity (20 Hours) 10 Hours 4 Hours

Executive Offices Maintenance Department IT Department

This figure shows an example of statistical key figures. A project cost center has 12 hours worth the activity. The statistical key figure is hours and is split at: 30% to the Work Center 50% to maintenance 20% to IS All costs for the labor will be allocated in this fashion
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CO Processes

Posting Primary Cost Element

Financial Accounting (FI) Supplies Expense Debit 1,500 Credit Cash Debit Credit 1,500

Managerial Accounting (CO)

Cost Center A

Primary Cost Element

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CO Processes

Posting Primary Cost Element

(FI) Transaction Document Amount G/L Account # Cost Center 1900012432 (CO) Transaction Document Cost Center Cost Element 20000657

Financial Accounting (FI)

Supplies Expense Debit Credit 1,500 Cash Debit Credit 1,500

Managerial Accounting (CO)

Cost Center
1,500

Transactions can have an effect on both FI and CO. The transaction will create a debit and a credit for FI (FI transaction) If CO is turned on a cost center or cost element bucket will be updated (CO transactions)

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CO Processes

Posting Secondary Cost Element

Financial Accounting (FI) Supplies Expense Debit 1,500 Credit Cash Debit Credit 1,500

Managerial Accounting (CO)

Cost Center A CC 1 CC 2 Secondary Cost Element

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CO Processes

Posting Secondary Cost Element

Rent Expense

Executive Offices

Debit
1,500

Credit

1,800

Copy Center
1,500 2,500
Sec. Cost Element

Maintenance Department

Supplies Expense

Debit 2,500

Credit

3,000

2,000
Information Services

Labor Expense

Debit Credit 2,000

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1,200
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Types of Allocation

Distribution
- Method for periodically allocating primary cost elements - Primary cost elements maintain their identities in both the sending and receiving objects - Sender and receiver cost centers are fully documented in a unique Controlling (CO) document.

Assessment
- A method of allocating both primary and secondary cost elements - Primary and/or secondary cost elements are grouped together and transferred to receiver cost centers through use of a secondary cost element. - Sender and receiver cost centers are fully documented in a unique Controlling (CO) document.

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Types of Allocation

In Distribution and Assessment, you further allocate costs (or quantities for Indirect Activity Allocations) collected on a cost center during the accounting period to receivers, according to user-defined keys. These are therefore indirect allocation methods, because the exchange of activity is not the basis for allocating costs/quantities. Instead, user-defined keys such as percentage rates, amounts, statistical key figures, or posted amounts provide the cost/quantity assignment basis. The advantage of these methods is that they are easy to use. You usually define the keys and the sender/receiver relationships only once. Distribution and assessment are used primarily for cost centers. This is because direct cost allocation is not possible here due to the variety of transactions, the lack of clearly defined individual activity types and the fact that the entry of the activity is too time-consuming. For example, the costs of the company cafeteria may be assigned based on the number of employees in each cost center. Telephone costs are seldom allocated directly to the individual cost centers, but are collected on a clearing cost center for each period. They are then reposted or distributed at the end of the period according to the number of telephone units or telephone installations in each cost center.

Assessment is a method of allocating primary and secondary costs in Cost Center Accounting and Activity-Based Costing. The following information is passed on to the receivers:
The original cost elements are assigned cumulatively, or in groups, to assessment (secondary) cost elements. The original cost elements are not recorded on the receivers. Sender and receiver information (sender cost center, receiver cost center, or business process) appears in the Controlling (CO) document.

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Distribution
Receiving cost centers
Primary cost element maintains its identity
D010 550 sft A005 400 sft A010 600 sft

Sending cost center

A010 Administration Rent Expense $1,500

Distribution
D005 900 sft

S010 100

A015 A020 150 100 S005 200

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Distribution
Receiving cost centers
Primary cost element maintains its identity
D010 $275 A005 $200 A010 $300

Sending cost center

A010 Administration Rent Expense $1,500

Distribution
D005 $450

S010 $50

A015 A020 $75 $50 S005 $100

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Assessment
Receiving cost centers
Primary and secondary cost elements

Sending cost center

D010 10%

A005 15%

A020 IT Software Expense $4,200 A020 IT Supplies Expense $500

A010 5%
D005 20%

Assessment
S010 10%

A015 10%
A020 0% S005 30%

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Assessment
Receiving cost centers
Primary and secondary cost elements

Sending cost center

A020 IT Software Expense $4,200 A020 IT Supplies Expense $500

A005 $705 D010 $470 D005 $940 A010 $235 A015 $470 A020 $0

Assessment
S010 $470

S005 $1,410

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SAP CO Module

Fully integrated with other SAP modules including, but not limited to:
Financial Accounting (FI) Materials Management (MM) Sales and Distribution (SD) Production Planning and Execution (PP)

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