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Accounting

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G/L Accounts

In the SAP R/3 system, each transaction that has a financial impact is recorded in a general ledger (G/L) account or sub-ledger accounts that are posted to the G/L via reconciliation accounts.

The central task of G/L accounting is to provide a comprehensive picture for external accounting and accounts. Recording all business transactions (primary postings as well as settlements from internal accounting) in a software system that is fully integrated with all the other operational areas of a company ensures that the accounting data is always complete and accurate.

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G/L Accounts

The SAP FI General Ledger has the following features: Automatic and simultaneous posting of all sub-ledger

items in the appropriate general ledger accounts (reconciliation accounts)

Simultaneous updating of general ledger and cost accounting areas

Real-time evaluation of and reporting on current accounting data, in the form of account displays, financial statements with different financial statement versions and additional analyses.

Can take some getting used to as reports can change continuously

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G/L Account

Essentially, the general ledger serves as a complete record of all business transactions. It is the centralized, up-to-date reference for the rendering of accounts. Actual individual transactions can be checked at any time, in real-time, by displaying the original documents, line items, and transaction figures at various levels such as: Account information Journals Totals/transaction figures Balance sheet/profit and loss evaluations

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Master Data

• Describes items or objects used in a business such as accounts, materials, vendors, customers that remains unchanged over an extended period of time

• Transaction data is data that is used for relatively short periods of time, usually to record business transactions (sales orders, purchase orders, production orders, payroll amounts)

• Transaction data is regularly removed from the system in a process known as archiving. For auditing purposes, it cannot simply be deleted.

• A master record must be created for every G/L account

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Balance Sheet Accounts

Assets What the firm owns, in various

levels of liquidity:CashReceivablesInventoryPlant & EquipmentReal Estate

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Balance Sheet Accounts

Liabilities What the firm owes

Payables—payment for materials/services received on credit

Bank loans

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Balance Sheet Accounts

Equity The difference between total

assets and total liabilities Includes

Retained earningsNet income on past periods

Assets = Liabilities + Equity

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Profit and Loss (P&L) Accounts

Revenues Money obtained by the sale of goods and services

to customers Expenses

Money spent to produce the revenue:MaterialsUtilitiesSalariesSelling expensesAdministrative expenses

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• Contain an identifier for the Retained Earnings account

• At fiscal year end, the P & L accounts are ‘closed’ to the Retained Earnings account

Profit and Loss (P&L) Accounts

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Reconciliation Accounts

Reconciliation account Accounts receivable, Accounts

payable, Assets 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

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G/L Master Records Contain:

Chart of Accounts Company Code G/L account number G/L account name Account type: Balance sheet or Income

Statement Account group

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Account Groups

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

Three Account Groups created for Fitter Snacker Balance Sheet Accounts Profit and Loss Accounts Reconciliation Accounts

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Account Groups

Financial accounting General ledger accounting G/L accounts Master Records Preparations Define Account Groups

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Account Determination

When you enter a goods movement (inventory receipt, inventory withdrawal, variances, etc.), you do not have to enter G/L accounts since R/3 automatically determines the correct accounts.

Automatic Account Determination is set in Customizing (IMG)

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Valuation Grouping Code

Allows the same account determination rules to be used in multiple plants

Assign a valuation grouping code to the valuation area, then use the valuation grouping code in automatic account assignment

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Automatic Account Determination

Hierarchical Process (classification) Chart of Accounts/Company Code

Valuation area/grouping code Transaction/Event Key (from transaction

being executed) Goods Receipt Modifier (if applicable) Valuation Class (from material master)

All specified at time of transaction

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Automatic Account Determination

Transaction Keys: BSX: Inventory Postings GBB: Offsetting Entry for Inventory Postings DIF: Materials Management Small

Differences PRD: Cost (price) differences WRX: Goods receipt / inv. receipt clearing

acct

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Automatic Account Determination

Valuation Class 3000: Raw Materials 7900: Semi-finished 7920: Finished

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Automatic Account Determination

General Account Modifier

Usage

AUF Goods Receipt From Production Order – post to production settlement

BSA Goods Receipt Into Initial Stock – only used once for posting inventory off-set for initial stock data load

VAX Goods Issue To Sales - post to Cost of Goods Sold (COGS)

VBR Goods Issue to Consumption - post to material consumption (e.g., goods issue to job or production order)

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Automatic Account Determination

From Transaction: Company Code Chart of Accounts Transaction Key (not same as transaction code) General Account Modifier (if applicable)

From Material Valuation Class

Determines: G/L Account for Posting

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Transaction Keys

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Automatic Account Determination

CHFS BSX 00AP 3000 Account 200000

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Controlling (CO)

CO

FI

ControllingInternal AccountingCost AccountingManagerial AccountingManagement Accounting

Flexible – Non-standard

Financial AccountingExternal AccountingFinancial StatementsLegal Requirements

Standard

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While there are different requirements for internal and external users of accounting data, the underlying data is usually the same for both purposes and can be “captured” while recording business transactions—purchase orders, goods receipts, material withdrawals, etc. The data can then be presented in different ways for different users.

Info system reports in FI are standard G/L Account Listing

Info system reports in CO are flexible

Controlling (CO)

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Cost Elements

Primary Cost Elements Expenses in FI that are relevant to cost accounting

are recorded in CO using primary cost element. Primary cost elements can only be created when a

G/L expense account exists. Thus, there is a one-to-one relationship between primary cost elements and G/L expense accounts.

When an FI posting occurs in a G/L account for which a primary cost element has been defined, a valid controlling object (cost center, order, etc.) is required before posting.

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Cost Elements

Secondary Cost Elements Secondary Cost Elements are used exclusively for

certain types of CO transactions. Secondary cost elements have no corresponding

G/L account. Secondary cost elements can be used in

transferring costs from one cost center to other cost centers. Primary costs are grouped together and transferred to receiver cost centers using a secondary cost element.

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Cost Centers

Cost centers are used to track WHERE costs occur in the organization. As costs are incurred, they are assigned or posted to the appropriate cost center.

The posting and assignment of costs to cost centers is a critical step in using the CO module.

Cost centers are organized in a Standard Hierarchy.

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Cost Center Standard Hierarchy

The cost center standard hierarchy organizes cost centers and provides the ability to organize reports at different levels in the organization:

FS-CC-## (Standard Hierarchy)

##HQ (Cost Center Group / Hierarchy Area)

HQ Cost CentersA010 – FinanceA020 – H/RA030 – SalesA040 – MarketingA050 – PurchasingA060 - Administration

##MFG (Cost Center Group / Hierarchy Area)

MFG Cost CentersP010 – ProductionP020 – WarehouseP030 – Receiving

FS-CC-## (Standard Hierarchy)

##HQ (Cost Center Group / Hierarchy Area)

HQ Cost CentersA010 – FinanceA020 – H/RA030 – SalesA040 – MarketingA050 – PurchasingA060 - Administration

HQ Cost CentersA010 – FinanceA020 – H/RA030 – SalesA040 – MarketingA050 – PurchasingA060 - Administration

##MFG (Cost Center Group / Hierarchy Area)

MFG Cost CentersP010 – ProductionP020 – WarehouseP030 – Receiving

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Cost Center Groups

Cost Center Groups can also be defined to support additional reporting capabilities:

##HQ (Cost Center Group / Hierarchy Area)

HQ Cost CentersA010 – FinanceA020 – H/RA030 – SalesA040 – MarketingA050 – PurchasingA060 - Administration

## Sales group

##HQ (Cost Center Group / Hierarchy Area)

HQ Cost CentersA010 – FinanceA020 – H/RA030 – SalesA040 – MarketingA050 – PurchasingA060 - Administration

HQ Cost CentersA010 – FinanceA020 – H/RA030 – SalesA040 – MarketingA050 – PurchasingA060 - Administration

## Sales group

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Cost Allocation

Frequently, costs like rent, computer expense, utilities, etc. have to be allocated to cost centers to provide accurate cost reporting.

Costs can be allocated using a statistical key figure, which defines some measurable value related to the cost center, like square footage, head count, CPU hours, etc.

Costs can also be distributed using fixed percentages.