SAP ERP Goal of Financial Accounting (FI)

Financial Accounting is designed to collect the transactional data

that provides a foundation for preparing the standard portfolio of
reports.
In general, these reports are primarily, but not exclusively, directed
at external parties.
Standard reports include:
- Balance Sheet
- Income Statement
- Statement of Cash Flows

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 SAP ERP Target Audience

Internal External
- Executives - Legal Authorities
- Senior Management - Banks
- Administrative Staff - Auditors
- Employees - Shareholders
- Insurance
- Taxing Authorities
- Media
- Financial Analysts

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 SAP ERP FI Organizational Structure

Represents the legal and/or organizational views of an enterprise

Forms a framework that supports the activities of a business in the
manner desired by management
Permits the accurate and organized collection of business
information
Supports the development and presentation of relevant information
in order to enable and support business decisions

SAP AG Page 7-3

 SAP ERP FI Organizational Structure

Client
- An independent environment in the system

Company Code
- Represents an independent legal accounting unit
- Balanced set of books, as required by law, are prepared at this level.
- A client may have more than one company code
United States
Germany
United Kingdom
Australia

Liabilities &
Assets
Owners Equity

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 SAP ERP FI Organizational Structure

Chart of Accounts
- A classification scheme consisting of a group of general ledger (G/L) accounts
- Provides a framework for the recording of values to ensure an orderly
rendering of accounting data
- The G/L accounts it contains are used by one or more company codes.

Credit Control Area

- An organizational entity which grants and monitors a credit limit for customers.
- It can include one or more company codes
Business Area
- An organizational unit that represents a separate area of operations or
responsibilities within an organization and to which value changes recorded in
Financial Accounting can be allocated
- Financial statements can be created for business areas, and these statements
can be used for various internal reporting purposes.

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 SAP ERP GBI 2.0 Structure for Financial Accounting

Global Bike Client

Company
Global Bike Inc. Global Bike Germany GmbH Code

Global Bike Chart of

Chart of Accounts Accounts

Bikes Business Area

Global Credit Control Credit Control

Area

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 SAP ERP Chart of Accounts

A listing of the accounts (assets, liabilities, equity, revenues, and expenses) that are
contained in the General Ledger
A chart of accounts must be assigned to every company code in order to create the
General Ledger for that company
Several company codes can use the same chart of accounts

We generally we want the same chart of accounts for consolidations

All the decision you are going to make of how you want to conduct
business
Chart of Accounts
This is a list of all G/L accounts used by one or several company codes.
For each G/L account, the chart of accounts contains the account number,
account name, and the information that controls how an account
functions
and how a G/L account is created in a company code.

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 SAP ERP Chart of Accounts

The foundation for the General Ledger is the Chart of Accounts

A Chart of Accounts contains a complete list of all of the accounts
utilized in the General Ledger for a given company
Financial accounting reports are prepared from the balances
contained in the General Ledgers Chart of Accounts

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 SAP ERP Chart of Accounts (continued)

There are five types of accounts contained in a Chart of Accounts

- Assets
- Liabilities
- Equity
- Revenues
- Expenses
There are two primary accounting reports prepared from the
General Ledger Chart of Accounts
- Balance Sheet
- Income Statement

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 SAP ERP FI Master Data

General Ledger (G/L) Accounts

- The unique combination of Company Code and Chart of Account
creates a data storage area called a General Ledger.
- The General Ledger contains a listing of the transactions effecting
each account in the Chart of Accounts and the respective account
balance.
- It is utilized in the preparation of financial accounting statements.

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 SAP ERP FI Master Data

Customer and Vendor Master Data

- Customer and vendor account balances are maintained in FI through fully
integrated accounts receivable and accounts payable sub-modules.
- Financial postings for customers and vendors are made directly to their
respective individual accounts and accompanied by a concurrent automatic
posting to the General Ledger.

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 SAP ERP Customer Accounts

Accounts Receivable Sub-Module (FI-AR)

- Information with respect to customers who purchase the enterprises goods and
services such as sales and payments made
- Substantive and important integration between Sales and Distribution (SD) and
Financial Accounting (FI)
- Billings in SD generate FI journal entries for sales activity

Customer 189 Customer 142

Accounts Receivable
100 300 (General Ledger)

950
Customer 135 Customer 123
400 150

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 SAP ERP Vendor Accounts

Accounts Payable Sub-Module (FI-AP)

- Information with respect to Vendors from whom the enterprise purchases goods
and services such as purchases and payments made
- Substantive and important integration between Materials Management (MM)
and Financial Accounting (FI)
- Purchase and goods receipt activities in MM generate FI journal entries

Vendor 100234 Vendor 100435 Accounts Payable

200 250 (General Ledger)

850
Vendor 100621 Vendor 100846
100 300

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 SAP ERP FI Processes

Posting a G/L Entry

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 SAP ERP FI Reporting

G/L Account Summary

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 SAP ERP FI Reporting

Balance Sheet
- Presentation of an organizations Assets, Liabilities, and Equity at a
point in time
- Assets: What the company owns
- Liabilities: What the company owes
- Equity: The difference between Assets and Liabilities
- Assets = Liabilities + Equity

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 SAP ERP FI Reporting

Balance Sheet Example

Assets Liabilities
Cash 1,000 Accounts Payable 750
Accounts Receivable 3,000 Taxes Payable 250
Equipment 500 Total Liabilities 1,250
Total Assets 4,500
Equity
Common Stock 2,000
Retained Earnings 250
Total Equity 2,250

Total Liabilities
and Equity 4,500

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 SAP ERP FI Reporting

Income Statement
- Presentation of an organizations revenues and expenses for a given
period of time (e.g. monthly, quarterly, or yearly)
- Revenues, in a simple sense, are inflows of cash as a result of selling
activities or the disposal of company assets.
- Expenses, in a simple sense, are outflows of cash or the creation of
liabilities to support company operations.
- Revenues - Expenses = Net Income

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 SAP ERP FI Reporting

Income Statement Example

Revenue
Sales 11,000
Deductions 750
Total Revenue 10,250

Operating Expenses
Cost of Goods Sold 4,500
Operating Expenses 3,750
Total Expenses 8,250

Net Income Before Taxes 2,000

Taxes 750
Net Income 1,250

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 SAP ERP FI Reporting

Statement of Cash Flows

- Considers the associated changes, both inflows and outflows, that
have occurred in cash arguably the most important of all assets
over a given period of time (e.g. monthly, quarterly, or annually)

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 SAP ERP Accountants and Audit Trails

Audit trails allow an auditor to begin with an account balance on a financial

statement and trace through the accounting records to the transactions that
support the account balance.
Audit trails enable an auditor to trace individual transactions to the effected
account balance(s) on a financial statement.

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 SAP ERP SAP Document Principle

Each business transaction impacting FI writes data to the SAP database

creating a uniquely numbered electronic document.
The document number can be used to recall the transaction at a later date.
It contains, for example, such critical and necessary information as:
- Responsible person
- Date and time of the transaction
- Commercial content

Once written to the SAP database, a financial document (one impacting the
financial position of the company) can not be deleted from the database.
It can be changed to some degree.
The SAP document principle provides a solid and important framework for
a strong internal control system a requirement of law for companies that
operate in the United States and in most other countries in the world.

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 SAP ERP SAP Document Principle

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 SAP ERP Goal of Controlling (CO)

Managerial Accounting also termed Controlling is designed to

collect transactional data that provides a foundation for preparing
internal reports that support decision-making within the enterprise.
These reports are exclusively for use within the enterprise and
include:
- Cost center performance
- Profit center performance
- Budgets analyses

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 SAP ERP CO Organizational Structure

Represents the legal and/or organizational views of an enterprise

Forms a framework that supports the activities of a business in the
manner desired by management
Permits the accurate and organized collection of business
information
Supports the development and presentation of relevant information
in order to enable and support business decisions

SAP AG Page 7-25

 SAP ERP CO Organizational Structure

Client
- An independent environment in the system
Company Code
- Represents an independent legal accounting unit
- Balanced set of books, as required by law, are prepared at this level.
- A client may have more than one company code
United States
Germany
United Kingdom
Australia
Liabilities &
Assets
Owners Equity

SAP AG Page 7-26

 SAP ERP CO Organizational Structure

Chart of Accounts
- A classification scheme consisting of a group of general ledger (G/L)
accounts
- Provides a framework for the recording of values to ensure an orderly
rendering of accounting data
- The G/L accounts it contains are used by one or more company
codes.
Controlling Area
- A self-contained, organizational unit for which the management of
revenues and expenses can be performed
- May include one or more company codes; therefore, an enterprise can
perform management accounting analyses and reports across several
companies
- A way to identify and track where revenues and costs are incurred for
evaluation purposes
Operating Concern
- Represents a part of an organization for which the sales market is
SAP AG structured in a uniform manner Page 7-27
- A operating profit for the individual market segments can be
 SAP ERP GBI 2.0 Structure for Controlling

Global Bike Client

Operating
Global Concern Concern

Controlling Controlling Controlling

North America Europe Area

Company
Global Bike Inc. Global Bike Germany GmbH Code

Global Bike Chart of

Accounts
Chart of Accounts

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 SAP ERP CO Master Data

Profit Center
- Responsible for revenue generation and cost containment
- Evaluated on profit or return on investment
- Enterprises are commonly divided into profit centers based on
Region
Function
Product

Cost Center
- Responsible for cost containment, not responsible for revenue
generation
One or more value-added activities are performed within each cost center.
Unit that is distinguished, for example, by area of responsibility, location, or
type of activity
Copy center
Security department
Maintenance department

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 SAP ERP CO Master Data

Internal Order
- Temporary cost center responsible for cost containment, not
responsible for revenue generation
- It is used to plan, collect, and monitor the costs associated with a
distinct short-term event, activity, or project
Company picnic
Trade show/Fair
Recruiting campaign

Revenue Element
- A one-to-one linkage (mapping) between General Ledger revenue
accounts and CO revenue elements is established to permit the
transfer of FI revenue information to CO.
- Posting in FI that impact revenue accounts lead to a posting in CO to
a revenue element.
- In other words, revenue account = revenue element just different
SAP AG words depending on whether FI object or CO object. Page 7-30
 SAP ERP CO Master Data

Cost Element
- A one-to-one linkage (mapping) between General Ledger expense
accounts and CO cost elements is established to permit the transfer of
FI expense information to CO.
- Postings in FI that impact cost accounts lead to a posting in CO to a
cost element.
- In other words, expense account = cost element just different words
depending on whether FI object or CO object.

Primary Cost Element

- Originate in the General Ledger within FI and are automatically
transferred to CO when an FI transaction is recorded in the General
Ledger
Secondary Cost Element
- Used exclusively in CO for allocations and settlements between and
amongst cost centers Page 7-31
SAP AG
 SAP ERP Primary vs. Secondary Cost Elements

Managerial Financial
Accounting Accounting
(CO) (FI)

Aggregated Cost Elements General Ledger Accounts

Income Balance
Statement Sheet

Secondary Cost Primary Cost Expense

Elements Elements Accounts

Revenue
Accounts

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 SAP ERP CO Master Data

Statistical Key Figures

- Provide the foundation for accurate and effective cost allocations between cost objects
- Utilized to support internal cost allocations involving allocations, assessments, and
distributions
- Examples: number of employees,square footage,minutes of computer usage

6 Hours Executive Offices

Copy
Center Maintenance
10 Hours
Activity Department
(20 Hours)
4 Hours IT Department

This figure shows an example of statistical key figures. A project cost center has 12
hours worth the activity. The statistical key figure is hours and is split at:
30% to the Work Center
50% to maintenance
20% to IS
All costs for the labor will be allocated in this fashion
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 SAP ERP CO Processes

Posting Primary Cost Element

Financial Accounting (FI)

Supplies Expense Cash

Debit Credit Debit Credit

1,500 1,500

Managerial Accounting (CO)

Cost Center
Primary Cost Element
A

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 SAP ERP CO Processes

Posting Primary Cost Element

(FI) Transaction Financial Accounting (FI)

Document Supplies Expense Cash
Amount Debit Credit Debit Credit
G/L Account # 1,500 1,500
Cost Center
1900012432
Managerial Accounting (CO)
(CO) Transaction
Document
Cost Center
Cost Center
Cost Element 1,500
20000657

Transactions can have an effect on both FI and CO.

The transaction will create a debit and a credit for FI (FI transaction)
If CO is turned on a cost center or cost element bucket will be updated (CO transactions)

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 SAP ERP CO Processes

Posting Secondary Cost Element

Financial Accounting (FI)

Supplies Expense Cash

Debit Credit Debit Credit

1,500 1,500

Managerial Accounting (CO)

Cost Center CC 1 Secondary Cost

A CC 2 Element

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 SAP ERP CO Processes

Posting Secondary Cost Element

Executive Offices
Rent Expense
Debit Credit 1,800
1,500 Copy
Center Maintenance
Department
Supplies Expense 1,500
Debit Credit 2,500 3,000
Sec. Cost Element
2,500 2,000
Information Services
Labor Expense
Debit Credit 1,200
2,000

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 SAP ERP Types of Allocation

Distribution
- Method for periodically allocating primary cost elements
- Primary cost elements maintain their identities in both the sending and
receiving objects
- Sender and receiver cost centers are fully documented in a unique
Controlling (CO) document.
Assessment
- A method of allocating both primary and secondary cost elements
- Primary and/or secondary cost elements are grouped together and
transferred to receiver cost centers through use of a secondary cost
element.
- Sender and receiver cost centers are fully documented in a unique
Controlling (CO) document.

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 SAP ERP Types of Allocation

In Distribution and Assessment, you further allocate costs (or quantities for Indirect Activity Allocations)
collected on a cost center during the accounting period to receivers, according to user-defined keys.
These are therefore indirect allocation methods, because the exchange of activity is not the basis for
allocating costs/quantities. Instead, user-defined keys such as percentage rates, amounts, statistical
key figures, or posted amounts provide the cost/quantity assignment basis.
The advantage of these methods is that they are easy to use. You usually define the keys and the
sender/receiver relationships only once.
Distribution and assessment are used primarily for cost centers. This is because direct cost allocation is
not possible here due to the variety of transactions, the lack of clearly defined individual activity types
and the fact that the entry of the activity is too time-consuming. For example, the costs of the company
cafeteria may be assigned based on the number of employees in each cost center. Telephone costs are
seldom allocated directly to the individual cost centers, but are collected on a clearing cost center for
each period. They are then reposted or distributed at the end of the period according to the number of
telephone units or telephone installations in each cost center.
Assessment is a method of allocating primary and secondary costs in Cost Center Accounting and
Activity-Based Costing. The following information is passed on to the receivers:
The original cost elements are assigned cumulatively, or in groups, to assessment (secondary) cost
elements. The original cost elements are not recorded on the receivers.
Sender and receiver information (sender cost center, receiver cost center, or business process)
appears in the Controlling (CO) document.

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 SAP ERP Distribution

Sending cost center Receiving cost centers

Primary cost element

maintains its identity
A005
D010 400 sft
550 sft
A010 Administration A010
Rent Expense Distribution 600 sft
$1,500 D005
900 sft

A015
A020 150
100
S010 100 S005
200

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 SAP ERP Distribution

Sending cost center Receiving cost centers

Primary cost element

maintains its identity
A005
D010 $200
$275
A010 Administration A010
Rent Expense Distribution $300
$1,500 D005
$450

A015
A020 $75
$50
S010 $50 S005
$100

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 SAP ERP Assessment

Sending cost center Receiving cost centers

Primary and
secondary cost
elements D010 10%
A005 15%
A020 IT
A010 5%
Software Expense
$4,200 D005 20%
Assessment A015 10%
A020 IT
Supplies Expense A020 0%
S010 10% S005 30%
$500

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 SAP ERP Assessment

Sending cost center Receiving cost centers

Primary and
secondary cost
elements
A005 $705
A020 IT D010 $470
Software Expense
A010 $235
$4,200 D005 $940
Assessment A015 $470
A020 IT
A020 $0
Supplies Expense
$500 S010 $470
S005 $1,410

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 SAP ERP SAP CO Module

Fully integrated with other SAP modules including, but not limited
to:
- Financial Accounting (FI)
- Materials Management (MM)
- Sales and Distribution (SD)
- Production Planning and Execution (PP)

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