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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
SAP AG
Page 7-1
SAP ERP
Target Audience
Internal
Executives Senior Management Administrative Staff Employees
External
Legal Authorities Banks Auditors Shareholders Insurance Taxing Authorities Media Financial Analysts
SAP AG
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SAP ERP
FI Organizational Structure
SAP AG
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SAP ERP
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
SAP AG
Page 7-4
SAP ERP
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.
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.
SAP AG
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SAP ERP
Global Bike
Client
Company Code
Chart of Accounts
Bikes
Business Area
SAP AG
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SAP ERP
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
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.
SAP AG
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SAP ERP
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
SAP AG
Page 7-8
SAP ERP
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
SAP AG
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SAP ERP
FI Master Data
SAP AG
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SAP ERP
FI Master Data
SAP AG
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SAP ERP
Customer Accounts
Customer 189
Customer 142
100
300
950
Customer 135 Customer 123
400
150
SAP AG
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SAP ERP
Vendor Accounts
Vendor 100234
Vendor 100435
200
250
850
Vendor 100621 Vendor 100846
100
300
SAP AG
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SAP ERP
FI Processes
SAP AG
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SAP ERP
FI Reporting
SAP AG
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SAP ERP
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
SAP AG
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SAP ERP
FI Reporting
4,500
SAP AG
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SAP ERP
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
SAP AG
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SAP ERP
FI Reporting
SAP AG
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SAP ERP
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)
SAP AG
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SAP ERP
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.
SAP AG
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SAP ERP
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.
SAP AG
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SAP ERP
SAP AG
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SAP ERP
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
SAP AG
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SAP ERP
CO Organizational Structure
SAP AG
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SAP ERP
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
SAP AG
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SAP ERP
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
Global Bike
Client
Global Concern
Operating Concern
Controlling Area
Company Code
Chart of Accounts
SAP AG
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SAP ERP
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
SAP AG Page 7-29
SAP ERP
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
SAP ERP
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.
- Used exclusively in CO for allocations and settlements between and amongst cost centers Page 7-31
SAP ERP
Income Statement
Balance Sheet
SAP AG
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SAP ERP
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
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
SAP AG Page 7-33
SAP ERP
CO Processes
SAP AG
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SAP ERP
CO Processes
(FI) Transaction Document Amount G/L Account # Cost Center 1900012432 (CO) Transaction Document Cost Center Cost Element 20000657
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)
SAP AG
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SAP ERP
CO Processes
SAP AG
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SAP ERP
CO Processes
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
1,200
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SAP ERP
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.
SAP AG
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SAP ERP
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.
SAP AG
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SAP ERP
Distribution
Receiving cost centers
Primary cost element maintains its identity
D010 550 sft A005 400 sft A010 600 sft
Distribution
D005 900 sft
S010 100
SAP AG
SAP ERP
Distribution
Receiving cost centers
Primary cost element maintains its identity
D010 $275 A005 $200 A010 $300
Distribution
D005 $450
S010 $50
SAP AG
SAP ERP
Assessment
Receiving cost centers
Primary and secondary cost elements
D010 10%
A005 15%
A010 5%
D005 20%
Assessment
S010 10%
A015 10%
A020 0% S005 30%
SAP AG
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SAP ERP
Assessment
Receiving cost centers
Primary and secondary cost elements
A005 $705 D010 $470 D005 $940 A010 $235 A015 $470 A020 $0
Assessment
S010 $470
S005 $1,410
SAP AG
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SAP ERP
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)
SAP AG
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