SAP FICO Introduction and Basics

Enterprise Resource Planning and SAP
SAP ERP Introduction
SAP FICO basics
Organization Structure Enterprise Resource

Master Data Planning and SAP
The Digital Revolution
Constant, high-speed data flow of the digital world has made traditional ways of working unsustainable
Big
Service Knowledge Natural
Orchestration Language
Chat Bots
Processing
Neural
Networks
Closed
</> Circuit TV
Blockchain Internet
of Things
Algorithms
Robotic Machine
Process Automation Learning
Cognitive
Process Computing
Automation Big Data
.
Digitization manifests through its five “senses” i.e. talk (chatbots etc), watch (IoT sensors, act (RPA etc.), think
(machine learning) and remember (big data) 2
SAP Solution Portfolio addresses digitization
Digital transformation for finance
The Finance Transformation PYRAMID
Digitization of
Pinnacle
transactional process  HANA Analytics

Digital
Finance for  Multi-channel

(e. auto invoice the
matching, scanning, auto Digital World integration
close, fast consolidation )  Big Data
Finance Finance  S/4 HANA Finance

Optimize your Faster Business
System Process  Fiori
Finance Function Optimization
Close Catalyst
Improvement
Foundations
Chart of Working Governance

Master Data
Get the Basics Accounts Capital Risk and  MDG on HANA
Management
Optimisation Management Controls  S/4 HANA Finance
Right
Finance Finance  BPO Best practices

Get the Back office
Policies and Finance and Target  Global Enterprise Model
Framework Sourcing
Procedures Strategy Operating  Digital Transformation
Strategy
Framework Model concept
Right
Three – Tier Model
• Enterprise Resource Planning and SAP
Presentation Server
SAP R/3 was the first SAP product to adopt the ‘Three-tier model’
which is the basis for SAP’s system
• Presentation Server – This is the graphical user interface

(GUI) where users come in contact with the system, enter
information, and display reports
Application Server
• Application Server – This is where the code for all SAP
modules exist and interacts
• Database Server – This is where all data and business

activity is stored
• A critical benefit of SAP has always been that all separate SAP
modules use the same single repository of data
• Note that historically, SAP applications could run on a
Database Server
separate company’s database server such as Oracle, IBM, etc
Example of Consolidated Table Structure
• In this example, data from 5 different areas of
SAP have been consolidated to one master
table ‘ACDOCA’, which is enabled by the new
technology
• Data is stored here only once, there is no need

for reconciliation between these modules
• The reduction in data footprint allows for

reduced memory use and increased system
performance
• Significantly more efficient reporting and

analysis is enabled by this change
SAP S/4 HANA
Presentation Server
SAP S/4 HANA represents the complete recreation of SAP’s
application layer to take advantage of the advances in the HANA
database capabilities
• Unlike all previous versions of SAP’s ERP application layer,

S/4 must be run on an SAP HANA database
Application Server
• S/4 HANA significantly reduces the number of tables used in
all modules. This streamlines many downstream processes
Database Server
For
For example
example in
in Finance,
Finance, 25
25 separate
separate tables
tables containing
containing financial
financial
information has been reduced to
information has been reduced to 4 4
SAP Fiori
Presentation Server
In 2013, SAP launched ‘Fiori’ which represented a complete
redesign of the SAP GUI layer.
• The traditional previous GUI is still available, but business

users now have more options than ever to improve the
User Interface (UI)
Application Server
Database Server
Unlike
Unlike previous
previous Presentation
Presentation Layers,
Layers, Fiori
Fiori apps
apps are
are fully
fully integrated
integrated
with
with cloud
cloud solutions
solutions and
and mobile
mobile
SAP Cloud Based Solutions
Since 2010, SAP has been expanding its cloud
presence and offerings through R&D and
acquisitions. A few examples include:
• SAP Ariba – Cloud based solution for

purchasing
• SAP Hybris– Cloud based solution for sales
• SAP Success Factors– Cloud based solution

for human resources
• SAP Concur– Cloud based solution for travel

and expense management
SAP Cloud Based Application Layer
Deployment Modes
SAP S/4 HANA can be deployed using three different approaches
• Hybrid approaches are also available where parts of a business run on one method and parts run on another
On Premise Private Cloud Public Cloud
• In an ‘On Premise’ deployment, the  In ‘Private Cloud’ deployment, companies  Part of financial statements and creates a
company installs and maintains its own their own hardware, but SAP proper posting in General Ledger
own hardware and software maintains the software (?)
 This can be implemented in the shortest
 Companies are not allowed to change core project timeline
• This involves the longest project SAP code, customization is extremely
timeline limited
 Companies are not allowed to change core
SAP code, customization is extremely
• Companies have the most flexibility limited
to customize SAP code in this
deployment
Enterprise Resource Planning and SAP
Enterprise Resource Planning Introduction
SAP FICO basics

What is FI and CO?
• SAP Finance and Controlling
• Financial Accounting (FI) and Controlling (CO) are independent components in the SAP system.
• Financial Accounting (FI) runs the applications that track and manage all financial transactions
• Controlling (CO) interprets financial data and analyzes it for internal reporting and profitability analysis
 The two components are tightly integrated
General
• Before S/4 HANA, data was sent from one FI
Manages all financial accounts
module to another on a regular basis. Ledger
• After S/4 HANA, the data for both modules is FI
Accounts
Payable Manages vendor invoices
stored in the same data tables
FI
Accounts
Receivable Manages customer billing
FI
Asset
Accounting Manages fixed assets and depreciation
CO Controlling Manages responsibility accounting

Key purpose of Financial Accounting
•Financial Accounting (FI) is the key building block to an organization on which most other modules depend on.
•FI Organization Elements ensure that other modules work in sync with business requirements.
•FI Organization Elements enable a thorough analysis of current business operations and enable planning scenarios.
•FI Organization Elements are assigned to Organization Elements from other modules viz. Sales Organization in SD, Purchasing Organization in MM, Plant in Logistics, this ensures
the real time integration of FI with all other modules.
•The central task of G/L accounting is to provide a comprehensive picture for external accounting and accounts.
• Recording all business transactions (primary postings as well as settlements from internal accounting) in a software system that is fully integrated with all the other operational
areas of a company ensures that the accounting data is always complete and accurate.
FI Organization Elements involve defining and configuring the elements which

will enable an organization to:
• Purchase materials from vendors (Payables Accounting).
• Make sales to customers (Receivables Accounting).
• Internal and External reporting of financials to stakeholders (Balance
Sheet, Profit & Loss Account, Cash Flow etc).
• Accounting & Control of Fixed Assets -Capitalize and depreciate (Asset
management).
• Make and receive payments (Treasury Management) .
• Enable planning for future projects (Investment management).
• Profitability & other MIS Analysis for various products, segments, cost
objects (Controlling).
The Difference between FI and CO Reporting
FI CO
External Reporting Internal Reporting
Regulatory Compliance Ad Hoc
Shareholders / Regulators Internal Management
Historical Forecasting
Financial Accounting (FI)
• The FI module is designed for automated management and external reporting of
general ledger, accounts receivable, accounts payable, asset accounting, and other sub-
ledger accounts within the chart of accounts
• This is the key component structure of financial accounting

Master General Accounts Accounts Fixed Periodic
Records Ledger Payable Receivable Assets Processing
Financials (FI): General Ledger (GL)
• Used for external reporting Financials
(FI)
• Document entry General

Ledger
• Account Management Asset

Accounting
Accounts
• Contains
Payable
• General Ledger Accounts Accounts

Receivable
• Chart of Accounts
Financials (FI): Asset Accounting (AA)
• Provides management of capitalized or tracked assets Financials
(FI)
• Generates depreciation transactions for the general ledger General

Ledger
• Contains Asset
Accounting
• Asset Classes
• Depreciation profiles Accounts
Payable
• Capitalized assets
• Tracked assets Accounts
Receivable
Financials (FI): Accounts Payable (AP)
• Process invoices Financials
(FI)
• Generate checks by due date or discount date General

Ledger
• Produce Reports Asset

Accounting
Accounts
• Contains
Payable
• Vendors Accounts
Receivable
• Checks
Financials (FI): Accounts Receivable (AR)
• Processes cash receipt transactions for either accounts Financials
(FI)
receivable or revenue transactions
General
• Invoices or bills customer for amount due Ledger
Asset
Accounting
• Contains
• Customers Accounts
Payable
• Billing logic
• Dunning Accounts
Receivable
TRADITIONAL BOOKS OF ACCOUNTS
Cash Purchases Sales

Book
Payroll Journal
General Ledger
Account balances
&
Transactions
Accounts Accounts
Payable Receivable
Sub ledger Acct..

Fixed balances Employee
Assets Subledger
G.L.Trial Balance
TRADITIONAL BOOKS OF ACCOUNTS - Continued …..
Traditional set of books contained:
1. General Ledger - Transactions details and summary for the nomenclated

account for given period.
2. Sub ledgers - Transaction details and summary for Suppliers,
customers and Assets and payroll.
3. Listings of classified transaction types such as : -
Cash & Bank Book- For all cash and bank transactions.
Purchases Register- For all purchases / returns from suppliers.
Sales Register-For all sales /returns transactions from customers.
Payroll Record- For all employees related transactions.
Fixed Assets Register- For recording all details of Fixed Assets.
Journal Register-For all other adjustment entries not related any of the
above sub ledgers or affecting multiple sub ledgers / GL accounts.
TRADITIONAL BOOKS OF ACCOUNTS - Continued …..
FOR THE PURPOSE OF BALANCE SHEET & TRADING ; PROFIT AND LOSS
ACCOUNTS
The details are gathered from :
• Accounts balances as per General Ledger

• Control ledgers maintained seperately for customers/vendors/ sales / purchase data
etc.
• External systems maintained specifically for particular module such as Assets,
Billing, payroll etc.
• Manual Registers maintained in the form of minutes books or listings e.g.
shareholders data.
BUSINESS PROCESSES - Traditional - Sales and Distribution
• Sales orders manual or outside system
Customer • No accounting entry for Delivery.
• Inventory adjustment carried out in
external system.
• General ledger transaction for Billing,
Sales Order either manual or batch process.
• Accounts Receivable in stand alone
system.
• Sub ledger posting either manual or
Delivery batch.
Manual or batch posting

G.ledger
G.Ledger
Account balances
Billing
Customer Account
Sub ledger balances and details
BUSINESS PROCESSES IN ERP - Sales & Distribution
Customer • Sales Order Processing as integrated process
• Material Accounts updation on delivery
• GL Accounting entry for cost of goods sold
on delivery
• GL and Accounts Receivable updation as
Sales Order
automatic process.
• Controlling module posting for Profit center
Automatic Postings
and Profitability Analysis automatic

• Related reports can be generated upto last
Delivery transaction.
Material Accounting
Financial Accounting
Controlling
Billing Sales Accounting
SAP FICO basics

Key Organizational units Highest level in the
SAP System
Hierarchy.
CLIENT
Operating
Operating Concern
Concern Company
Company Company represents
group entity
The Controlling Area is
A company code the business unit where
represents an Chart
Chart of
of accounts
accounts Cost & Revenue
independent legal Accounting & Analysis is
accounting entity for carried out in
external or statutory Functional
Functional management
reporting
Area
Area perspective.
Company
Company code
code Controlling
Controlling Company
Company code
code
Area
Area
Business
Business Business
Business
Area
Area Area
Area
Cost
Cost Centre
Centre //
Internal
Internal Order
Order // Represent separate areas of operation within
an organization and can be used across
Profit
Profit Centre
Centre // company codes for example, product lines,
Profitability
Profitability Segment
Segment divisions or branches. Normally used for
external reporting
Organizational units - interrelationships
Group Company A Operating

Concern
Business Area 1
Controlling Area Controlling Area
1 2
Company Code
Company Code 2
Business Area 2 1
Company Code
– Business Area can be cross- company 3
codes.
– A controlling area may include single or
multiple company codes.
– Operating concern can have more than
one controlling areas assigned to it to
enable cross controlling area profitability Functional Area Functional Area
analysis across multiple company codes. (Sales) (Production)
– Functional area is also available across
multiple company codes.
SAP FICO basics
Organization Structure
Master Data concepts

Organizational Structure vs. Master Data
• SAP Master Data
• There is a critical difference between organizational structure and master data in SAP
• A ‘company code’ and a ‘chart of accounts’ are both examples of organizational structure in SAP.
They must be defined in SAP configuration which is part of the design and build phases of a
project. Business users will not have access to change the organizational structure of the entity.
• A ‘general ledger account’ and ‘business partner account’ are both examples of master data in
SAP. There will be thousands of these master data accounts which will change over time. Every
day, normal business functions like setting up a new customer or changing the bank account
information of an existing vendor will require someone to create or edit one of these master
data accounts. Business users will have access to create/change/delete master data on a daily
basis.
SAP Data Hierarchy and Dependency - Illustration
• SAP Master Data
InfoStructures, Business Warehouse
Reporting
D
Journal Entries, A/P or A/R Transactional e
Invoices, Debit/Credit Memos Data p
e
n
Conditional d
Payment Terms, Payment e
methods, House Banks Master Data n
c
y
General Ledger Accounts,
Business Partners, Foundational Master Data
Materials
Enterprise Structures
Company Code, Plant,
(Configuration Data)
Purchasing Organization,
Sales Organization
Master Data - re-usable information which is required to create and maintain an enterprise-wide "system
of record“ which spans multiple business functions (e.g., purchasing, accounting, etc.).
Master Data
SAP Master Data
General Ledger and the Chart of Accounts
General Ledger and

the Chart of
Accounts
Purpose of General Ledger Accounts
• General Ledger and the Chart of Accounts
United States Balance Sheet Income Statement
• One important purpose of General 12/31/2017 01/01/2017-12/31/2017
Ledger Accounts is to enable Assets Revenues
management to prepare external reports Current Assets Sales 6,000,000
Cash 1,000,000 Gains of Sales of Assets 500,000
Accounts Receivable 1,000,000 Total Revenues 6,500,000
Property, Plants, and Equipment Expenses
• For publicly traded companies in the Fixed Assets 1,000,000 Cost of Goods Sold
Equipment 1,000,000 Materials 1,000,000
United States, the Securities and Total Assets $ 4,000,000 Labor 1,000,000
Exchange Commission legally requires Liabilities Overhead 1,000,000
Current Liabilities Total Cost of Goods Sold 3,000,000
every company to prepare a balance Notes Payable 1,000,000 Gross Margin 3,500,000
sheet and a profit & loss statement Accounts Payable
Long-Term Liabilities
1,000,000 Selling, General, & Administrative
Administrative 1,000,000
every quarter Bonds Payable 1,000,000 Rent 750,000
Total Liabilities $ 3,000,000 Depreciation 750,000
Stockholders Equity Total SG&A 2,500,000
Common Stock 2,000,000 Operating Income 1,000,000
• Each blue row on these reports Retained Earnings 1,000,000
represents a group of consolidated Total Stockholders Equity
Total Liabilities and SE
$
$
3,000,000
6,000,000
general ledger accounts.
General Ledger Accounts Example
• The red accounts are examples United States Balance Sheet
of specific General Ledger Assets
Current Assets
Accounts which ultimately roll US Chart of Accounts Cash 1,000,000
up to ‘Fixed Assets’ in the GL Account Description Accounts Receivable 1,000,000
company’s financial reports 160000

160010
Land
Buildings
Property, Plants, and Equipment
Fixed Assets

1,000,000
160020 Machinery Equipment 1,000,000
Total Assets $ 4,000,000
• In this example, ‘Land’, ‘Building’,

and ‘Machinery’ are three
separate GL accounts defined in
the system
Short Accounting Overview
• Assets represent something a company owns or
12/31/2017 01/01/2017-12/31/2017
will receive a benefit from Assets Revenues
• Liabilities represent a debt or obligation the Current Assets Sales 6,000,000
company owes Cash 1,000,000 Gains of Sales of Assets 500,000
• Stockholders Equity equal the difference Property, Plants, and Equipment Expenses
between assets and liabilities and represent the Fixed Assets 1,000,000 Cost of Goods Sold
Equipment 1,000,000 Materials 1,000,000
value controlled by the owners of a company.
Total Assets $ 4,000,000 Labor 1,000,000
• When liabilities exceed assets, oftentimes a Liabilities Overhead 1,000,000
company has to declare bankruptcy Current Liabilities Total Cost of Goods Sold 3,000,000
Notes Payable 1,000,000 Gross Margin 3,500,000
Accounts Payable 1,000,000 Selling, General, & Administrative
Long-Term Liabilities Administrative 1,000,000
Bonds Payable 1,000,000 Rent 750,000
• Assets, Liabilities, and Stockholders Equity are Stockholders Equity Total SG&A 2,500,000
all considered Balance Sheet Accounts. In Common Stock 2,000,000 Operating Income 1,000,000
financial reports, these are always displayed at Retained Earnings 1,000,000
Total Stockholders Equity $ 3,000,000
a given point in time and shown in the report Total Liabilities and SE $ 6,000,000
on the left
• Revenues represent income that a business earns over United States Balance Sheet Income Statement
time 12/31/2017 01/01/2017-12/31/2017
Assets Revenues
Current Assets Sales 6,000,000
• Expenses represent costs incurred by a business over time Cash 1,000,000 Gains of Sales of Assets 500,000
• Revenue and Expenses are both considered Profit & Loss Fixed Assets 1,000,000 Cost of Goods Sold
Accounts. In financial reports these are always displayed as Equipment 1,000,000 Materials 1,000,000
the change in a given time period and are displayed in the Total Assets $ 4,000,000 Labor 1,000,000
Income Statement report on the right Liabilities Overhead 1,000,000
• The connection between the two reports is the Retained Accounts Payable 1,000,000 Selling, General, & Administrative
Earnings Account on the Balance Sheet. Long-Term Liabilities Administrative 1,000,000
• At the end of every year, all P&L accounts are closed out to Stockholders Equity Total SG&A 2,500,000
the Retained Earnings Account Common Stock 2,000,000 Operating Income 1,000,000
Retained Earnings 1,000,000
• At the beginning of the next year, last year’s activity shows Total Liabilities and SE $ 6,000,000
up in Retained Earnings and all P&L Accounts will be zero.
• An ERP system is the tool most companies use to United States Balance Sheet Income Statement
keep track of all of their accounting activity. Using 12/31/2017 01/01/2017-12/31/2017
Assets Revenues
GL accounts keeps everything understandable and Current Assets Sales 6,000,000
organized Cash 1,000,000 Gains of Sales of Assets 500,000
• A ‘Chart of Accounts’ in SAP is a defined variant Fixed Assets 1,000,000 Cost of Goods Sold
which holds all of the GL accounts that one Equipment 1,000,000 Materials 1,000,000
Total Assets $ 4,000,000 Labor 1,000,000
company code would need to conduct its business
Liabilities Overhead 1,000,000
• A global entity can operate in multiple countries Accounts Payable 1,000,000 Selling, General, & Administrative
and can be required to create reports for different Long-Term Liabilities Administrative 1,000,000
accounting authorities (US GAAP vs. European IFRS) Bonds Payable 1,000,000 Rent 750,000
so the same company often requires multiple sets
Stockholders Equity Total SG&A 2,500,000
of different GL accounts to track business activity Common Stock 2,000,000 Operating Income 1,000,000
Retained Earnings 1,000,000
• Every different set of GL accounts will require the Total Liabilities and SE $ 6,000,000
creation of a separate chart of accounts in SAP
• An FI consultant on a new project 12/31/2017

Assets
01/01/2017-12/31/2017
Revenues
needs to complete the following Current Assets

Cash 1,000,000
Sales
Gains of Sales of Assets
6,000,000
500,000
steps: Accounts Receivable

Property, Plants, and Equipment
1,000,000 Total Revenues
Expenses
6,500,000
• Learn how an organization tracks its Fixed Assets

Equipment
1,000,000
1,000,000
Cost of Goods Sold
Materials 1,000,000
accounting information Total Assets $ 4,000,000 Labor 1,000,000
Liabilities Overhead 1,000,000
• Create General Ledger Accounts to Current Liabilities Total Cost of Goods Sold 3,000,000
categorize and group that information Accounts Payable 1,000,000 Selling, General, & Administrative
• Assign those General Ledger Accounts

Long-Term Liabilities Administrative 1,000,000
to a Chart of Accounts Total Liabilities

Stockholders Equity
$ 3,000,000 Depreciation
Total SG&A
750,000
2,500,000
• Determine if multiple Charts of Common Stock
Retained Earnings
2,000,000
1,000,000
Operating Income 1,000,000
Accounts are required to support Total Stockholders Equity $ 3,000,000

Total Liabilities and SE $ 6,000,000
different accounting methodologies or
languages
• Assign the completed
This Chart of
This process
process enables
enables an
an entity
entity to
to prepare
prepare financial
financial reports
reports through
through SAP
SAP and
and makes
makes up up the
the building
building
Accounts to a Company
blocks Code
blocks for
for all
all business
business activity
activity in
in SAP
SAP
Define a Chart of Accounts
• A chart of accounts in SAP is a full set of General Ledger Accounts required by an entity to conduct business. To define a chart of accounts in SAP you must
provide initial information which governs how the general ledger accounts within it will look and operate
• Initially defining a Chart of Accounts requires the following information:

• Name
 Chart of accounts key (A variant code to describe the chart of accounts)
 Description
• General Information
 Maintenance language – All accounts in this Chart of Accounts will be maintained in this language
 Allowable length of the G/L account number – Accounts are allowed to be up to 10 characters
• Controlling Integration
 Manual or automatic creation of cost elements
• Consolidation
 Group chart of accounts – This field can assign a ‘parent’ chart of accounts used in financial consolidation (more details in later slides)
• Status
 “Blocked” indicator – This field can prevent anyone from using this chart of accounts temporarily
Determining a Chart of Accounts
• An organization will need to define a separate chart of accounts every time it needs to set up financial
reports using a different accounting methodology (ie. US GAAP vs. European IFRS) or language (ie.
English vs. German)
• The same Chart of Accounts can be assigned to any company code which uses the same accounting
methodology and language Overall
Entity
English Chart of German

Accounts Chart of Accounts
Company Code 1 Company Code 2 Company Code 3

United States Canada Germany
Example Chart of Accounts Set Up
• For this example company, one English
Chart of Accounts has been created
with the code ‘0010’ and one German
Chart of Accounts has been created
with code ‘INT’
• A chart of accounts that is not yet

completed can be blocked so that no
company code can use it until it is
ready.
• Every company code must have a

chart of accounts assigned to it
Assigning Chart of Accounts to Company Code
• For a chart of accounts to be used in SAP, it must first be assigned to a company code. To accomplish this, assign
the chart of accounts key to a company code in the SAP Configuration Screen shown below
• One chart of accounts can be assigned to several company codes (variant principle).
• If company codes intend to use cross-company code controlling, they must use the same chart of accounts.
Creating General Ledger Accounts
• Once a Chart of Accounts is created, the next step is to define General Ledger Accounts which
align with how the business wants to track its activity from an accounting perspective
• The master data of every General Ledger Account is broken down into two sections:
• Chart of Accounts Segment Data
• Company Code Data
• The Chart of accounts segment contains more general basic information about the accounts
including:
1. Account number
2. Name of the account (as short and as long text)
3. Control fields
4. Consolidation fields
General Ledger ‘Segment Data’
• The ‘Chart of Accounts Segment’ master data information for the
“Buildings” GL Account is shown here
• The critical difference between ‘Chart of Accounts segment Data’

and ‘Company Code Data’ is that segment data cannot be
maintained separately for each company code
• Because the US and Canada company codes are using the same chart
of accounts, the Account Group and text cannot be different between
them.
• The information on the later tabs, ‘Control Data’, ‘Bank/Interest’, etc

can be different by company code
• Because Germany is using a separate Chart of Accounts, they can

rename and renumber “Building” into a separate GL Account with a
German name
General Ledger ‘Segment Data’
• The GL Account Type determines where the data from
the GL account will show up on a financial report
• For example, an account type could mark a GL account as

a balance sheet account, a profit & loss account, or as an
internal-only cost estimate account
• An ‘Account Group’ allows a company to group related

GL accounts together and control the number range and
field status of the accounts
• The G/L Account Types, Account Groups, field statuses,

and number ranges will be described in more detail in
the following slides
Account Types: Balance Sheet and P&L Accounts
In the chart of accounts segment, you specify whether an account is a balance sheet or a profit and loss
statement account
These two types of accounts are treated differently in the closing procedure:
• Balance Sheet Accounts - Balance is carried forward to the same account.
• Profit and Loss Statement Accounts - Balance is carried forward to a retained earnings account and the
profit and loss statement account is set to zero
• Profit and Loss Accounts must be assigned to a Retained Earnings. This is a special account which forms the
connection between the Profit & Loss statement and the Balance Sheet. All income a company earns in a
year is moved from the Profit & Loss accounts to the Retained Earnings account at the end of the year.
• If there is only one retained earnings account, the system automatically uses the one defined in Customizing
• If there are more than one retained earnings account on creating a master record; the retained earnings
account for each profit and loss statement account can be selected
Account Groups for G/L Accounts
• Since a chart of accounts contains many different types of
accounts, they can be grouped into different Account Groups
• By assigning a number range to an account group, you can

ensure that accounts of the same type are within the same
number range
• Number intervals for G/L account master records can overlap
• Keeping related GL accounts in the same number range is

critical for ease of use
• You must enter the account group in the chart of accounts

segment; it controls the appearance of the company code
segment of a G/L account.
Account Group Example
• Three account groups have been created for the US Chart of Accounts ‘0010’
• The GL Account “Buildings” is in the Account Group ‘BS’. Therefore the GL

account code for Buildings must be within the number range defined above.
Account Groups for G/L Accounts
The field status enables you to control the display and maintenance of an account's
master data
• You can assign fields that you do not use the status Hide.
• Fields whose values must not be changed can have the status Display (even in
change mode).
• For fields where you must enter a value, you can define the status Required Entry.
• Fields that can contain an entry, but are not required, can be set to Optional Entry.
Field Status for Master Data
• The fields displayed in the general ledger account master record are not only controlled by the account
group, but also by the transaction that you are using to edit the master data (transaction-specific
control)
• For each field, the field status definitions from the account group and the transaction are taken into
consideration and the one with higher priority is used
• The priorities are (starting with the highest):

1. Hide
2. Display
3. Required entry
4. Optional entry
General Ledger ‘Company Code Segment’
• The Company code segment consists of several important sets of
information that can be provided
• These are entered on the tabs after ‘Type/Description’ on the GL

Account Master Data screen
• To use one of the accounts from the assigned chart of accounts in a

company code, you must fill out the company code data of the account
for that company code. This company code segment is added to the
chart of accounts segment, and together they form the account.
• All of this information can be different by company code
• Whether any of these fields are required, optional, or hidden is

determined by the field status in the Account Group mentioned earlier
General Ledger ‘Company Code Segment’
Information that is relevant to each company
code includes
1. Currency
2. Taxes
3. Reconciliation account
4. Line item display
5. Sort key
6. Field status group
7. House bank
8. Interest calculation information
Reconciliation Accounts
• Some General Ledger accounts have a special designation called ‘Reconciliation Accounts’ which is a concept in
SAP where one account can have multiple subaccounts roll up to it
• An example account which would be designated as a reconciliation account is the ‘Accounts Receivable’
General Ledger Account
• Accounts Receivable refers to all of the money that a company’s customers currently owe it. In the example
below, a company has three customers which collectively owe the company $1,000,000
United States Balance Sheet
12/31/2017
Subledger Accounts Assets (General Ledger Accounts)
Customer Account Customer Name Amount Owed Current Assets
2000000001 Customer 1 300,000 Cash 1,000,000
2000000002 Customer 2 300,000 Accounts Receivable 1,000,000
2000000003 Customer 3 400,000 Property, Plants, and Equipment
Fixed Assets 1,000,000
Equipment 1,000,000
Total Assets $ 4,000,000
Reconciliation Accounts Example
• In this case the ‘Accounts Receivable’ general ledger account would be set up as a reconciliation account. This
account would be assigned to all customer accounts in the customer master data (which will be covered in more
detail later)
• All postings to the customer accounts (subledger accounts) are automatically posted to the assigned reconciliation
accounts.
• Because of this connection, you can never post an amount directly to a reconciliation account. The account is only
able to display the aggregate balance of all subledger accounts assigned to it.
• You define a G/L-account as a reconciliation account by entering one of the following account types in the field
Reconciliation Account for Account Type:
D for Accounts Receivable

K for Accounts Payable
Open Item Management
• Items in accounts with open item management are specified as open or cleared.
• Accounts with open item management must have line item display activated.
• You should use open item management for the following accounts:
• Bank clearing accounts
• Clearing accounts for goods receipt/invoice receipt
• Salary clearing accounts.
• You can only activate or deactivate open item management if the account has a
zero balance.
Open Item Manage Example
• Certain processes in SAP are enabled by selecting the
‘Open Item Managed’ checkbox in the GL Account master
data.
• For example, a customer invoice is created indicating that

a customer has bought $1,000 worth of goods. A posting
has been made to SAP showing that the $1,000 is ‘Open’
on the customer account. You can run a report to see how
much is ‘Open’ for any customer in the system. This easily
indicates what any customer owes your company.
• The example report on the right indicates that a user only

wants to see ‘Open Items’ for Customer 491000 in
Company Code 1000.
Open Item Manage Example
• The result of the report is that three invoices were found.
They have a red circle at the front of the line indicating that
they are ‘Open’ and have not yet been paid.
• Later, when the customer pays for some of these invoices,

there is a process where SAP can ‘Clear’ these accounts to
indicate they have been paid.
• Clearing documents will be discussed in more detail in the

discussion on Document Posting & Control
• It is important to note that this process cannot be enabled

unless ‘Open Item Management’ is selected in the GL
Account Master Data
• For accounts that do not use clearing, this should not be

enabled
Account in Local Currency
• You can select one of the following currencies as account currency:
• Local currency
• Foreign currency
• If the account currency is the local currency, the account can be posted to in any
currency. The other currencies are translated into the local currency for each line
item.
• Accounts with a foreign currency as the account currency can only be posted to
in this foreign currency.
Group Consolidation
• If an entity wants to prepare reports for data which is contained in multiple countries around the world, there needs to be a method to
allow them to complete this consolidation
• In the example below, if the company is headquartered and publicly traded in the US, the Securities and Exchange Commission will require
them to submit financial statements which includes accounting information from all countries that they operate in
• SAP has two approaches to this issue: Group Chart of Accounts and Country-Specific Chart of Accounts
Overall
Entity


Group Chart of Accounts Methodology
Overall
Entity
Group Chart Group Chart of

of Accounts Accounts
Operational
Chart of
Accounts

Group Chart of Accounts
• To use the Group Chart of Accounts approach, this example would require entering the
code for the English Chart of Accounts in the initial set up screen of the German Chart of
Accounts
• This group chart of accounts must contain all of the group accounts.
• The group chart of accounts must be assigned to each operational chart of accounts. After you have
done this, the “Group Account Number” field in the chart of account segments of the operational
charts of accounts becomes a required entry field.
• You must enter the group account number in the chart of accounts segment of the operational account.
Different accounts of one operational chart of accounts can refer to the same group account.
• You must use a financial statement version for the group chart of accounts.
Disadvantage:
• Because the company codes use different operational charts of accounts, you cannot carry
out cross-company code controlling.
Country Chart of Accounts Methodology
Overall Entity
Operational
Chart of English Chart of
Accounts Accounts

Country-Specific German Chart of

Chart of Accounts Accounts
Country Chart of Accounts
• An alternative to using a group chart of accounts is to use a country chart of accounts. All
company codes use the same operational chart of accounts
• Company codes that nevertheless require a special chart of accounts for external reporting have the following
option:
• A country chart of accounts is assigned.
• The country chart of accounts number (alternative account number) is entered in every company code
segment. Every country chart of accounts number can only be used once.
• Since all company codes use the same operational chart of accounts for postings, you can carry
out cross-company code controlling.
Disadvantage:
• Accounting clerks who may be familiar with the country charts of accounts will first have to get
used to using the operational chart of accounts.

SAP FICO Introduction and Basics

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Enterprise Resource Planning and SAP

SAP ERP Introduction

SAP FICO basics

Organization Structure Enterprise Resource

The Finance Transformation PYRAMID

transactional process  HANA Analytics

Finance for  Multi-channel

Finance Finance  S/4 HANA Finance

Chart of Working Governance

Finance Finance  BPO Best practices

• Presentation Server – This is the graphical user interface

• Database Server – This is where all data and business

• Data is stored here only once, there is no need

• The reduction in data footprint allows for

• Significantly more efficient reporting and

• Unlike all previous versions of SAP’s ERP application layer,

• The traditional previous GUI is still available, but business

• SAP Ariba – Cloud based solution for

• SAP Hybris– Cloud based solution for sales

• SAP Success Factors– Cloud based solution

• SAP Concur– Cloud based solution for travel

On Premise Private Cloud Public Cloud

Enterprise Resource Planning Introduction

SAP FICO basics

Organization Structure Enterprise Resource

CO Controlling Manages responsibility accounting

FI Organization Elements involve defining and configuring the elements which

External Reporting Internal Reporting

Regulatory Compliance Ad Hoc

Shareholders / Regulators Internal Management

• This is the key component structure of financial accounting

• Document entry General

• Account Management Asset

• General Ledger Accounts Accounts

• Generates depreciation transactions for the general ledger General

• Generate checks by due date or discount date General

• Produce Reports Asset

• Invoices or bills customer for amount due Ledger

Cash Purchases Sales

Sub ledger Acct..

Traditional set of books contained:

1. General Ledger - Transactions details and summary for the nomenclated

The details are gathered from :

• Accounts balances as per General Ledger

Manual or batch posting

and Profitability Analysis automatic

SAP FICO basics

Organization Structure Enterprise Resource

Group Company A Operating

SAP FICO basics

Master Data concepts

SAP Master Data

General Ledger and the Chart of Accounts

General Ledger and

company’s financial reports 160000

• In this example, ‘Land’, ‘Building’,

• An FI consultant on a new project 12/31/2017

needs to complete the following Current Assets

steps: Accounts Receivable

• Learn how an organization tracks its Fixed Assets

• Assign those General Ledger Accounts

to a Chart of Accounts Total Liabilities