BBP_FICO_V 2.0

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Project: XXXXX

ABC PHARMA LTD

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Financial Accounting and controlling (FICO)

BBP_FICO_V.2.0

SIGNATORY NAME TITLE DATE SIGNATURE

Prepared /Signed by / /

Reviewed/Approved by / /



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DOCUMENT NUMBER:BBP_FICO_V.1 PAGE: 2 of 202

TITLE: Business Blue PrintADDENDUM/AMENDMENT #: SUPERSEDES:

TABLE OF CONTENTS1. INTRODUCTION 6

2. FINANCIAL ACCOUNTING KEY COMPONENTS 7

2.1 FI MODULE OVERVIEW 72.2 CO MODULE OVERVIEW 7

3. ENTERPRISE STRUCTURE 9

3.1 CONTROLLING AREA 93.2 COMPANY CODE 103.3 FISCAL YEAR VARIANT 113.4 POSTING PERIOD VARIANT 113.5 SALES ORGANIZATION 123.6 DIVISIONS 123.7 PLANTS 133.8 PURCHASING ORGANIZATION 163.9 PURCHASE GROUPS 163.10 CHART OF ACCOUNTS 173.11 CREDIT CONTROL AREA 183.12 CONTROLLING AREA 193.13 COST CENTER ACCOUNTING 193.14 PROFIT CENTERS 243.15 OPERATING CONCERN 283.16 SEGMENTS 28

4. GENERAL SETTINGS 29

4.1 CURRENCY 294.2 DOCUMENT TYPES 294.3 DOCUMENT NUMBERING 304.4 POSTING KEY 314.5 FOREIGN EXCHANGE RATES 324.6 FIELD STATUS GROUP (FI DOCUMENT ENTRY) 324.7 TOLERANCE GROUPS 334.8 TOLERANCE GROUPS FOR G/L ACCOUNTS 344.9 INTEREST CALCULATION 344.10 OPEN AND CLOSE POSTING PERIODS 344.11 TAX PROCEDURE 354.12 NEW GL WITH DOCUMENT SPLITTING 354.13 RETAINED EARNINGS ACCOUNT 36

5. FI CO MASTER DATA 37

5.1 GENERAL LEDGER 375.2 CUSTOMER ACCOUNT 425.3 VENDOR ACCOUNT 445.4 BANK ACCOUNTING 465.5 HOUSE BANKS 46

Revision Date: Saturday, April 22, 2023

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5.6 FIXED ASSETS 465.7 COST ELEMENTS 475.8 COST CENTER 475.9 ACTIVITY TYPES 485.10 INTERNAL ORDER 485.11 PROFIT CENTERS 495.12 PRODUCT COST CONTROLLING 525.13 MATERIAL MASTER 53

6. FI - BUSINESS PROCESSES 56

6.1 GENERAL LEDGER ACCOUNTING 566.1.1 POSTING GENERAL LEDGER JOURNAL VOUCHERS 596.1.2 FAST ENTRY SCREENS 606.1.3 RECURRING ENTRIES 606.1.4 SAMPLE DOCUMENTS 616.1.5 PARKING AND POSTING PARKED DOCUMENTS 616.1.6 POSTING PARKED DOCUMENTS 626.1.7 CLEARING OF LINE ITEMS 636.1.8 PARTIAL CLEARING 636.1.9 RESIDUAL CLEARING 646.1.10 VALIDATION IN ACCOUNTING DOCUMENTS 646.1.11 ACCOUNT ASSIGNMENT MODEL /TEMPLATES 646.1.12 VALUATION OF G/L ACCOUNTS IN FOREIGN CURRENCY 656.1.13 FINANCIAL STATEMENT VERSIONS 656.1.14 CLOSING OPERATIONS 666.1.15 GL PROCESS STEPS 686.2 ACCOUNTS RECEIVABLE 726.2.1 SALES INVOICES POSTING TO ACCOUNTING 726.2.2 CASH / CHECK RECEIPTS FROM CUSTOMER 736.2.3 POST DATED CHECK FROM CUSTOMER 746.2.4 BILLS OF EXCHANGE / LETTERS OF CREDIT FROM CUSTOMERS 746.2.5 CREDIT MEMO PROCESSING 756.2.6 CUSTOMER DOWN PAYMENT 766.2.7 CUSTOMER INCOMING PAYMENT 766.2.8 USAGE OF BILLS OF EXCHANGE/ LETTERS OF CREDIT FROM CUSTOMERS 776.2.9 DUNNING CUSTOMERS FOR OVERDUE RECEIVABLES 776.2.10 CREDIT MANAGEMENT 786.2.11 AR CLOSING OPERATIONS 796.2.12 AR PROCESS STEPS 816.3 ACCOUNTS PAYABLE 846.3.1 VENDOR INVOICE WITHOUT PURCHASE ORDER (DIRECT EXP. BOOKING) 846.3.2 GOODS RECEIPT BASED VENDOR INVOICE VERIFICATION 856.3.3 GR BASED VENDOR INVOICE VERIFICATION FOR IMPORTS 876.3.4 INVOICE FOR DELIVERY COSTS 886.3.5 PAYMENTS TO VENDORS 886.3.6 DOWN PAYMENT TO VENDORS 906.3.7 TAX DEDUCTED AT SOURCE (TDS) 926.3.8 VALUATION OF FOREIGN CURRENCY OPEN ITEMS 96


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6.3.9 LOANS / ADVANCE TO EMPLOYEES 966.3.10 CLOSING OPERATIONS 976.3.11 AP PROCESS STEPS 996.4 GENERAL FINANCE PROCESS 1026.4.1 DOCUMENT CHANGE 1026.4.2 DOCUMENT REVERSAL 1026.4.3 OPEN ITEM CLEARING 1036.4.4 TAXES 1046.5 FIXED ASSET ACCOUNTING 1096.5.1 CHART OF DEPRECIATION 1106.5.2 CALCULATION OF DEPRECIATION 1106.5.3 DEPRECIATION KEY 1116.5.4 CUTOFF VALUE KEY 1116.5.5 ACQUISITION OF FIXED ASSET 1126.5.6 ASSETS UNDER CONSTRUCTION – ACCUMULATION AND CAPITALIZATION 1126.5.7 EVALUATION GROUPS 1136.5.8 ASSET TRANSFER PROCEDURES 1136.5.9 TREATMENT OF LOW VALUE ASSET 1146.5.10 INSURANCE 1146.5.11 SALE / RETIREMENT / SCRAPPING OF FIXED ASSET 1156.5.12 POSTING OF DEPRECIATION 1156.5.13 DOWN PAYMENT FOR CAPITAL (TANGIBLE) ASSETS 1156.5.14 PHYSICAL INVENTORY OF ASSETS 1166.5.15 CLOSING OPERATIONS 1176.5.16 ASSET ACCOUNTING PROCESS STEPS 1197 CO – BUSINESS PROCESS 1217.1 COST CENTER PLANNING 1247.1.1 COST ELEMENTS / ACTIVITY INPUT PLANNING 1247.1.2 COST ELEMENTS WISE ACTIVITY DEPENDENT PLANNING 1257.2 ACTIVITY OUTPUT / PRICES 1267.3 ACTIVITY OUTPUT PLANNING FOR A COST CENTER 1277.4 STATISTICAL KEY FIGURE PLANNING 1277.5 COST CENTER ALLOCATIONS 1277.5.1 ASSESSMENT 1277.5.2 DISTRIBUTION 1287.6 AUTOMATIC ACCOUNT ASSIGNMENTS 1297.7 ACTUAL POSTING IN COST CENTER ACCOUNTING 1307.8 PERIOD END CLOSING ACTIVITIES IN COST CENTER ACCOUNTING 1317.9 INTERNAL ORDER ACCOUNTING 1327.9.1 INTERNAL ORDER MASTER MAINTENANCE 1327.9.2 BUDGET MANAGEMENT FOR INTERNAL ORDERS 1337.9.3 AVAILABILITY CONTROL FOR INTERNAL ORDERS 1347.9.4 ACTUAL POSTING TO INTERNAL ORDER 1347.9.5 INTERNAL ORDER PERIOD END CLOSING ACTIVITIES 1357.10 PRODUCT COST CONTROLLING 1367.10.1 PRODUCT COST PLANNING 1367.10.2 PRODUCT COST CONTROLLING 1377.11 PRODUCT COSTING 140


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7.12 BATCH VALUATION 1445.3.1 COSTING OF PROCESS ORDERS 1457.13 WORK IN PROCESS CALCULATION 1467.14 VARIANCE CALCULATION 1467.15 PROFIT CENTER ACCOUNTING 1477.15.1 STANDARD HIERARCHY 1487.15.2 PROFIT CENTER ASSIGNMENTS 1497.15.3 PROFIT CENTER PLANNING 1527.15.4 AUTOMATIC DERIVATION OF PROFIT CENTER IN ACTUAL TRANSACTIONS 1537.15.5 ACTUAL POSTING IN PROFIT CENTRE ACCOUNTING 1557.15.6 PROFIT CENTRE ACCOUNT ANALYSIS 1557.16 PROFITABILITY ANALYSIS (CO-PA) 1567.16.1 OPERATING CONCERN: 1567.16.2 DATA STRUCTURE 1567.16.3 CHARACTERISTICS: 1577.16.4 VALUE FIELDS: 1577.16.5 FLOW OF ACTUAL VALUES INTO PROFITABILITY SEGMENTS: 1597.16.6 INFORMATION SYSTEM IN CO-PA: 159

8 INTEGRATION 160

7.1 CHART OF ACCOUNTS: 1607.2 GENERAL LEDGER ACCOUNT: 1607.3 FI – CO INTEGRATION: 1617.4 MM – FI INTEGRATION: 1617.5 SD – FI INTEGRATION: 1637.6 PRODUCTION PLANNING 1677.7 HR – FI INTEGRATION: 167

9 SCRIPTS & REPORTS REQUIREMENTS AND WORKAROUNDS 187

9.1 REPORTS REQUIREMENTS 187

10. FUNCTIONAL REQUIREMENTS AND WORKAROUNDS 191

11. AUTHORIZATION CONSIDERATION 197

12. Master Data Consideration 197


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1. Introduction

The purpose of this document is to compile the requirements gathered during business process design workshops and it documents the business process requirements of the company. With this, you can better understand how the company intends to run its business within the SAP System.

This document describes the design of the proposed solution and implications for the business process. This document is to communicate the new business solution and expected changes to the business process. The information needs to include:

Enterprise organizational structures

The proposed integrated business processes

Associated function definitions

Business requirements in term of reports/script and functionality

Authorizations

With the information conveyed by this document, the business should be able to approve the proposed solution. The Process Definition Document becomes the master deliverable/document, which serves as a basis for the entire project.


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2. Financial Accounting Key Components

The Financial Accounting Module is a complete accounting system capable of recording all business transactions. The system has the following features:

1. Powerful tools for real-time evaluation and reporting of current accounting data.

2. Comprehensive tools (balance lists, journals, balance audit trails and other standard reports) for documenting accounts.

2.1 FI Module Overview

Financial Accounting having the following sub-modules

General Ledger Accounting

Accounts Receivables

Accounts payables

Fixed Assets

Bank Accounting

Periodic Processing

FI is being used for external / statutory reporting. Financial Statements are prepared through financial

accounting. FI is being integrated with all other SAP Modules. Necessary Accounting entries are being posted

automatically, based on the business process requirements.

2.2 CO Module Overview

Controlling provides you with information for management decision-making. It facilitates coordination,

monitoring and optimization of all processes in an organization. This involves recording both the consumption

of production factors and the services provided by an organization.

As well as documenting actual events, the main task of Controlling is planning. You can determine variances

by comparing actual data with plan data. These variance calculations enable you to control business flows.


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Income statements are used to control the cost efficiency of individual areas of an organization, as well as the

entire organization. The various components of CO include:

Cost and Revenue Element Accounting

Cost and Revenue Element Accounting provides you with an overview of the costs and revenues that occur in

an organization. It provides the structure for the assignment of CO data through the classification of transaction

line items according to the nature of the cost or revenue posting to an object in CO. Most of the values are

moved automatically from Financial Accounting to Controlling.

Cost Center Accounting

This component is used to track the occurrence of costs 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 not

only makes Managerial Accounting possible but is a vital step in using other CO components. The standard

hierarchy of the CO Area includes all Cost Centers and provides the ability to analyze costs at different

positions.

Internal Orders

It is a very flexible tool that can be used for a wide variety of purposes to collect costs and also Revenues, it

provides capabilities for planning and monitoring and allocation of costs. While Overhead Orders are used to

monitor overhead costs for particular purposes, Investment Orders are used to collect costs incurred in the

creation of a Fixed Asset

Product Cost Controlling

It is concerned with all aspects of planning the cost of producing products as well as analyzing and tracking the

actual costs in the production process. It has the following sub-components


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a. Product cost planning refers to the creation of cost estimates for the production of goods.

b. Cost Object Controlling where the actual costs incurred in the production of a good is collected using

Process Orders. It also provides the tools for calculating the Work in Process and the variances at the period

end closing.

Profitability Analysis (CO-PA)

Profitability Analysis analyzes the profit or loss of an organization by individual market segments. The system

allocates the corresponding costs to the revenues for each market segment. Profitability Analysis provides a

basis for decision-making, for example, for price determination, customer selection, conditioning, and for

choosing the distribution channel.

Profit Center Accounting (EC-PCA)

It lets you analyze internal profit and losses so that evaluating different areas or units within an organization is

possible. Profit Structure can be structured according to the region, function or product classifications.

3. Enterprise Structure

Within the Financial Accounting Module, specific high-level organizational structures are defined. These

Enterprise Structures provide a direction for how the solution operates and how business functions, data and

reporting are defined.

The Enterprise Structure in SAP Financial Accounting and integrated Modules consists of the following

3.1 Controlling Area

Controlling Areas is an organizational unit within an Organization. Controlling Areas is being used to represent

a closed system for cost accounting purposes. Controlling Areas is used for internal reporting purposes.


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Multiple Company Codes can be used same Controlling Area, to have a uniform Costing Systems in place. All

the company codes in the controlling area must use one Chart of Accounts and Fiscal Year Variant.

Controlling Area “1000- ABC - Standard Hierarchy” are to be used for all Company Codes

3.2 Company Code

Company Code is the Organizational Unit of Financial Accounting for which a complete self-contained set of

accounts can be drawn up for purposes of external reporting. This includes recording of all relevant

transactions and generating all supporting documents required for financial statements. At each Company

Code level Balance Sheet and Profit and Loss Account and all financial statements can be generated.

Statements required for Legal Reporting can be generated / balanced at Company Code level. Company code

is used for various processes within Financial Accounting in order to balance entries, post transactions and

manage security.

ABC group will be using three Company Codes.

SL No Company Code ID Company Code Description

1 1000 Hyderabad Chemicals Limited


SL No Controlling Area

Company code Company Code name

1 1000 1000 Hyderabad Chemicals Limited

2 1000 2000 Hyderabad Chemical Products Limited

3 1000 3000 Neo Seeds India Limited

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2 2000 Hyderabad Chemical Products Limited

3 3000 Neo Seeds India Limited


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3.3 Fiscal Year Variant

Fiscal year variant represents the accounting period as per the financial year of an organization. A fiscal year

is usually for 12 months (12 periods). A fiscal year need not correspond to the calendar year. The fiscal year

variant specifies the number of posting periods and special periods in a fiscal year. The fiscal year variant also

determines the posting periods during posting.

In addition to the normal 12 posting periods, SAP supports additional 4 months to post the Book Closure, Audit and Year

end entries. Fiscal year variant can be as follows for different company codes of Hyderabad Chemicals as follows

Sl. No. Fiscal Year Variant

Company Code Company Code Description and Country

1 V3 1000Apr to March , 4 Special Periods

2 V3 2000 Apr to March , 4 Special Periods

3 V3 3000 Apr to March , 4 Special Periods

3.4 Posting Period Variant

The Financial Year of the organization is split into different posting periods based on the fiscal year Variant.

The transaction postings in a company code are controlled through the Posting Period Variant. A separate

posting period variant is defined for each company code. The name of the variant corresponds to the name of

the company code. Through this posting period variant, one can specify which periods are open for posting.


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Each month can be considered as one posing period. The following Posting Period Variants are required to

control the posting period.

Sl No

Company Code Posting period Variant Description

1 1000 1000 PP Variant for 10002 2000 2000 PP Variant for 20003 3000 3000 PP Variant for 3000

3.5 Sales Organization

A sales organization is responsible for the sale and distribution of goods and services. It is an organizational

unit within logistics that structures the company according to its sales requirements. The Sales Organizations

for ABC are:

The Sales Organizations are:

3.6 Divisions

A division can be defined as a Product group or business segment or line of business that could be made up of

a wide-ranging spectrum of products. This entity normally groups together saleable materials and services for

the purpose of responsibility and analysis.


Company Code Sales Org Code Sales Organization Description1000 1000 Domestic Sales Organization ABC1000 1500 Export Sales Organization-----ABC2000 2000 Domestic Sales Organization HCPL2000 2500 Export Sales Organization-----HCPL3000 3000 Domestic Sales Organization -- Neo Seeds3000 3500 Export Sales Organization – Neo Seeds

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Division Description10 Pesticides(insecticides/fungicides/weedicides ,etc)11 Bio Fertilizers ,12 Soluble Fertilizers 13 Bio Pesticides 14 Power15 Agri Farms20 Active Ingredients 21 Bulk Formulations22 By Products 23 Miscellaneous ( Packing mat/Assets /Raw)30 Germ plasm 31 Breeder seed32 Foundation (Certified/Truthful)33 Hybrid seeds34 OP seeds (Certified/Truthful)35 Reminent Seeds00 Common division

3.7 Plants

Plant is an operational unit within a Company Code. A Plant is an organizational unit that structures the

enterprise from the production, procurement, distribution, Stock Storage Area and Inventory Management. The

following are the plants in Hyderabad Chemicals Limited.

S no Company Plant Description Plant Location1 1000 1100 Hyderabad Chemicals Limited Balanagar2 1000 1200 Hyderabad Chemicals Limited Jammu

3 1000 1800Wind Power,Kadavakallu ,Anathapur Dist ,AP (ABC) Ananthapur

4 1000 1801 Wind Power , Lathur ,Maharashtra (ABC) Lathur 5 1000 1900 Agri Farms, Achampet Mahabubnagar , AP Achampet6 2000 2100 Hyderabad Chemicals Products Limited Pashamayalaram


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S no Company Plant Description Plant Location7 2000 2200 Hyderabad Chemicals Products Limited Humnabad

8 2000 2800Wind Power, Kadavakallu ,Anathapur Dist ,AP (HCPL) Ananthpur

9 2000 2801 Wind Power , Lathur ,Maharashtra ( HCPL) Lathur 10 2000 2802 Wind Power , Tamil Nadu (HCPL) Tamil Nadu11 2000 2900 Agri Farms, Achampet Mahabubnagar , AP Achampet12 2000 2901 Agri Farms , Gomaram, Medak , AP Gomaram13 2000 2902 Agri Farms ,Kalakal, Medak,AP Kalakal14 3000 3100 Neo Seeds India Limited Medchal15 3000 3900 Agri Farms , Masaiapet , Medak .AP Masaiapet

Depots (Plant)

S no Company Plant Description Plant Location16 1000 7101 ABC Depot Hyderabad 17 1000 7102 ABC Depot Nandyal18 1000 7103 ABC Depot Rajahmundry 19 1000 7104 ABC Depot Guntur 20 1000 7105 ABC Depot Vijayawada 21 1000 7106 ABC Depot Warangal 22 1000 7107 ABC Depot Nellore 23 1000 7108 ABC Depot Khammam24 1000 7109 ABC Depot Toophranpet25 1000 7110 ABC Depot Cuttack 26 1000 7151 ABC Depot Bellary 27 1000 7152 ABC Depot Gulbarga 28 1000 7153 ABC Depot Sindhanur29 1000 7154 ABC Depot Hubli30 1000 7155 ABC Depot Erode31 1000 7156 ABC Depot Indore 32 1000 7157 ABC Depot Akola 33 1000 7158 ABC Depot Sholapur 34 1000 7159 ABC Depot Rajkot 35 1000 7160 ABC Depot Ahmadabad 36 1000 7176 ABC Depot Sirsa37 1000 7177 ABC Depot Bathinda38 1000 7178 ABC Depot Sri Ganganagar39 1000 7179 ABC Depot Ghaziabad 40 1000 7180 ABC Depot Ludhiana


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S no Company Plant Description Plant Location41 1000 7181 ABC Depot Hissar42 1000 7182 ABC Depot Rudrapur43 1000 7183 ABC Depot Lucknow

S no Company Plant Description Plant Location44 2000 7210 HCPL Depot Cuttack 45 2000 7251 HCPL Depot Bellary 46 2000 7252 HCPL Depot Gulbarga 47 2000 7253 HCPL Depot Sindhanur48 2000 7255 HCPL Depot Erode49 2000 7256 HCPL Depot Indore 50 2000 7257 HCPL Depot Akola 51 2000 7259 HCPL Depot Rajkot 52 2000 7260 HCPL Depot Ahmadabad 53 2000 7261 HCPL Depot Yanam54 2000 7276 HCPL Depot Sirsa55 2000 7277 HCPL Depot Bathinda56 2000 7278 HCPL Depot Sri Ganganagar57 2000 7284 HCPL Depot Delhi 58 3000 7301 Neo Seeds Depot Hyderabad 59 3000 7302 Neo Seeds Depot Nandyal60 3000 7303 Neo Seeds Depot Rajahmundry 61 3000 7304 Neo Seeds Depot Guntur 62 3000 7305 Neo Seeds Depot Vijayawada 63 3000 7306 Neo Seeds Depot Warangal 64 3000 7307 Neo Seeds Depot Nellore 65 3000 7308 Neo Seeds Depot khammam66 3000 7309 Neo Seeds Depot Toophranpet67 3000 7310 Neo Seeds Depot Cuttack 68 3000 7353 Neo Seeds Depot Sindhanur69 3000 7354 Neo Seeds Depot Hubli70 3000 7356 Neo Seeds Depot Indore 71 3000 7357 Neo Seeds Depot Akola 72 3000 7358 Neo Seeds Depot Sholapur 73 3000 7377 Neo Seeds Depot Bathinda74 3000 7381 Neo Seeds Depot Hissar

Logical Plants (Bonded Warehouse)


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S no Company Plant Description Plant Location75 1000 8101 ICD Hyderabad 76 1000 8102 CFS Chennai 77 1000 8103 Navaseva Mumbai78 2000 8201 ICD Hyderabad 79 2000 8202 CFS Chennai 80 2000 8203 Navaseva Mumbai

3.8 Purchasing Organization

Purchasing organization is an organizational unit responsible for procuring materials or services for one or

more plants and for negotiating general conditions of purchase with vendors. The purchasing organization

assumes legal responsibility for all external purchase transactions. ABC will have the following Purchasing

Organizations

3.9 Purchase Groups

Purchasing group: The purchasing organization is further subdivided into purchasing groups (buyer groups), which are responsible for day-to-day buying activities.


Purchase Org. Description

1000 Central Purchase Organization

1100 Plant specific Purchase Organization – Balanagar

1200 Plant specific Purchase Organization – Jammu

2100 Plant specific Purchase Organization – Pashamayalaram

2200 Plant specific Purchase Organization – Humanabad

3100 Plant specific Purchase Organization – Medchal

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A purchasing group can also act for several purchasing organizations.

3.10 Chart of

Accounts

A chart of accounts provides a framework for the recording of values, in order to ensure an orderly rendering of

accounting data. The general ledger accounts they contain are used by one or more company codes.

Hyderabad Chemicals Limited will operate under the single chart of accounts that will be centrally maintained.


Purchasing Group Description

P01 Purchase Group 001





P06 Stores 001

P07 Stores 002

P08 Stores 003

P09 Stores Jammu

P10 Production 001

P11 Quality Dept 001

P12 P & M 001

P13 Wind Mill

P14 A& F

P75 Sub Contracting

P80 Services

P90 Stock Transfer

P99 Transportation

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Chart of Account “1000 –Chart of Account” is to be defined to meet the requirements of Hyderabad Chemicals

Chart of Account is having the following Characters:

Length of GL Account ID - 8 Language - English

The First Digit of the GL account number for ABC Group is as follows:

Sl.No Group1 Liabilities2 Assets3 Revenues4 Material Consumption & Manufacturing Expenses, Administration and

Selling overheads

Chart of account “1000” will be used as Operative Chart of Account. Required GL Accounts will be created in the Chart of Account.

3.11 Credit Control Area

It is an organizational unit that represents an area responsible for granting and monitoring credit. Credit

information can be made available per customer within a credit control area. For Hyderabad Chemicals

Limited, there will be Three Credit Control Areas


SL No Chart of Accounts Description

1 1000 Hyderabad Chemicals

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SL No Credit Controlling Area Credit Controlling Area Description

1 1000 Hyderabad Chemicals Limited2 2000 Hyderabad Chemical Products Limited3 3000 Neo Seeds India Limited

3.12 Controlling Area

Controlling provides you with information for management decision-making. It facilitates coordination,


of production factors and the services provided by an organization. Controlling Area “1000 – ABC Group Controlling Area” will be defined to meeting the requirements of ABC group. All company codes will use the

one Controlling area.

As well as documenting actual events, the main task of Controlling is planning. You can determine variances

by comparing actual data with plan data. These variance calculations enable you to control business flows.

3.13 Cost Center Accounting

This component is used to track the occurrence of costs 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 not only makes Managerial Accounting possible but


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is a vital step in using other CO components. The standard hierarchy of the CO Area includes all Cost Centers and provides the ability to analyze costs at different positions.

SL.No. Controlling Area

Cost Centre

Name Profit Centre

1 1000 10000501 Marketing -1 10002 1000 10000502 Marketing (KSV) 10003 1000 10000503 Testing (Marketing) 10004 1000 10000701 Finance 10005 1000 10000702 General Admn 10006 1000 10000703 HR 10007 1000 10000704 Insurance 10008 1000 10000705 Canteen 10009 1000 10000706 EDP 1000

10 1000 11000101 Production-1 110011 1000 11000102 Production-2 110012 1000 11000103 Production-3 110013 1000 11000201 Maintaince-1 110014 1000 11000301 QA 110015 1000 11000401 R&D 110016 1000 11000701 Finance (canteen) 110017 1000 12000101 Production-1 120018 1000 12000102 Production-2 120019 1000 12000103 Production-3 120020 1000 12000201 Maintaince-1 120021 1000 12000301 QA 120022 1000 12000401 R&D 120023 1000 12000701 Finance (canteen) 120024 1000 18000901 Machine 180025 1000 18000902 Machine 180026 1000 18000903 Machine 180027 1000 18000904 Machine 180028 1000 18000905 Machine 180029 1000 18010901 Machine 180030 1000 18010902 Machine 180031 1000 18010903 Machine 180032 1000 18010904 Machine 180033 1000 18010905 Machine 1800


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34 1000 18010906 Machine 180035 1000 18010907 Machine 180036 1000 19001001 Agrifarms 190037 1000 71010801 Hyderabad 710138 1000 71010802 Hyderabad Jammu 710139 1000 71020801 Nandyal 710240 1000 71020802 Nandyal jammu 710241 1000 71030801 Rajahmundry 7103

421000

71030802Rajahmundry Jammu

7103

43 1000 71040801 Guntur 710444 1000 71040802 Guntur jammu 710445 1000 71050801 Vijayawada 710546 1000 71050802 Vijayawada jammu 710547 1000 71060801 Warangal 710648 1000 71060802 Warangal jammu 710649 1000 71070801 Nellore 710750 1000 71070802 Nellore jammu 710751 1000 71080801 khammam 710852 1000 71080802 khammam jammu 710853 1000 71090801 Toophranpet 710954 1000 71090802 Toophranpet jammu 710955 1000 71100801 Cuttack 711056 1000 71100802 Cuttack jammu 711057 1000 71510801 Ballary 715158 1000 71510802 Ballary-Jammu 715159 1000 71520801 Gulberga 715260 1000 71520802 Gulberga-Jammu 715261 1000 71530801 Sindhanoor 715362 1000 71530802 Sindhanoor-Jammu 715363 1000 71540801 Hubli 715464 1000 71540802 Hubli-Jammu 715465 1000 71550801 Erode 715566 1000 71550802 Erode-Jammu 715567 1000 71560801 Indore 715668 1000 71560802 Indore-Jammu 715669 1000 71570801 Akola 715770 1000 71570802 Akola-Jammu 715771 1000 71580801 Sholapur 7158


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72 1000 71580802 Sholapur-Jammu 715873 1000 71590801 Rajkot 715974 1000 71590802 Rajkot- Jammu 715975 1000 71600801 Ahmadabad 716076 1000 71600802 Ahmadabad-Jammu 716077 1000 71760801 sirsa 717678 1000 71760802 sirsa- Jammu 717679 1000 71770801 Batinda 717780 1000 71770802 Batinda-Jammu 717781 1000 71780801 Sri Ganganager 7178

821000

71780802Sri Ganganager-Jammu

7178

83 1000 71790801 Gaziabad 717984 1000 71790802 Gaziabad-Jammu 717985 1000 71800801 Ludhiana 718086 1000 71800802 Ludhiana-Jammu 718087 1000 71810801 Hissar 718188 1000 71810802 Hissar-Jammu 718189 1000 71820801 Rudranager 718290 1000 71820802 Rudranager-Jammu 718291 1000 71830801 Lucknow 718392 1000 71830802 Lucknow-Jammu 7183

SL.No. Contriling Area

Cost Centre Name Profit Centre

1 1000 20000501 Marketing -1 20006 1000 20000601 Purchase -1 20007 1000 20000602 Purchase -2 20008 1000 20000701 Finance & Admin -1 20009 1000 20000702 Finance & Admin -2 2000

10 1000 20000703 Finance & Admin -3 200011 1000 20000704 Finance & Admin -4 200012 1000 20000705 Finance & Admin -5 200013 1000 20000706 Finance & Admin -6 200014 1000 20000707 Finance & Admin -7 2000


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15 1000 21000101 Production -1 210016 1000 21000201 Maintenance -1 210017 1000 21000301 QA-1 210018 1000 21000401 R & D-1 210019 1000 21000701 Finance & Admin -1 210020 1000 21000702 Finance & Admin -2 210021 1000 22000101 Production -1 220022 1000 22000201 Maintenance -1 220023 1000 22000301 QA-1 220024 1000 22000401 R & D-1 220025 1000 22000701 Finance & Admin -1 220026 1000 22000702 Finance & Admin -2 220027 1000 72100526 Cuttack Depo 721028 1000 72510511 Bellary Depo 725129 1000 72520512 Gulberga Depo 725230 1000 72530513 Sindhanoor Depo 725331 1000 72550515 Erode Depo 725532 1000 72560516 Indore Depo 725633 1000 72570517 Akola Depo 725734 1000 72590519 Rajkot Depo 725935 1000 72600520 Ahmedabad Depo 726036 1000 72760521 Sirsa Depo 727637 1000 72770522 Batinda Depo 727738 1000

72780523Sri Ganganager

Depo7278

39 1000 72840531 Delhi Depo 728440 1000 28000901 Wind Power 280041 1000 29001001 Agri Farms -1 290042 1000 29011001 Agri Farms -1 290143 1000 29021001 Agri Farms -1 2902

SL.No. Contriling Area

Cost Centre Name Profit Centre

1 1000 30000501 Marketing - 1 30002 1000 30000601 Purchase -1 3000


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3 1000 30000602Finance & Admin -

1 3000

4 1000 30000701Finance & Admin -

2 30005 1000 31000101 Production -1 31006 1000 31000201 Maintenance -1 31007 1000 31000301 QA-1 31008 1000 31000401 R & D-1 31009 1000 39001001 Agri Farms -1 3900

3.14 Profit Centers

Profit Center analyzes internal profit and losses so that evaluating different areas or units within an

organization is possible. Profit Center Structure can be structured according to the region, function or product

classifications.

Sl.No. Company Code Profit Center

Profit Center Description

01 1000 1000 ABC Head Office 02 1000 1100 Balanagar Plant 03 1000 1200 Jammu Plant 04 1000 1800 Wind Power, Kadavakallu ,Anathapur Dist.AP

(ABC)

05 1000 1801 Wind Power ,Lathur ,Maharashtra (ABC)

06 1000 1900 Agri Farms, Achampet Mahabubnagar , AP

07 1000 2000 HCPL Head Office 08 2000 2100 Pashamayalaram Plant


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09 2000 2200 Humnabad Plant 10 2000 2800 Wind Power, Kadavakallu ,Anathapur Dist.AP

(HCPL)

11 2000 2801 Wind Power , Lathur .Maharashtra (HCPL)

12 2000 2802 Wind Power, Tamil Nadu (HCPL)13 2000 2900 Agri Farms, Achampet Mahabubnagar , AP14 2000 2901 Agri Farms , Gomaram, Medak , AP15 2000 2902 Agri Farms ,Kalakal, Medak,AP16 3000 3000 Neo Seeds Head Office 17 3000 3100 Neo Seeds Medchal Plant 18 3000 3900 Agri Farms , Masaiapet , Medak .AP

Depot Profit Center

29 1000 7151 Bellary

30 1000 7152 Gulbarga

31 1000 7153 Sindhanur

32 1000 7154 Hubli


Sl.No. Company Code Profit Center Profit Center Description

19 1000 7101 Hyderabad20 1000 7102 Nandyal21 1000 7103 Rajahmundry22 1000 7104 Guntur23 1000 7105 Vijayawada24 1000 7106 Warangal2526

1000 7107 Nellore26 1000 7108 Khammam27 1000 7109 Toophranpet28 1000 7110 Cuttack

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33 1000 7155 Erode

34 1000 7156 Indore

35 1000 7157 Akola

36 1000 7158 Sholapur

37 1000 7159 Rajkot2

38 1000 7160 Ahmadabad

39 1000 7176 Sirsa

40 1000 7177 Bathinda

41 1000 7178 Sri Ganganagar

42 1000 7179 Ghaziabad

43 1000 7180 Ludhiana

44 1000 7181 Hissar

45 1000 7182 Rudrapur

46 1000 7183 Lucknow

47 2000 7210 Cuttack

48 2000 7251 Bellary

49 2000 7252 Gulbarga


51 2000 7255 Erode

52 2000 7256 Indore

53 2000 7257 Akola

54 2000 7259 Rajkot


56 2000 7261 Yanam


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57 2000 7276 Sirsa

58 2000 7277 Bathinda


60 2000 7284 Delhi

61 3000 7301 Hyderabad

62 3000 7302 Nandyal

63 3000 7303 Rajahmundry

64 3000 7304 Guntur

65 3000 7305 Vijayawada

66 3000 7306 Warangal

67 3000 7307 Nellore

68 3000 7308 khammam

69 3000 7309 Toophranpet

70 3000 7310 Cuttack


72 3000 7354 Hubli

73 3000 7356 Indore

74 3000 7357 Akola

75 3000 7358 Sholapur

76 3000 7377 Bathinda

77 3000 7381 Hissar

3.15 Operating Concern


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Profitability Analysis analyzes the profit or loss of an organization by individual market segments. The system

allocates the corresponding costs to the revenues for each market segment. Profitability Analysis provides a

basis for decision-making, for example, for price determination, customer selection, conditioning, and for

choosing the distribution channel.

Operating concern is an organizational element to generate the Profitability Analysis reports. Based on the

ABC’s requirements, 1000 will be defined as Operating Concern.

3.16 Segments

Segment is an Organizational unit for internal reporting. Segment is the can be an organizational unit or a

sales area or a division of the company. It has both the functionalities of the Business area as well as the Profit

Centre and it can be termed as an organization with in the main company code and is like a group of Profit

Centre. The segment as such is derived from the assigned profit centre. It can be used for Balance sheet and

Profit and Loss statement for internal reporting. It can span across company codes. ABC’s line of Business for

each location (for chemicals, Agri Farms, wind power, seeds etc.) will be represented as Segment:


SL No Segment Code

Description

1 1000 Common Segment

2 1100 Chemicals

3 1200 Seeds

4 1300 Wind Mills

5 1400 Agri Farms

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4. General Settings

4.1 Currency

ABC will use Indian Rupees (INR) as the base currency. The Company will define all other currencies in

relation to the Indian Rupees. For Hyderabad Chemicals Industries INR currency will have the standard two

decimals.

4.2 Document types

Document types are required in R/3 system to create and post financial documents (e.g. Bank Payment

Voucher, Receipt Voucher etc.)

The document type controls the following:

Document Numbering

Account Types which can be entered in the Document (e.g. Vendors, Customers, General Ledger, Assets)

Apart from the key controls mentioned above, few other definitions are made at document type level for

the purpose of transactions processing which are driven by the business process needs.

Some of the document types are tabulated below:

Document Type Description

AA Asset posting

AB Accounting document

AF Dep. postings

AN Net Asset Posting


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Document Type Description

C0 Cash Voucher

C1 Cash Receipt

C2 Cash Payment

DA Customer document

DG CustomerCreditmemo

DR Customer invoice

DZ Customer payment

KA Vendor document

KG Vendor credit memo

KR Vendor invoice

KZ Vendor payment

RV Billing Doc.transfer

SA G/LAccountDocument

WA Goods issue

WE Goods receipt

X1 Recurring entry doc.

X2 Sample document

In addition to the above mentioned document types, ABC uses additional documents which

automatically triggers Sales and Distribution and materials management.

4.3 Document Numbering

Each of the Documents defined would have identification no. R/3 system uses predefined number

ranges for the purpose. The number ranges may be defined to be internal i.e. automatically generated


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by the system in chronological order. Alternatively they may be external i.e. entered by the transaction

user. The ABC will have an Internal numbering for all the documents. Number ranges are defined for

each of the company codes separately for a fiscal year. Each document type is then assigned with one

number range.

4.4 Posting Key

Posting Key controls Debit or Credit account indicator for each line item. The posting key also

describes the type of transaction that is entered in a line item and allowable account type, which may

be entered for the respective line item. Posting keys are defined at client level in R/3 system. The R/3

system provides certain predefined posting keys. These predefined posting keys would be used

wherever applicable. For every posting key, properties control the entry of the line item. The most

commonly used are:

Posting keys

Debit/Credit Account Types

01 Invoice D D - Customers02 Reverse credit

memoD D - Customers

09 Special G/L debit D D - Customers

11 Credit memo C D - Customers19 Special G/L credit C D - Customers

21 Credit memos D K – Vendors

29 Special G/L debit D K – Vendors

31 Invoice C K – Vendors

32 Reverse credit memo

C K- Vendors

39 Special G/L credit C K – Vendors

40 Debit entry D S - General Ledger

50 Credit entry C S - General Ledger


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Posting keys

Debit/Credit Account Types

70 Debit asset D A – Assets

75 Credit asset C A – Assets

4.5 Foreign Exchange Rates

The exchange rate would be referred for the purpose of financial transactions. Average Exchange rate for

conversion of each foreign currency into Indian Rupees quoted by bank i.e. State Bank would be entered on a

daily basis in the exchange rate master. The translation ratio for currency translation will be maintained as 1:1

for all the currencies. Indirect quotations would be maintained as the standard quotation for the exchange rate

for the currency INR.

The definition of exchange rate would be effective from a particular date. Only one exchange rate can be

maintained per currency on a particular date. If an exchange rate or the local and the foreign currency amount

were entered manually during document entry, then a comparison is made with the exchange rates stored in

the system.

Exchange Rate Type “M- Average Rate Type” is being used to convert the Foreign currency to INR i.e.

company currency.

4.6 Field Status Group (FI Document Entry)

The field status group is being at the time of creation of GL Account Master. Based on the Fields Status group,

system will control the field at the document entry level. Based on the Field Status group system will change

the status of field as Input required (Mandatory), Surpress (will not be displayed on the screen), optional (entry


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is optional for input). The various field status groups are attached to Field Status Variant in order to link it with a

company code. Each company code would have a field status variant containing possible combination of field

status groups. The Field Status Variant code would be the same as the company code

The following Field Status Groups under the Fields Status Variant:

Group Text110B General Liablities - Text Optional150B A/P. Rec. a/c. Text / Assin - Optional190A Payables Clearing Accounts190B Freight/customs provisions/clearing (MM)200A General for Assets (Text- mandatory)200B General for Assets (Text- Optional)240B A/R . Rec. a/c. Text / Assin - OPTIONAL240C A/R . Rec. a/c.Text / Assin-OPT/OTH Fiel250B Cash & bank- Assets(Text - Optional)260B A/P.Advancesc.- PO Optional300A Revenue accounts300C Revenue accounts- Asset Retirement410B MM adjustment accountsG004 Cost accounts

4.7 Tolerance Groups

Tolerance groups are used to define different amount limits for the SAP users at ABC. These limits to

determine:

The maximum amount for which an SAP user is permitted to post a document

The maximum line item amount of a SAP user is permitted to enter in a customer, vendor or

general ledger account

The percentage amount a SAP user can enter in a line item


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The maximum acceptable payment difference

Payment differences within certain tolerance groups are posted automatically. The system either

adjusts the discount or posts the difference to a separate expense or revenue account.

Since the same limits usually apply for a group of employees, enter the limits for employee groups.

These Tolerance limits will be defined based on the User groups to be provided by ABC.

4.8 Tolerance Groups for G/L Accounts

For G/L account clearing, tolerance groups define the limits within which differences are accepted and

automatically posted to predefined accounts. The groups defined here can be assigned in the general

ledger account master record.

4.9 Interest Calculation

Interest calculation can be done from the system. Interest calculation can be based on

Line item calculations

Balance calculations

In case of line item calculation, interest is calculated per line item based on due dates. In case of

balance calculation, interest is calculated on the balance in the account as on the key date.

Interest calculation would be based on line items for customer overdue line items.

4.10 Open and Close Posting Periods

In this activity, we specify which periods are open for posting for each variant. Two time intervals (time

period 1 and time period 2) can be maintain in the system. In each interval, specify a period lower limit,

a period upper limit, and the fiscal year, one will be used for regular transactions and other one is being

used for posting the FI transactions at the time of Audit in the Special periods.


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Close a period by selecting the period specifications so that the period to be closed does not fall within

them.

Authorization group also can be assigned to permit the posting periods. This means that in month-end

or year-end closing for example, can open some posting periods for specific users only. The

authorization group only has an effect on time period 1.

1. Specify the periods permitted for posting.

2. Enter the periods permitted for posting for all variants.

3. Specify entries for account types if the periods are to be further restricted for specific accounts.

4. In addition, enter an authorization group for each time period 1 in order to limit user access.

4.11 Tax procedureTax procedure contains the necessary specifications for the calculation and posting of taxes on

sales/purchases. Every calculation procedure groups several tax types together into a condition type (for

example, output tax or input tax) in the calculation procedure, and determines calculation rules for it.

It is mandatory to define a tax procedure in SAP System and assign to country. Tax procedure is defined for

each country. Input tax and out tax codes are created and defaulted for the country.

Tax code Country Tax Procedure Tax type Other fields

A0 IN 1TAXINN A (Sales tax) All other active fields blank

V0 IN 1TAXINN V (Purchase tax) All other active fields blank

4.12 New GL with Document Splitting

Online Split and scenario assignmentDocument splitting enables a complex display of documents. Line items are split here for selected dimensions,

such as Segment and Profit Center. This ensures that ABC can draw up complete financial statements for the


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selected dimensions at any time. Using the document splitting procedure, ABC can also create a segmented

display of a (partial) balance sheet according to a legal requirement or according to areas of responsibility.

Define Zero-Balance Clearing AccountThis will ensure, if two dimensions are being posted in a document, balance will be made at each dimension

and offsetting posting will be made to this account.

Define Document Splitting Characteristics for GL AccountingHere you specify to which document splitting characteristics document splitting applies, for example, profit

centre or segment. ABC requires to draw the P&L and Balance sheet based on Profit centre wise and Business

segments. To take care this business requirement both profit centre and segment is considered as scenario

which required to be mapped.

4.13 Retained Earnings AccountBefore including P&L statement accounts in the chart of accounts, it is required to specify the retained earnings

account to which profits or losses are transferred. There is a special program designed to transfer these

amounts to this account. In order for this program to be able to carry forward the profit or loss, it is required to

enter the number of this retained earnings account in the system.

Each P&L account is assigned to a retained earnings account via a key. You have to enter this key in the P&L

statement account type field found in the chart of accounts area of each P&L account.

Chart of Accounts P&L Statement Account Type GL Account

1000 X 1250100


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5. FI CO Master Data

5.1 General LedgerThe General Ledger serves as a complete record of all business transactions. It is the centralized, up-to-date

reference for the rendering of accounts. GL account records are maintained at the Chart of Accounts level and

at the Company Code level.

The Account Groups and the G/L Account Number Range for Chart of Accounts 1000 is as follows.

Chart Of Accounts

Account Groups Name From

AccountTo

Account

1000 110 110 - SHARE CAPITAL 11000000 110999991000 120 120 - RESERVES AND SURPLUS 12000000 120999991000 130 130 - LONG TERM LOANS 13000000 130999991000 135 135- WORKING CAPITAL LOANS 13500000 135999991000 140 140- INTERCORPORATE DEPOSITS 14000000 140999991000 141 141 - FIXED DEPOSITS 14100000 141999991000 145 145- UNSECURED LOANS 14500000 145999991000 150 150- CURRENT LIABILITIES 15000000 150999991000 155 155- TDS DEDUCTION/ PAYABLE 15500000 155999991000 160 160 -PROVISIONS 16000000 160999991000 190 190 - CLEARING ACCOUNTS 19000000 190999991000 210 210- FIXED ASSETS 21000000 210999991000 218 218-CAPITAL WORK-IN-PROGRESS 21800000 21899999

1000 219219- ACCUMULATED DEPRECIATION 21900000 21999999

1000 220 220 - INVESTMENTS 22000000 22099999

1000 230230 - INVENTORY/CURRENT STOCKS 23000000 23099999


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1000 240 240- SUNDRY DEBTORS 24000000 240999991000 250 250- CASH AND BANK BALANCES 25000000 250999991000 260 260- LOANS & ADVANCES 26000000 260999991000 270 270- EXCISE RELATED ACCOUNTS 27000000 270999991000 290 290- DEFFERED EXPENSES 29000000 290999991000 310 310- SALES REVENUES 31000000 310999991000 320 320- OTHER INCOME 32000000 320999991000 330 330-WIND MILL INCOME 33000000 330999991000 340 340-AGRI INCOME 34000000 340999991000 410 410- MATERIAL CONSUMPTION 41000000 410999991000 420 420 - MFG. EXPENSES 42000000 420999991000 430 430- EMPLOYEE BENEFITS 43000000 430999991000 440 440- ADMINISTRATIVE EXPENSES 44000000 440999991000 450 450- SELLING EXPENSES 45000000 450999991000 460 460- SALES INCENTIVES 46000000 460999991000 470 470- FREIGHT OUTWARD 47000000 470999991000 480 480- INTEREST 48000000 480999991000 490 490- DEPRECIATION 49000000 490999991000 491 491 - DEFFERED EXPENSES 49100000 491999991000 492 492- APPROPRIATIONS 49200000 492999991000 499 499- NOTED ITEMS 49900000 49999999

Requirements of General Ledger Master Record

General Ledger account number is entered in the Chart of Accounts segment.

Few accounts may be managed by open items, which mean that in these accounts you have the possibility to clear the open items. These accounts are used for managing and tracking open transactions. E.G. TDS accounts, Advances accounts may be managed on the basis of open items.

Few additional definitions may be made at each account code level such as definition of line item display, sort keys, field status etc.

Master data needed

Before updating General Ledger Master, the following masters need to be updated:

Account Group


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Tax Code Master

House Bank and Account id Master

General Ledger Master Data Maintenance FunctionsSAP provides the following functionality for maintaining GL account master records:

Create a new account at Chart of Account Level

Extend the new account at Company Code Level

Create a new account centrally ( both COA and Company Code level)

Create a new account with template

Change an account

Display an account

Block/unblock an account for creation, posting

Mark an account for deletion

The above operations may be undertaken at the chart of accounts level, the company code level, or centrally

against both levels.

General Ledger Account FieldsThere are two segments in the General Ledger Master record:

a. Chart of Accounts Segment

b. Company Code segment

The following table describes some of the important fields in the GL account master record and their significance:

Sr. No. Field Description Description

1 G/L Account Number The G/L account number identifies the G/L account in a chart of accounts


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2 Company Code The company code in which the GL account will get used. This field will be populated in order to specify company code specific items in the GL master.

3 G/L account group An object whose attributes determine the creation of master records. An account group must be assigned to each master record. It controls account number ranges and screen layouts.

4 Account is a balance sheet account Indicates that the G/L account is managed as a balance sheet account.

5 P&L statement account Indicates that the G/L account is managed as a P & L account.

6 Description (Short text) Short text is used for online displays and evaluations which do not have sufficient space for the long text. (20 Characters )

7 Description (Long Text) Given sufficient space, long text is used for online displays and Evaluations. (50 Characters )

8 Account currency Enter the currency in which the account is to be managed I.e. generally the company code currency.

9 Indicator: Only Manage Balances in Local Currency

Allows you to maintain balances only in local currency

10 Exchange Rate Difference Key The system uses this key to find the accounts for gains and losses for the valuation of foreign currency balances

11 Valuation Group A valuation group can include a number of different freely definable G/L accounts

12 Tax Category Determines whether the account is a tax-relevant, a tax account, a tax-relevant G/L account


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13 Posting without tax allowed Indicates that the account can still be posted to even if a tax code has not been entered

14 Recon Account Type An entry in this field characterizes the G/L account as a reconciliation account for vendors, customers or assets. The reconciliation account ensures the integration of a sub ledger accounts into the general ledger.

15 Alternative account number in company code

The alternative account number field in the company code area is freely definable. This field can be used to track the related legacy account number.

16 Indicator: Open item management Setting this indicator on allows display of the open and cleared items and amounts in an account.

17 Indicator: Line Items Display Indicates that line item display is possible in this account. Do not set this indicator for accounts in which the number of postings is so great that line item display online would not be advantageous.

18 Sort Key Specifies a basis on which line item reports of that particular GL account would be sorted.

19 Field status group Determines the screen layout for document entry. Fields can have the following statuses. (1)Optional entry - you can enter data in the field. (2)Mandatory entry - you must enter data in the field. (3)Suppressed - the field does not appear on the screen.

20 Indicator: Posted automatically only This indicator means that the account can be only posted through by way of automatic system postings. No manual entry would be possible.


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5.2 Customer Account

Customer Accounts represent the various business partners to whom goods are sold or services performed and from whom receivables are due for this. The Customer Master is used for Customer Requests, Deliveries, Invoices and Payments.

Customer Masters are created as shared data on the client level and Company code-specific data for each Company Code. The customer account number is assigned on the client level.

Accounts Receivable Master Data Maintenance FunctionsSAP provides the following transactions for maintaining Accounts Receivable master records:

Create a new account


Change an account

Display an account

Block/unblock an account

Set the deletion indicator

The above operations may be undertaken at the general/company code level, the sales area level or centrally

against both levels.

The ABC accounts receivable account maintenance will be centralized with ABC Team, Hyderabad, and that

the creation of any new accounts will go through an approval process, internally.

Data in the customer master is stored in 3 views:

General Data: Data that applies to all company codes and sales areas (e.g. customer’s name,

addresses, language and telephone data).

Company Code/Accounting Data: Data that is specific to a company code (e.g. the reconciliation

account number, payment terms and dunning area).

Sales Area Data: Data specific to the sales area of the company (e.g. sales office, sales district, pricing

information, as well as information relating to shipping and billing).


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Customer Reconciliation AccountCustomer account is linked with General ledger with a reconciliation account (operative chart of account). A

reconciliation account is account to which one or more customers account is attached. The reconciliation

account is to be maintained in customer master data.

Account GroupsThe account group determines the data that is relevant for the master record, and a number range from which

numbers are selected for the master records. ABC uses the following account groups with external number.

The customer Account Groups and their number ranges for the Hyderabad Chemicals Limited are as under

Group Name Number range From To

ZDOM Domestic customer ZE A ZZZZZZZZEXP Export customer ZE A ZZZZZZZ

5.3 Vendor Account Vendor Accounts represents the various business partners from whom materials or services are procured. Vendor Masters are created as shared data on the client level and Company code-specific data for each company code. The Vendor account number is assigned on the client level.

Accounts Payable Master Data Maintenance Functions

SAP provides the following transactions for maintaining Accounts Payable master records:

Create a new account


Change an account


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Display an account

Block/unblock an account

Set the deletion indicator

The above operations may be undertaken at the general/company code level, the purchasing organisation

level or centrally against both levels.

The ABC accounts payable account maintenance will be centralized with ABC Support Team, Hyderabad, and

that the creation of any new accounts will go through an approval process.

Data in the vendor master is stored in 3 views:

General Data: Data that applies to every company code and purchasing organisation (e.g. the vendor’s

name, addresses, language and telephone data).

Company Code/Accounting Data: Data that is specific to a company code (e.g. the reconciliation

account number, payment terms, and payment methods).

Purchasing Organisation Data: Data specific to the purchasing organisation of the company (e.g.

settings for request for quotations, purchase orders, invoice verification and inventory control). The

Materials Management module is required to enter this data and to print purchase orders.

Vendor Reconciliation AccountVendor account is linked with General ledger with a reconciliation account. A reconciliation account is account

to which one or more vendor account is attached. The reconciliation account is to be maintained in vendor

master data.

When you post items to a subsidiary ledger, the system automatically posts the same data to the general

ledger. These reconciliation accounts ensure that there are no differences between the balance of G/L account

and the total of subsidiary ledger. This means that you can draw up balance sheets at any time without having

to transfer totals from the sub ledgers to the general ledger.


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You have to specify a reconciliation account in every vendor master record.

Account GroupsAccount group determines the data that is relevant for the master record, and a number range from which

numbers are selected for the master records.

The Vendor Account Groups and their number ranges for the Hyderabad Chemicals Limited are as under

Group Name Number range From ToZDOM Domestic Vendor (Ext. No.) DM 100000 199999ZIMP Imported Vendor (Ext. No.) IM 200000 299999ZSER Service Vendor (Ext. No.) SR 300000 399999ZFIN Finance Vendor (Ext. No.) FI 400000 499999ZEMP Employees A/C (External No) EM 500000 599999

5.4 Bank Accounting

Bank Accounting takes care of the transactions, which take place with the Banks the company, is dealing with. It is further subdivided on the basis of incoming & outgoing payments. House banks take care of all the banks with which the organization deals with on a day-to-day basis. House bank Master records contain all information about the particular house bank and also the Accounts maintained by the organization in the respective House bank.


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5.5 House BanksA house bank is any banking institution with which the organization conducts business. Bank master record data includes the bank key, the name of the bank, the address and country specification. Each house bank of a company code is represented by a bank ID and every account at a House Bank by an account ID. G/L accounts will be created and linked for the various bank accounts. The G/L account shall be managed in the same currency as the account at the bank.

Bank Name Account No. Account Type Account Purpose Currency

State Bank of India CURRENT Vendors cheques, customer cheques

INR

5.6 Fixed AssetsThe asset master record contains detailed accounting information related to the purchase of the asset. The asset master record also contains information, such as depreciation areas, description, asset class, scrapping and date of purchase.

Fixed Asset Classes and its number ranges have been defined for the Hyderabad Chemicals Limited as below.

Asset Class Name Number rangeNumber interval from To

10000 LAND 1 10000 1999920000 BUILDINGS - FACTORY 2 20000 2999921000 BUILDINGS - NON-FACT 2 20000 2999930000 PLANT&MACHINERY 3 30000 3999930900 PLANT&MACHINERY-LVA 3 30000 3999931000 ELECTRICAL INSTALLAT 4 40000 4999960000 OFFICE EQUIPMENT 5 50000 5999961000 FURNITURE& FIXTURES 6 60000 6999970000 COMPUTERS 7 70000 7999980000 VEHECLES 8 80000 8999999000 CWIP 9 90000 99999


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5.7 Cost ElementsA cost element describes the nature and origin of costs. Cost Elements are defined as either Primary or Secondary. Profit & Loss Accounts in Financial Accounting are created with corresponding Primary Cost Elements in Controlling. G/L accounts which are Primary Cost Elements would require a compulsory cost object whenever these accounts are credited or debited in the Financial Accounting.

Secondary Cost Elements are used exclusively in CO for the purpose of carrying out processes affecting CO like allocations and settlements.

5.8 Cost Center

Cost Centers represents the location of cost occurrence. It can be set up based on function, geographical location, area of responsibility, activities / service provided or allocation criteria. The cost center structure serves the purpose of displaying cost reports separately wherever required for a department / function and allocating these costs to various CO Objects.

Cost Center Hierarchy -1000STD has been maintained for Hyderabad Chemicals Limited as given below.

Sno Controlling Area Cost Center Name Profit Center

01 1000 11000101 Production(Plant 1 )-ABC 110002 1000 10000401 Finance - ABC 100003 1000 31000101 Production - Neo Seeds 3100

5.9 Activity Types


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The Activity Type classifies the specific activities that are provided by one or more Cost Centers. If a Cost Center provides activities for other Cost Centers, Orders, Processes, etc. then it implies that its resource is being used. The costs of these resources need to be allocated to these receivers of the activity. Activity Types serve as the tracing factors for this cost allocation. To plan and allocate the activities, the system records quantities that are measured in activity units.

Activity Activity Description

MACHIN Machine Hour cost

LABOUR Labour Hour Cost

5.10 Internal Order

Internal Orders are used to plan, collect and settle the cost of specific activity or task. They can be monitored through their entire life-cycle i.e. from their initial creation, the planning and posting of actual costs and the final settlement wherever required.

Statistical Internal Orders can be used for monitoring objects in Cost Accounting whereas Real Orders can be used where the costs collected are to be capitalized.

Order type Order Number Order Description

Responsible cost center

0400 XXXXX Marketing 110001010450 XXXXX Telephones 100002010550 XXXXX Motor Vehicle 71010501

5.11 Profit CentersProfit Center is an Organizational unit in accounting that reflects Management Oriented structure of the Organization for internal purpose. Profit centers are not directly posted to they are assigned to all the objects that contain related data. By making these assignments the system automatically transfers the data to Profit


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Center Accounting when it is posted to the original object and you can display selected balance sheet items by Profit Center.



01 1000 1000 ABC Head Office 02 1000 1100 Balanagar Plant 03 1000 1200 Jammu Plant 04 1000 1800 Wind Power, Kadavakallu, Anathapur Dist. AP

(ABC)05 1000 1801 Wind Power, Lathur, Maharashtra (ABC)

06 1000 1900 Agri Farms, Achampet Mahabubnagar, AP

07 1000 2000 HCPL Head Office 08 2000 2100 Pashamayalaram Plant 09 2000 2200 Humnabad Plant 10 2000 2800 Wind Power, Kadavakallu,Anathapur Dist.AP

(HCPL)11 2000 2801 Wind Power, Lathur. Maharashtra

(HCPL)12 2000 2802 Wind Power, Tamil Nadu (HCPL)13 2000 2900 Agri Farms, Achampet Mahabubnagar , AP14 2000 2901 Agri Farms, Gomaram, Medak , AP15 2000 2902 Agri Farms,Kalakal, Medak,AP16 3000 3000 Neo Seeds Head Office 17 3000 3100 Neo Seeds Medchal Plant 18 3000 3900 Agri Farms, Masaiapet , Medak .AP


Sl.No. Company Code

Profit Center Profit Center Description

19 1000 7101 Hyderabad20 1000 7102 Nandyal21 1000 7103 Rajahmundry22 1000 7104 Guntur23 1000 7105 Vijayawada24 1000 7106 Warangal2526

1000 7107 Nellore26 1000 7108 Khammam27 1000 7109 Toophranpet28 1000 7110 Cuttack

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29 1000 7151 Bellary

30 1000 7152 Gulbarga


32 1000 7154 Hubli

33 1000 7155 Erode

34 1000 7156 Indore

35 1000 7157 Akola

36 1000 7158 Sholapur

37 1000 7159 Rajkot2


39 1000 7176 Sirsa

40 1000 7177 Bathinda


42 1000 7179 Ghaziabad

43 1000 7180 Ludhiana

44 1000 7181 Hissar

45 1000 7182 Rudrapur

46 1000 7183 Lucknow

47 2000 7210 Cuttack

48 2000 7251 Bellary

49 2000 7252 Gulbarga


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51 2000 7255 Erode

52 2000 7256 Indore

53 2000 7257 Akola

54 2000 7259 Rajkot


56 2000 7261 Yanam

57 2000 7276 Sirsa

58 2000 7277 Bathinda


60 2000 7284 Delhi

61 3000 7301 Hyderabad

62 3000 7302 Nandyal

63 3000 7303 Rajahmundry

64 3000 7304 Guntur

65 3000 7305 Vijayawada

66 3000 7306 Warangal

67 3000 7307 Nellore

68 3000 7308 Khammam

69 3000 7309 Toophranpet

70 3000 7310 Cuttack


72 3000 7354 Hubli

73 3000 7356 Indore


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74 3000 7357 Akola

75 3000 7358 Sholapur

76 3000 7377 Bathinda

77 3000 7381 Hissar

5.12 Product Cost Controlling

Product Cost Controlling enables to find out the standard cost estimate of the products manufactured in house. The Components covered under Product Cost Controlling for Hyderabad Chemicals Limited are Product Cost Planning and Cost Object Controlling. Product Cost Planning includes tools for planning costs and setting prices for materials (cost estimate with or without quantity structure) and for other objects of cost accounting (base object costing, simulation costing). In Cost Object Controlling we can use cost objects such as production orders, process orders,

Material cost will flow to costing from standard bill of material

Internal activity prices like machine hours, labor hours and setup time to be consider as overheads on process order

Overheads are to be considered in categories of Raw material overheads, packing material overheads and factory overheads.

5.13 Material Master

They represent the various goods that are the subject of business activity. Material Masters are used for goods

which can be traded, used in manufacture, consumed, or produced.


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The data contained in the material master record is required for many functions like Purchasing data for

ordering, Inventory management data for posting goods movements and managing physical inventory and also

accounting data for material valuation.

Since materials are processed by various functional groups within a company and each group will stores

different information for the materials, the material master is subdivided into information grouped by various

functions or uses. Each group has a different view of the material master record and is responsible for

maintaining the data to support its function.

The valuation area is the organizational level at which material is valuated. When stock is valuated at plant

level, you can valuate a material in different plants at different prices. For ABC, each Plant will represent a

Valuation Area. Existing Material Types and Valuation Classes are used for the valuation area of Company

code ABC.

The Accounting views contain important data which is relevant to the Financial Accounting. Consequently, only

the Finance Department will have the authorization to maintain this view.

Important fields

Price Control - indicates the price control used to valuate the stock of a material. In the SAP System, there

are two types of price control:

S - Standard price - A constant price at which a material is valuated without taking goods movements

and invoices into account.

V - Moving average price - Price that changes in consequence of goods movements and the entry of

invoices, and which is used to valuate a material. The moving average price is calculated by dividing

the value of the material by the quantity of material in stock. It is recalculated automatically by the

system after each goods movement or invoice entry.

These two types of price control differ in how they handle price variances resulting from goods receipts or

invoice receipts


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Valuation using a standard price has the following features:All inventory postings are carried out at the standard price

Variances are posted to price difference accounts

Variances are updated

Price changes can be monitored

If a material is assigned a standard price (S), the value of the material is always calculated at this price. If

goods movements or invoice receipts contain a price that differs from the standard price, the differences are

posted to a price difference account. The variance is not taken into account in valuation.

Valuation using a moving average price results in the following: Goods receipts are posted at the goods receipt value.

The price in the material master is adjusted taking into account the delivered price.

If a material is assigned a moving average price (MAP), the price is automatically adjusted in the material

master record when price variances occur. If goods movements or invoice receipts are posted using a price

that differs from the moving average price, the differences are posted to the stock account; as a result, the

moving average price and the value of the stock change.

For ABC materials like Raw materials, Intermediates, Finished Goods, etc., will be valued with Batch Split

Valuation.

Packing materials will be valued with Moving Average Price .

Valuation Class – is used to combine materials for assigning G/L accounts so that you do not have to manage

a separate stock account for each material. Based on the Material Types the Valuation class will be assigned in

the Material Master. Valuation Class determines which stock account and offsetting account to be posted

based upon goods movement. The various Valuation Classes which will be used by ABC are as follows:

Material Type Valuation Class Description

ZRAW 1000 Raw materials 1


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ZINT 6000 Semi-Finished

ZSPA 3000 General Items

ZPKG 2000 Packaging Material

ZCAP 4100 Capital Goods

ZSRP 6900 Scrap

ZTRG 4000 Trading Material

ZRTP 7900 Returnable Packing

ZFIN 7000 Finished products


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6. FI - Business Processes

6.1 General Ledger Accounting

General Ledger is the sub-module in which all of the financial accounting data for the legal entity is recorded

either manually or automatically through integrated processes. Business transactions with a financial

accounting impact are posted to the General Ledger sub-module on a real-time basis either directly or through

integration from other modules and FI Sub-modules. Posting of entries in the general ledger are made using

the accounts as defined in the ABC Operating Chart of Accounts. The Financial General Ledger will allow

Hyderabad Chemicals Limited:

• Automatically and simultaneously post all sub-ledger items in the appropriate general ledger accounts

(through reconciliation accounts)

• Simultaneously update the general ledger and cost accounting areas

• Real time evaluation and reporting on current accounting data, in the form of account. Displays, financial

statements and additional analyses

The general ledger will serve as a complete record of all business transactions for ABC. It is the centralized,

up-to-date reference for the rendering of accounts. Using the general ledger, Hyderabad Chemicals Limited will

be able to check any financial transaction in any general ledger account in real-time processing by displaying

the original documents, line items, and transaction figures at various levels.

New General Ledger

New General Ledger in the SAP system offers a powerful feature known as document splitting. With document

splitting, accounting line items are split according to specific characteristics. You can create financial

statements for entities such as Segments and meet legal requirements.


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You can use the document splitting procedure to split up line items for selected dimensions (such as receivable

lines by profit centre) or to effect a zero balance setting in the document for selected dimensions (such as

segment). This generates additional clearing lines in the document. Using the document splitting procedure is

the prerequisite for as well as an essential tool for drawing up complete financial statements for the selected

dimensions at any time.

You can choose between displaying the document with the generated clearing lines either in its original form in

the entry view or from the perspective of a ledger in the general ledger views.

Example 1: Invoice

Suppose a vendor invoice containing the following items is entered:

Posting Key Account Segment Amount

31 Payables -100

40 Expense 001 40

40 Expense 002 60

Document splitting then creates the following document in the General Ledger view:

Posting Key Account Segment Amount

31 Payables 001 -40

31 Payables 002 -60

40 Expense 001 40

40 Expense 002 60

Using the document splitting procedure, you can also create a segmented display of a (partial) balance sheet

according to a set of legal requirements (for example, IAS) or according to areas of responsibility.

Efficiently handle Financial Reporting, according to both local and international accounting

principles


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Flexibly perform reporting tasks based on data reconciled in real time

Concept of Ledger

Leading Ledger

The leading ledger is based on the same accounting principle as that of the consolidated financial statement. It

is integrated with all subsidiary ledgers and is updated in all company codes. You must designate one ledger

as the leading ledger.

In each company code, the leading ledger automatically receives the settings that apply to that company code:

the currencies, the fiscal year variant, and the variant of the posting periods.

Non-Leading Ledger

The non-leading ledgers are parallel ledgers to the leading ledger. They can be based for example on local

accounting principles

For each ledger that you create, a ledger group of the same name is automatically created.

For general-ledger account postings that have a specified cost centre, the system always reconciles the profit

centre and general-ledger account simultaneously

Two views of the new General Ledger:

Regular entry view

General-Ledger View

Segment Reporting

IAS/IFRS/US GAAP requires Segmental reporting. Segment is provided in addition to Business area / Profit

centre. It is one of the standard account assignment objects available for running analysis below the company

code level.


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6.1.1 Posting General Ledger Journal Vouchers

ABC will post journal vouchers directly in the general ledger, which do not originate from a sub-ledger or

another module. Such entries could be to make corrections to the general ledger or part of the period end

process. Hyderabad Chemicals Ltd will be able to post only complete documents.

For posting a Journal Voucher, the following minimum information will be required in the document header:

− Posting date: the date that general ledger account balances are updated. It determines the posting period.

− Document date: Issue date of the original document (not necessarily the same as the posting date). For

invoices it is called the invoice date.

− Document type: refers to the type of voucher pertaining to a specific Document Number Range

− Currency: transaction currency in which the Document is posted.

− Reference and Document header text will be additionally required for specific Document Types.

Each Journal Voucher will have at least two line items, a minimum of one debit and one credit, and at most 999

line items.

Every line item contains a:

Posting key - a two-digit numeric key that controls how document line items are entered and posted. The

posting key -

• Specifies whether the line item is a debit or credit

• Specifies the account type i.e. Customer, Vendor, General ledger account, Asset, Material

• Contains Field Status definitions that are used as a factor in determining the screen layout while posting

transactions.

G/L Account number – The G/L Account created for Hyderabad Chemicals Limited in the operating Chart of

Accounts 1000 will be used while posting Documents.

Amount – All amounts shall be converted to the Company Code currency INR if the Document Currency is a

foreign currency.


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The Assignment field (alphanumeric, up to 18 characters) is updated automatically with the data from the field

referenced in the Sort Key field of the general ledger account. The Assignment field will be used to sort line

items during general ledger line item display and Automatic Clearing. A value in the Assignment field can also

be manually entered.

Since it is posted at the Company Code level, where balanced financial statements are ensured, a document

can only be posted if the debits equal the credits. In the system, a document is created for every business

transaction and receives a unique document number. Document number ranges are defined per company

code and are assigned to each document type in the system. Number ranges will be defined for each fiscal

year.

6.1.2 Fast Entry Screens

Fast entry screens are used for quick entry of transactions having multiple line items. Fast entries screens may

be best used when majority of the fields are suppressed for a particular business process transaction. This

would simplify the procedure of document entry by adopting a simplistic screen for document entry.

Entries in the fast entry screens would have similar validations at the time of posting as compared to a normal

transaction entry screen. The users can use the fast entry screens for transactions with multiple line items.

Fast entry screens may be best utilised for general ledger / customer / vendor transactions having multiple line

items.

SAP enjoy transactions provide for a viable alternative for fast entry of transactions. The advantage of using

enjoy transaction over fast entry is that posting keys which control the debit/credit need not be entered

6.1.3 Recurring Entries

Recurring entries are business transactions that are repeated regularly, such as rent or insurance. This acts as

standing order that we give to the bank to deduct rent, premium payments, or loan repayments. You enter this


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recurring data in a recurring entry original document. This document does not update the transaction figures.

The recurring entry program uses it as a basis for creating accounting documents.

In the recurring entry document, you define when a posting is to be created with this document. Postings can

be made periodically or on a specific date:

For periodic postings, specify the first and last day of execution, as well as the interval in months.

To post recurring entry documents, you have to set up a separate number range for the company codes that

use them. You have to use key X1 for the number range. The system takes numbers for the recurring entry

original document from this number range.

6.1.4 Sample Documents

Sample documents acts as templates when manually entering a document. The use of sample documents is

beneficial if you need to enter many documents that are similar to each other.

We can use sample documents as reference documents entered specifically for this purpose. Sample

documents have a separate number range. When you enter and post a sample document, the system stores

the document, but does not update any transaction figures. They serve merely as data sources for an

accounting document.

6.1.5 Parking and Posting Parked Documents

Hyderabad Chemicals Limited will be using the Document Park and Post functionality as a measure of

introducing internal control procedures. Both complete and incomplete documents can be parked and then

posted at a later date by a different user.

Parking Documents


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Information entered as part of a parked document is only checked as to whether it exists. Only a few fields - for

example the posting key and account number – will be the required entry fields.

The authorization checks carried out for document parking are basically the same as those made for standard

document entry and processing. Instead of the activity "posting", the activity "parking" is required for document

parking. Necessary authorizations will be assigned which differentiate between users who only have parking

authorization and those who can park and post documents.

The required entry fields defined using the field selection strings in the Posting Key and G/L Account Field

Status Group are reduced to the status of optional entry fields.

No tolerance checks will be carried out while parking a document. Though Account Assignment models can be

used, Reference Documents will not be available for Document Parking. Substitutions and validations will not

be supported while parking a document, but will be supported when parked documents are completed and

posted.

Parked Documents will not update transaction figures but can be included in Document Journals and in the

reports for line items. Cash Management data will however be updated with the preliminary posting.

When a parked document is saved, a message containing the document number is displayed. Since these

numbers are assigned in the same way as the standard document posting function, the posted document will

retain the parked document’s number.

6.1.6 Posting Parked DocumentsA parked document can be changed and gradually completed. A large number of header and item fields can

be changed during this process, including the amounts. Certain values that cannot be changed are the

currency and the company code. The data in parked documents is deleted when they are posted, a document


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is written to the document database and the appropriate data (transaction figures etc.) is updated. The number of

the parked document will be transferred to the posted document.

Parked documents can also be deleted. The Document No. of the deleted Parked Document cannot be

reused. A document which has been parked by one user can only be posted by another user.

6.1.7 Clearing of Line Items

Clearing process is used to clear open items in Customer, Vendor or General Ledger accounts. Clearing

process is used to clear one or more open line items within one account. On clearing open items, R/3 system

would create a clearing document.

For example

Customer receipts can be cleared against customer invoice posting

TDS payable can be cleared against TDS payments

Process Overview

Clearing process in R/3 system may be automatic or manual.

Automatic Clearing clears the transactions in an account based on user defined criteria. Automatic

clearing is generally used for clearing bulk transactions. Manual clearing would clear all other

accounts.

Manual Clearing can be done in 2 ways

Partial Clearing

Residual Clearing


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6.1.8 Partial Clearing

Partial Clearing is used in a business scenario where a part payment is either received or made for a customer

or vendor open item.

If the Partial Clearing is used, R/3 system would post a line item in credit for the payment received. The system

however, does not clear the invoice till the entire invoice amount is cleared. Till the invoice is cleared all such

line items are shown as open items.

However the disadvantage of using partial clearing method is that both the items i.e. the invoice and the part

payment remain open items. Hence the ageing analysis shows skewed results as the invoice amount debit is

shown from the invoice date and the part receipt amount is shown as credit received from the receipt date.

6.1.9 Residual Clearing

Residual clearing is also used for clearing open items in case of part payment etc.

In case of residual clearing R/3 system clears the open line item to the extent and generates a new line item

for the balance receivable. The default baseline date for the new document would be Residual document date.

During the clearing, the residual amount i.e. the balance amount needs to be entered against the original open

item.

6.1.10 Validation in Accounting Documents

Validations will be used by Hyderabad Chemicals Limited to ensure integrity of data at the time of transaction

entry. Combination of specified criteria will be checked for validity before posting a document. With validations,

you can check values and combinations of values as they are being entered while posting documents. As data

is being entered, the system validates the data against the validation rules. Because data is validated before it

is posted, only valid information enters the system.


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6.1.11 Account Assignment Model /Templates

An account assignment model is a pattern for document entry. For posting the various monthly closing entries,

multiple account assignment models will be used to enter items in list form using screen templates. The

posting in the account assignment model does not need to be complete. The blank fields will have to be filled

when the model is actually used.

The account assignment model will be primarily used to post transactions to general ledger accounts rather

than sub-ledger accounts. At the time of posting, the account assignment model can be called up multiple

times within one document to add the same line items over and over again. Other account assignment models

can also be used in the same posting. In addition, more line items can be added manually and the pre-

assigned fields can also be changed.

When a document is being posted more than once with little or no change, the user can reference a previously

posted document.

6.1.12Valuation of G/L Accounts in Foreign Currency

All the G/L accounts in foreign currency would be always revalued at month end according to month end

exchange rate. The difference would be posted to separate G/L Accounts for gains and losses.

The balance in local currency of the G/L Account revalue will be adjusted with the amount of gain / loss on

such revaluation. In the new month, the valuation at previous month end would be rolled back. The valuations

and the reversals will be posted using batch input sessions only.


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6.1.13Financial Statement Versions

The financial statement version forms the basis for creating a balance sheet and profit and loss statement. The

SAP standard Financial Statement analysis allows for the comparison of financial statements from two time

periods, and the determination of the differences in the individual financial statement items. Financial

statement can be carried out for the following time periods:

Year comparisons

Half-year comparisons

Quarterly comparisons

Monthly comparisons

In addition to financial statement, SAP provides a standard Balance Display report (Trial Balance). This report

facilitates the evaluation of transaction figures.

The following are the Financial Statement Versions for ABC:

Sl. No. Chart of Accounts Financial Statement Version

1 1000 - ABC Chart of Accounts 1000 - Financial statement version ABC

6.1.14 Closing Operations

ObjectiveThe following are the operations that are to be covered as a part of closing operations –

The operations shall cover:

Monthly closings

Yearly closings

Monthly – end Closing Month-end closing comprises all activities involved in closing a posting/accounting period. Accounting period is

a division of a company’s fiscal year. The number of periods and definition of period are to be determined


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during configuration.

Each posting into the system must be associated with an accounting period. This is to ensure that each

transaction can be reported in the corresponding period. In the same token, periods must be controlled to

ensure validity of the reports.

The check list for month end process will be documented after the Realization Phase of this project.

The below proposed flow for month-end processing shall be used as a guideline for this blueprint as the

activities may not be finalized until Realization phase.

Process Overview Explanation

Step Procedures1 Run payroll postings to update FI.

2 Execute the recurring entry program and post the entries3 Execute Sample document program and account assignment model

4 Complete all the outstanding journal entries related to month end closing.5 To prepare and post accrual journals.6 To execute accrual reversal entries.7 Execute depreciation run to compute and post depreciation.

8 Execute GR/ IR clearing entries to clear the matched GR/IR clearing transactions.

9 Run foreign currency valuation transactions10 Close posting period to ensure no transaction can take place in that period

and open new posting period.

11 Generate monthly reports: Trial Balance Profit & Loss statement Balance sheet etc.

Year – end closing Year-end closing comprises all activities involved in closing the financial year apart from Month-end closing activities.


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The check list for year-end process will be documented after the Realization Phase of this project.

The below proposed flow for year-end processing shall be used as a guideline for this blueprint as the activities

may not be finalized until Realization phase.


Step Procedures1 Carry forwarding of GL Balances

2 Carry forwarding of Customer/Vendor Balances

3 AUC Tracking

4 Fixed Assets fiscal year change

5 Fixed Assets Year end closing

6 Open new fiscal year.

7 Generate yearly reports: Trial Balance Profit & Loss statement Balance sheet etc.

6.1.15 GL Process Steps

Main process Description Process of SAP Transaction code

1. GeneralCreating a New GL and Posting

of documents

Creation of new account FS00Posting an entry F-02

Viewing a document FB03


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Viewing an Account FS10

2. Parking of the

document:

Parking of documents where

authorization is required before

posting.

Parking of the document F-65

Releasing parked document FBV0

3. Sample Document

When there is a transaction

which will be posted every

month whose date is fixed but

amount is not fixed, this

technique will be utilized.

Creation of sample

documentF-01

Posting with reference F-02

4. Recurring

Document

When there is a transaction

which will be posted every

month and whose date and

amount are fixed, this

technique will be used.

Creation of recurring

document FBD1

Recurring document display F.15

Recurring document posting F.14

5. Accrual / deferral

documents

Whenever there is a provision

to be made for accrual /

deferral documents, SAP

provides a screen to make it

and later reverse the

transaction.

Posting of accrual /

deferral documentFBS1

Reversing the accrual /

deferral documentF.81

6. Reversal of

documents

Whenever there is an error

while posting SAP offers a

methodology to make a reverse

posting. A reversal reason is

configured and different

number ranges were given for

reversal documents from FI as

Individual reversal FB08

Mass reversal F.80

Cleared item reversal See cleared

items and do

un clearing and

reverse it,

FBRA (to see


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per the requirement.

recently

cleared items),

Accrual / deferral document

reversalF.81

Reversal of reversal F-02

7. General Ledger

account analysis

By using SAP we can see the

line items / balances of GL

accounts and also change the

layout of display by adding any

necessary things like cost

center etc.,

GL Line Item Analysis FAGLL03

GL Balance Analysis FAGLB03

8. Account clearing

Open items in GL accounts ex.

Like outstanding expenses can

be cleared one by one and can

be arranged in ascending /

descending order and can be

cleared.

Without Specification of

Clearing Currency F.13

9. Foreign currency

revaluation

In closing, foreign currency

loans or items related to foreign

currency can be revaluated

using the transaction

FAGL_FC_VAL and

represented in the balance

sheet. Based on either loss or

profit different GL accounts can

be mentioned and the values

can be automatically sent to

Creation of GL accounts

and assignment of

exchange rate to GL

FS00

Posting of loan F-02

Repayment (outgoing

payment)

F-07

Revaluation of FC

Transaction

FAGL_FC_VAL


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those GL accounts to maintain

the balances.

10. Regroup payables /

receivables

Based on company code or

document type wise payables /

receivables can be regrouped

to represent in the company

code balance sheet or

companywide consolidated

balance sheet. Use F101 to

generate a batch input program

to group payables /

receivables.

Vendor / Customer

RegroupingF101

11. GR/IR Clearing and

material valuation

At the time of closing GR/IR

account has to be cleared from

SAP transaction F.19.

Revaluation of materials has to

be done t o represent the new

values (market value or

realization value whichever is

less) in the balance sheet.

GR/IR Clearing MR11, F.19


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6.2 Accounts Receivable

Accounts Receivable is the sub-module in which the financial accounting transactions involving customers are

recorded and administered. All postings in Accounts Receivable are also recorded simultaneously in General

Ledger. The components of Accounts Receivable are closely integrated with components of Sales and

Distribution and Materials Management which will support an automated sales cycle.

Document type used for accounts receivables – RV, DR, DA, DG, and DZ

6.2.1 Sales Invoices posting to AccountingThe billing document is a document which supports the creation of customer invoices, credit or debit memos,

and the recording of the financial impact of these transactions in the general ledger. In ABC, the Billing

Document or Sales Invoices created in Sales & Distribution Module will automatically create an Accounting

Document. The Accounts Department shall as part of the closing process verify that the policies in respect of

Revenue recognitions have been followed for the Sales Invoices. The Billing Document and the Delivery

Documents in respect of the Sales Invoices which do not meet the Revenue recognition criteria will be

cancelled / reversed.

As a result of the creation of a billing document, integration to the Financial Accounting module occurs with the

automatic creation of an accounting document containing the following accounting entries:

• Debit to the customer account (sub-ledger) and the appropriate general ledger reconciliation account


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assigned to it

• Credit to the appropriate general ledger revenue account

The Payment Term maintained in the Sales Area segment of the Customer should be the same as in the

Accounting Document. Consequently no changes in the Payment Term will be allowed while creating the Sales

Order or Billing Document. A change in the Payment Terms in the Sales Order would be considered as a

credit-sensitive field for the purpose of Credit Management. Consequently, any change in the Payment Term

would block the Sales Order for Delivery automatically.

6.2.2 Cash / Check Receipts from CustomerThe receipt of payment from a customer is the final step in the integrated sales cycle. Hyderabad Chemicals

Ltd, will process customer payments by clearing open items in the Customer Account. Posting of an incoming

payment will create an accounting entry, which will debit the appropriate general ledger cash account and

credit the appropriate customer account. At the same time, a credit is posted to the general ledger

reconciliation account assigned to the Customer Account. A partial payment leaves the original invoice intact

and creates a credit in the customer account for the amount of the partial payment. No items will be cleared as

a result of a partial payment.

All incoming payments shall be routed through the Checks under Collection clearing account and the amount

shall be transferred to the main Bank Account upon the realization of the check. The Checks under Collection

G/L Account shall be open-item managed so that the details of checks in clearing can be seen from the open-

item list.

In case of dishonor of check, the Customer Account shall be manually "Blocked for Delivery”. This block shall

not restrict new Sales Orders from being created but all subsequent deliveries including deliveries in respect of

earlier created Sales Orders cannot be processed for that Customer.

The incoming payment document shall thereafter be reversed which will clear the item in the Checks under

Collection Account and the Customer Invoices shall again be open. Bank charges for such dishonor shall be


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recoverable from the Customer for which Debit Notes shall be issued to the Customer.

If there is any difference in payment and if such differences are within the tolerance limits, such differences

arising out of under or over payment shall be posted to separate G/L Account. All the Customers shall have the

following tolerances for payment differences; the lower limit between them would be valid.

The realized exchange gain / loss will be calculated and posted automatically while clearing open items in

foreign currency. Any Bank charges specified when settling payments will also be automatically posted to the

G/L Account for bank charges.

6.2.3 Post Dated Check from Customer

The receipt of Post Dated Checks (PDC) will be handled differently by Hyderabad Chemicals Ltd, since such

checks cannot be considered at the time of receipt of the check as a realized payment. Hyderabad Chemicals

Ltd, will keep all PDC received by it in the custody of the bank in a safety locker till the instrument date i.e. the

date of the check. Hyderabad Chemicals Ltd will be using Special G/L Indicator “n” for this purpose so that the

normal Accounts Receivable Reconciliation G/L Account Balances are not affected. Instead the alternate

Reconciliation G/L Accounts balances will be updated with the PDC amounts when the Customer Account is

credited with this Special G/L indicator. A separate G/L Account shall be used to represent the Checks in Hand

which shall be debited at the time of receiving such PDC.

When the check is deposited in the bank on the instrument date, the Check in Hand Account is cleared with the

posting to the Checks under Collection G/L Account. The amount shall be transferred to the main Bank

Account upon the realization of the check. The normal open item shall be cleared against the special item in

the Customer Account subsequently to reflect the correct receivable amounts.

In case of dishonor of check, the Customer Account shall be manually blocked for delivery and all the payment

documents reversed.


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6.2.4 Bills of Exchange / Letters of Credit from Customers

Bills of exchange are handled as special G/L transactions by Hyderabad Chemicals Ltd. These transactions

are thus maintained independently of other transactions in the subsidiary ledger and are posted to a special

G/L account in the general ledger. This will facilitate an overview of bills of exchange receivable at any stage.

Firstly, the payment by bill of exchange is posted using the Special G/L Indicators and used to clear the

receivable against the customer.

The two special G/L Indicators that will be used are:

“W” – for certified and without recourse Bills of Exchange

A bill of exchange receivable is recorded on the customer account and the special G/L account. The bill of

exchange receivable is posted to the customer account and reduces the receivables from goods and services

on the reconciliation account. The bill of exchange receivable is also automatically posted to the special G/L

account for bills of exchange receivable in the general ledger. The existing bill of exchange receivable at any

time can be monitored via the customer account.

The special G/L account for bill of exchange receivables will show the total amount of bill of exchange

receivables that exist for the customers represented in this account. Bills of exchange receivable are not

canceled until they have been cleared.

6.2.5 Credit Memo Processing

Credit memo will be created when a customer is over-billed. It adjusts previous entries that were overstated.

Therefore, posting a credit memo always leads to a credit posting on the customer account. A credit memo

will only be prepared if the corresponding invoice was created and sent out to the customer. A credit memo


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will not be created if the invoice has not been sent to the customer, as user is able to cancel the original

invoice, reversing the relevant G/ L entries and create a new invoice.

For credit memo with reference to AR invoice, the credit memo must be created with reference to the original

invoice in order to correctly reflect customer outstanding balance. This is done by updating "Invoice Reference"

field during the creation of the credit memo.

6.2.6 Customer Down PaymentSome of the Customers will make the advance payment along with their orders. Advances are treated as Down

Payments in SAP System. Down payment is to be made with reference to Sales order in case of both export

sales and domestic sales. If the customer pays an amount in advance, a down payment is captured in a

separate GL account distinct from the normal reconciliation GL Account which is used for normal transaction.

This is a special GL Account. This account is used to record only transaction related to down payment. This

Advance can be adjusted against the invoice after goods are dispatched.

Customer account is linked with General Ledger Account by a reconciliation account. All transactions related to

customer are automatically posted to this reconciliation account. Special GL Account is the reconciliation

account used to record the down payment transaction to a separate account than the normal reconciliation

account.

The SAP Standard down payment process is different from that of process and reporting requirement of ABC

for Card Sales and a development / work around is envisaged in this regard.

6.2.7 Customer Incoming PaymentThis function allows user to record receipts from customers in the system and adjust them against invoices and

debit memos. In the case of payments received against invoices, the invoices can be adjusted against the

payments. In case the payment is not with reference to specific Invoices, the receipt is recorded as an “On

Account” receipts, and linked to one or more invoices later or the oldest invoice is adjusted. Invoices, advances


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and debit memos can be settled to the extent of the outstanding amount. Incoming payment can be booked

partially. Invoices, advances and debit memos can be partially settled.

In case the receipt currency is not the local currency, the same is converted into local currency for accounting

purposes. However, the receipt details are stored in the entered currency but can be viewed in local and foreign

currency as and when required.

6.2.8 Usage of Bills of Exchange/ Letters of Credit from Customers

Bills of exchange are also discounted by Hyderabad Chemicals Ltd, at a bank in advance of its due date

(discounting) and bears cost in the form of interest (discount) and handling charge. If the bill of exchange is

used for refinancing and is passed on to a bank, then the bill of exchange usage is posted. In the general

ledger, the bill of exchange recourse liability is managed until it has expired in separate G/L accounts that

offset the entry in the bank account.

The bill of exchange liability will be automatically posted to the specified bank sub-accounts. These bank sub-

accounts which can be posted automatically only shall be managed with line item display and open item

management to enable Hyderabad Chemicals Limited to monitor the current bill of exchange liability. Any bank

charges borne for discounting shall be automatically debited to the G/L Account for Bank and Finance

Charges.

Once the due date has been reached and the protest period as per law has elapsed, the bill of exchange

liability will be manually reversed. This is done by clearing the Bill of Exchange Receivable in the Customer

Account whereby the Special G/L Account is offset against the Contingent Liability Account.

In case where the Bill of Exchange amount has to repaid to the bank due to dishonor by the Customer, the Bill

of Exchange liability and usage is cancelled and payment documents are reversed. The original Customer

Invoice shall once again be open.


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6.2.9 Dunning Customers for overdue receivablesHyderabad Chemicals Ltd will send Customers a payment reminder or a dunning notice to remind them of their

outstanding debts. The dunning program duns the open items from Customer Accounts in which the overdue

items create a debit balance. It will select the overdue open items, determines the dunning level of the account

in question, and creates a dunning notice. It then saves the dunning data created for the items and accounts

affected.

The Dunning Procedure controls how dunning is carried out by the system. Hyderabad Chemicals Ltd, will use

Dunning Procedure “1000 – Hyderabad Chemicals Ltd Dunning Procedure” which has a dunning interval of 14

days and 4 dunning levels for dunning the customers.

The dunning levels will be calculated based on the number of days the open items are in arrears. The dunning

program determines the accounts and items which are to be dunned, the dunning level and all other details

necessary for dunning. The dunning program produces a dunning proposal list. The dunning proposal list can

be created as often as required since the dunning data for the item and in the account is not updated until the

dunning notices have been printed.

The dunning proposal list can be edited by raising or lowering the dunning level of some line items, blocking

some line items from being dunned, or removing dunning blocks. The print program prints the dunning notices.

It will update the fields “Dunning level” and “Dunning date” in each line item, and dunning date and level in the

master records.

The dunning texts will be different for each of the dunning levels. Only those Customer Accounts which contain

a dunning procedure in the master record will be included in the dunning run.

6.2.10 Credit Management

Hyderabad Chemicals Ltd will define Credit Limits for each Customer to minimize its’ Credit risks. Automatic


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Credit check will be applied for each Customer at the point of creation of Sales Order. Only one risk category is

maintained for the customers for the purpose of setting Credit Limits and Credit Control.

In case a new Sales Order leads to the credit limit being exceeded for the Customer, a warning message will

be issued but the Sales Order will not be prevented from being created. However, the Sales Order will be

blocked for delivery.

Also if the Payment Term in the Sales Order is different from the Payment Term maintained in the Sales Area

Customer Master Data, the Sales Order would be automatically blocked for delivery.

An authority is assigned to release all blocked outbound deliveries.

6.2.11 AR Closing OperationsObjectiveThe following are the operations that are to be covered as a part of closing operations –


Monthly closings

Yearly closings

Monthly – end Closing Once all parked documents are completely posted and payments for the month are completed, the posting

period for customers can be closed. This is to prevent the occurrence of back posting invoices to the previous

period after reports are generated.

Before posting period can be closed, other month end processing activities such as executing the recurring

program need to be performed if applicable.

Opening the new period and closing the previous period are two parts of the closing procedure.



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Step Procedures1 Accounts posts / deletes the outstanding parked documents

through parked document program.

2 Execute recurring program, if applicable.

3 After completed all the additional postings. Run Currency Valuation

for valuating open items in foreign currency. Post the valuation

differences. Close AR posting period and open the new period.

4 Generate month end reports:

AR Ageing

Customer Balances

Open Items, etc

Year – end closing At the end of the fiscal year, carry forward program is required to be executed to carry forward the customer

and customer account balances to the new fiscal year. After running the carry forward programs, when a

transaction is posted to the previous year, the account balances in the current year are immediately updated

automatically. Balance carry forward program is done after entries are completed.

In SAP year end closing is similar to the month end process with additional activity of carry forward of balances

to next year. The advantage of this is even after balances are carry forwarded to next year, any entries to

previous year will automatically update the opening balance of next year.

Year-end closing comprises all activities involved in closing the financial year apart from Month-end closing

activities.


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Step Procedures1 Execute AR balance carry forward program to carry forward customer

balances to the new fiscal year.

2 Post additional posting in special period, if

applicable.

3 After completed all the additional postings. Close the posting period / fiscal

year and open the new period / Fiscal year. System allow for the current

year even though previous account is not closed yet.

4 Generate year end reports, e.g.:

AR Ageing

Customer balances

Open items, etc

6.2.12 AR Process Steps


1. General Reconciliation GL

& customer

master will be

created


(sundry debtors, etc., )

FS00

Creation of customer master

(in sync with SD)

XD01, XD02,

XD03

Customer invoice posting (in F-22


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case of FI customers)

View the customer accounts FBL5N

Incoming payment and

clearing the customer invoice

F-28

2. Advance

Payment:

When a

customer paid

any down

payment before

sending the

goods it will be

collected in a

special GL

account by using

Special GL

indicator and

after goods are

received it will be

cleared.

Creation of Special GL

accounts for advance

payments

FS00

Link between sundry debtors

and advance payments

OBXR

Advance receipt F-29

Invoice posting (in case of

FI customers)

F-22

Transfer of advance from

special GL to normal account

by clearing

F-39

Clearing of normal item F-32

3. Bills of

Exchange

In the cases of

payments by LC

(bills of

exchange) it will

be recorded into

SAP system and

can be checked

periodically.

Creation of Special GL

accounts for bills of

exchanges

FS00

Invoice posting F-22

Receipt of BOE F-36

Discounting with the bank F-33

Party wise due list S_ALR_87012213

Reverse Contingent liability F-20


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4. Customer

Payments

Any payments

from customer

can be checked

with the down

payments, bills of

exchange and

pending invoices

and cleared.

Manual Incoming Payments F-28

5. Customer

account analysis

By using SAP we

can see the line

items / balances

of Customers and

also change the

layout of display

by adding any

necessary things

like cost center

etc., into display

Customer line item analysis FBL5N

Customer balance analysis. FD10N


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6. Account

Clearing

After the outgoing

payment has

been posted all

Customer

invoices can be

cleared either

age wise or one

by one.

Manual Clearing F-32

6.3 Accounts Payable

Accounts Payable is the sub-module in which the financial accounting transactions involving vendors and

employees are recorded and administered. All postings in Accounts Payable are recorded simultaneously in

General Ledger. The components of Accounts Payable will be closely integrated with components of Materials

Management to support an automated Procurement Cycle.

Document types used in Accounts payable are – KR, RV, KA, KZ, KG

6.3.1 Vendor Invoice without Purchase Order (Direct exp. Booking)

Hyderabad Chemicals Ltd receives Vendor Invoices in respect of expenses for which Purchase Orders are not

created. These Invoices would be accounted for directly in the FI Module without any procurement process.

Since there are no preceding documents like Purchase Orders, Goods Receipt / Service Entry Sheet, the

Invoice would be physically verified and approved by the concerned Department Head responsible for incurring


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the expense.

For posting a Vendor Invoice, the following minimum information will be required in the document header:

− Vendor Code − Posting date: the date that the Vendor and G/L Account balances are updated. It determines the posting

period.

− Document date: issue date of the original document (not necessarily the same as the posting date). For

invoices it is called the invoice date.

− Amount: the total amount of the Invoice

− Document type− Currency− Reference and Document header text would be have to be entered mandatory

G/L Account number – The G/L Account created for Hyderabad Chemicals Ltd, in the operating Chart of

Accounts 1000.

Amount – All amounts shall be converted to the Company Code currency INR if the Document Currency is a

foreign currency.

Additional assignments including Cost Center would be required depending on the G/L Account used. The

Assignment field (alphanumeric, up to 18 characters) is updated automatically with the data from the field

referenced in the Sort Key field of the general ledger account. A value in the Assignment field can also be

manually entered.

All such Vendor Invoices would have to be initially parked and subsequently posted.


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6.3.2 Goods Receipt based Vendor Invoice Verification

The main task of the Invoice Verification component is to complete the procedure of materials procurement by

posting the vendor invoice and to pass on information concerning the invoice to Financial Accounting and

subsequent applications. Invoices that originate in procurement of services can also be processed.

An Invoice against a Purchase Order will be processed with reference to the Purchase Order Number or the

Delivery Note. An invoice for a service will refer to a service entry sheet. Goods-receipt-based Invoice

Verification must be defined in ALL purchase orders. Each invoice item can then be matched up uniquely with

the goods receipt item.

All deliveries or services provided by a vendor can be settled in a single invoice. On the item list all purchase

order items that match the reference allocation and that are ready to be invoiced will be suggested.

All invoice items in which the quantity expected to be invoiced is not zero will be selected by default. Only the

selected invoice items are copied to the document when you post the invoice. Any invoice items that has been

proposed and selected should be manually deselected if they do not appear in the Vendor’s invoice.

In the Quantity column, the quantity to be invoiced will be proposed. This quantity will be the difference

between the quantity delivered and that invoiced so far for each goods receipt.

In the Amount column, the product of the quantity proposed and the order price will be proposed. This amount

will not include taxes.

The following information will be mandatory entry during the Invoice Verification process.

Document Date i.e. date of invoice

Posting Date

Invoice Number


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Invoice Amount

Purchase Order / Delivery Note or Service Entry Sheet number

The following information will be then copied from the Purchase Order:

Vendor, terms of payment (if defined there), currency

Invoice items

The following information is derived from the Purchase Order history:

Quantity, amount

Tolerances limits shall be specified for different types of variances which are defined in the various Tolerance

Keys. When processing an Invoice, each item shall be checked for variances between the invoice and the

Purchase Order or Goods Receipt. Variances are allowed within predefined tolerance limits. If a variance

exceeds a tolerance limit, however, an informational message will be issued during Invoice Verification. If an

upper limit is exceeded, the invoice is blocked for payment when it is posted. The invoice would have to be

released subsequently by removing the Payment Block from the Accounting Document. However, the

informational message shall be changed to an Error Message when tolerances in respect of prices are

exceeded.

If in the master data for the material it has been defined that the Goods Receipt of the material is subject to

inspection and that an Invoice for the material should be blocked due to Quality Inspection, then an Invoice for

the material would be blocked if no usage decision has been made about the inspection lot for the goods

receipt concerned or if the inspection lot is rejected.

It will not be possible to post an invoice before the goods receipt. Also, the invoice quantity will not be greater

than the actual delivered quantity.


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All Invoices will be initially parked before being posted. For each incoming invoice, Invoice Verification creates

an MM invoice document and an FI invoice document. Both these document numbers will be informed via the

system message when the document has been successfully processed. When the invoice is posted, the GR/IR

clearing account is debited and the vendor account is credited.

After the invoice has been posted, the document appears as an open item on the vendor account. It will also

update the purchase order history.

6.3.3 GR based Vendor Invoice Verification for Imports

Purchase Orders in foreign currencies are created for imports of finished or semi-finished goods and capital

assets. In the case of Invoice Verification in respect of imports, the currency of the document is determined

from the Purchase Order currency. The exchange rate differences are calculated from the exchange rate at the

time of the goods receipt and the exchange rate at the time of the invoice receipt. The difference between them

will be automatically calculated and posted to separate G/L Account so that the amounts posted in Local

Currency to GR/IR Clearing Account are identical.

6.3.4 Invoice for Delivery Costs

Freight charges are sometimes planned in the purchase order. More often, they are not known in detail when

the purchase order is created and are entered only in Invoice Verification on the basis of information in the

invoice. Therefore, delivery costs can be divided into:

Planned delivery costs which are entered at item level in the Purchase Order

Unplanned delivery costs which are entered at invoice receipt.

For planned delivery costs, postings will be made to the GR/IR clearing account at goods receipt. These

postings are cleared when the invoice is posted. Any differences between the planned costs and actual will be


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treated as Unplanned Delivery Costs and posted to separate expense accounts.


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6.3.5 Payments to Vendors

Hyderabad Chemicals Limited will be making manual payments from time to time to pay the outstanding

Vendor Invoices which are due for payment. If the outgoing payment involves a payment in foreign currency,

the defaulted local currency would have to be changed to the foreign currency being used for payment. The

exchange rate maintained as on the Posting Date which is defaulted can be changed if the buying rate is

different.

Separate bank sub-accounts for outgoing payment would be maintained for each House Bank and Account.

The bank sub-account from which payment is being made as well as the payment amount and the bank

charges, if any for the payment has to be determined in case of manual payment. The bank charges would

then be automatically posted to the appropriate G/L Account.

If the payment is being made through the printed check the following Header Data would be maintained first

i. Payment method as “C” for check

ii. the House Bank from which the check is being issued

iii. the Check lot which is being used

iv. the printer defined for printing the check

The bank sub-account would be determined automatically from the House Bank.

Both normal open line items and special G/L line items can be selected while making the payment. Additional

selections can be made based upon specific fields including Amounts, Document Number, Reference, etc.

Additional field of “Net Due Date” will be available in the display and for sorting so that the open items can be

sorted based on their due dates.


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Any under-payment or over-payments within the tolerance limits shall be accounted for in the specified G/L

Accounts. Similarly, in the case of payment in foreign currency any gain / loss between the exchange rate for

the payment and the original / revaluated open item will be posted to separate Gain and Loss on realized

foreign exchange G/L Accounts.

Hyderabad Chemicals Limited will be usually making full payments against invoices. Occasionally partial

payments will be done but Residual payment will never be done. In case of partial payments, the invoice and

the partial payment amount shall both appear as open items.

Once the payment document is posted, the items selected for the payment shall be marked as cleared items

and no longer appear in the open item list. The number and posting date of the payment document shall be

updated in the documents which were cleared against it. Additionally, in case of payment with print, the check

shall be printed immediately on posting the payment document and the check information created.

The Remittance Advise and Payment Voucher will be printed subsequently.

Payment to vendors through manual payment with cheque printing

Payment to vendors through manual payment without cheque printing

Automatic payment to the vendors

6.3.6 Down Payment to Vendors

Hyderabad Chemicals Limited has to pay advance payments to vendors i.e. payments in advance of receiving

the invoice. These payments shall be posted to the Vendor Account with special G/L indicators so that their

balances can be updated in separate G/L Accounts instead of the normal reconciliation accounts for vendors.

Special G/L Transactions


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Special G/L transactions are special transactions in accounts receivable and accounts payable that are

displayed separately in the general ledger and the sub ledger. This may be necessary for reporting or for

internal reasons.

For example, down payments may not be balanced with receivables and payables for goods and services.

Consequently, they are treated as special G/L transactions in the General Ledger, Accounts Payable and

Accounts Receivable.

This is achieved by posting to alternative reconciliation accounts, instead of posting to the normal reconciliation

accounts for receivables and payables.

The special G/L transactions which are available in SAP system are as follows:

Down payments and down payment requests

Bills of exchange receivable, bills of exchange payable and checks/bills of exchange

Bank bills

Payment requests

Guarantees

Reserves for bad debt

Security deposits

These special procedures are displayed separately from other receivables and payables on the balance sheet

either for legal reasons, such as with down payments, or for control reasons, such as with guarantees

received. A separate special G/L account is created for each special G/L transaction as Bills of exchange,

Down Payment and etc. As a result, it is possible to display each transaction in the balance sheet without

having to carry out any transfer postings and to receive an overview via the account limited to this procedure

only.

The special G/L indicators and G/L Accounts to be used for Vendor Down Payments are:

A – Down Payments, Current Assets


http://www.sap-exp.com/receivable-management-process.html

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All down payments to Vendors shall be paid only with reference to Down Payment Request for the same.

These Down Payment Requests shall identify the Vendor to whom the payment is to be made, the special G/L

indicator, the amount and the requested date for payment. Additionally, the Down Payment Request can only

be made with reference to the Purchase Order Number and the Line Item identification against which the down

payment is to be made.

Down Payment Requests are only noted items and do not update any G/L Account balances. However, since

they can be managed as a line item in the account, line item display will be active for the special G/L Account

for Down Payment Requests.

Actual Down Payments shall be made only with reference to the earlier created Down Payment Requests. The

down payment shall automatically clear the line item in the Down Payment Request G/L Account and post a

document with the selected special G/L indicator.

The down payment can be cleared against the Invoice after the Invoice Verification is done. The down payment

can also be cleared while making an outgoing payment to the vendor. Down payments will also be updated in

the Purchase Order history.

6.3.7 Tax Deducted at Source (TDS)

The TDS process in the SAP system can be divided into following steps:

Down Payment

Invoice Receipt

Down payment clearing

Provisions at period end


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Challan updates

Bank challan update

Certificate print/reprint/cancel

Annual returns

The Income Tax Act, 1961 requires the tax be deducted at source at the time of payment or invoicing, which

ever is earlier. The following data is used to explain the various scenarios:

Down payment amount – Rs. 1000

Invoice Amount – Rs. 3000

TDS – 2%

Down Payment

At the time of down payment the vendor accounts gets debited by the total amount of payment inclusive of

TDS payable. A sample accounting entry follows:

Account Description Dr / Cr Amount

(Rs.)

Vendor - Advance Dr 1000

Bank Cr 980

TDS Payable Cr 20

Invoice Receipt


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At the time of recording the invoice received from the vendor, the expense account is debited to the extent of

the entire invoice value. Liability in the vendor account is posted net of TDS liability. A sample entry follows:


(Rs.)

Services Dr 3000

Vendor Cr 2940

TDS Payable Cr 60

Down Payment Clearing

At the time of clearing the down payment against the vendor liability, TDS payable account is also reversed to

the extent of tax deducted at the time of making the down payment. A sample entry follows:


(Rs.)

Vendor Dr 980

TDS Payable Dr 20

Vendor - Advance Cr 1000


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Provision at period end

At the time of preparation of financial statements, if there are cases where vendors have provided services but

have not invoiced the same to ABC, the EWT component on these items can be provided for. These provisions

would also consider the impact of tax deducted on down payments, if any. Once the vendor sends an invoice,

the provision against the same would be reversed.

These two steps are carried out in SAP by way of executing transactions for the same.

Challan updates

At the time of remittance of TDS to the relevant tax authorities, the following entry would get passed:


(Rs.)

TDS Payable Dr 60

Bank Cr 60

Bank challan update

When TDS is remitted to the permitted bank, such bank provides the remitter with a payment reference

number or a Challan number, which acts as proof of remittance. SAP provides the facility of recording this

Challan number. This reference is then printed in the TDS certificate issued as well as the TDS Annual Return.

Certificate print/reprint/cancel

The Income Tax Act, 1961 requires that the vendor in respect of whom tax has been deducted and remitted

should be provided with a withholding tax certificate within 60 days of the business transaction. SAP provides

the following facilities with respect to withholding tax certificates:

Printing TDS certificates

Cancelling of TDS certificates


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Re-printing of TDS certificates (duplicate copy)

The layouts of these forms as required by the relevant tax authorities will have to be developed in SAP.


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6.3.8 Valuation of Foreign Currency Open Items

Hyderabad Chemicals Limited has to value at the end of each month all the open line items in Vendor

Payables which have been recorded in foreign currencies. Each open item shall be revalue at the end of each

month. The exchange rate maintained for exchange rate type M - Standard translation at average rate shall be

used for the purpose of revaluing open items.

In the case of open items being revalue, the difference between the exchange rate for the document and the

month end exchange rate would be the unrealized gain / loss on revaluation. The revaluation will be reversed

on the 1st of the next month.

The gain on revaluation and loss on revaluations shall be posted to separate G/L Accounts. The Accounts

Payable adjustment during the foreign currency valuations will be posted to a separate G/L Account.

6.3.9 Loans / Advance to Employees

Hyderabad Chemicals Limited has various types of transaction excluding salary payments with it’s’ employees.

For the purpose of recording these transactions separately, the employees shall be created as Vendor

Accounts.

Since the majority of transactions with employees are in the form of advances related to their carrying out their

official duties, the normal reconciliation account for the Employee Vendor Accounts shall be “Employee

Advances”. Special G/L Transactions would be used for the purpose of summarizing the below in the Financial

Statements

1. Advances for travel

2. Personal advances / advances for expenses

3. Loans


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6.3.10 Closing Operations

The following are the operations that are to be covered as a part of closing operations –


Monthly closings

Yearly closings

Monthly – end Closing

Once all parked documents are completely posted and payments for the month are completed, the posting

period for vendors can be closed. This is to prevent the occurrence of back posting invoices to the previous

period after reports are generated.

Before posting period can be closed, other month end processing activities such as executing the recurring

program need to be performed if applicable.

Opening the new period and closing the previous period are two parts of the closing procedure.

In SAP closing of activity is centralized and vendor posting can be blocked for all the location after

completing the vendor related transactions for that month. This will avoid delay in closing the month end and

results in streamlining of closing activity.

Month-end closing comprises all activities involved in closing a posting/accounting period. Accounting period is

a division of a company’s fiscal year. The number of periods and definition of period are to be determined

during configuration.

Each posting into the system must be associated with an accounting period. This is to ensure that each

transaction can be reported in the corresponding period. In the same token, periods must be controlled to

ensure validity of the reports.





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Step Procedures1 Accounts posts / deletes the outstanding parked documents

through parked document program.

2 Execute recurring program, if applicable.

3 After completed all the additional postings. Run Currency Valuation

for valuating open items in foreign currency. Post the valuation

differences. Close AP posting period and open the new period.

4 Generate month end reports:

AP Ageing

Vendor Balances

Open Items, etc

Year – end closing At the end of the fiscal year, carry forward program is required to be executed to carry forward the vendor and

vendor account balances to the new fiscal year. After running the carry forward programs, when a

transaction is posted to the previous year, the account balances in the current year are immediately updated

automatically. Balance carry forward program is done after entries are completed.

In SAP year end closing is similar to the month end process with additional activity of carry forward of balances

to next year. The advantage of this is even after balances are carry forwarded to next year, any entries to

previous year will automatically update the opening balance of next year.

Year-end closing comprises all activities involved in closing the financial year apart from Month-end closing

activities.




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Step Procedures1 Execute AP balance carry forward program to carry forward vendor

balances to the new fiscal year.

2 Post additional posting in special period, if

applicable.

3 After completed all the additional postings. Close the posting period / fiscal

year and open the new period / Fiscal year. System allow for the current

year even though previous account is not closed yet.

4 Generate year end reports, e.g.:

AP Ageing

Vendor balances

Open items, etc

6.3.11 AP Process Steps

Main process Description Process of SAPTransaction code

1. General

Reconciliation GL &

Vendor master will be

Created


(for all sundry creditors,

inventories etc)

FS00

Creation of Vendor

master (in sync with MM)

XK01, XK02,

XK03


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If Withholding tax is

applicable to the vendor

Attach withholding tax

codes to the vendor

master

XK02

Invoice posting (if FI

vendors)

F-43

To See the party wise

account

Payment posting and

printing the checks

F-53

2. Advance Payment

When a particular

vendor asked for any

down payment before

sending the goods it will

be collected in a special

GL account by using

Special GL indicator

and after goods are

received it will be

cleared.

Creating the special GL

accounts

FS00

Down payment request F-49

Advance Payment

posting

F-48

Invoice posting F-43

Clearing advance

payment by transferring

to normal account

F-54

Clearing the normal item F-44

3. Banks:Payment to Vendor by

Check

Creation of check lots FCH1

Payment through bank F-53

Manual check updating or

when automatic payment

program is configured

system takes the next

FCH5 or F110.


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available check number

and prints it and matches

to the invoice.

Check register FCHN

To enter check

encashment date

FCH6

Un-issued check

cancellations

FCH3

Issued check

cancellations

FCH8.

4. Vendor account

analysis

By using SAP we can

see the line items /

balances of vendors

and also change the

layout of display by

adding any necessary

fields like cost center,

etc., into display

Vendor line item analysis FBL1N

Vendor balance analysis. FK10N

5. Account Clearing

After the outgoing

payment has been

posted all vendor

invoices can be cleared

either age wise or one

by one.

Manual Clearing F-44


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6.4 General Finance Process

6.4.1 Document Change

Errors discovered after a document has been posted can be corrected by changing the document. Document

change rules determine which document fields can be changed and under what circumstances. Fields directly

related to the accounting information in a document can never be changed (e.g., posting key, account number,

amount, currency and the dates in the document header). Changes to financial accounting data can only be

made by reversing the document and posting a new one.

6.4.2 Document reversal

The process of document reversal creates a new document containing line items that are the opposite of those

in the document being reversed. Since the original document remains intact, document reversal offers a better

audit trail than correcting errors through manual adjusting entries. Both the original document and the reversal

document appear as cleared documents when displaying account line items. If a posting date is not specified

for a reversing entry, the system enters the posting date of the original document.

A document can be reversed only if:

• The document has no cleared line items

• The document contains only customer, vendor, or general ledger account line items

• The document was posted in FI

• All values in the original document, such as cost centers are still valid

Hyderabad Chemicals Limited will use types of reversal, the true reversal and the traditional reversal. The

traditional reversal causes both the debit and credit columns in the account balance and subsequently in the

trial balance of an organization’s books to increase by the amount of reversal. As a result, the transaction

figures are inflated. The true reversal is based on the negative posting principle according to which the


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“negative” line item amount is posted on the same side (debit or credit) as in the original document. As a result,

when a document is reversed, the account balances that were originally increased by an incorrect posting are

in turn reversed by the negative (reversal) posting. The true reversal document looks exactly the same as the

traditional reversal document, it contains postings with reversing posting keys, and it is not possible to

determine at first sight that the amounts are negative. However, in the “More Details” screen of a line item a

flag indicates that the negative postings took place. Neither the account balance nor the original transaction

reflects the reversal on either side (debit or credit), which is the key purpose of the true reversal.

Negative postings will be permitted on the company code level and also a special reason code for negative

postings will be used for ABC. The traditional reversal can still be used. The conditions for the true reversal are

the same as for the traditional reversal.

6.4.3 Open Item Clearing

Line items are considered open when they are posted to “open item managed” general ledger accounts and to

all customer or vendor accounts. Clearing is the process of matching open debit entries with open credit

entries within the same account. The system assigns a clearing number to the matched items. Only general

ledger accounts that are open item managed can be cleared. All customer and vendor accounts can be

cleared.

The “additional selection” section of the clearing transaction can be used to narrow the number of line items

viewed, especially when a large number of open items exist in the account. The viewed line items must be

selected for clearing. The net value of all selected line items must be zero or within the tolerance limits. A

document header is created even when no clearing entries are necessary to balance the items to zero. The

clearing number is derived from the document number of the clearing document. The clearing document has

its own number even if it is just a header.

Automatic clearing program will be used wherein line items with matching amounts and specified criteria will be

selected and cleared automatically. If the clearing date is not specified then the date on the clearing document


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will default to the most recent date of either the document date or posting date of the documents that contain

the line items selected for clearing. In order to clear accounts, a clearing tolerance will be specified in the

master record.

The clearing differences for clearing the various accounts will be posted to the various accounts.

6.4.4 Taxes

6.4.4.1 Tax on Sales and Purchases

For ABC on each taxable sale (i.e. non-exempt) and on each taxable purchase (i.e. non-exempt) made inside

the respective state, a value added tax (VAT) will be applied. The rate is determined by the kind of product,

service that is purchased. The taxes on the sales and purchase transactions are classified as exempt, zero tax

rate, or standard tax rate. It is possible for the VAT Tax on some purchases to be non refundable. For these

transactions the Vat amount will be added to the actual cost of the product.

A tax code will be set for every vendor and every material in the SAP system. This denotes that taxes are

calculated automatically. The code can be manually overwritten with a non-taxable code if taxes are not

applicable to a certain transaction when the transaction is entered. Tax codes are to be assigned to the

Vendors and Materials records.

Some of the tax codes maintained for ABC are:

Tax Indicator Description

A0 Tax on sales VAT – Exempt (0%)

A1 Tax on sales VAT – 4% deductible

A4 Tax on sales VAT – 8%

A5 Tax on sales VAT – 12.5%

V0 Tax on Purchases – Exempt (0%)


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V1 Tax on Purchases VAT – 4% deductible

V2 Tax on Purchases VAT – 8% deductible

V3 Tax on Purchases VAT–12.5%deductable

V4 Tax on Purchases VAT – 16%

V9 VAT on imports

6.4.4.2 Service TaxService tax is payable on the services obtained for the organization. Categories of services that attract service

tax is notified by the tax authorities. Service tax is tracked through separate tax codes and posted to separate

accounts. Service tax paid can be set off against the out put service tax, if any, else same can be set off

against the excise duty payable.

Some of the service tax codes maintained for ABC are:

Tax Code Description

S0 Service Tax – Exempt (0%)

S1 Service Tax – 12.36% deductible

6.4.4.3 Extended Withholding TaxTDS will be covered as:

TDS on salary of employees

TDS on others

TDS ON SALARY

TDs on Salary to employees will be covered in HR payroll and deduction will be done at the end of each

month. TDS on salary will be posted to a separate GL account as required. Payment to Government will be

made by Finance dept. every month on the due date.


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Accounting entry on the payroll run: Dr. Employee vendor a/c

Cr. TDS on Salary payable

Deposit of TDS:Dr TDS on Salary payable Cr Bank account

Form 16 for tax deducted from salary of employees shall be generated from HR. Similarly Tax return for Salary

will also be generated from HR.

TDS on Others

TDS on Others will be categorized as per the following sections under Income Tax Act.

Official Withholding tax key:

The deduction of TDS takes place under various sections of the Income Tax Act. These sections are defined as

Withholding Tax keys in the system and mapped to the sections of the Income Tax Act under which TDS is to

be deducted. Based on the above the following official Withholding Tax codes shall be created in the system:

Section-193 TDS on Interest on SecuritiesSection-194 TDS on DividendsSection-194A TDS on Interest other than Interest on securitiesSection-194C TDS on payment to Contractors and sub contractorsSection-194H TDS on Commission and BrokerageSection-194I TDS on RentSection-194J TDS for Professional and Technical servicesSection-195 TDS on payments for Foreign services

Any new section which attracts TDS can be configured as Official Withholding Tax Key

Recipient type:The vendors from whom TDS is deducted need to be classified as Company and Others. Recipient

type enables categorization of the vendors. This categorization is required for creation of separate

challans and printing the TDS certificates


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Withholding Tax types:Withholding tax types are defined at client level to represent the various types of withholding taxes for

eg 194C, 194D etc. Withholding tax types are also used to determine whether the deduction of TDS will

take place at the time of invoice verification or at the time of payment. These withholding tax types can

be used once these are linked to the Company codes. Withholding tax types shall be configured as per

ABC requirement. For each withholding tax type minimum and maximum amounts shall be

maintained.

Withholding Tax Codes:The various sections of the Income tax Act prescribe the rate at which the Tax is to be deducted.

Withholding tax codes are used to define the rate at which tax is to be deducted and the base amount

on which the tax is to be calculated. The rate will also include rate of surcharge and Education Cess if

any is applicable. Surcharge and Education cess rates shall be maintained separately in tables and

printed on the Vendor TDS certificate.

Vendor master:WHT type /codes shall be maintained in the Vendor master as applicable to the vendor. Tax

computation will be done by the system based on the WHT type/code maintained in the vendor master

at the time of invoice entry and also advance payments. Withholding Tax Type and Withholding Tax

code are maintained at the Invoice Entry level and PAN# will be made as a part of Vendor Master

Only tax type is maintained at the Payment level. This will ensure tax will not be deducted both at the

time of invoice and payment. In the case of Advance payment, tax type will be maintained and user

needs to select the tax code. If multiple TDS sections are applicable to a particular vendor, then all the

tax types and tax codes for invoices applicable for those TDS sections must be maintained in the

vendor master. However at the time of invoice entry the user has to select the correct tax type and code

and exclude those which are not applicable.

System should facilitate manually enter the taxable amount: - At the time of posting user shall amend the base amount.

Once the tax is calculated, it should be posted to the respective account Tax Payable A/c automatically is a


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standard functionality. TDS Payable Account will be maintained section wise.

Exemptions rates will be maintained at the Vendor Master level for deducting tax to vendors.

Accounting entry at the time of Invoice entry:Dr Expense a/c Cr Vendor Cr TDS Payable (Separate GL accounts shall be created section wise like TDS payable – Contractors, TDS payable - Professional fee. etc.)

Accounting entry for advance payment to vendors:Dr. Vendor Advance a/cCr. Bank a/cCr. TDS Payable

TDS remittance: Remittance will be made through the system by standard T-code J1INCHLN. Challans will be updated

for each section wise, corporate and Non corporate separately. Due dates will be defined in the

configuration for each section wise.

Dr TDS Payable

Cr Bank a/c

Bank Challan updation: Bank challan number will be updated in the system through standard T code – J1INBANK. This will link

the remittance challans with the external bank scroll number. No accounting entry will be generated.

TDS certificate: Certificates for the vendors can be generated by T Code- J1INCERT

Certificates cannot be generated more than once. However duplicate certificate can be issued.

Quarterly E-Returns: E-Returns for TDS shall be generated from the system by T code – J1INQEFILE. The return shall be

converted into required excel file and can be validated for filing.

TDS deducted by Customers:A separate set of WT tax code & tax type shall have to be created for customers. Following accounting


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entry shall be generated at the time of receiving the payment:

Dr. Bank a/c

Dr. TDS deducted by customer a/c

Cr. Customer a/c

The system will propose the TDS amount and the user can overwrite the amount, if required.

After receiving the TDS certificate from the customer, J1INCUST transaction shall be run and following

accounting entry shall be generated:

Dr. Advance Tax Paid A/c

Cr. TDS deducted by customer a/c

Standard report J1INMIS will give the details of TDS – Section Wise & Vendor Wise

6.5 Fixed Asset Accounting

The Fixed Assets module serves as a subsidiary ledger to the Finance (FI) General Ledger and is used to

manage and track fixed assets. This module encompasses the entire lifecycle of the asset from purchase order

or the initial acquisition through its retirement. Depreciation is calculated and available through standard

reports. The Fixed Assets module also has special functionality for dealing with assets under construction.


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The objective of asset accounting will be to track ABC’s long-term assets with respect to valuation, useful life,

depreciation, physical location, retirement, and transfer. Master records will be created for each of the long-

term assets at the acquisition value. Depreciation rules will be established and calculated automatically at

period-end.

6.5.1 Chart of DepreciationChart of depreciation contains the various data needed to manage the Depreciation and valuation of Assets. All

valuation parameters and values necessary for this are maintained in an area called the Depreciation area.

The system allows the maintenance of multiple depreciation area. Depreciation areas are grouped together

into a Chart of Depreciation.

6.5.2 Calculation of Depreciation

The depreciation areas specify the different methods for calculating depreciation for the asset to which they are

assigned. Each asset of Hyderabad Chemicals Limited solution will have at least two depreciation areas which

are defined in the Chart of Depreciation

01. Book depreciation in local currency as per companies act.

For each asset the useful life of each asset is used as the basis in accordance with the information provided in

the depreciation areas to calculate the depreciation/expense and post it to the general ledger. The useful life in

years shall be maintained for each Asset Class. When an Asset Master is created, this useful life maintained in

the Asset Class shall be defaulted.

Separate general ledger accounts will be established to collect the values for depreciation for different Asset


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Classes.

The system determines the start or end of depreciation based on the asset value date of a transaction (of the

acquisition or retirement) using period controls. For ABC, depreciation will be calculated from the day of

acquisition or Ordinary Depreciation Start Date.

6.5.3 Depreciation Key

Depreciation keys contain the calculation methods for depreciation calculation

You can enter a separate depreciation key for each depreciation area in the asset master record.

Depreciation Key Description

SL01 Straight Line Method - 1.63%





6.5.4 Cutoff value key

Calculation key used for controlling the calculation of the cutoff value for depreciation.

The cutoff percentage rate is determined on the basis of cutoff value key and is used by the system when

There is no absolute scrap value entered in the depreciation areas of the asset concerned (an absolute

scrap value takes precedence over a cutoff percentage rate)


sapevent:DOCU_LINK%5CDS:GLOS.3526B93DAFAB52B9E10000009B38F974

sapevent:DOCU_LINK%5CDS:GLOS.D4D95F95F4F0D211BDEE0004ACE6148F

sapevent:DOCU_LINK%5CDS:GLOS.depreciation_key

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Negative book value is not allowed for the asset

6.5.5 Acquisition of Fixed Asset

Fixed Assets is integrated with other components / modules. Fixed assets is also integrated with the

procurement cycle and may be updated with detailed acquisition data such as, but not limited to Purchase

order number, Purchase price, Book value, Date acquired, Vendor, etc.

The “normal” asset procurement flow starts when the need to purchase an item is identified. When this need is

identified the requisitioner begins the purchase requisition but does not determine if the item is an asset. At the

time of converting the requisition into a Purchase Order the item is determined by the Purchase Department to

be an asset. The Purchasing Department contacts the Accounts Department and supplies information about

the asset. Once the Accountant has received the asset information he/she creates the asset master record and

notifies the Purchase Department so that the Purchase Order can be finalized.

The asset values will be automatically posted with the Goods Receipt posting. Once the invoice for an asset is

received, the value on the invoice is compared with the value of the asset on the asset master record.

6.5.6 Assets under Construction – Accumulation and Capitalization

All capital expenditures while constructing a capital asset are accumulated in a separate Fixed Asset account

under the Asset Class "Assets under Construction". No depreciation will be calculated on these Fixed Assets.

Internal Orders of the Object Class “Investment” shall be used for the purpose of collecting the amounts to be

capitalized in respect of long-term projects. An Internal Order shall be created for each such project and all


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postings in respect of the project shall be made to this Internal Order using separate G/L Accounts. At the end

of every month, the Internal Order shall be settled to an Asset which represents the Asset under Construction.

Projects are depreciated after being capitalized in accordance with the Group’s Depreciation policy. Each

quarter, the Asset under Construction Fixed Asset is reviewed to determine if there are completed assets that

should be capitalized. New Fixed Asset Master is created and the amount to be capitalized is transferred to

these Fixed Assets. The date of start of depreciation has to be determined.

6.5.7 Evaluation Groups

The evaluation groups are another option for classifying assets for reports. This acts as selection criteria for

Reporting. You can use five different evaluation groups (four with 4 characters, and one with 8

characters). You can store the characteristics for these groups in the asset master record. Evaluation groups

are majorly used for asset reporting purpose.

These are part of master record. So you can maintain master data information in this field to identify an asset

in asset accounting module.

Example: If we have certain asset lying with Employees and just want to track it as to what all assets

are lying with Employees then you can create on evaluation group saying Employees and wherever an asset is

lying with the employee then select evaluation group in that.

6.5.8 Asset Transfer Procedures

SAP has provided two Transfer Procedures

Transfer with in the Company Code

Using intracompany asset transfer, you transfer a fixed asset, or an asset component, to a different asset master record. The target asset has to be in the same company code as the sending asset. Intracompany transfer may be necessary for one of the following reasons:


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An asset was created in the wrong asset class. Since you cannot change the asset class in the asset master data, you have to transfer the asset to a new master record.

You split up an asset or move part of an asset (transfer from asset to asset).

You settle an asset under construction and transfer it to a finished asset.

Inter Company Transfer of Assets: - These are again sub divided into

Automatic intercompany transfer (Acquisition and retirement in one step)

Manual intercompany transfer (Acquisition and retirement in two separate steps

6.5.9 Treatment of Low Value AssetWe specify the maximum amount for low-value assets (LVAs). The specifications of LVA are per company code or per depreciation area. The system checks this maximum amount during every acquisition posting, providing the corresponding LVA indicator is set in the asset class.

SAP supplies low-value asset maximum amounts for most countries.

The ABC asset classes include one asset class for low-value assets managed individually.

During a quantity check, the system determines if the value of the collective low-value asset divided by the quantity entered in the asset exceeds the LVA maximum amount for the company code or depreciation area.

6.5.10 InsuranceHere we define the valuation and management of the assets in regard to insurance policies. For this, we define various information in the asset master record for insurance policies and insurable values. It is also possible to manage insurable values in their own depreciation area.

It is particularly useful to manage insurance data and insurable values in the master record in the following instances:

You need certain insurance data for informational reasons (such as liability or collision insurance for vehicles).

The insurance types which you want to use (for example, fire insurance)


sapevent:DOCU_LINK%5CGL:insurance_type

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varied master record information for insurance specifications (such as, the insurance company)

6.5.11 Sale / Retirement / Scrapping of Fixed Asset

The asset retirement process is used when it is determined that an asset is no longer of value to ABC. When

you post an asset retirement, you can enter the revenue from the sale of the asset. The gain or loss (affecting

income) as the difference between this revenue and the book value of the asset being retired is automatically

determined. The gain or loss shall be posted to the corresponding profit and loss account. If it is determined

that the asset has no value or insignificant value and should be scrapped, the loss arising out of such

scrapping is determined and posted.

6.5.12 Posting of Depreciation

Depreciation shall be calculated and posted every month end as part of the monthly closing process. The

depreciation values will be posted to the corresponding expense and asset balance sheet accounts in the

General Ledger. The periodic posting will take place using a batch input session. Only summarized postings

will be made per G/L Account instead of individual documents.

6.5.13 Down Payment for Capital (tangible) Assets

Down payment to vendors for capital acquisitions are to be reported separately in the Balance Sheet under the

head Capital Work in Progress. Hence down payment for capital goods would be tracked through a separate

special general ledger indicator.

The procedure to be followed is:


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Definition of alternative reconciliation accounts for Accounts Payable for posting down payments

made for Capital assets

Clearing the down payment in Accounts Payable with the closing invoice.

A new G/L account shall be created for the special G/L transactions.

A) The accounting entry for making the down payment shall be:

Vendor Advance for Capital Goods Account Debit

Bank A/c Credit

B) When the invoice is booked the following entry is passed

Asset A/c Debit

Vendor A/c Credit

C) Clearing of Invoice against Down Payment

Vendor A/c Debit

Vendor Advance for Capital Goods Account Credit

6.5.14 Physical Inventory of AssetsThe FI-AA component provides the following functions to support the physical inventory – Inventory list

The system provides an inventory list to assist with physical inventory. You find this list in the standard

Information System for Asset Accounting. You adapt the structure and sorting of the list to meet your specific

needs. You make these modifications using standard report. The list displays only those assets in which the

inventory indicator is set in the asset master record


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6.5.15 Closing OperationsObjectiveThe following are the operations that are to be covered as a part of closing operations –


Monthly closings

Yearly closings

Monthly – end Closing





Step Procedures1 Settlement of completed CWIP assets to main assets

2 Execute Depreciation Run

Year – end closing Fiscal Year ChangeFiscal Year change is the opening of a new fiscal year for a company code. At the fiscal year change, the asset

values from the previous fiscal year are carried forward cumulatively into the new fiscal year. Once the fiscal

year change takes place, user can post to assets using value dates in the new fiscal year. At the same time,

continue to post in the previous fiscal year.

The fiscal year change can only be carried out (even in test mode) for the new fiscal year. The earliest that you


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can carry out a fiscal year change is in the last month of the old fiscal year. You can choose any point in the

new fiscal year for carrying out the fiscal year change. Before you can change to fiscal year YYYY, you must

have already closed fiscal year YYYY.

Maximum of two successive fiscal years can be opened for posting at one time.

No business transactions can be posted in a new fiscal year before the fiscal year change. You can continue to

post in the old fiscal year, even after the fiscal year change. The system automatically corrects any values that

are affected by postings in the past. The fiscal year change has to be carried out as background processing

for performance reasons. The system carries out the fiscal year change for all assets, even if the assets have

errors. The system provides statistics per company code for the assets that have been changed. The system

writes assets with errors to an error log. In the case of program termination, you can repeat the fiscal year

change as often as required.

Year-End Closing

Before close a fiscal year in Financial Accounting from a bookkeeping perspective, carry out Year End Closing

activity in Asset Accounting to close the fiscal year for the company codes from an accounting perspective.

Once the fiscal year is closed, no longer post or change values within Asset Accounting (for example, by

recalculating depreciation). The fiscal year that is closed is always the year following the last closed fiscal year

and cannot close the current fiscal year. Perform the year-end closing as background processing for

performance reasons.

The system only closes a fiscal year in a company code if

The system found no errors during the calculation of depreciation (such as, incorrectly defined

depreciation keys).

Planned depreciation from the automatic posting area has been completely posted to the general

ledger.

All assets acquired in the fiscal year have already been capitalized.

All incomplete assets (master records) have been completed.


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The system lists any assets that do not meet the above requirements in the log of the year-end closing.

The log also shows the reason for the errors.


Step Procedures1 Execute the standard SAP inbuilt check which will validate the pre closing

activities.

2 Execute fiscal year change program which will validate and carry forward

asset balances to next fiscal year

3 Execute year-end closing program to close the fiscal year for one or more

company codes from an accounting perspective.

6.5.16 Asset Accounting Process Steps

Main process

Description Process of SAPTransaction

code

Asset

Maintenance

In this step asset master record

will be created, any changes

can be done and also asset

retirement can be done. Group

asset can be identified based

on asset classes defined.

Creation of master record AS01, AS11,

AM01Creation of group asset AS21, AS24

Asset mass change OAAX

Asset shutdownAS02, AS22,


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Receipts Once asset master record is

made, asset acquisition shall

be posted depending on with

PO / without PO and with

vendor / without vendor. All

down payments to be taken

care of and also any

subsequent acquisition posted

as asset sub number.

Direct acquisition with

vendor

F-90

Acquisition and clearing

with offsetting entry

ABZON, F-

91

Down payments F-48

Retirements

All the asset retirements will be

taken care of in this step and

any profits / losses posted.

Retirement with Revenue

with CustomerF-92

Asset sale without

customerABAON

Asset Retirement by

ScrappingABAVN

Depreciation While calculating the

depreciation first depreciation

planning can be done which will

be processed along with cost

centers and overhead orders

if any and then depreciation

posting run will be made

periodically. This is a batch

input transaction that will be run

at the time of period closing.

Manual depreciation ABMA

Unplanned depreciation ABAA

Depreciation Planning AFAB, ASKB

Depreciation Processing AFAB

Depreciation posting AFAB


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Business

transactions

All the transactions relating to

asset under construction will be

collected separately and after

finishing they will be

capitalized. Post capitalization

transactions include adding

value after capitalizing the

asset.

Settlement of AUC AIAB, AIBU,

AIST

Post Capitalization ABNA (Post

cap)

Reposting ABUMN,

ABTIN

Write ups. ABZU, ABZS

Closing

operations

The existing asset inventory

can be taken out by using the

SAP standard report.

Changes to the fiscal year will

be carried out and the

previous year is closed. Before

opening the new period,

depreciation postings will be

made.

Physical asset inventory AR01

Fiscal year change AJRW

Preparations for year end

closing for assets.

AJAB

Mass change of assets AR01, OA02

Depreciation postings AFAB

Specific

valuations

Separate depreciation area will

be defined to make revaluation

postings.

Revaluation of Assets ABAW (BS

rev), AR29,

AFAR


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7 CO – Business Process

Controlling Area is an organizational unit within an Organization. Controlling Area is being used to represent a

closed system for cost accounting purposes. Controlling Area is used for internal reporting purposes. Multiple

Company Codes can be used same Controlling Area, to have a uniform Costing Systems in place. All the

company codes in the controlling area must use one Chart of Accounts and Fiscal Year Variant.

Controlling provides with the information for management decision-making. It facilitates coordination,


of production factors and the services provided by an organization.

Along with documenting Actual events, Planning can also be done in controlling module. This facilitates

determining variances between plan and actual data. These variance calculations enable to control business

flows.

Co - Master Data

Cost Elements

A Cost Element describes the nature and origin of costs.

Cost Elements are defined either as Primary or Secondary. Profit & Loss GL Accounts in Financial

Accounting are created as corresponding Primary Cost Elements in Controlling.

G/L accounts which are Primary Cost Elements would require a compulsory cost object whenever

these accounts are credited or debited in the Financial Accounting.

Secondary Cost Elements are used exclusively in Controlling for the purpose of carrying out

processes affecting Controlling like allocations, settlements (transfer of Costs from one object to

another), Work in Process calculations, Production Variance calculations, Activity Price Calculations

and Overhead Calculations.


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The data automatically flows to Controlling if a GL account is created as Cost Element in Controlling.

This is because of integration between Finance and Controlling modules.

Primary Cost Elements will be created with naming convention as that of GL accounts for revenues

and expenses. Without GL Account, it is not possible to create the Primary Cost Element.

Important fields in Cost Elements are as follows:

Cost Element Category – determines the business transactions for which the Cost Element can be

used.

ABC will be using Cost Element Category “01” for all the Primary Cost Elements.

Cost Element Category “41 – Overhead Rates” for Overhead calculations

Cost Element Category “42 - Assessment” for Secondary Cost Elements for the purpose of

Assessments between Cost Centers.

Cost element groups will be used to process several cost elements in one business transaction.

Multiple Cost Element Groups will be maintained for the purpose of executing the various Controlling

Reports effectively.

Cost Center Accounting

It is necessary to check the costs of individual areas in an organization so as to provide decision-making data

for management. This requires that all costs be assigned according to their source. Since, source-related

assignment is especially difficult for overhead costs; Cost Center Accounting lets you analyze the overhead

costs according to where they were incurred within the organization.

The main activities in Cost Center Accounting include entering the plan figures at the beginning of a fiscal year


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for the combination of Cost Center and various other Master Data. Thus it involves entering plan figures for

Costs, Activities, Prices or Statistical Key Figures for a particular Cost Center and a particular Planning Period.

The variances from these figures can then be determined by comparing these plan values with the actual. The

other objective of planning is for the calculation of product cost.

The period-end processes in Cost Center Accounting include periodic allocations between the various Cost

Centers through Distribution and Assessments and Variance Calculation to analyze the cause of them.

Hyderabad Chemicals Limited will be doing planning in all the three planning areas in Cost Center Planning:

Cost Center Category – Each Cost Center is to be assigned to its category. The respective Cost

Center Categories for ABC are:

Sl. No. Cost Center Category Description

1. E Development

2. F Production

3. G Logistics

4. H Service cost center

5. L Management

6. M Material

7. S Social

8. V Sales

9. W Administration


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7.1 Cost Center PlanningCost centre planning involves entering plan figures for costs, activities, or statistical key figures for a particular

cost centre and a particular planning period. You can then determine the variances from these figures when

you come to compare these plan values with the costs actually incurred.

7.1.1 Cost Elements / Activity input planning

Hyderabad Chemicals Limited will be doing Activity – independent cost planning for primary costs without

referring to specific Activity Types. This involves entering the planned costs that arise from the consumption of

goods and services procured externally. The planned figures will be entered in the local currency INR using

the Version “0”.

The Activity-independent primary costs are planned for the combination of Cost Centers and Cost Elements.

The costs will be initially planned for the whole fiscal year and equally distributed among the various periods.

Any changes in the plan costs during the fiscal year will be changed for the remaining periods of that year.

7.1.2 Cost Elements wise Activity dependent planning

Activity – Dependent cost planning for primary costs will be made, based on the following combinations:

Cost Center

Activity Type

Primary Cost Elements

Some of the cost can be directly identifiable in the above combinations. This involves entering the planned

costs that arise from the consumption of goods, services procured externally, expenses incurred. The planned

figures will be entered in the local currency INR using the following versions.

Version Description

0 Plan/actual version

1 Plan Version: Preliminary


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2 Plan Version: Change 2

4 Plan Version: Change 3

The Activity-independent primary costs are planned for the combination of Cost Centers and Cost Elements.

The costs will be initially planned for the whole fiscal year and equally distributed among the various periods or

based on the distribution key.

7.2 Activity output / prices

Activity Type planning involves the determination of the quantity based output of a Cost Center. Activity types

are used primarily to measure the activity quantities on the cost centers. This enables the measurement of the

operating rate or the rate of capacity utilization of a cost center. The activity price is determined per Cost

Center / Activity Type either manually or in automatic activity of price calculation.

The following Activity Types shall be used by ABC a. Setup Timeb. Machine Hoursc. Labour Hours

Hyderabad Chemicals Limited will be setting manual activity prices for the various Production Cost Center /

Activity Type combination. Gradually it shall do the automatic activity price calculation during which all primary

and secondary costs planned for the appropriate cost centers are included in the activity price. If several

activity types are planned on a cost center, the plan costs are broken down (split) onto these activity types for

activity price calculation. This will be accomplished by entering equivalence numbers along with each planned

activity type, or with plan cost splitting. The unit price for an activity type is calculated by dividing planned costs

for an activity by the planned quantity of activity type units.


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This Activity Price or rate is used in product cost planning / controlling to arrive at the planned cost of

production or standard cost estimate and actual production costs.

7.3 Activity Output Planning for a Cost Center

Part of Activity Type planning, it is required to determine quantity based output of a Cost Center. Activity types

are used primarily to measure the activity quantities in a cost centers. This enables the measurement of the

operating rate or the rate of capacity utilization of a cost center. The activity price is determined per Cost

Center / Activity Type either manually or in automatic activity of price calculation.

7.4 Statistical Key Figure planning This process is required for entering cost centre wise planned SKF so that in distribution and assessment cycle

this can be used in tracing factor.

7.5 Cost Center Allocations

Costs collected in a Cost Center during a period are further allocated to other Cost Centers on the basis of

user-defined keys such as percentage rates, amounts, Statistical Key Figures, etc. Hyderabad Chemicals

Limited will be using Assessments as a method of allocating both Primary and Secondary Costs. The original

Cost Elements are assigned cumulatively or in groups to Assessment (Secondary) Cost Elements.


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7.5.1 AssessmentAssessment is a method of allocating the Costs in Cost Center Accounting. The following information is passed

on to the receivers:

The original cost elements are assigned cumulatively, or in groups, via secondary cost elements

(assessment cost element). The original cost elements are not recorded on the receivers.

Sender and receiver information

Allocation through assessment is useful when the composition of the costs is unimportant for the receiver.

7.5.2 DistributionDistribution is used to allocate the primary costs of a cost center. The following information is passed on to the

receivers:

The Original Cost Element

Sender and receiver information

You can analyze the distribution results according to sender and receiver relationships.

To transfer the costs Assessment or Distribution cycles will be created in the system. The cycles are split into

various segments, if the distribution ratios are changed:

From the Sender Cost Center & Sender Cost Element will be transferred to receiving cost center based on a

tracing factor / percentage / identified ratio.

Costs collected in a Cost Center during a period are further allocated to other Cost Centers. ABC will be using

Assessments as a method of allocating both Primary and Secondary Costs. The original Cost Elements are

assigned cumulatively or in groups to Assessment (Secondary) Cost Elements.

Sender-receiver relationships between the various Cost Centers will be defined in the various segments of the

Assessment Cycle. During assessment, the original cost elements will be summarized into the Assessment

Cost Element. Line items are posted for both the sender and receiver Cost Center while recording the


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allocation using the Assessment Cost Element.

Statistical Key figures are used for Allocation of Electricity, Telephone, Cleaning, Gardening, Maintenance

expenses etc.

7.6 Automatic Account Assignments

Automatic Account Assignments means default account assignments. These are defined in the

system to post transactions to Controlling module from other modules like MM, SD etc through

automatic processing transactions like Goods receipt, Invoice verification etc.

ABC will be defining default account assignments for postings to primary cost elements. These

assignments will be defined for cost elements that need to be posted to a particular real Cost object

so that this assignment is automatically included for primary postings. These default postings can be

either to a Cost Center.

The default Cost Centers assignments will be made at the following levels-

Controlling Area, Company Code, Valuation Area and Cost Element – This will be for the following

transactions –

Material Consumptions for Sub-Contracting process

Subcontracting Charges of Vendors (Price mentioned in Sub contracting purchase orders is the

conversion charges to be paid to sub-contracting vendors)

Changes in Stock” which will hit when Goods are received from subcontractor. This is an

offsetting GL account and a Cost element for the subcontracting inventory (semi-finished goods)

inventory receipt.


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The Gains or Losses which arise due to differences in quantity or prices between Goods

Receipts and Invoice verifications which are posted through manual clearings in GR/IR Clearing

Account based on business decisions.

Price differences arising due to differences in Prices between Goods Receipts and Invoice of a

material, in case sufficient inventory is not available at the time of invoice receipt. Price

difference arises to the extent of inventory consumed; rest of the amount is adjusted to

inventory.

Exchange rate differences arising due to differences between exchange rates between Goods

receipt and Invoice receipt, in case sufficient inventory is not available at the time of invoice

receipt. Exchange difference arises to the extent of inventory consumed; rest of the amount is

adjusted to inventory.

Unplanned delivery Costs in Vendor Invoices

The price differences arising because of return deliveries from Sales when the standard prices

changes (due to revaluation) between date of sales and date of return.

Controlling Area, Company Code and Cost Element. This will be for the following transactions –

Gains or Losses on Foreign Currency revaluation and Realised Losses/ Gains on Vendors, Customers

and Inter Company accounts.

7.7 Actual Posting in Cost Center Accounting

The actual values are posted online to monitor costs on an ongoing basis. These postings enable us to

recognize variances at an early stage, and to take the necessary counter measures.

Actual cost entry involves transferring primary costs from upstream components to the Controlling (CO)


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application component. In the CO component, this transfer occurs real-time from the components Financial

Accounting, Asset Accounting, Materials Management, Production Planning and Payroll Accounting. This is

achieved by entering a cost accounting object (such as a cost centre or an internal order) during account

assignment.

Primary costs entered in other systems are allocated further using internal allocations and as true to source as

is possible. To enable this, costs are determined for each business transaction, based on the valued internal

activity. They are then posted real-time to the sender and receiver object(s) (debit and credit postings).

Errors are unavoidable and may result particularly during initial days of SAP live operations. Thus, there will be

occasions where postings are assigned to the wrong controlling object, and ABC should be able to rectify

posting errors related to erroneous assignment to controlling objects.

ABC can repost primary costs from one controlling object to another using transaction-based transfers; the

original cost element is always retained. This function is designed to correct posting errors. Posting errors

should preferably be corrected in the application component where they originate, so that external and internal

accounting (FI and CO) is always reconciled.

In ABC, the assignment of CO objects to the transactions in other modules like FI, SD etc. is taken care of

where ever possible, to post the entries automatically to the respective CO objects, in order to reduce the

chances of error occurrence.

Posting errors involving assignment to a controlling object (cost centre or internal order) can, however, is

corrected using a transaction-based reposting in CO. The reposting costs (or revenues) transaction is simple

transfer of cost (or revenue) from one controlling object to another.

Alternatively, ABC can repost line items from CO documents. To do this, the CO reposting document must

reference the original FI document that posted the costs to CO. This enables to track the movement of cost

with in CO, and still preserve the link with the originating FI document. In repost line items, facility is provide to


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enter multiple receiver objects for a line item reposting, but the full amount of original line item must be

reposted.

7.8 Period End Closing Activities in Cost Center AccountingPeriod-end closing in Overhead Cost Controlling is part of the work carried out at period-end throughout the

entire organization.

The tasks required at period-end, and the sequence in which they must be carried out, depend on what system

functions can be used and which cost accounting method. This topic describes the basic elements of period-

end closing. The explanations assume that all the features available are being used.

ABC will allocate the Costs collected on a cost center during the planning / actual posting, during the accounting period to

receivers, based on user defined ratio. The Activity-independent primary costs which are planned / posted in the

combination of Cost Centers and Cost Elements, need to be allocated to Production Cost Centers, by using the

Assessment and Distribution method.

7.9 Internal Order Accounting

Internal Orders will be used by Hyderabad Chemicals for the purpose of collecting costs related to Assets

under Construction, for capturing telephone expenses, vehicle related expenses These Internal Orders created

under a separate Internal Order Type would be of the Object Class Expenses orders

The Internal Orders would be released before any assignments or postings can be made to them. The

Settlement Profile for these Internal Orders would allow the settlement of the balances on the Internal Orders

to be settled to Fixed Assets.

Postings would be made to the Internal Order using a separate range of G/L Accounts. As part of the monthly


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closing processes, these Internal Orders would be settled to the Asset under Construction. An Asset Master of

the Asset Class “Asset under Construction” would be created for each such Investment Internal Order.

Settlement Rule will be created for such Internal Order through which the accumulated costs on the Order shall

be settled / posted to the Asset under Construction. The settlements would take place against the same G/L

Accounts used for posting to the Internal Orders.

7.9.1 Internal Order Master Maintenance Internal Order Master Maintenance and planning The following table describes the high-level process analysis of the Internal Order Master Maintenance

using SAP business practices framework:

Process

Name

Process Requirements

Internal

Order

Maintenance

Purpose

To create a new Internal Order for an overhead order released and to allocate a plan value

for the same. Some fields and attributes of Internal order like settlement rule can be

changed.

ABC Uses:

In ABC Internal Orders can be used for Overhead or CAPEX Cost Management. Internal

Order can be used to track the costs or non-operating revenues.

Process Steps:

Create a True/statistical internal order for a particular internal task.

Use the function of change and display whenever necessary.

Configuration Considerations:

Standard SAP functionality will cover all the business requirements for this process. Capital

Investment Order with settlement to G/L account will be used as the Asset Module of the


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Process

Name

Process Requirements

SAP R/3 is not planned for the first phase of the project.

Data Migration Consideration

All existing internal orders to be created manually and unspent budget to be entered

manually.

7.9.2 Budget Management for Internal OrdersThe budget is the approved cost structure for an order and differs from the cost plan in that it is binding. Having

estimated the costs as accurately as possible using the different tools during the planning phase, we then

prescribe the funds available for the order in the form of a budget. The budget is the device by which

management approves the expected development of order costs over a given timeframe.

The following different budget types exist:

Original Budget This is the budget originally assigned, before any updates were made.

Budget Updates Unforeseen events, additional requirements, for example, price rises for external activities, and so on.

This may mean you need to update the original budget, in the form of:

Supplements Returns Current BudgetThis is derived from the budget types already mentioned:

Original budget

+ Supplements


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- Returns

= Current budget

7.9.3 Availability Control for Internal OrdersAvailability control enables to control costs actively by issuing warnings and error messages when costs are

incurred. As per availability control ABC is expecting the warning message issue once budget consumption

reaches 80%.Once the budget consumed fully (100%) system issues error message. These controls assigned

to the budget profile and as per this assignment, system will give warning message once budget consumption

reaches 80% and gives error message and stop posting to order once budget consumption reaches 100%.

7.9.4 Actual Posting to Internal OrderAn actual posting to internal order enables up-to-date monitoring of the costs incurred by the organization. In

this way, the variances can be identified at an early stage and correct them.

The following table describes the high-level process flow for the Posting to Internal Order.

No Process Description

1. Data flow from Financial

Accounting

All invoices and other entries related to the event

will be posted to true or statistical internal order for

information and plan checking.

2. Data flow from Materials

Management

All internal goods issue and all service order and

service entry sheet related to particular task will be

posted to Internal Order.

Expenses Vouchers Derive the Internal Order

From Purchase Order if defined in purchase order


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7.9.5 Internal order period end closing activities

Internal Order SettlementAn internal order is usually used as an interim collector of costs and an aid to the planning, monitoring, and

controlling processes needed. When the job has been completed, you settle the costs to one or more receivers

(cost center, fixed asset, profitability segment, and so on).

An internal order is used as an interim collector of costs and an aid to the planning, monitoring, and controlling

processes needed. At ABC, Internal orders are planned to be used for capturing costs of prospective orders

and for Assets under construction. In addition, a separate order type will be created for budgetary control over

Assets purchase, which will be statistical in nature.

When the job has been completed, user can settle the costs to one or more receivers. For example, in the

case of prospective orders if the order is firmed up, the accumulated costs will be settled to the job and if it

does not materialize, the costs will be settled to the marketing cost center.

Periodic settlement of these internal orders will always be to the cost center which incurred the costs

Settlement of orders would be based on the settlement rule for Internal Orders. This in turn is controlled by the

settlement profile for the order type. An Internal Order could be settled to a GL Account or Fixed Asset, where

as a capital Internal Order is always settled to Assets under Constructions. Once the Order is approved for

Capitalization, it would be settled to a Fixed Asset manually.

Carry forward to next yearIn case of job is carried forward to next year the budget for that order has to be carried forward.

7.10 Product Cost Controlling

7.10.1 Product Cost Planning


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Planned cost of the product is calculated

Using the BOM and the master records of the materials in the BOM

Using the recipe, resource where the respective operations are carried out, the cost centers, and the

activity types.

When process order is released, the planned cost is calculated as follows:-

Cost Component Quantity Rate

Material Standard BOM Price from Material Master

Labour Cost Standard activities

in Recipe

Plan price as average of all

fiscal year periods

Machine Cost Standard activities

in Recipe

Plan price as average of all

fiscal year periods

Overhead Costing Sheet Based on the overhead rate

mentioned in the costing

sheet

7.10.2 Product Cost ControllingThe process order captures all the cost, which are incurred during the production process. The details of each

cost are as below.

Production Process: Product costing is closely tied to production. The financial and costing entries automatically result from the

daily production transactions entered into the system. The month-end processes are necessary to complete

the financial picture for product costing.

As all the materials including the finished and semi finished materials are using the moving average price as

price control indicator, the standard costing system cannot be suggested.

The following process to be adopted for Product Costing:


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Creation of Process order:For every batch of production a process order is raised in the production department. The process order

contains the details of BOM and recipe.

The Bill of Material (BOM) details the raw material and packing material in the required portions that are

required for production.

The recipe contains the details process of production activity including resource such as manufacturing

vessel, equipment. Each operation is assigned to its resource and each resource assigned to relevant

activities such as Labour, fuel, power etc. (maximum of six parameters for each resource). Each

resource is attached to a cost centre.

The recipe and BOM are copied to process order automatically when the order is created. The quantities

of materials and activities are determined at standard levels (Planned costs).

Process Order releaseReservation of material for an order will be done at the time of release of order. Material will be reserved batch

wise for the order. The reservation also serves as pick list for picking materials from stores. Any unplanned

issues will have to be added manually.

Creation of batch number:A unique batch number has to be assigned to the order. Batch number can be internally generated / manually

as per the logic decided.

Creation of Inspection lot:Release of process order will result in generation of inspection lot. The inspection lot will be used to record

quality parameters for the order.

Issue of materials to order:Issue of materials to an order can be done either before execution of the order or at the time of confirmation

(Back flushing)


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Confirmation of order:Confirmation of the order means declaration of production against the order. The order has to be confirmed

completely. Confirmation is possible for release order only. Confirmation will result in stock up of product,

reduction in stock of all raw materials.

At the time of confirmation standard activities (machine, labour) & quantities as per BOM are proposed.

Changes can be done at this stage. The actual cost is updated depending upon the actual quantities

confirmed. In case of back flush option is used then changes can be done for the goods issue quantity as well

during “goods movement:” Goods receipt quantity (Yield) is automatically transferred to storage location

specified.

Following data are confirmed at confirmation stage phase wise:

Quantities – Confirmation of quantity processed in a phase.

Activity data – Confirmation of activity used to carry out the phase, such as the duration of the processing

time.

Times and dates – Confirmation of start and finish time of phase

Resource – confirmation of the resource at which the phase was carried out

Posting date - A posting date is to be entered for every completion confirmation. The system

automatically proposes the current date as the posting date. One can, however, enter a different date.

Long text - Long text can be entered to describe the completion confirmation

Technical Completion of Order:It is the completion of a process order from the logistics point of view. This function is used to terminate

execution of an order prematurely, or if the order was not properly executed and we want to delete open

requirements of the order (for example, reservations, capacity requirements).

The following actions are carried out when the order is technically completed:

The order is not indicated as relevant to MRP anymore

The reservations are deleted


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The capacity requirements are deleted

Purchase requisitions that may exist for externally processed operations are deleted

The system status Technically Completed (TECO) is set for the order and the operations

Order Settlement:Order settlement will update the order material price in material master. This activity to be done before issuing

the goods to higher level order so as to capture the actual cost of the materials.

Revaluation of Process OrdersInitially cost planned in cost centre accounting against activity types are used for valuating the materials that

are produced. At the month end when actual cost are booked from financial accounting, revised activity price

calculation is carried in cost centre accounting and with this prices the Process Orders are revalued. The

revaluation is carried to the extent of difference between planned vs. actual activity prices. The revaluation

Process Orders will not be carried, as Process Orders will be settled immediately.

Order closing:It is the final closure from production point of view. The Closed (CLSD) status is set in the Process Order. It has

the following characteristics:

No more costs can be posted to the order, that is, confirmations and goods movements are no longer

permitted for the order.

The order can no longer be changed.

All actions relating to the status technically completed (TECO) are executed.

Suggested business process:The actual cost of every batch is determined using above process. A report is generated to know the cost for

each batch.

Settlement of Process Orders The goods receipt against Process Order is based on the planned cost of the Process Order.


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During settlement the difference between actual cost incurred and goods receipt value are settled to material.

7.11 Product Costing

The Product Costing Components covers the following business processes:

a. Calculating the Standard Cost estimates based on Bill of Material and Routings for Process orders and

releasing it for Inventory valuation ( For Estimation)

b. Calculating the Batch Cost based on Bill of Material and Activity Hrs/Overheads for Process orders and

releasing it for Inventory valuation

c. Calculating the actual cost of production of intermediary and finished products

d. WIP Valuation at period end.

1. Standard cost estimates:

The Standard Cost Estimates shall be used for the purpose of calculating the standard cost of producing a Finished or Intermediate or Bulk products in a Plant.The Standard Cost Estimate shall be calculated using the following strategy and process:Standard Cost Estimates will be done at the beginning of the month for all the materials produced in house - Finished Goods, Intermediates and Bulk products at the Manufacturing Plant.ABC will use the Costing Variant “PP01 – Std Cost Est (Mat.)” for the purpose of calculating the Standard Cost Estimate.The Standard Cost of finished products, Intermediates and Bulk constitutes Materials (Raw materials and Packaging materials) and Conversion cost. The Standard cost for material component will be determined from the Bill of Materials (BOM) and Raw material Prices. The Bill of Materials (BOM) contains the standard material quantities for manufacturing finished product. Bill of Materials (BOM) with usage “1 - Production” will be used for the purpose of calculating the


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quantities of the material. These Quantities from the Bill of Materials (BOM) and the Moving Average Price maintained in material master will be used for calculation of Standard Cost Estimate.The Standard Conversion cost will be determined through the Master Recipe and Planned Activity rate. The Master Recipe contains all resources required to produce a material and the number of hours required for each activity performed by each resource. The planned rate for each Activity and standard number of hours maintained in Master Recipe will be used for calculating conversion cost for each material. The conversion cost will include the following overheads of Operations Cost Centers.

1. Labor 2. Machine

The conversion cost doesn’t include Administrative, Sales and Marketing and other general and administrative expenses.Valuation Variant: The strategy for picking up various prices / costs of inputs for estimating standard cost, based on the Valuation Variant maintained in the Cost Variant. ABC will be using the following strategy:

a. Material component – the system will pick up prices of materials in Bill of Materials (BOM) in the following order:

1. Planned Price 12. Moving average price3. Standard price

ABC will be maintaining “Moving average prices” for all raw materials, packaging and semi-finished materials and finished materials. So SAP R/3 will pick up the prices accordingly while estimating Standard Cost.

b. Activity Prices – system will pick up “Most up-to-date Plan price”c. Overheads – from Cost Sheet

The Standard Cost Estimate is a three step process in SAP R/3:1 Estimate Standard Cost. This is just calculation (estimation) step in SAP R/3


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2 Mark the Standard Cost estimate. This will update the Future Price in the material master.

3 Release the Standard Price. This will update the Standard Price in the Material Master. This has impact on Financials due to revaluation of Inventory.

It is recommended to analyze the Reports before “releasing standard cost” to ensure that correct prices are updated in the material master.

In case of materials having more than one Bill of Materials (BOM)/ Master recipe because of capacity differences Production department will create different Production versions. For these materials the Production department should create the most popular version as Version 1 so that the Standard Cost is updated with Bill of Materials (BOM)/ Master recipe of the most popular version. This will reduce variances due to capacity differences in actual production.The Itemization report of Standard Cost for any material will show the Raw Material / Packaging/ Intermediate/ Semi-finished Material Code and the quantities for materials costs and similarly the cost center/ activity type for activity costs.The Cost Component report for the Standard Cost will show report as per Cost Components –

1 Raw Materials

2 Packaging Materials

3 Outside Services

4 Manufacturing Costs

The report can show Fixed and Variable proportions separately for each Cost Component.

The Cost Components will be as follows:

Cost

Component

Cost Elements Cost Component

Description

1 4001000 – 4001150 Raw Materials


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Cost

Component

Cost Elements Cost Component

Description

4004000

4004050

656000

2 4002000

4002150

Packaging Material

3 4901100 Outside services

4 9101000 – 9102500 Manufacturing Costs

7.12 Batch Valuation

Valuation category – The valuation category determines whether stocks of the material are valuated jointly or separately. For All RM, SF & FG materials Valuation Category will always be “X” – Batch Valuation.

As Raw materials are valuated as Batch valuation”X”, during process order settlement the variances are settled to the Batch Itself.

To ensure that the variances are totally settled to the process order it is mandatory to do the settlement immediately after the GR is performed (Consumption and Technically confirmation)The laxity in this (User not performing the Settlement immediately after GR can be controlled by proving an enhancement (ABAP) so that the settlement is automated immediately after GR


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Manufacturing Cost

The manufacturing cost will be determined through the Routing, the Work Centres at which the operations are

performed, the Cost Centres and the relevant Activity Types. Hyderabad Chemicals will calculate and maintain

for every period the Activity rate manually and update cost centre wise.

The Activity Price calculated and maintained for each combination of Cost Centre and Activity Type and the

standard hours maintained in the Routing will be used for the purpose of calculating the manufacturing costs.

In the case of Finished Goods manufactured through sub-contracting the Semi-finished materials and the

packaging material are supplied by Hyderabad Chemicals and the sub-contractor is paid a rate per unit as

manufacturing costs.

In the itemization for the cost estimate, the Raw Material / Packaging Material Code and the quantities are

displayed. Similarly the cost center/ activity type is displayed in the itemization. The Fixed and Variable Portion

of the cost estimate would be displayed separately using the following Cost Component Structure

5.3.1 Costing of Process Orders

Separate Process Orders will be created/ generated for each stage of Finished and Intermediate Product.

When the production order is released, the planned cost is calculated as follows:-

Cost Component Quantity Rate

Material Standard BOM Price from Material Master

Manufacturing Cost Standard activities in Routing Plan price for the period


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Actual Cost in Process Orders

The Material costs are calculated simultaneous with the consumption of Raw Material / Packaging Material

during the production activities. The actual Machine / Labor hours will be confirmed in all the Process Order.

The manufacturing cost based upon the actual hours and the Planned Activity Rate will be charged to Process

Order.

7.13 Work In Process Calculation

The WIP will be calculated each month end for those Process Orders where the entire manufacturing process

has still not been completed. The WIP Calculation will be executed and posted to the G/L Accounts using the

Result Analysis Version. When the Process Order activities are completed in a subsequent period the WIP

postings are reversed. The WIP Calculation and Reversal will be done in the following manner

Process Order Status Result Analysis Type

REL / PREL WIP Calculation on Basis of Actual Costs

DLV / TECO Cancel Data of WIP Calculation and Results Analysis

7.14 Variance Calculation

Variances are calculated each month end only on completion of the Process Order. The actual costs collected

in the Process Order and Standard Price of the Product will represent the Variance.


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Settlement of Production orders

All the Production orders will be settled immediately after process order teco. The Variance will be transferred

and the calculated Variances will be transferred to “Process order –Settlement variance”. The contra entry will

be shown in “Gain/Loss production variances”

Sample Accounting Entries

Process Accounting Entry

Issue of Material to Production

(to Process Order)

Material Consumption A/c (P&L) Dr.

To Material Inventory A/c

Realization of Work-in-process at period-end Work-in-process Stock (B/S) A/c Dr.

To Work-in-process stock change A/c (P&L)

Receipt of Finished Goods in Finished

Goods Stores

Finished Goods Stock A/c Dr.

To Cost of Goods Manufactured A/c

Finished Goods Dispatched to Customer Cost of Goods Sold A/c Dr.

To Finished Goods Stock A/c

Sale of Finished Goods to Customer Customer A/c Dr.

To Sales A/c

7.15 Profit Center Accounting

The main aim of Profit Center Accounting is to determine profit for internal areas of responsibility. Profit Center


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Accounting (EC-PCA) is a statistical accounting component. This means that it takes transaction data posted in

other components and represents it from a profit-center-oriented point of view. The postings in EC-PCA are

statistical postings, since the profit center is not itself an account assignment object in Controlling.

The integration of the R/3 system makes it possible to post profit-relevant data to Profit Center Accounting

automatically as soon as the transaction is posted. The system either transfers the relevant items from the

original postings or creates additional postings.

You assign Overhead Cost Controlling objects (cost centers, internal orders, and projects, business processes)

to profit centers in order to observe the flow of overhead costs from Financial Accounting and their allocation

through internal accounting from a profit center point of view.

7.15.1 Standard Hierarchy

The Profit Centre Standard Hierarchy is a tree structure which contains all profit centres and reflects the

organizational structure used in Profit Centre Accounting. The definition of the standard hierarchy is based on

the understanding of the internal organizational structure and planning, allocation & reporting requirements.

The standard hierarchy consists of summarization nodes and end nodes. Summarization areas group together

profit center data at a higher level. Each node of the standard hierarchy, which is not an end node, is a

summarization area. You cannot assign profit centers directly to a summarization area; it merely groups

together the profit center areas and summarization areas that lie below it. The summarization nodes are used

in reporting and the profit centers are assigned to the end nodes.

To fulfill the requirements, the Profit Centers have to be set up in such a manner as to reflect the reporting

requirement of ABC. For ABC, Profits are classified as from Agro Chemicals and Formulation Products. The

Chemicals product segment is further sub-divided into self-manufactured products,

In the context of the above and its current operations, the Profit Center hierarchy for Hyderabad Chemicals is

as follows.


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7.15.2 Profit Center Assignments

All account assignment / business objects including Cost Centers, Internal Orders, Materials, Assets, Sales

Orders, etc. are assigned to profit centers. The data flows automatically to profit center accounting due to the

assignment of these objects to the profit centers. The assignment of business objects to profit centers is

absolutely essential to ensure data consistency in reporting. The following business objects are to be assigned

to the profit centers in ABC:

Material masterAssignments of materials to profit centers provide the default values for assignment of sales orders and

manufacturing orders. With internal goods movements also (such as stock transfers or material withdrawals)

the profit center is derived from the material master, if no other account assignment has been made. The

assignment of materials also forms the basis for the transfer of material stocks to Profit Center Accounting.


Hyderabad chemicals

HCL Neo Seeds

Balangar PlantNeo Seeds

HCPL

Pashamylaram Plant

Jammu Plant

Humnabad Plant

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Maintaining Profit centres in Material master would be as follows.

Nature of Material Profit Center in Material master

Raw/ Packaging/ Intermediates produced

Balangar/ Jammu/Pashamylarm/Medchal

Semi-finished/ Finished Goods Balangar/ Jammu/Pashamylarm/Medchal

Spares / Others Balangar/ Jammu/Pashamylarm/Medchal

Sales Orders

It is necessary to assign SD Sales orders to profit centers in order to reflect sales revenues and sales

deductions. The profit center assignment is also passed on from the sales order through the logical chain i.e.

Sales Order -> Delivery Note -> Goods Issue -> Billing Document. This means that when the goods issue is

posted, the goods usage which corresponds to the revenues is also passed on to the profit center of the sales

order. Each order item can be assigned to a separate Profit center

Hyderabad Chemical Profit center updating in sales order is derived from the Profit Center maintained in the

Material Master.

Process orders

In Process orders system proposes the profit center from the master record of the material being produced.


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For process orders, the profit center proposed is that of the main product in the order.

All the costs and internal cost allocations posted to the production order are passed on to the assigned profit

center, along with the credit posted when the production order is delivered or settled.

The assignment of production orders also transfers Work in Process for open orders to Profit Center

Accounting.

Cost centers

The assignment of a cost center to Profit Center facilitates the postings made to the Cost Center to flow to the

Profit Center automatically. The Cost Centers of Hyderabad Chemicals will be assigned to the Profit Centers in

the following manner

Nature of Cost center

Profit center

Production Cost Centre Balangar/ Jammu/Pashamylarm/Medchal

department Cost Centers

Balangar/ Jammu/Pashamylarm/Medchal

service Cost Centre Head office cost centers and department wise cost centers

All other Sales & Marketing

Head office cost centers


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Cost Centers

Fixed Assets

By assigning Assets to profit centers, profits and losses due to the sale of assets as well as depreciation are

transferred to Profit Center Accounting. This assignment also makes it possible to transfer asset portfolios to

Profit Center Accounting. By entering the Cost Center in the Fixed Asset Master Data, the asset and

transactions related to it are assigned to the profit center of that Cost Center.

7.15.3 Profit Center Planning

The main aim of profit center planning is to provide data and key figures for the purpose of planning for

responsibility areas. The costs shall first be planned at the various Cost Centres and this plan data shall be

subsequently transferred to the Profit Centers based on the Profit Centre maintained in the respective Cost

Centers. Other plan information (revenues, costs, changes in stock, and so on) shall be planned directly in

Profit Center Accounting.

The plan data in Profit Center Accounting is contained in different plan versions. These plan versions will be

used to store separate sets of plan data for the same profit center. Hyderabad Chemicals will have approved

budget before the beginning of the year, 1st forecast at the end of the 1st quarter, 2nd forecast at the mid of

the year, and 3rd forecast at the end of third quarter. ABC generates reports comparing the actual with Budget

as per the management requirement.

In view of the above following versions will be used for Hyderabad Chemicals


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Version Description Remarks

0 Plan/actual version Can be used for plan & actual purpose

7.15.4 Automatic derivation of profit center in actual transactions

The profit center can be maintained in the masters and while doing actual transactions the profit center is

derived. The profit center derivation logic is explained in the following table.

Sl. No.

Particulars Logic

1. Expenditure Cost of goods sold: Each Material at plant level is

assigned to a Profit Center at the material master. At

the time of booking of sale the Profit Center will be

automatically derived from the Material master.

Price Difference: The same will be derived from the

Material master.

Internal consumption: At the time of booking of

consumption, Cost Center / order is a mandatory

field. This will in turn derive the Profit Center.

Inventory Shrinkage/Lost in transit: The same will

be booked to a Cost Center, which in turn will derive

the Profit Center.

Other Direct and Indirect Expenditure: At the time

of booking of expenditure Cost Center is to be given.


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This will in turn derive the Profit Center.

The Cost Center field should be mandatory in case

of booking of any expenditure.

2. Income Sales of material / Scrap: Each material / Service

at plant level is assigned to a Profit Center at the

master level. At the time of booking of sale the Profit

Center will be automatically derived from the material

master.

Other operating income: in case of manual FI

entry, Profit Center has to be manually entered at the

time of entry. The same has to be a mandatory field.

3. Fixed Assets At the time of booking of fixed asset, Profit Center

will be derived from the cost center assigned in the

asset master.

4. Inventory Each Material at plant level is assigned to a Profit

Center at the Material master.

5. Debtors and other

related special GL

transactions

(excluding advance

received)

The Profit Center will be derived from the offsetting

line item. In case there are multiple offsetting line

items, the system will break the debtors in the ratio

of the offsetting line item.

6. Advance received

from customers

Manual entry at the time of booking


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7. Creditors and other

related special GL

transactions

(excluding advance

given)

Same as Debtors

8. Advance given to

vendors

Manual entry at the time of booking

9. Share Capital Profit Center can be attached at the GL level

10. Secured and

Unsecured Loans

Profit Center can be attached at the GL level

7.15.5 Actual Posting in Profit Centre Accounting

All the postings in Financial Accounting, Materials Management, Asset Management and Sales and Distribution

and Controlling that affect profits are reflected in Profit Centre Accounting. Profit centers cannot receive direct

postings in the SAP ECC System. Instead, the data is posted to other objects and passed on from there to a

profit centre in Profit Centre Accounting. This makes it possible to display company’s results by profit centre

based on the original postings and with no additional work.

7.15.6 Profit Centre Account Analysis

The information system lets one analyze all the Data in Profit Centre Accounting individually as well as in a

summarized form according to different criteria. The reports in the Profit Centre Accounting information system

can be classified into two groups:


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Drilldown reports

Report Painter reports (and Report Writer reports)

7.16 Profitability Analysis (CO-PA)

CO-PA lets you analyze the profitability of segments of your market segments structured according to products,

customers, orders, and summarizations of these and other characteristics as well as organizational units such

as company code. The aim is to provide your sales, marketing, planning, and management organizations with

decision-support from a market-oriented viewpoint.

The business purpose of Profitability Analysis is to provide profitability-oriented performance information on a

company's market segments or sales channels, in order to support corporate planning and decision-making,

especially in the areas of sales and marketing.

This sales-oriented approach in CO-PA means that no contribution to the organization's success is made until

a sales transaction has been completed. Consequently, the products sold are transferred to CO-PA in

accordance with the cost-of-sales accounting method and provide information on the sales revenue and sales

deductions.

This net revenue is then compared with the cost of sales. These costs consist of the cost of goods

manufactured of the products sold or services rendered plus any production variances known.

To round off the profitability data, we can also assign overhead costs to profitability segments in the course of

your period-end closing activities.


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7.16.1 Operating Concern:The operating concern is the highest reporting level within CO-PA; it defines the limit of sales and marketing

information, which can be reported together from this module. One or more controlling areas are assigned to

an operating concern when organizational structures are defined.

7.16.2 Data StructureThe data structure will organize the costs and revenues onto how it will be displayed or analysed.1000- ABC

operating concern will be used in order to determine the structure of profitability segments. The data structure

is defined by Characteristics and Value Fields as described in the subsequent narratives.

7.16.3 Characteristics:Characteristics are nothing but the profitability segments for which analysis has to be performed. For eg., a

customer, a region, a sales office etc can be defined as a characteristic.

7.16.4 Value Fields:Value Fields are the detailed elements that form part of the analysis report. For eg., sales revenue, costs,

overheads can be defined as value fields that form part of the profitability analysis report for a particular

segment.

In ABC some of the individual characteristics will be grouped as below:

Characteristic Groups Characteristics

Organizational units Company code

Sales Organization

Distributional channel

Customer related Customer

Account Assignment group

Country

Customer class


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Characteristic Groups Characteristics

Customer group

Sales District

Sales group

Sales office

Product related Product

Plant

Division

Material group

Other Characteristics Billing type

Controlling Area

Sales Order

Sales Order item

In ABC some of the Value Fields will be defined as below:

Sales Quantity

Cash discounts

Cost of goods manufacturing

Customer disct.

Freight

Inventory adjustment

Inventory price diff.

Manufacturing costs

Material revaluation

Other discounts

Outside services

Price reduction

Price variances


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Prod. cost variances

Production variances

RPM

Revenue

Variable Mfg. Costs

Fixed Mfg. Costs

Condition types: The condition type is used for different functions. In pricing, for example, the condition type

helps in differentiating between different kinds of discount; in output determination.

The following design and configuration options for the setup of the CO-PA operating concern

Cost-based CO-PA is used to match the revenues and costs of products so that cost of sales and

contribution margin analyses can be carried out. Value fields are used to capture cost and revenue data.

Cost elements are mapped to value fields in configuration, but cost elements are not available in cost-

based CO-PA.

The cost of a product (cost of sales) is only posted to CO-PA when the revenue is posted or when the

invoice is passed to accounting.

Once the order is complete, the production order variances are posted to CO-PA during order settlement

for this Z1 (ABC – Prod. PA Transfer Structure) is the PA transfer Structure assigned to process order

settlement profile ( ZPI01)

PA Transfer structure FI (Direct Acct Assign. from. FI/MM) is used for direct posting from FI and MM.

Currency will updated in both operating concern currency and Company code currency

7.16.5 Flow of actual values into Profitability Segments:Profitability Analysis can receive actual data from the following R/3 applications:

SD (customer agreements, sales orders, goods issues, billing documents)

CO-OM (assessment of cost center and process costs, activity and process allocation, order settlement)

CO-PC (valuation using material cost estimates, settlement of cost objects, production variances)


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FI (general ledger postings)

Each CO-PA-relevant transaction in SAP (such as invoicing) triggers the creation of line items in COPA. The

data posted in CO-PA is determined through automatic and manual mappings, and through derivation and

valuation configuration.

7.16.6 Information System in CO-PA:The CO-PA information system uses an online reporting tool - called "drilldown reporting" –, which allows to

evaluate the data collected in Profitability Analysis. With this tool we can select the desired dataset according

to any of the characteristics in our CO-PA system.

It is possible to display several profitability segments for any key figure, or several key figures for any

profitability segment.

The CO-PA information system provides a number of different ways to analyze profitability data. We can define

and display profitability reports to analyze the characteristics that are contained in the segment level for an

operating concern.

When defining the profitability report, it is possible to specify the different analysis criteria mainly by selecting

characteristics and value fields.

All the MIS reports for Sales and Profitability Analysis of ABC would be generated through CO-PA.

8 Integration


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7.1 Chart of Accounts:The operating chart of accounts is shared by Financial Accounting as well as Controlling. The accounts in a

chart of accounts can be both expense or revenue accounts in Financial Accounting and cost or revenue

elements in cost/revenue accounting.

7.2 General Ledger Account:Automatic account determination / posting is one of the most powerful methods to determine the correct G/L

account to post to by considering the type of transactions and other factors. This feature provides a lot of

flexibility and eliminates the need to hard code the G/L account in the source code.

7.3 FI – CO Integration:The operating chart of accounts is shared by Financial Accounting as well as Controlling. The accounts in a

chart of accounts can be both expense or revenue accounts in Financial Accounting and cost or revenue

elements in cost/revenue accounting. All GL-P&L accounts are maintained as cost elements in Controlling.

Further these cost elements are linked to cost centers.

7.4 MM – FI Integration:MM and FI are integrated by way of automatic account assignments to GL accounts for material movements

types, which have an impact on financial information. Also valuation classes are linked to FI for purpose of

providing inventory valuation.

MATERIAL MANAGEMENT

Accounting of Purchases:


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Accounting of purchases would be configured using account determination in MM module of R/3

system. The determination may be made using following parameters:

Company Code

Valuation Class

Valuation Grouping code

The accounting document for accounting of purchases is a two step process. On posting of Goods

Receipt Note (GRN) in MM, stock account and GR/IR account is posted to. In second step, after invoice

verification, vendor is posted, while clearing GRIR account.

A) Accounting Entry for Goods receipt

Stock/Inventory account Debit

GR/IR account Credit

Freight clearing account Credit

B) Accounting Entry on invoice verification of supplier

GR/IR Debit

Vendor account Credit

C) Accounting Entry on invoice verification of freight vendor

Freight clearing account Debit

Freight Vendor account Credit

D) Accounting Entry Physical Inventory verification posting

Physical Inventory RM Debit

Stock RM. Credit


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E) Revaluation of Materials

A) Accounting entry in the case of Price Increase

Stock (RM/FG/WIP) A/c Debit

Revaluation gain / loss a/c Credit

B) Accounting Entry in the case of Price decrease

Revaluation gain/loss RM A/c Debit

Stock (RM/FG/WIP) A/c Credit

F) Transfer of Materials from one plant to another plant

A) Price control in the Material master is Moving Average price

Receiving plant material stock A/c Debit

Sending plant material stock A/c Credit

Note: - If the price in the Material master is different in sending plant and receiving plant, system will

change the moving average price in the receiving plant material master.

7.5 SD – FI Integration:SD account assignments depend on the condition tables & access sequences to determine the correct G/L

account. One can set up condition tables / types to use different characteristics such as:

Customer class

Plant

Material group

Account modifiers


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Sales & Distribution

A) Delivery of Goods to Customer

COGS-Finished Goods A/c Debit

Stock-Finished Goods A/c Credit

NOTE: COGS Finished goods a/c is part of Increase/ Decrease in stock

Billing Accounting Entry:

Customer A/c Debit

Sales Revenue – Domestic A/c Credit

Excise Duty A/c Credit

Sales Tax A/c Credit

Freight A/c Credit

EXCISE ACCOUNTING ENTRIES

A) On Updating Excise Part-II

1) Raw materials

CENVAT RG23A BED a/c Debit

CENVAT RG23AECESSa/c Debit

CENVAT Clearing a/c Credit

2) Capital Goods, Tools, etc.


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CENVAT RG23C BED a/c Debit

CENVAT RG23CECESSa/c Debit

Capital CENVAT RG23C hold Debit

CENVAT Clearing a/c Credit

B) At the time of Invoice verification CENVAT clearing a/c gets reversed.

GR / IR Account A/c Debit

CENVAT Clearing A/c Debit

Vendor A/c Credit

C) PLA Payment and excise records updating

TR6 Challan Bank Payment

PLA Excise Hold Account Debit

Bank a/c Credit

PLA Register updating

Excise PLA – BED a/c Debit

Excise PLA – BEDEcess a/c Debit

PLA Excise Hold Account Credit

Note: at the time of TR6 Challana Bank payment document posting we have to debit the PLA Excise

Hold a/c. By this document posting, system will not update the excise records.


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We have to give this document number to excise people. By using this document number they will

update the excise records. At the time of Updating of excise PLA records system will post the second

accounting entry

D) Excise Invoice Accounting Entry

Excise Duty A/c Debit

Excise BED Payable A/c Credit

Excise BED EcessPayable A/c Credit

E) Excise Duty Utilization Accounting Entry

Excise Duty BED Payable A/c Debit

Excise Duty BEDEcess Payable A/c Debit

RG23A BED Account Credit

RG23A Ecess Account Credit

RG23C BED Account Credit

RG23C Ecess Account Credit

Excise PLA (BED) Account Credit

Excise PLA (Ecess) Account Credit

F) Excise entry for sales returns (if we take modvat credit back)

RG23 A BED A/C Debit


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RG23 A Ecess A/C Debit

Excise duty a/c (Expenses) Credit

The following are the Standard Reports which are available in SAP:

7.6 Production planning

A) On consumption of Materials

Consumption RM A/c Debit

Stock RM A/c Credit

B) Confirmation of Production order (Finished goods Production)

Stock finished goods a/c Debit

Order settlement a/c Credit

NOTE: Order settlement a/c is a part increase and decrease in stock. This one is profit & loss a/c


T.Code DescriptionJ1IH TR6 Challan Payment / Excise JV

J2IUNUtilization of CENVAT / PLA against BED Payable

J1I5,J2I5 RG23A / RG23C Part II, PLA J2I9 CENVAT Report generationJ2I8 Capital Goods Transfer CreditJ2IER1 ER1 Monthly Returns

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7.7 HR – FI Integration:The SAP HR Payroll India component integrates with other SAP HR components such as Personnel

Administration and Personnel Management. There are interfaces to Financial Accounting and Controlling.

The following payroll functions are being addressed part of the pay roll;

Basic Increments

Dearness Allowance

House Rent Allowance

Conveyance Allowance

Claims

Bonus

Income Tax

Section 80

Third Party Deductions

Tax on Arrears

Exemptions

Exemption on Leave Travel Allowance

Exemption on Medical Reimbursements

Exemption on Medical Insurance

Exemption on Child Education Allowance

Exemption on Child Hostel Allowance

Exemption on Other Allowances and Reimbursements

Exemption on Leave Encashment

Exemption on Voluntary Retirement Scheme

Interest on Housing Loan

Previous Employment Tax Details

Professional Tax

Provident Fund

Employee State Insurance


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Labour Welfare Fund

Loan deductions

Termination Work Bench

Gratuity

Form 16

Account number and Bank Details

SAP HR Payroll India supports retroactive accounting. This function automatically recalculates payroll in the

event of changes to master data and time data in periods for which payroll has already been completed.

Employee master is being assigned with a cost center, to identify the costs. The summary of payroll is being

posted to the Financial Accounting expenses head wise and to clearing accounts. The deductions are being

identified as clearing accounts, where the amounts need to be payable to the third party. If any posting

required to be posted to the Employee account, the same will be posted from clearing account to the Employee

account.

Based on the payment method assigned in the employee master, the bank transfer advice will be generated from the

system.


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* Requirement Priority Defined

M = This is a critical requirement and the system MUST perform it

W = This is a critical requirement and we can use a WORKAROUND

N = This requirement is NICE to have

F = This requirement is planned for a future Implementation Wave

9 Scripts & Reports Requirements and Workarounds

9.1 Reports Requirements

S No Report Name Reporting Process Area

Reporting categories/ Data

Config/Custom/Manual

RE_FICO_01 Bank Book FICO Date, Amount, Account

This requirement will be Meet by ABAP Development

RE_FICO_02 Batch wise Costing Report FICO Qty unit Rate Value


RE_FICO_03 Batch wise Costing Report finished products and Semi finished products

FICO Qty unit Rate Value


RE_FICO_04 BRS Reports FICO This requirement will be Meet by ABAP Development

RE_FICO_05 Cash Book FICO Date, Amount, Account


RE_FICO_06 Cash flow & projections actual receipts and payments for the previous month projections for the current month

FICO Inflow, Outflow current assets


RE_FICO_07 Cash Voucher Printing FICO Date, Amount, Account


RE_FICO_08 Creditors Weighted Average FICO


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ReportRE_FICO_09 Customer Ledger FICO Date, Amount,

Document NoThis requirement will be Meet by ABAP Development

RE_FICO_10 Creditors Sub Ledger Trail Balance

FICO Vendor name Invoice amout


RE_FICO_11 Debtors Weighted Average Report

FICO

RE_FICO_12 Debtors and Creditors Advance Reports

FICO Date, Amount, Account


RE_FICO_13 Finished goods sales statement (NR Based)product wise area wise and pack wise

FICO Sale qty Value Net qty


RE_FICO_14 Freight Outward analysis FICO Depo wise plant wise


RE_FICO_15 Journal Voucher Register FICO Date, Amount, Account


RE_FICO_16 Monthly Advances Report FICO Customer, Amount


RE_FICO_17 Monthly Bank charges Analysis FICO Period, This requirement will be Meet by ABAP Development

RE_FICO_18 Monthly cash Flow - actual receipts and payments



RE_FICO_19 Monthly creditors advance issued bills to be received

FICO Vendor amount This requirement will be Meet by ABAP Development

RE_FICO_20 Monthly Jammu expenditure analysis- expenditure month wise

FICO Profit Centre, This requirement will be Meet by ABAP Development

RE_FICO_21 Monthly product wise contribution-product wise analysis

FICO Sale qty rmc cost


RE_FICO_22 Monthly Profit and loss account – cash flow current assets Ratio analysis



RE_FICO_23 Party wise Sales Report FICO Product sale qty


RE_FICO_24 Productwise Excise duty inputs period wise for Jammu plant

FICO Item, Value Duty, MRP

This requirement will be Meet by ABAP


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DevelopmentRE_FICO_25 Purchase Register with item

wise summarizedFICO Vendor, date

amountThis requirement will be Meet by ABAP Development

RE_FICO_26 Quarterly Analysis -Dist wise traveling other Exp

FICO State wise depo wise


RE_FICO_27 Quarterly Incentive analysis –provisions ,actual ,district wise, party wise

FICO State wise product wise


RE_FICO_28 Quarterly Marketing Expenses Analysis -state wise traveling other Exp

FICO Depo wise state wise


RE_FICO_29 Quarterly Weighted average analysis

FICO Recipts, W.Avg days


RE_FICO_30 Quarterly pending claims - Insurance

FICO This requirement will be Meet by ABAP Development

RE_FICO_31 Sales Return Register FICO Customer Date amount


RE_FICO_32 Statutory Forms Tracking Report

FICO Customer, Document no


RE_FICO_33 Stock age wise stock holding qty and value

FICO Qty Date Value

This requirement is meet by Standard SAP

RE_FICO_34 Stock Transfer Register FICO Depot wise This requirement is meet by Standard SAP( T Code MB51)

RE_FICO_35 Vendor Ledger FICO Vendor, date Amount


RE_FICO_36 Vendor Sub Ledger Trail Balance

FICO Vendor, date Amount


RE_FICO_37 Weekly Collection Report FICO Customer depot bank


RE_FICO_38 Weekly Creditors report FICO Vendor amountDate


RE_FICO_39 Weekly Debtors collection Outstanding breakup for overdue

FICO Depo wise state wise


RE_FICO_40 Wind Power Generation Report Machine wise

FICO KWH, Hours This requirement will be Meet by ABAP


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DevelopmentRE_FICO_41 Wind Power Generation Report

state wise and Month wise FICO KWH, Hours This requirement will be

Meet by ABAP Development

RE_FICO_42 Monthly Bank charges Analysis FICO Date, Amount This requirement will be Meet by ABAP Development

RE_FICO_43 Monthly Profit and loss account – cash flow current assets Ratio analysisStock age wise stock holding qty and value

FICO Sales, ExpensesDepot


RE_FICO_44 Monthly Jammu expenditure analysis- expenditure month wise

FICO Sales, Expensesunit


9.2 Script Requirements

S No Report Name

Reporting Process Area

Reporting categories/ Data

Config/Custom/Manual

SC_FICO_01Balance Confirmation Letter FICO Script


SC_FICO_02 Bank Book Printing FICO ScriptThis requirement will be Meet by ABAP Development

SC_FICO_03 Bank Voucher Printing FICO ScriptThis requirement will be Meet by ABAP Development

SC_FICO_04 Cash Book Printing FICO ScriptThis requirement will be Meet by ABAP Development

SC_FICO_05 Cash Voucher Printing FICO ScriptThis requirement will be Meet by ABAP Development

SC_FICO_06

Check Printing with payment advice and without payment advice FICO Script


SC_FICO_07 Cheque Printing FICO ScriptThis requirement will be Meet by ABAP Development

SC_FICO_08Debit/Credit Not Voucher printing FICO Script


SC_FICO_09 General Ledger Printing FICO ScriptThis requirement will be Meet by ABAP Development

SC_FICO_10 Journal Voucher Printing FICO ScriptThis requirement will be Meet by ABAP Development

SC_FICO_11 Pay in Slip FICO ScriptThis requirement will be Meet by ABAP Development


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SC_FICO_12 Vouchers Printing FICO ScriptThis requirement will be Meet by ABAP Development

10. Functional Requirements and WorkaroundsFunctional Design Requirements:Enter a unique number for the requirement

Requirement Implications of Not Meeting this Business Requirement

Req. Priority*

FICO_01 Ability to create GL accounts centrally

NA - Met with standard SAP M

FICO_02 Ability to Block GL accounts from Posting


FICO_03 Ability to maintain GL accounts in COA


FICO_04 Ability to maintain GL accounts in Company Code


FICO_05 Ability to Open and Close Posting Periods.


Ability to maintain standard hierarchies (groupings) of cost objects

N/A this requirement is met by standard SAP

M

FICO_06 The ability to create Cost Center Master Data


M

FICO_07 Ability to Settlement of Process Order


M

FICO_08 Ability to Change Price on Activity Types


M

FICO_09 Ability to maintain Activity Types N/A this requirement is met by standard SAP

M

FICO_10 Ability to maintain Internal Orders N/A this requirement is met by standard SAP

M

FICO_11 Ability to perform Cost Center N/A this requirement is met by M


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Reposting standard SAPFICO_12

Ability to perform CO Period Lock N/A this requirement is met by standard SAP

M

FICO_13 Ability to create Profit Center Master Data

N/A this requirement is met by Standard SAP

M

FICO_14 Ability to create/maintain bank records on system


M

FICO_15 Ability to associate a GL account to each bank account


M

FICO_16 The ability to process invoices in foreign currencies

N/A – Met with Standard SAP M

FICO_17 The ability to calculate use taxes on purchases


FICO_18 The ability to create an invoice document for validating duplicate invoice checking to vendor without a purchase order


FICO_19 The ability to manually block invoices from payment


FICO_20 The ability to process a down payment that does not reference a purchase order.


FICO_21 The ability to post vendor recurring documents over multiple periods


FICO_22 The ability to review report to identify open and cleared down payments.


FICO_23 Ability to clear checks manually received from Bank


FICO_24 Ability to record payments (i.e. check books) made externally (of R/3 System) using FI-AP


FICO_25 Ability to create payments by check in INR and print on pre-numbered check form


FICO_26 The ability to enter manual invoice or credit memo directly within Accounts Receivable.

N/A Met with Standard SAP M

FICO_26 The ability to validate the manual invoices, debit memos, and credit memos applied to customer accounts


FICO_27 The ability to create credit memo requests for miscellaneous sales

N/A Met with Standard SAP. M

FICO_28 The ability to post partial payment or residual items or



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receipt on accountFICO_29 The ability to Reset Customer

Clear ItemsN/A Met with Standard SAP M

FICO_30 The ability to Match the Open Items accurately and offsetting the items using the Manual Clearing Process.


FICO_31 The ability to transfer the Items that are incorrectly applied to customer accounts.


FICO_32 The ability to print an Aged Balance Report to list all the overdue open items


FICO_33 The ability to show line item report showing Gross receivable – Paid = Net


FICO_34 The ability to create the legal end of month reports


FICO_35 The ability to know days outstanding from customers


FICO_36 Create purchase order for asset N/A this requirement is met by standard SAP

M

FICO_37 Create asset master record N/A this requirement is met by standard SAP

M

FICO_38 Ability to execute asset transfer between plants / company code


M

FICO_39 Ability to calculate and post unplanned depreciation


M

FICO_40 Ability to dispose of assets via sales transaction and appropriately calculate gain / loss on asset sale


M

FICO_41 Ability to dispose of assets by scrapping


M

FICO_42 Ability to dispose of asset without customer


M

FICO_43 Ability to settle values from Capital Internal Order to AUC at period end and to final asset when construction is complete.


M

FICO_44 Ability to calculate and post depreciation values based upon immediate depreciation (i.e. daily depreciation based upon purchase date)


M

FICO_45 Ability to compare fixed asset detail N/A this requirement is met by M


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data to general ledger account totals

standard SAP

FICO_46 Ability to display asset balances by company code, asset class, cost center


M

FICO_47 Ability to post journal entry to general ledger and cost center

N/A Met with standard SAP M

FICO_48 Ability to create journal entry with reference to a prior entry.


FICO_49 Ability to park a journal entry before completing and posting


FICO_50 Ability to execute mass reversals of posted documents


FICO_51 Ability to clear GL accounts N/A Met with standard SAP MFICO_52 Ability to post and clear GL

accounts.N/A Met with standard SAP M

FICO_53 This system must have the ability to calculate standard costs for internally manufactured product


M

FICO_54 The system to have Mark and Release cost estimate.


M

FICO_55 The system must have ability to compare the cost estimates


M

FICO_56 This system must have the ability to analyze the variances between costing runs by company code, plant, and material type


M

FICO_57 This system to have ability to execute cost estimate for a material.


M

FICO_58 Ability to plan costs by cost center and cost element (by period)

N/A – This requirement is met by standard SAP

M

FICO_59 The system must provide the ability to analyze production variance and to settle these over/under absorptions at month end


M

FICO_60 Ability to execute WIP calculation per process order based upon actual costs charged to order


M

FICO_61 Ability to execute WIP calculation program collectively


M

FICO_62 Ability to execute Process order variance calculation based upon target versus actual costs


M

FICO_63 Ability to execute Process order N/A – This requirement is met by M


Business Blue Print



variance calculation program collectively

standard SAP.

FICO_64 Ability to execute Process Order Settlement program individually


M

FICO_65 The ability to settle process orders collectively.

Inefficiencies built into this business process

M

FICO_66 The ability to generate summary balance sheets by company code


M

FICO_67 The ability to generate detail balance sheets by company code


M

FICO_68 Ability to automatically clear GR/IR account(s)


M

FICO_69 Ability to perform balance carry-forward for GL accounts


M

FICO_70 Ability to perform balance carry-fwd for sub-ledger accounts


M

FICO_71 Tree type sub ledger is required. exchange range should be clarify in FBL1N

FICO_72 After completion of technical order, settlement for costing should be clarify


M

FICO_73 In Segmental accounting add another segment as Fertilizers and Trading sales .As this fertilizers is a distant product from chemicals this is to be shone as separate segment and trading sales is a different activity


M

FICO_74 All the depot should be numbered in serial considering the sate as the base. ( Ex. Sirsa and Hissar are in Haryana state but depot numbers are not in serial.


M

FICO_75 For central warehouse in depot a separate storage location is to be given to identify the central stocks and depot stocks separately


M

FICO_76 In Finance module the a separate schedule is to be provided for incentives


M

FICO_77 These incentives should be tracked by individual customers so sub ledger is to be provided for this.


M

FICO_78 The expenses like telephone N/A – This requirement is met by M


Business Blue Print



traveling etc. are to be identify employee wise. District wise, depot wise.

standard SAP

FICO_79 In invoice process the Debit note and credit not to be implemented for the difference of invoice and the purchase order.


M

FICO_80 At the time of entry of GRN the excise is to be calculated based on the vendor invoice price only there should not be any manual change in excise amount other than imports.


M

FICO_81 In the GRN actual fright amount should be entered my modifying the fright field if not the alternative option is to be provide. In invoice process fright modification should not the done because the material value will not update and the valuation of the material will be under valued.


M

FICO_82 The job work material received should not carry any value to the books of accounts


M

FICO_83 The material purchased for the production of non excise materials. The value of the excise value should charged to material value


M

FICO_84 The basic price of billing should not exceed MRP less abatement value. If the price is exceeded than excise amount is to be paid on the difference amount.

M

FICO_85 There should be a working sheet for valuation of maximum retail price. This is used to know the how valuation of MRP is done.

M

FICO_86 Allocation of overheads needed to be clarify.


M

FICO_87 Fright and clearing charges Lading on costing rates


M

FICO_88 we required Vender outstanding report before Invoice booking based on provision figure

FICO_89 Who can we track the price N/A – This requirement is met by M


Business Blue Print



variation account for costing on each material etc?

standard SAP

FICO_90 Parties ledger account and General ledger account must be in tree view

FICO_91 How can we track the stock transfer value for sales tax purpose and who can the depot people can give the form "F" to head office. If not showing value in invoice


M

11. Authorization ConsiderationNeeds to be discussed with BPO’s before finalizing

12. Master Data Consideration

No. Master data Consideration Remark1. Customer Master Reconciliation account is mandatory

Dunning Procedure to be mandatoryTo ensure dunning and recon accounts for all Customers

2. Vendor Master Reconciliation account is mandatory Bank Statement to be mandatory

To ensure monthly statements are generated

3. Fixed Asset Master Capitalization date, depreciation key for Asset to be mandatory

To enable mapping with legacy data

4 General Ledger Accounts

P&L item and balance sheetLine item display

To ensure to mark p&l or B/s items and line item display for all items

5 Cost Centers As per requirement by user/ctm Profit centers to attach each cost center.


Business Blue Print



History of Change

Version Number

Section Reason for Revision

05.02.2010 V 1.0 All Initial Document22.02.2010 V 2.0 All Modified Document


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