SAP Financial Accounting (SAP FI)

The Financial Accounting (SAP FI) module in SAP is designed to capture organizations business transactions in

a manner that will satisfy external reporting requirements. Local legal considerations are pre-delivered with the

system and the ability to manage and report on multiple companies in multiple countries with multiple

currencies is part of standard functionality. Integration with Sales and Distribution, Purchasing and Materials

Management allows for the ability to select any financial transaction and "Drill Down" to the originating

transaction whether it is a purchase Order, Sales Order or material movement.

Financial Accounting includes the following sub-modules:

General Ledger (FI-GL)

Accounts Payable (FI-AP)

Accounts Receivable (FI-AR)

Bank Accounting (FI-BL)

Asset Accounting (FI-AA)

Funds Management (FI-FM)

Travel Management (FI-TV)

Special Purpose Ledger (FI-SL) (I am not sure this is really considered a module anymore)

The flexibility of the Finance modules organizational structure gives the module the ability to handle any

economic situation. Whether a smaller organization with a single legal entity or a large organization with

numerous companies, consolidations and varying legal requirements, the FI module can support and automate

most financial postings and reporting. Below is a listing of the main organizational elements in the Finance

module:

Company Code - Represents a legal reporting entity. There can be numerous company codes within an

organization. Each has its own balanced books and reports itself as a single economic entity.

Credit Control Area - If credit management is being used, this sets the general parameters for how

credit is managed. The credit control area can control credit for a single company code representing a

decentralized credit management approach or multiple company codes representing a more centralized

credit management approach.

Chart of Accounts - The system supports single or multiple charts of accounts providing the ability to

record transactions and report financially in many different regulatory environments. A chart of

accounts can support multiple Company Codes if necessary.

Business process associated with the SAP FI module:

The Finance Module is designed to record financial transactions in a manner consistent with external reporting.

External reporting must be in compliance with a country's accounting principles and is required for public

entities, regulatory agencies and information required by banks and other lenders. The module also handles legal

consolidations, receivables, payables, fixed assets as well as banking functions if required.

This is brief review of the components and processes associated with the SAP FI module.

SAP FI Terminology

Client: In commercial, organizational and technical terms, a self-contained unit in an R/3 System with separate master records and its own set of tables. Company Code: The smallest organizational unit of Financial Accounting for which a complete self-contained set of accounts can be drawn up for purposes of external reporting. Business Area: An organizational unit of financial accounting that represents a separate area of operations or responsibilities within an organization and to which value changes recorded in Financial Accounting can be allocated. Enterprise structure: A portrayal of an enterprise's hierarchy. Logical enterprise structure, including the organizational units required to manage the SAP System such as plant or cost center.

Social enterprise structure, description of the way in which an enterprise is organized, in divisions or user departments. The HR application component portrays the social structure of an enterprise fiscal year variant: A variant defining the relationship between the calendar and fiscal year. The fiscal year variant specifies the number of periods and special periods in a fiscal year and how the SAP System is to determine the assigned posting periods. Fiscal Year: A period of usually 12 months, for which the company produces financial statements and takes inventory. Annual displacement/Year shift: For the individual posting periods various entries may be necessary. For example, in the first six periods the fiscal year and calendar year may coincide, whereas for the remaining periods there may be a displacement of +1. Chart of Accounts: Systematically organized list of all the G/L account master records that are required in a company codes. The COA contains the account number, the account name and control information for G/L account master record. Financial statement version: A hierarchical positioning of G/L accounts. This positioning can be based on specific legal requirements for creating financial statements. It can also be a self-defined order. Account group: An object that attributes that determine the creation of master records. The account group determines: The data that is relevant for the master record A number range from which numbers are selected for the master records. Field status group: Field status groups control the additional account assignments and other fields that can be posted at the line item level for a G/L account. Posting Key: A two-digit numerical key that determines the way line items are posted. This key determines several factors including the: Account type, Type of posting (debit or credit),Layout of entry screens . Open item management: A stipulation that the items in an account must be used to clear other line items in the same account. Items must balance out to zero before they can be cleared. The account balance is therefore always equal to the sum of the open items. Clearing: A procedure by which the open items belonging to one or more accounts are indicated as cleared (paid).

Reconciliation account: A G/L account, to which transactions in the subsidiary ledgers (such as in the customer, vendor or assets areas) are updated automatically. Special G/L indicator: An indicator that identifies a special G/L transaction. Special G/L transactions include down payments and bills of exchange. Special G/L transaction: The special transactions in accounts receivable and accounts payable that are shown separately in the general ledger and sub-ledger. They include:

Bills of exchange

Down payments

Guarantees

House Bank: A business partner that represents a bank through which you can process your own internal transactions. Document type: A key that distinguishes the business transactions to be posted. The document type determines where the document is stored as well as the account types to be posted. Account type: A key that specifies the accounting area to which an account belongs. Examples of account types are:

Asset accounts

Customer accounts

Vendor accounts

G/L accounts

Dunning procedure: A pre-defined procedure specifying how customers or vendors are dunned. For each procedure, the user defines

Number of dunning levels

Dunning frequency

Amount limits

Texts for the dunning notices

Dunning level: A numeral indicating how often an item or an account has been dunned. Dunning key: A tool that identifies items to be dunned separately, such as items you are not sure about or items for which payment information exists. Year-end closing: An annual balance sheet and profit and loss statement, both of which must be created in accordance with the legal requirements of the country in question.

Standard accounting principles require that the following be listed: All assets

All debts, accruals, and deferrals

All revenue and expenses

Month-end closing: The work that is performed at the end of a posting period. Functional area: An organizational unit in Accounting that classifies the expenses of an organization by functions such as:

Administration

Sales and distribution

Marketing

Production

Research and development

Classification takes place to meet the needs of cost-of-sales accounting. Noted item: A special item that does not affect any account balance. When you post a noted item, a document is generated. The item can be displayed using the line item display. Certain noted items are processed by the payment program or dunning program - for example, down payment requests. Accrual and deferral: The assignment of an organization's receipts and expenditure to particular periods, for purposes of calculating the net income for a specific period. A distinction is made between:

Accruals -

An accrual is any expenditure before the closing key date that represents an expense for any period after this date.

Deferral -

Deferred income is any receipts before the closing key date that represent revenue for any period after this date. Statistical posting: The posting of a special G/L transaction where the offsetting entry is made to a specified clearing account automatically (for example, received guarantees of payment). Statistical postings create statistical line items only. Valuation area: An organizational unit in Logistics subdividing an enterprise for the purpose of uniform and complete valuation of material stocks. Chart of depreciation: An object that contains the defined depreciation areas. It also contains the rules for the evaluation of assets that are valid in a specific country or economic area. Each company code is allocated to one chart of depreciation. Several company codes can work with the same chart of

depreciation. The chart of depreciation and the chart of accounts are completely independent of one another. Asset class: The main criterion for classifying fixed assets according to legal and management requirements. For each asset class, control parameters and default values can be defined for depreciation calculation and other master data. Each asset master record must be assigned to one asset class. Special asset classes are, for example:

Assets under construction

Low-value assets

Leased assets

Financial assets

Technical assets

Depreciation area: An area showing the valuation of a fixed asset for a particular purpose (for example, for individual financial statements, balance sheets for tax purposes, or management accounting values). Depreciation key: A key for calculating depreciation amounts. The depreciation key controls the following for each asset and for each depreciation area:

Automatic calculation of planned depreciation

Automatic calculation of interest

Maximum percentages for manual depreciation

The depreciation key is defined by specifying: Calculation methods for ordinary and special depreciation,

for interest and for the cutoff value

Various control parameters

Period control method: A system object that controls what assumptions the system makes when revaluating asset transactions that are posted partway through a period. Using the period control method, for example, you can instruct the system only to start revaluating asset acquisitions in the first full month after their acquisition. The period control method allows different sets of rules for different types of asset transactions, for example, acquisitions and transfers. Depreciation base: The base value for calculating periodic depreciation. The following base values are possible, for example:

Acquisition and production costs

Net book value

Replacement value

SAP FICO: A BRIEF OUTLINE

SAP Financial Accounting (FI) is an important core module where in live-time, the financial processing transactions are all captured to provide the basis via which data is drawn for external reporting. This SAP FI Module is integrated with many parallel modules that enable a company to unify processes that may have needed the utilization of many software packages.

Amongst these CO – Controlling is another major focus for those coming from

the Finance/Accounting/Auditing/Budgeting and Financial Reporting/Analysis

Backgrounds/Professions. SAP FI: There are many sub-modules that streamline and specialize in each aspect of the Financial Accounting Processes: AA – Asset Accounting AP – Accounts Payable AR – Accounts Receivable BL – Bank Accounting FM – Funds Management GL – General Ledger Accounting LC – Legal Consolidations SL – Special Purpose Ledger TM – Travel Management

Out of the above, FI-AR, FI-AP, & FI-AA are the three sub-modules that send

simultaneous postings to FI-GL.

Now, the new SAP GL – integrates many streamlined processes to be unified more closely to further alleviate any duplication of live-time tasks. This New General Ledger Accounting in mySAP ERP has some dynamic advantages in comparison to the classic General Ledger Accounting (as used in SAP R/3 Enterprise Version) – such as the ability to run real-time reconciliation between Management Accounting (CO) and Financial Accounting (FI) – i.e. – there is a real-time integration with Controlling. Previously time-consuming reconciliations are hence now rendered obsolete. The new SAP GL further allows the management of multiple ledgers within the General Ledger Accounting Module itself. This creates the scope for portraying parallel accounting scenarios within the SAP System.

Controlling (CO) is the term by which SAP refers to “Managerial Accounting”. The Organizational Elements in CO are Operating Concern, Controlling Area, and Cost Centers. Hence, the SAP CO Module helps management by providing reports on cost centers, profit centers, contribution margins, profitability, etc. It focuses on internal users, in contrast to FI – which focuses

on data drawn for external reporting. The transactions posted in FI are transferred to CO for cost accounting processing, analytical reporting, and audit-controlling spectrums.

There can be either a one-to-one relationship or there can be one-to-many relationship between Controlling Areas Verses Company Codes. Hence, CO becomes the governing module that oversees the consolidation of costing data whereby management can derive their perspectives for analysis.

The SAP Controlling (CO) Module‟s Components are:

Cost Element Accounting Cost Controlling Cost Center Accounting Internal Orders Activity-Based Costing Product Cost Controlling Profitability Analysis Profit Center Accounting

Some methodologies that are unique in their structural concepts are – for example – CO PA & PCA. PA refers to Profitability Analysis that derives from how profitable your market-segments are on their external sides. EC-PCA refers to Profit Center Accounting that produces the analysis that portrays how your internal „profit centers‟ are functioning in terms of their profitability. To further expand the potential, we also have CO-PC in SAP – which streamlines Product Cost Controlling. CO-PA supports two forms of Profitability Analysis: Costing-based & Account-based. Costing-Based Profitability Analysis groups costs and revenue according to value fields and costing-based evaluation approaches. Both of these may be defined by the client. It provides the client with a complete short-term profitability reporting capability at all times. Account-Based Profitability Analysis is organized in accounts using an account-based valuation process. Its use of cost and revenue elements gives it a distinguishing characteristic. This provides the client with a profitability report that is permanently reconciled with financial accounting. Hence, Profitability Analysis (CO-PA), alongside Profit Center Accounting (EC-PCA), is one of the application components of Profitability Analysis. The SAP Control (CO) Module is integrated with FI, AA, SD, PP, and HR. While FI is the main source for data for CO, the others such as SD, MDD, and PP have many integration points with CO. Revenue postings in FI will result in postings in CO-PA & EC-PCA. The HR Module also generates various types

Of costs to CO. In addition, Planned HR Costs can be passed on to CO as well for CO planning purposes. Above is a brief outline and write-up about the dynamics of SAP FI/CO. It would be well worthwhile for Finance/Accounting Professionals to explore the depths of this innovative software for the enrichment of their career spectrum.

Grouping SAP modules versus grouping SAP processes In the early days SAP functionality was

grouped into modules which could be implemented separately. The most important module was –

and still is – Finance (FI) as you need it to set up a ‘company’ before you can use any functionality

offered by the system. The main objective of the FI module is to allow the company to perform tasks

linked to external financial reporting. When there is a need for internal reporting, then the

Controlling module (CO) needs to be added. In essence FI and CO must be seen as the core of any

SAP system. SAP is an “Enterprise Resource Planning system”, offering the opportunity to integrate

all data collected by all departments by using one single database. This has many benefits as there is

no duplicated data in several independent systems that need attention. Also linking the entire

business into one pool of data trigger synergy. It makes reporting easier and more reliable. Also it

makes it more effective to trace the information, goods and money flows throughout the company.

In addition, you can link your customers and vendors to the system and take advantage of the

efficiency when dealing with external partners. Additional modules were introduced, such as Sales

and Distribution (SD), Materials Management (MM) and Production Planning and Control (PP). Each

module has specific subsets of functionality like sales (SD-SLS), billing (SD-BIL), consumption based

planning (MM-CBP), purchasing (MM-PUR) and inventory management (MM-IM). Throughout the

years it became rare that a company would only purchase individual modules. Therefore SAP

changed its vision to walk away from the modular approach and instead focus on integration. Now

all the modules mentioned earlier are part of the SAP ECC Central Component and offered as one

single product. This also resulted in an integrated approach regarding development of new

functionality. Terms like “Logistics Execution” were introduced which focuses on inbound and

outbound goods flow, directly linked with business processes shared with the traditional SD and MM

modules. Still SAP customers are referring to the traditional modules as it provides a quick and high

level conceptual idea of the skill set required when in need of external consult. But it is important to

understand that in future it will become more difficult to keep this simplified approach towards

labeling the SAP functionality available. Therefore it would make more sense to focus on grouping

processes (such as Order to Cash, Procure to Pay, Register to Report) used within a specific industry

(such as Oil, Retail, Pharmaceutical, Food and Chemical industries). SAP ECC functionality in scope

for No Tie Generation prototype When demonstrating a very basic Supply Chain Management

prototype, the following decisions were made: No forecasting Manufacturing is outsourced Storage

and transportation is outsourced So in terms of the traditional SAP modules, the focus will be on the

integration between the traditional modules SD and MM. Here a list of grouped sets of functionality

that will be part of the basic Supply Chain Management demonstration for the model company

called No Tie Generation: Consumption based planning (MM-CBP) Purchasing (MM-PUR) Inventory

management (MM-IM) Invoice verification (MM-IV) Sales (SD-SLS) Customer billing (SD-BIL) Inbound

and outbound shipments (LE-SHP) Regarding purchasing, both regular purchase orders as

subcontracting purchase orders are taken into account. With regard to the subcontracting, these

purchase order created within the MM module can trigger outbound shipments which are

commonly associated with SD module related transactions. This is a perfect example why ‘Logistics

Execution’ cannot be solely associated to either SD or MM. Also it is inevitable that there is

integration with FI, but that is kept to a bare minimum to allow financial postings triggered by goods

movements, customer payments and vendor payments. - See more at:

http://sandboxtycoon.com/build-prototype-2/#sthash.SDHuPcX2.dpuf

What is SAP General Ledger?

This article gives the complete configuration required to create SAP GL-account in SAP-FI, Right from the definition of Company to creation of GL-account in the company code and chart of accounts with screen shots and explanation of the entire process to make the Reader have a clear understanding of the configuration. The process of creating an Enterprise structure begins with the definition of Company. The various organizational units in a business are defined individually and they are assigned to each other in a hierarchical way which forms the whole Enterprise Structure in an ERP system.

A Company: It is said to be an organization or a corporate group which has one or many Company code under it. The screen shots below will give the detailed step to define Company in SAP system. Most of the configuration relating to SAP is done in SPRO (SAP Project Reference Object); follow the navigation shown in the picture to Define Company in SAP, The definition of the company is shown above; The Company is represented using a Four Digit numerical character (it can also be alphanumerical) 4623 with the name Lokesh Group of Industries.

Company Code: It is said to be the representation of an independent balancing or legal accounting entity within the Corporate Group which can create its own financial statements; there can be „n‟ number of company code within a corporate group. Choose Second option to create New Company Code and First option to Copy and create new company with all the data from an existing Company Code.

Creation of Company Code 1000: Company Code 1000 is created.

Creation of Company Code 2000: Once the Creation of Company code is done they are to be assigned to the Company in SAP to achieve the Enterprise Structure.

Company 4623- Ketan Group of Industries

Company Code 1000- Ketan Iron & Steel Company Code 2000- Ketan Paper Mills

SAP General Ledger

Assign Company Code to Company:

The Screen shot explains the assignment of the CC 1000 & 2000 to Company 4623. Thus a basic Organizational Structure is achieved in the Enterprise structure. Now the Financial accounting Global setting is explained below with configuration steps and screen shots. Financial accounting Global Settings: The Variant Principle: The Variant Principle is a Three Step Method used in the SAP system to assign particular properties to one or more objects, the steps are;1. Define The Variant.2. Determine Values For The Variant.3. Assign The Variant To The Object.

Company Code: SAP FICO Company Code

The first step of SAP FI configuration is to Create Company Code. It is a unique four alphanumeric characters that represents an independent and legal accounting entity. It‟s the smallest and minimum necessary organizational structure in SAP that required by law to provide a set of financial reports (such as Balance Sheet and Profit/Loss Statements). In the real world, it can be a company of a corporate group and in an SAP client; It can be more than one. The general ledger is kept at company code level. For consolidation process in SAP EC module, a company code must be assigned to a company. A company can comprise one or more company codes. With SAP FI module, we can generate the financial reports of a company code. A company code‟s financial reports are used for external purpose, such as for external auditors, shareholders/stock exchange commission, tax office, etc.

SAP FICO Company Code

It is one of the two main organizational units of SAP FI module. The other one is Business Area. Business areas are used for internal purpose, such as for company‟s management. Business areas represent separate areas of operation within one or some companies. With business areas, for example, SAP can generate financial reports of a specific regional area of a company. Let‟s say Coca Cola Company has one company code in USA (and several others in the whole world). With company code, SAP can only generate one set of financial reports for USA office. But, with business areas (depends on how it configured), SAP can generate sets of financial reports per state in the USA. By doing so, the management can analyze the performance of each branch in each state better. It gives more useful information that can be used in decision making process. The use of Business Areas is optional in SAP FI module. All SAP transactions that have impact to the financial reports from all SAP modules (such as FI, MM, HR, etc) will generate accounting journals in company code‟s general ledger. The transaction can determine the company code involved either from the user input for the company code (such as in FI module) or from other organizational unit that related to the company code (such as in MM module, company code can be determined from the plant that input by user). In MM module (Logistics), each plant must be assigned to a CC. It can have several plants. A plant can also be assigned to a business area; a business area can be assigned to several plants. Material valuation can be set at company code level or plant level.

Copy Company Code

We create company code from the following menu path of “SPRO” t-code: Enterprise Structure – Definition – Financial Accounting – Edit, Copy, Delete, Check Company Code. There are two options: § Copy from other company code (or from SAP standard company code) § Create from the scratch SAP recommends that we copy a CC from an existing CC. The advantage is SAP will also copy the existing company code-specific parameters. Then we can change certain data in the relevant application if necessary. This is much less time-consuming than creating a new company code. But if we create company code from the scratch then we have to define other parameters need in other relevant configuration process manually.

3 Concepts for SAP Beginners

Starting your SAP career is an exciting time, but it can also be very overwhelming. Like any technology or new

career, there is a steep learning curve that can feel insurmountable. The goal of this blog is to concisely give you

three major concepts to focus on when starting your career.

As a SAP beginner, you need a basic understanding of business processes, SAP acronyms and project concepts.

I first learned about SAP and ERP’s (Enterprise Resource Planning systems) while in school at Grand Valley

State University. The SAP Alliance business program included a mandatory ERP course. Before fumbling

through SAP transactions, we were given a framework of common business processes. For example, to

understand how to process an invoice, you must first understand the purpose of invoices and where this step fits

in the overall order to cash process. We also needed some key SAP and project terms to get a foundational

understanding of what’s involved in a SAP project and the key components of the system.

1. Business Processes: If you have little or no exposure to a functional area, you first want to start with

understanding the business processes that flow through SAP. Also keep in mind that most processes are cross-

functional and go end-to-end, meaning they pass through many departments in an organization. Even if you are

in a technical role, you need a general understanding of what business drivers are behind your role. Michael

Management courses provide a functional understanding as you learn about SAP. You may also find it valuable

to invest in business/or SAP textbooks specific to your functional area. As you dive in to SAP, remember to

always focus on how technology drives the business. Focusing on streamlining business processes can avoid

creating unnecessarily complex technical design and avoid creating waste in the system.

2. SAP Acronyms: Secondly, understanding SAP acronyms and how you fit in the overall SAP project is

important in quickly providing value. As a beginner, you’re probably finding the world of SAP to be filled with

intimidating acronyms. Before you get too overwhelmed, realize that there is probably only a subset of

acronyms and terms that will actually be relevant to your role in SAP. As you meet people in your project or

organization, you can start to build a mental list of which areas you will integrate with and hone in on those

terms and acronyms.

To start, I recommend you check out Michael Management’s course SAP100 Essential SAP Skills. It’s the

perfect course to feel comfortable with basic SAP concepts and terms. I’ve also found many websites that

feature a list of SAP acronyms that you can use as reference. This wiki on SAP’s community network may be

helpful: http://wiki.sdn.sap.com/wiki/display/HOME/SAP+Acronyms. Finally, I recommend following SAP

news to learn more about the SAP terms you hear. SAP’s community network is an active community of SAP

customers and partners and its one of the best resources to learn about functional modules, SAP trends, and

news. Keep in mind that it takes experience and your own research to feel comfortable with SAP acronyms.

Here are some common acronyms that every beginner will hear:

Functional & Technical Modules: FI (Finance), CO (Controlling), SD (Sales & Distribution),

MM (Materials Management), HR (Human Resources), BI (Business Intelligence), BW (Business

Warehousing), PM (Plant Maintenance), QM (Quality Management), LE (Logistics Execution),

FSCM (Financial Supply Chain Management), PP (Production Planning), CRM (Customer

Relationship Management), SEC (Security), Basis (Business Application Software Integration

System)

SAP Technical Acronyms: ABAP (Advances Business Application Programming), ALE

(Application Link Enabling), ALV (SAP List Viewer), BAPI (Business Application

Programming Interface), BEx (Business Explorer), BAdI (Business Add In), CATT (Computer

Aided Test Tool), GUI (Graphical User Interface), HTML (Hyper Text Markup Language), IMG

(Implementation Guide), EDI (Electronic Data Interchange) LSMW (Legacy System Migration

Workbench), OLE (Object Linking and Embedding), OSS (Online Support System), R/3 (Real

Time 3 Tier), RFC (Remote Function Call), SOLMAN (Solution Manager), WD (Web Dynpro),

SPRO (SAP Project Reference Object)

3. SAP Project Concepts: Finally, every beginner should understand basic SAP project concepts like the

phases and roles people involved in a SAP implementation.

Let’s begin with SAP deployment phases. ASAP, Accelerated SAP, is the standard implementation approach

that is used on every SAP implementation. The approach consists of 5 phases: Project Prep, Business Blueprint,

Realization, Final Prep, and Go Live & Support. Each phase includes important milestones that allow the project

to continue to the next phase. A successful project has clear ‘exit’ and ‘entrance’ criteria that must be fulfilled

for the project to move to the next phase. These criteria are reviewed by project management and key

stakeholders to assess the projects performance.

In the project preparation phase, project goals, scope and timeline are defined by project stakeholders and

project management. In the blueprint phase, current business processes are documented and then redesigned to

fit in SAP. Any requirement or process that does not fit using standard SAP functionality is documented as

‘gap’. This is a key part of the blueprint phase called ‘Fit/Gap Analysis’. In the realization phase, all

requirements are configured in the system and the system is testing using integrated scenarios. Integration

testing is cross-functional testing used to identify ‘defects’ or issues in the system that need to be resolved. In

final preparation, testing is completed, training is delivered, and cutover steps are performed. Cutover involves

all the steps necessary to go from the old, legacy system to SAP. Finally, Go Live and support occurs when

users begin to perform their job in SAP and the project team monitors and supports users.

If you are fortunate enough to join a project in the beginning phases, you may have a better understanding of

how a project moves from project preparation, to blueprint, to realization, to final preparation, and in to go live

and support. Realistically, most resources are brought in to a project as things ramp up in the blueprint and

realization phases.

Next, it’s key to understand who is involved in a SAP implementation to understand where you fit in. At the top

level, you have corporate executives that are deemed project stakeholders. It is their job to oversee the project

from a high level and ensure it fulfills the defined goals and objectives. Below stakeholders is the project

management which is more hands on in overseeing the project and closely monitors each functional and

technical area of the project. Project management helps mitigate risks and issues, delivers project messaging,

and keeps the project within the timeline and budget. Heading up each functional and technical team is a team

lead. Team leads oversee team members and communicate status, risks, and issues to project management.

Functional team members configure the system to meet business requirements and write functional

specifications for customized needs. Technical team members work in a variety of roles: security, ABAP

development, data conversion, Basis, etc.

By focusing in on these 3 concepts, I hope you can quickly come up on the SAP learning curve and provide

value on your project.

Preparing for Your First SAP Interview

Preparing for your first SAP interview can be stressful with few online resources that provide SAP relevant

advice. I was unprepared for my first SAP interview because I wasn’t sure what to expect in the way of SAP

questions. Looking back now, I’d like to think I know a thing or two about interviews. My last interview was

less than six months ago for my current position as a SAP Consultant with Deloitte, the world’s largest

professional services firm. I’ve previously interviewed with a number of companies throughout the past few

years for full-time positions, internships, and I led and participated in mock interviews. I would actually enjoy a

position as a career mentor or counselor. Editing resumes, prepping for interviews, and choosing classes is

exciting to me while overwhelming to others.

If you want my secret to a successful interview, it’s this: play a game with the interviewers. Sounds tough right?

First you enter the interview nervous, sweaty, overwhelmed with memorizing facts about the company, and now

you can’t just simply answer the questions? The most valuable advice I’ve been given about interviewing is

make the interviewers want you. I think most people view interviews as a question and answer session where the

interviewee has little control. Instead, think of it as a time to highlight your achievements and skills while

making them relevant to the position. This mindset will change your approach from responding to questions to

taking control of what the interviewers learn about you.

Here are a few more things to keep in mind:

Enter the room with confidence. Have confidence in your experience, appearance, and ability to make

conversation. Gain confidence by reviewing the company’s financial statements and website. Use keywords

from the job description in your interview to demonstrate you have the skills they’re looking for. Ask insightful

questions about the past, present, or future of the company to show you’re interested. Shake hands firmly with

all interviewers, state your name and ask for their name. Notice I say interviewers; you will likely be

interviewed by several SAP managers and a Human Resources employee.

Sell your education. Interviewers in the Midwest are well aware of the value of Grand Valley’s Management

Information Systems program. However, when I interviewed for my current position in San Diego, I had to give

context to the program at Grand Valley to have that same impact. I started by mentioning that GVSU is a SAP

Alliance University, which means I had hands-on SAP experience. Share the value of your relevant courses and

how you excelled in a particular project or assignment. Make your degree more than a line on your resume.

Remember to set yourself apart from other graduates from your school.

Tackle SAP interview questions. Be prepared to discuss your previous project experience in coursework or

internships in detail. I have never been asked technical SAP questions about a specific module like you hear

about engineering interviews. Interviewers are trying to weed out the interviewees that have real SAP

experience and those that talk up their skills. The trick here is to prove that you know what you’re talking about.

Be honest about your SAP experience! Here are a few SAP questions I’ve been asked:

What SAP modules do you have experience in? – Mention the modules you’ve used in projects and those that

you interface with. Be honest about your level of experience with each module. Give examples of tasks you’ve

completed in these modules. For example: I am experienced in FICO. In my previous role, I executed product

costing, created cost centers and cost elements, etc.

What modules would you like to learn more about? – This is a great opportunity to express what you hope to

learn in this position. Answer the question as if you were in the role you’re interviewing for. In my previous role

I had the opportunity to interface with the production planning and plant maintenance teams. I would enjoy

learning more about these modules to increase my breadth of SAP knowledge.

What methodologies have you used? – If you’ve used the ASAP or another methodology describe how this

project used and benefited from the method.

What has been the biggest headache for you in your previous deployments? – This is an easy opportunity to lose

it so be careful that you don’t bad mouth specific people or teams. This is how I have answered that question:

My biggest headache has been data because the amount of work involved in extracting, loading, and

transforming data can be easily underestimated. In answering that way I’m not bad mouthing previous

coworkers and I acknowledge that I understand the impact of data in projects. That’s an easy way to show what

you’ve learned from your experience.

Demonstrate your experience. In addition to SAP specific questions, be prepared to answer questions that aim

to understand your behaviors. The best way to answer behavioral interview questions is the STAR technique:

Situation or Task, Action, and Response. Start by describing a situation or task that relates to the question. Then

briefly describe the action you took to resolve or succeed in the situation. Conclude with the result. Look over

your resume and reflect on your coursework to think of several examples you can pull from in an interview.

You don’t want to stare dumfounded at the interviewers because you can’t think of a good example on the spot.

For example: Tell me about a time that you overcame conflict in a group setting. ‘In a course last semester, my

team members decided that it would be easier to plagiarize our 15 page final paper than write an original

(SITUATION/TASK). I thought about why my team had given up on even attempting the assignment and

decided I could alleviate some of the stress by suggesting we break apart the work (ACTION). The team worked

well once the paper was broken apart, and it came together cohesively. Our professor nominated our paper to be

published in a management journal but the class voted for another group to have that honor (RESULT).’ I like

this example because the word ‘plagiarize’ has some shock value! This is actually a true story.

Avoid talking numbers. Don’t mention anything about how/when/what amount/on what terms you will be

compensated. If the interviewer asks how much you currently make or what you expect to make, politely state

that you are sure you can come to an agreement on salary when you discuss an offer. If the interviewers are not

HR people, they likely won’t mention salary. Recruiters can be sneaky and aggressive in order to get you to say

your current salary. Remember once the number is on the table, they might try to low ball you or dismiss you as

a possible candidate if you make more than what they’re prepared to pay.

End on a strong note. Thank the interviewer for their time and ask for the next steps in the process. Will there

be another set of interviews? When should you expect to hear from them? If the interviewer asks if you have

any questions, ask at least one to show you are very interested in the position. Once you leave, write down the

questions you were asked and reflect on your answers. Save this list to prepare for future interviews!

Best of luck to you in your first (or second, or third) SAP interview! Please share your advice and experience

with readers!

New General Ledger Configuration

New General Ledger (Multiple Ledgers): This is the Concept given in ECC6.0 by SAP.

For Indian Companies Financial Year is April to March. If an Indian Company is registered

in US Stock Exchange, it has to Submit Reports to Stock Exchange according to the Financial

Year there in US (i.e., Jan to Dec). If The Same Company had its Group Head Quarters in

UK, it has to Submit Reports according to the Financial Year there (i.e., July to June). So For

One Company we are Creating Reports according to the Financial Year. In India Period of

April is 01 but in US it is ’04′ and in UK it “10″. So When we are posting a Transaction in

the Period “04″ for the Fiscal Year Variant V3 ( which is for India), it has to update the

Posting Period ’01′ for the Fiscal Year Variant K4 (for US) and Posting Period ’10′ for the PP

Variant V6(for UK).

Here we have the Concept of Leading Ledger and Non Leading Ledgers.

Example:

Company Location Financial Year FY Variant Ledger Group

In India 1st April to31st March V3 OL Leading Ledger

In US 1St Jan to 31st Dec K4 J1 Non Leading Led

IN UK 1st July to 30th June V6 J2 Non Leading Led

When we create Ledger J1, Automatically Ledger Group J1 will be created and J1 ledger will

be assigned. At the Time of Posting, if we do not give any Ledger Group it will updates all

the Ledgers.

For Example, Gain on FC Revaluation in India and US it will be transferred to P& L A/c as

Other Income. But in UK it will Add to the Fixed Assets and calculate Depreciation over the

Life of Asset.

We create a New Ledger Group J3 and assign Ledgers 0L and J1. At the Time of Posting

When we give Ledger Group J3, and Post, it updates Ledgers 0L and J1. In Ledger Group

One Ledger will be Representative Ledger and others will be Non Representative Ledgers.

We have to open the Periods in which Posting is done in Representative Ledgers. Even

though the Periods for Non Representative Ledgers is not open, it will update the records.

When the Ledger Group is consisting of Ledgers 0L a J1 always 0L will be the Leading

Ledger or Representative Ledger When we Post a Document, System will generate

Documents in non leading ledgers. In Live Environment, for all document types we will give

only One Number Range for No range interval to post in Non Leading Ledgers.

Customization:

Step 1: Define Ledgers for GL Account:

SPRO⇒ Financial Accounting (New)⇒ Financial Accounting Global Settings(New)⇒

Ledgers⇒ Ledger⇒ Define Ledgers for GL A/c

Select New Entries Button

Ledger Description

J1 (Text Field) Non Leading Ledger 1 for 3300

Totals Table: FAGLFLEXT

Ledger Description

J2 (Text Field) Non Leading Ledger 2 for 3300

Totals Table: FAGLFLEXT

→SAVE →ENTER to SAVE in your Request

Ignore the Warning Message →ENTER Once Again

Ignore the Warning Message →ENTER

Step 2.Define and Activate Non Leading Ledgers:

Same Path ( Next Level to the Old Path)

Ledger : J1 →ENTER

select New Entries Button

Comp. Fiscal Yr PPV

Code Variant

3300 K4 3300 → SAVE

→ ENTER to SAVE in your Request

Select Back Arrow Button

Ledger : J2 →ENTER

select New Entries Button

Comp. Fiscal Yr PPV

Code Variant

3300 V6 3300 →SAVE

→ENTER to SAVE in your Request

Step 3. Define Ledger Groups: Same Path ( Next Level to Last path)

Select New Entries Button

Ledger Group: J3

Description: Ledger Group for 3300 →SAVE

→ENTER to SAVE in your Request

Select Ledger Group J3

Double Click on Ledger Assignment Folder

Select New Entries Button

Ledger : 0L

Select Representative Ledger Check Box

Ledger: J1

De-select Representative Ledger Check Box →SAVE

Step 4. Define Document Types for Entry View in a Ledger:

SPRO ⇒ Financial Accounting( New)⇒ Financial Accounting Global Settings (New)⇒

Document ⇒ Document Types ⇒ Define Doc. Types for Entry View in a Ledger

Ledger: J1

→ENTER

Select New Entries Button

Type No. Range Type No. Range Type No. Range

SA 61 ER 61 RE 61

AA 61 WA 61 RV 61

KR 61 WE 61 WL 61

→SAVE

→ENTER to SAVE in your Request

Select Back Arrow

Ledger: J2

→ENTER

Select New Entries Button

Type No. Range Type No. Range Type No. Range

SA 62 ER 62 RE 62

AA 62 WA 62 RV 62

KR 62 WE 62 WL 62

→SAVE

→ENTER to SAVE in your Request

IN Live Environment we have to Give Number Range for all 51 Document Types

Select Back Arrow

Step 5. Define Document Types for General Ledger Group:

Ledger: J1

→ENTER

Select New Entries Button

Type No. Range Type No. Range Type No. Range

SA 63 ER 63 RE 63

AA 63 WA 63 RV 63

KR 63 WE 63 WL 63

→SAVE

→ENTER to SAVE in your Request

Ledger: J2

→ENTER

Select New Entries Button

Type No. Range Type No. Range Type No. Range

SA 64 ER 64 RE 64

AA 64 WA 64 RV 64

KR 64 WE 64 WL 64

→SAVE

→ENTER to SAVE in your Request

Step 6. Define Document No Ranges for Entry Group:

Upto Document Path is same ⇒Document No. Ranges ⇒Documents in Entry View

⇒Define Doc. No Ranges for Entry View

Company Code: 3300

Select Change Intervals Button

Select Interval Button

No. Range: 61

Year : 2013

From. No 800001

To No 900000 →ENTER

Select Interval Button

No. Range: 62

Year : 2013

From. No 900001

To No 1000000 →ENTER & SAVE

Ignore Warning Message →ENTER

Step 7. Define Document Number Ranges for General Ledger View:

Upto Document Path is same ⇒ Document Number Range ⇒ Doc. In General Ledger

View ⇒ Define Document Number Ranges for General Ledger View

Comp. Code: 3300

Select Change Interval Button

No. Range Year From.No To No

63 2013 1 100000 →ENTER

Select Interval Button

64 2013 100001 200000 →ENTER&

SAVE

Ignore Warning Message and Press Enter

As the Company is in India, it has Currency of Indian Rupee. As it is listed in US Stock

Exchange, Transactions has to pass to that Ledger in USD. For UK, system should Pass

Entries in GBP. So We need to Maintain Group Currency in SAP when we are using New GL

Accounts.

Step 8. How to Maintain Group Currency GBP:

Path: Tools⇒ Administration ⇒ Administration ⇒ Client Administration ⇒ Client

Maintenance (Sec4)

Select Client: 800

Select Details Button

Menu⇒ Table View⇒ Display/Change

Standard Currency: Change to GBP →SAVE

Step 9. How to Maintain Hard Currency USD per Country India:

SPRO⇒ SAP Net weaver⇒ General Settings⇒ Set Countries⇒ Define Countries in my

SAP Systems

Select Position Button

Country: IN (India) →ENTER

Select IN Select Details Button

Language: EN Hard Currency: USD →SAVE

→ENTER to save in your Request.

Step 10. Define Currencies for Leading Ledger:

SPRO⇒ Financial Accounting(New) ⇒ Financial Accounting Global Settings(New)⇒

Ledger⇒ Define Currencies of Leading Ledger

Select Company Code: 3300

Select Copy As Button Change Company Code to: 3300

Select Save or Ctrl + S →ENTER to save in your Request.

Step 11. Define and Activate Non Leading Ledgers: Same Path

Ledger : J1 →ENTER

For Currency 2{C2}: 40(Select for USD) →SAVE

→ENTER to save in your Request.

Select Back Arrow

Ledger : J2 →ENTER

For Currency 2{C2}: 30(Select for GBP) →SAVE

→ENTER to save in your Request.

Financial Accounting Global Settings in

SAP FICO

⇒Define Fiscal Year ⇒Define Posting Periods

⇒Define Field Status Variant

⇒Define Tolerance group for Users

⇒Define Document Types and Assign Number ranges

⇒Define Posting Keys

⇒Assigning all above to Company Code

⇒Define Fiscal Year

A period of usually 12 months, for which the company produces financial statements and

takes inventory.

A fiscal year need not correspond to the calendar year. Under certain circumstances, fiscal

years containing fewer than 12 months are also permitted (short fiscal year).

Definition: The fiscal year variant is used to define the fiscal year.

You can define the following using a fiscal year variant:

o How many posting periods are in a fiscal year

o How many special periods you require

o How the system determines the posting periods when posting.

In the definition, you allocate your posting periods to the calendar year.

Allocation control requires the same number of posting periods in the company code and

in the assigned controlling area.

This means that the number of posting periods in the fiscal year variants must be the

same in the company code and in the controlling area. The period limits for the two fiscal

year variants must also coincide.

You must define which fiscal year variant is to be used for each company code. To do

this, you must define the appropriate fiscal year variant (to contain no more than 16

periods).

Fiscal Year Fiscal Year – Year Independent

Fiscal Year – Year Dependent

Normal and Special Periods Normal Periods 1 to 12

Special Periods 13 to 16

Open/Close Posting Periods

Define Fiscal Year Variant Menu Path: IMG – Financial Accounting – Financial Accounting Global Settings – Fiscal

year – Fiscal year Variant

T Code : OB29

Steps: Click ‘New Entries’

1. Select ‘V3’

2. Click ‘Copy as’

3. Change ‘V3’ as ‘SV’

4. SAVE the settings

5. Click ‘Copy all’

6. Press ‘Enter’

7. SAVE

Assign Company Code to Fiscal Year Variant Menu Path: IMG – Financial Accounting – Financial Accounting Global Settings – Fiscal

year – Assign Company Code to Fiscal year Variant

T Code : OB37

Steps:

1. Click ‘Position’

2. Enter Co. Code

3. Enter FYV

4. SAVE the settings

⇒Define Posting Periods

A period within a fiscal year for which transaction figures are updated.

Every transaction that is posted is assigned to a particular posting period. The transaction

figures are then updated for this period.

Definition: This describes the specifications for a posting period (for example, beginning and end).

Each company code refers to exactly one variant. Therefore, as many company codes as you

require can use the same variant.

Define Variant for Open Posting Period Menu Path: IMG – Financial Accounting – Financial Accounting Global Settings –

Documents – Posting Period – Define Variant for Open Posting Period

T Code : OBBO

Steps: Click ‘New Entries’

1. Enter 4 digit code

2. Enter Variant Name

3. SAVE the settings

Open and close Posting Periods Menu Path: IMG – Financial Accounting – Financial Accounting Global Settings –

Documents – Posting Period – Open and close Posting Periods

T Code : OB52

Steps: Click ‘New Entries’

1. Enter 4 digit variant

2. Enter ‘+’

3. Enter starting Period

4. Enter Year

5. Enter Ending period

6. Enter year

7. Enter First Spl Period

8. Enter Year

9. Enter End Spl Period

10.Enter Year

11.SAVE the settings

Assign Company Code to Posting Period Variant Menu Path: IMG – Financial Accounting – Financial Accounting Global Settings –

Documents – Posting Period – Assign Company Code to Posting period Variant

T Code : OBBP

Steps: 1. Click ‘Position’

2. Enter Co. Code

2. Enter Variant Code

3. SAVE the settings

⇒Define Field Status Variant

Definition: A field status variant groups together several field status groups. You assign a field status

variant to each company code.

The field status group specifies which fields are ready for input, which fields must be filled or

which fields are suppressed when entering documents. This specification is known as the

field status.

Define Field status Variant Menu Path: IMG – Financial Accounting – Financial Accounting Global Settings –

Documents – Line Items –Controls – Maintain field status Variant

T Code : OBC4

Steps: Click ‘New Entries’

1. Select ‘0001’

2. Click ‘Copy as’

3. Change ‘0001’ as ‘SIVA’

4. SAVE the settings

5. Click ‘Copy all’

6. Press ‘Enter’

7. SAVE

Assign Company Code to Field Status Variant Menu Path: IMG – Financial Accounting – Financial Accounting Global Settings –

Documents – Line Items – Controls – Assign Company Code to Field Status Variant

T Code : OBC5

Steps: 1. Click ‘Position’

2. Enter Co. Code

2. Enter Variant Code

3. SAVE the settings

⇒Define Tolerance group for Users

An accepted deviation from specified values. With reference to the key, tolerances for the

entry of documents and the granting of cash discounts can be determined for all employees

of the group for payment settlement.

Define Tolerance Group for Users Menu Path: IMG – Financial Accounting – Financial Accounting Global Settings –

Documents – Line Items – Controls – Define Tolerance group for Users

T Code : OBA4

Steps: Click ‘New Entries’

1. Enter Co. Code

2. Enter Currency ‘INR’

3. Enter Max Amount

4. Enter Amount

5. Enter Percentage

6. Enter Amount

7. Enter Percentage

8. SAVE

⇒Define Document Types

The document type classifies accounting documents. It is noted in the document header.

Attributes that control the entry of the document or which are themselves stored in the

document are stipulated for each document type. In particular, the number range assigned to

the relevant documents is determined on the basis of the document type.

Define Document Types Menu Path: IMG – Financial Accounting – Financial Accounting Global Settings –

Documents – Document Header – Define Document Types

T Code : OBA7

Steps: Click ‘New Entries’

1. Enter Doc Type

2. Define No. range

3. Define Rev Doc type

4. Define A/c type

5. Select Control fields

6. Select req fields

7. SAVE the settings

⇒Define Assign Number ranges

Number which identifies the number range for the number assignment.

The process by which numbers are allocated to business objects.

There are two types of number assignment:

o Internal number assignment occurs automatically in the R/3

System.

o External number assignment is performed either by the user or an

external system.

Define Number Ranges for Document Types Menu Path: IMG – Financial Accounting – Financial Accounting Global Settings –

Documents – Document Header – Define Document Types

T Code :OBA7

Steps: 1. Double click ‘Doc Type’

2. Click ‘No. range info’

3. Enter Co. code

4. Click ‘Change Interval’

5. Click ‘Insert Interval’

6. Enter Sl No.

7. Enter Year

8. Enter From No.

9. Enter To No.

10. SAVE the settings

⇒Define Posting Keys

Definition: The posting key describes the type of transaction which is entered in a line item.

For every posting key, you specify properties which control the entry of the line item or are

noted in the line item itself.

The most important properties which are derived from the posting key are:

o The account type

o The allocation to the debits or credits side

o The possible or necessary specifications which are to be entered in the line item.

Account Type

key that specifies the accounting area to which an account belongs.

Examples of account types are:

o Asset accounts

o Customer accounts

o Vendor accounts

o G/L accounts

The account type is required in addition to the account number to identify an account,

because the same account number can be used for each account type.

Posting Keys and Account Types

Define Posting Keys Menu Path: IMG – Financial Accounting – Financial Accounting Global Settings –

Documents – Line Items – Controls – Define Posting Keys

T Code : OB41

Steps: 1. Click ‘Create’

2. Enter Posting Key

3. Define Key Name

4. Define Debit/Credit

5. Define A/c type

6. SAVE the settings

Why and When to use Business Area

Can any body tell me why we want to use business area and where it is going to be used,

as I know it helps in consolidation and still more?

CG.Gopinath

Business Areas in SAP are used to differentiate transactions originating from different

points/lines/locations in business. Let me give some examples to elucidiate:-

A company (say, ABC) is a huge company and has a variety of businesses under it. Let us say

that it typically operates in 3 different domains like machinery manufacturing, trading and

assembling of machine parts.

There are 2 options here now -

1. Either create different company codes for the 3 business operations (which would be the

easiest and require no creativity)

or

2.) Create each of these business lines into business areas (the better option).

The advantages of using the second option is:

1. You can use these business areas if other company codes require the same areas

2. The configuration is simpler as in case of company code, you would require to go through

the entire configuration of creating Chart of Accounts, Fiscal Year variants, posting periods

variants and so on. In the business area option, you just need to attach it to the company code

and the rest of the details in Business area is attached by default from the company code you

are using it in.

3. Using the options in controlling (EC-PCA, Enterprise Controlling, Profit Centre

Accounting), you can even draw up Balance Sheets and PL statements for your business

areas and hence this is used for management accounting in some companies (like HP, Dell,

etc) when it wants to know the operating profits for different business areas/lines.

The above was an example when the company wanted to separate entries according to the

lines it operates in... the other case could be when it wants to find out profitability during its

operations in cities and differentiates these cities into Business

Areas...

Business Areas are not much relevant in FI but are much more relevant in CO.

Hope this clears.

Jacob Joseph

You have given a very good example for Business Area. I have questions.

If I want the B/s and P&L Account for Business Area wise, I can take it. But, How

about those transactions which are not assigned any business area during the document

entry.

Kotni

Let me first be sure of what you are asking. Is it:

1) You want the B/S and P/L statements of transactions carried out in areas other than the

business areas defined by you? or

2) You only want to view the transactions that were not carried out in any business area?

Whatever were your doubts, let me clarify.

If your doubt was the first one, then, in that case, the financial statements will not be

available. There are reasons for the same. All transactions in FI pass through G/L accounts.

The data in FI is then passed to CO through primary cost elements.

According to the settings that you have configured for your controlling area and operating

concern, the costs are distributed to the various cost centers (Cost Center Accounting & CO-

PA). The costs are then apportioned to the various cost centers (which may or may not be a

part of your business areas or may be independent cost centers). Now, with this data,

financial statements of the business area are drawn up. For transactions not part of business

area, they are transferred to independent cost centers (e.g. like Head Office Salaries, HR, etc)

and hence, cannot be drawn up as a financial statement but just as line item displays in your

reconciliation ledger (if you have activated it in the CO-OM-CEL {Cost Element

Accounting})

[The answer to your second doubt, I hope].

Financial statements of Business areas are unbalanced because not always does the debit and

credit entries of a transaction lie in the same business area/cost center; but for cost accounting

purposes, they are reasonably sufficient.

I hope this clears.

Jacob Joseph

Thank you for the reply. I understand I need to give more clearly about my doubt.

I want to configure FI and other modules and there is no CO or operating concern. But

I want Balance sheet and Profit and Loss Account for each of the business area.

As you aware, the business area can be defined above or below company code level.

Is it possible to get what I want.

Kotni Ravi Kumar

In order to generate BS and P&L at business area level you should carry out the following:

1. You should have activated " Enable BA balance sheet" under enter global parametets in

FA global settings.

2. You should do configuration under the transaction code "OBXM"

3. You also have run the transaction codes f.50 for P&L and 5.d& 5.e for Balance sheet

readjustment.

System automatically posts the taxes and reconciliation accounts of NIL BA transactions to

BA and tally the trial balance of all B. areas

Yerra Rao

Your explanations were excellent and precise, but I have a quick question why would

one use business area against a profit center as business area data is never precise and

getting a balance sheet report via business area is not recommended. Profit center

would be better just a doubt please clarify

Sabarinathan Swaminathan

Why would I use business area against a profit center?" is a very pertinent one and

conceptually necessary. Let me explain to you what a profit center exactly means, both in

SAP terminology and in management accounting.

In management accounting, a profit center is an area or department from where the

management wants to find out the return on investment or ROI, as the accountants know it.

The concept in SAP is similar as it is used by management to find out the ROI. On the other

hand, business areas are just segregation of business transaction origins. So, a certain

business area can have more than one profit center within it. Both have their unique uses and

both have their unique features.

Using the above understanding, you can easily work out where you would use business

centers and where you would use profit centers.

Hope this clears,

Jacob Joseph

Thanks for the explanation its good thanks

Sabarinathan Swaminathan

Creating and Maintain SAP Business Area

You can set up several business areas for each client so that the system can assign the

postings made in all company codes defined in this client.

To ensure consistency in document entry, you should give business areas the same name in

all company codes.

Goto transaction SM30 and specify the view V_TGSB

To maintain to business area click the Maintain button.

SAP CO

Controlling provides we 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. We can determine variances by comparing actual data with plan

data. These variance calculations enable we to control business flows. Income statements such as, contribution margin accounting, are used to

control the cost efficiency of individual areas of an organization, as well as

the entire organization.

Integration

Controlling (CO) and Financial Accounting (FI) are independent

components in the SAP system. The data flow between the two components

takes place on a regular basis.

Therefore, all data relevant to cost flows automatically to Controlling from

Financial Accounting. At the same time, the system assigns the costs and

revenues to different CO account assignment objects, such as cost centers,

business processes, projects or orders. The relevant accounts in Financial

Accounting are managed in Controlling as cost elements or revenue

elements. This enables us to compare and reconcile the values from

Controlling and Financial Accounting.

Features

Cost Element Accounting (CO-OM-CEL)

Cost and Revenue Element Accounting provides us with an overview of the

costs and revenues that occur in an organization. Most of the values are

moved automatically from Financial Accounting to Controlling. Cost and

Revenue Element Accounting only calculates costs which either do not have

another expense or only one expense in Financial Accounting.

If needed, reconciliation of the values in Financial Accounting and

Controlling takes place in Cost and Revenue Element Accounting.

Cost Center Accounting (CO-OM-CCA) We use Cost Center Accounting for controlling purposes within your

organization. It is useful for a source-related assignment of overhead

costs to the location in which they occurred.

Activity-Based-Accounting (CO-OM-ABC)

Activity-Based Costing analyzes cross-departmental business processes.

The goals of the whole organization and the optimization of business flows

are prioritized.

Internal Orders (CO-OM-OPA)

We use internal orders to collect and control according to the job that

incurred them. We can assign budgets for these jobs, which the system

monitors, to ensure that they are not exceeded.

Product Cost Controlling (CO-PC)

Product Cost Controlling calculates the costs that occur during manufacture

of a product, or provision of a service. It enables us to calculate the

minimum price at which a product can be profitably marketed.

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)

Profit Center Accounting evaluates the profit or loss of individual,

independent areas within an organization. These areas are responsible for

their costs and revenues.

Profit Center Accounting is a statistical accounting component in the SAP

system. This means that it takes place on a statistical basis at the same time

as true accounting. In addition to costs and revenues, you can display key

figures, such as, Return on investment, working capital or cash flow on a

profit center.

Business process associated with the SAP CO module:

Interview Preparation

Enterprise Structure

What is a Company Code and what are the basic organizational

assignments to a company code? Company Code is a unique four alphanumeric characters that represents an

independent and legal accounting entity.

Company Code is a legal entity for financial statements like Profit and Loss

and Balance Sheets are generated. Plants are assigned to the company code,

Purchasing organization is assigned to the company code, and Sales

organization is assigned to the company code.

What is the relation between a Controlling Area and a Company code? A Controlling area can have the following 2 type of relationship with a

Company code a. Single Company code relation b. Cross Company code relation

Controlling Area is the umbrella under which all controlling activities of

Cost Center Accounting, Product Costing, Profit Center and Profitability

Analysis are stored. In a similar way Company Codes is the umbrella for Finance activities.

How many Chart of Accounts can a Company code have? The COA is a variant that contain the structure and the basic information about general ledger accounts. COA is used by one or several company codes. Only one COA can be assigned to CCODE. But Country Specific and Group COA are optional. When we use parallel

COA like Country specific, we need to choose which one should consider for

B/Sheet and P&L account.

What are the options in SAP when it comes to Fiscal years? Fiscal year is nothing but the way financial data is stored in the system. SAP

provides you with the combination of 12 normal periods and also four

special periods. These periods are stored in what is called the fiscal year

variant.

There are two types of Fiscal Year Variant

Calendar Year Year Dependent Fiscal Year

SAP allows maximum of 16 posting periods each fiscal years. The 16

periods normally comprise 12 regular posting period and 4 special

positing period which can be used for such things as posting audit or tax

adjustments to a closed fiscal year.

K4 = JAN-DEC V3= APR-MAR V6= JUL- JUN V9= OCT-SEP R1= SHORTERNED FISCAL YEAR

What is a year dependent fiscal year variant ? In a year dependent fiscal year variant the number of days in a month are not as per the calendar month.

How does posting happen in MM (Materials Management) during

special periods? There is no posting which happens from MM in special periods. Special

periods are only applicable for the FI module. They are required for making

any additional posting such as closing entries, provisions. which happen

during quarter end or year end.

How many currencies can be configured for a company code? A company code can have 3 currencies in total. They are local currency ie

company code currency) and 2 parallel currencies. This gives the company

the flexibility to report in the different currencies.

Do you require to configure additional ledger for parallel currencies?

Where only 2 currencies are configured (Company code currency and a

parallel currency) there is no need for an additional ledger. In case the

third parallel currency is also configured and if it is different than the

second currency type, you would then need to configure additional ledger.

If there are two company codes with different chart of accounts how

can you consolidate their activities? In this case you either need to write an ABAP program or you need to

implement the Special Consolidation Module of SAP. If both the company

codes use the same chart of accounts then standard SAP reports give you

the figure.

New GL has now an added dimension of Profit center and segment accounting in it. New GL functionality is very useful for companies which have multiple parallel reporting such as local reporting, Parent reporting and tax reporting. Earlier all this was only possible by creating separate GL codes and different retained earning accounts. This had reconciliation issues between the various reporting. With New GL structure now, no separate GL codes are required. The data for one accounting principle is stored in the general ledger that is known as the Leading ledger. Various functions in New GL:

New Tables Ledger concept Document Splitting Improved Integration Segment Reporting Parallel Ledgers Migration to the New Ledger Fast close

New Table Three new tables in the new general ledger handle totals, store general-ledger and specific line items, and calculate valuations for year-end closings in parallel ledgers

A New Totals Table In addition to using the new totals table in the standard software, we can define our own table, using a new table (FAGLFLEXT) as a template. We might need to define our own table if we have a very large volume of data or very different characteristic values. (For more information, see SAP Note 820495.) Before creating new totals tables, we recommend that you check to see if using the standard table would be sufficient. This step is important because the report writer software or drill-down tools do not recognize new totals tables that you create. The new totals table contains additional standard fields for storing totals. With the standard table, you can easily activate support for many scenarios by customizing the software. The table thus supports such activities as:

Segment reporting Profit-center updating Cost-of-sales accounting Cost-center updating Preparation for consolidation Business-area updating