Organization Structure in SAP

A. Company Code: Company Code is a legal entity for which 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. Table T001

B] Rules of accounting – Business Transactions having monetary implications: Every

debit has an equal corresponding credit.
Following are the three types of accounts –

1) Personal Account – This is the account of persons. For example – Accounts of Vendor,
Customer are personal accounts. Rule applied for this type of account are „Debit the
receiver & credit the giver‟.

For example – When a payment is made to a Vendor for supplying material, the entry is
made as below – Debit – Vendor INR 1, 00,000 / - Credit – Bank Account INR 1, 00,000 / -

2) Real Account – These are the accounts of properties. For example – Cash, Inventory,
Machinery. Rule applied for this type of account is „Debit what comes in & Credit what goes
out‟.

A. For example – When a material is received to inventory after GRN against Purchase Order,
following entries are posted –

Debit – Inventory Raw Material INR 1, 00,000 / - Credit – GR / IR Clearing Account INR 1,
00,000 / -

3) Nominal Account – These are the accounts of income & expenditure. For example –
Travelling expenses, Colony Expenses, Rent received from land. Rule applied for this type
of account is „Debit Expenses & Credit Incomes‟.
For example – When Travel expenses for an employee are booked, following are the FI
postings – Debit – Travel expenses INR 250 / - Credit – Bank Account INR 250 / - These
rules can be applied interchangeably between the different types of accounts depending on
the business transaction.

B. Client: In the SAP landscape, a client is an entity with independent information and
data. The SAP client concept is based on the fact that an application service provider
(ASP) must provide and administer all resources at a minimal cost, which is quite
 challenging in a multiple customer-client environment. A client is defined as a self-
contained commercial, organizational, and technical unit within an SAP System. This
means that all business data within a client is protected from other clients. Each
client has its own customer data, which can be considered as the exclusive property
of this client.
We need to look at one more concept before we think about what it means to actually run SAP. In
the world of SAP, the term client has special meaning. Clients are essentially self-contained
business entities or units within each SAP system; using a web browser or one of SAP's special
user interfaces, you log in to a client in SAP to actually access and use the system. Each system—
SAP ERP, CRM, SCM, and so on—has a unique system-specific client you log in to.
Contemporary organizations thus have multiple production clients (one production client per SAP
component). And each component contains several nonproduction clients, as well. These are used
to develop and test the business functionality that will one day be put into the production client and
handed over to the company's end users.
C. Business Area: Organizational unit of external accounting that corresponds to a specific business
segment or area of responsibility in a company. Movements in value entered in Financial Accounting are
assigned to business areas. Financial statements can be created for business areas for internal
purposes.

D. Controlling Area: Controlling Area is the umbrella under which all controlling activities of Cost
Center Accounting, Product Costing, Profit Center and Profitability Analysis are stored.  A
controlling area may contain one or more company codes, which can operate in different currencies, if
required. The company codes within a controlling area must all use the same operational chart of
accounts.

E. Profit Center: is an organizational unit in accounting that 

reflects a management-oriented structure of the 
organization for the purpose of internal control. Profit 
Center Accounting evaluates the profit or loss of 
individual, independent areas within an organization. These 
areas are responsible for their costs and revenues.

F. Cost Center: Cost Centers are the organizational units within a 

controlling area that represents a location where costs 
occur. Organizational divisions can be done on the basis 
of functional, settlement-related, activity-related, 
region/section/department related, and/or responsibility-
related, to monitor actual and plan figure standpoints 
where cost is captured.

G. Cost Element: All Profit and Loss GL account defined in Finance Chart of account shall be
created, as Cost Element This is in order to avoid Reconciliation of FI and CO module. As soon
as Cost element is created in controlling module one needs to give Cost object to it. Cost Object
 could be Material, Cost Center, Internal Order, Production Order etc.Two Types of CE: Primary
CE- Primary cost elements, which are based on GL accounts. Secondary CE- Secondary
cost elements are used only in CO booking in case of 
transfer/allocation/Distribution/Recovery of cost within Controlling.

H. Internal Order: An internal order is used to accumulate cost for a specific project or task for a
specific time period. An internal order is therefore used for a short period with a specific
deadline.

I. Chart of Accounts: A chart of accounts is a listing of the names of

the accounts that a company has identified and made available for
recording transactions in its general ledger. A company has the
flexibility to tailor its chart of accounts to best suit its needs, including
adding accounts as needed.

J. Credit Control Area: A credit control area is an organizational unit for specifying and
controlling customer credit limits. A credit control area can include one or more company
codes. It is not possible to divide a company code into several credit control areas. The credit
control area is used for credit management in the application components Accounts
Receivable (FI-AR) and Sales and Distribution (SD).

You define a credit control area according to the areas of responsibility for credit monitoring. For
each credit control area, you enter a key, a name , and the currency in which the credit limit
is to be managed in the credit control area. You select a four-character alphanumeric key. In the
simplest case, each company code corresponds to one credit control area. In this case, we
recommend that you use the same key for the credit control area as for the company code.

Each credit control area carries out credit control for one or more company codes and, to enable it
to do this, you must assign the respective credit control area to the company codes.
 Document Type Key is used to distinguish between
K. Document Types:
different business transactions and to classify the accounting
documents. It is also used to determine the number range for
documents and account types such as asset, material, vendor, etc.
for posting.

Common Document Type Keys are as follows −

 Document Type Document Type Description

AA Asset Posting

AN Net Asset Posting

DR Customer Invoice

DZ Customer Payment

KA Vendor Document

KG Vendor Credit Memo

L. Posting Periods:SAP FI Posting period variant is used to maintain

accounting periods that are open for posting and all closed period
are balanced. This is used for opening and closing period in the
fiscal year for posting purpose.

You can assign these posting periods to one or more company codes.

M. P2P Cycle:
a. Purchase Requisition – ME51N
b. RFQ(request for Quotation) –ME41
c. Open Contract- ME31K
d. PO-ME21N
e. Release PO- ME21N
f. Good Receipt-MIGO
Inventory DR
GR/IR CR
g. Service Entry –ML81N
h. Invoice/MIGO
GR/IR- DR
VAT - DR
Vendor- CR

Import MIGO-

Inventory –Dr
GR/IR Clearing a/c. Cr

Freight Clearing – Cr

Import MIRO -

GR/IR Clearing – Dr

Freight Clearing –Dr

Vendor - Cr

C&F Vendor - Cr

Order To Cash Process

a. Inquiry – VA11
b. Quotation- VA21
c. Sale Order- VA01
d. PGI – VL01N
e. Delivery – VL01N

COGS - Dr

Inventory - Cr

f. Billing- VF01

Sales – Cr

Tax – Cr

Customer – Dr.

Chart of Depreciation

Chart of depreciation is nothing but a chart containing difference areas of

depreciations like Book depreciation, Tax depreciation, consolidated
derpeciation, etc. Because we have to prepare our statements as per Indian
Companies Act (Book depreciation), Income Tax Act (Tax depreciation)like
that...Like in Chart of accounts ... there we have list of GL accounts in COA
whereas we have list of depreciation areas in Chart of Depreciation.

Depreciation Key
The depreciation key contains the value settings which are necessary for determining depreciation amounts. It
represents a combination of calculation rules, which are used for the automatically calculated depreciation types