sap financials

21
SAP Financials A Project Report Jamil Siddiqui 6/12/2013 This Report is based on SAP-FI module submit to Mr. Ashraf Bana

Upload: siddiqui-jamil

Post on 20-Oct-2015

51 views

Category:

Documents


4 download

DESCRIPTION

Details of SAP Financials...

TRANSCRIPT

SAP Financials A Project Report

Jamil Siddiqui

6/12/2013

This Report is based on SAP-FI module submit to Mr. Ashraf Bana

P a g e | 1

Acknowledgement

In the name of Almighty Allah who is the most beneficial and merciful who gave me the

strength and courage to make this report successfully.

I am thankful to Mr. Ashraf Bana who taught SAP Inventory Management in PAF KIET

City Campus Karachi in MBA ERP Program by the concept of SAP System which was

developed in his course I created this report based on SAP Financial Accounting module.

This report depicts the general perception of SAP FI module.

P a g e | 2

Table of Contents Page

SAP FI an Overview .......................................................................................................................................................................................................... 2

The FI (Financial Accounting) components ............................................................................................. 2

Accounts Receivables ................................................................................................................................2 Accounts Payable ......................................................................................................................................3 Asset Accounting ...................................................................................................................................... 3 Special Purpose Ledger ............................................................................................................................ 3

Travel Management ................................................................................................................................. 3

Bank Accounting ...................................................................................................................................... 3

Consolidation ........................................................................................................................................... 3

Funds Management ................................................................................................................................. 3

General Ledger ......................................................................................................................................... 3

Objectives ................................................................................................................................................................................................................................... 3

Financial Information System ............................................................................................................................................................................. 4

Purpose ......................................................................................................................................................4

Company ...................................................................................................................................................5

Company Code ......................................................................................................................................... 5

Controlling area ........................................................................................................................................ 5

Chart of Accounts ..................................................................................................................................... 5

Account Groups ........................................................................................................................................ 6

Fiscal Year ................................................................................................................................................. 6

Special Periods .......................................................................................................................................... 6

Cost Centre ................................................................................................................................................ 7

Cost Centre Group .....................................................................................................................................7 Profit Centre ...............................................................................................................................................7 Profit Center Group ................................................................................................................................... 7

Posting Keys ...............................................................................................................................................7 Document Type ........................................................................................................................................ 10

Reverse Document Type .......................................................................................................................... 11 MASTERS ................................................................................................................................................................................................................................... 12 General Ledger Account Codes................................................................................................................ 12 Creation of Codes ..................................................................................................................................... 13

Primary and Secondary Cost Elements ................................................................................................................................................... 13 Primary Cost Elements / Revenue Elements ........................................................................................... 13 Secondary Cost Elements .............................................................................................................. 14

Integration with FI (Financial Accounting) ............................................................................................... 14 Vendor Master Data ................................................................................................................................. 14

Customer Master Data ............................................................................................................................. 14

Asset Master Data .................................................................................................................................... 15 Bank Master Data ..................................................................................................................................... 15

Account Receivables & Accounts Payables ........................................................................................... 16 Bank Accounting ...................................................................................................................................... 16

Conclusion ............................................................................................................................................................................................................................... 18 References............................................................................................................................................................................................................................... 18

Appendix A .............................................................................................................................................................................................................................. 18

Appendix B .............................................................................................................................................................................................................................. 18

P a g e | 3

SAP FI an Overview

The SAP FI Module has the capability of meeting all the accounting and financial needs of an organization. It is within this module that Financial Managers as well as other Managers within a business can review the financial position of the company in real time as compared to legacy systems which often times require overnight updates before financial statements can be generated and run for management review. The real-time functionality of the SAP modules allows for better decision making and strategic planning. The FI (Financial Accounting) Module integrates with other SAP Modules such as MM (Materials Management), PP (Production Planning), SD (Sales and Distribution), PM (Plant Maintenance. The FI Module also integrates with HR (Human Resources) which includes PM (Personnel Management), Time Management, Travel Management; Payroll Document transactions occurring within the specific modules generate account postings via account determination tables.

The FI (Financial Accounting) components

The FI Module comprises several components as follows Accounts Receivables Accounts Payable Asset Accounting Special Purpose Ledger Travel Management Bank Accounting Consolidation Funds Management General Ledger

Accounts Receivables Accounts Receivables records all account postings generated as a result of Customer sales activity. These postings are automatically updated in the General Ledger. It is within the Accounts Receivables Module that can monitor aging of the receivables and generate customer analysis. The Accounts Receivable Module also integrates with the General ledger, Sales and Distribution, and Cash Management Modules.

P a g e | 4

Accounts Payable Accounts Payable records account postings generated as a result of Vendor purchasing activity. Automatic postings are generated in the General Ledger as well. Payment programs within SAP enable the payment of payable documents by check, EDI, or transfers.

Asset Accounting Asset Accounting is utilized for managing a company’s Fixed Assets. SAP allows company to categorize assets and to set values for depreciation calculations in each asset class. Special Purpose Ledger Special Purpose Ledger is used to define ledgers for reporting purposes. Data can be gathered from internal and external applications. Travel Management Travel Management provides management of all travel activities including booking trips and handling of expenses associated with travel. Bank Accounting Bank Accounting allows for management of bank transactions in the system including cash management. Consolidation Consolidation enables the combining of financial statements for multiple entities within an organization. These statements provide an overview of the financial position of the company as a whole. Funds Management Funds Management allows management to set budgets for revenues and expenses within the company as well as track these to the area of responsibility. General Ledger General Ledger is fully integrated with the other SAP Modules. It is within the General Ledger that all accounting postings are recorded. These postings are displayed in real-time providing up-to-date visibility of the financial accounts.

Objectives The main focus of this report is based on SAP-FI. This report describes how SAP FI module is implemented and works in an Enterprise & how it fulfills the requirements of a company regarding its financial processes.

P a g e | 5

Business process associated with the SAP FI module

Financial Information System Purpose The financial information system enables to run evaluations for the general ledger, accounts receivable, and accounts payable. The Financial Accounting application component is the primary database of the financial information system. This application is a central data pool that collects all accounting data from within an organization. The function of the financial information system is to evaluate this extensive database online and display the information on the screen in an easy-to-read form. Within the accounts receivable and payable information systems, you can analyze individual operational areas as often as you require. You can evaluate, among other things, payment history, and cash discount history, currency exposure among customers and vendors, or aging reports.

P a g e | 6

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 The smallest organizational unit for which individual financial statements are created according to the relevant legal requirements. A company can include one or more company codes. A company’s financial statements also from the basis of consolidated financial statements. Company Code Smallest organizational unit of external accounting for which a complete, self-contained set of accounts can be created. This includes the entry of all transactions that must be posted and the creation of all items for legal individual financial statements, such as the balance sheet and the profit and loss statement. Controlling area The Controlling Area is an entity in Controlling. All the CO transactions in R/3 system would be entered with respect to the controlling area. There will be one controlling area to which all the company codes will be assigned. All Company codes shall use same Chart of Accounts and Fiscal Year Variant.

Chart of Accounts The chart of accounts list is a directory of all charts of accounts that can be used in a client and must assign one chart of accounts to each company code. Therefore need at least one chart of accounts for a group company in the system. The chart of accounts is shared by Financial Accounting as well as cost/revenue accounting. The items in a chart of accounts can be both expense or revenue accounts in Financial Accounting and cost or revenue elements in cost/ revenue accounting. We can define the length of the G/L account numbers. The maximum length is ten characters. Internally, the system keeps the account numbers with a ten character length. The system pads purely numeric account numbers with zeroes from the left and alphanumeric account numbers from the right.

P a g e | 7

Account Groups The account group is a summary of accounts based on criteria that effects how master records are created. The account group determines: The number interval from which the account number is selected when a G/L account is

created. The screen layout for creating G/L accounts in the company code-specific area. Fiscal Year Usually a period of twelve months for which a company regularly creates financial statements and checks inventories the fiscal year may correspond exactly to the calendar year, but this is not obligatory. Example 1. 0L- Fiscal Year from April to March. It will be leading Ledger. 2. SL- Fiscal Year from July to June. It will be Secondary Ledger.

We have to enter the documents in any one ledger and the entry will be posted in other ledger accordingly.

Posting Period and Counting

Special Periods Special posting periods that subdivide the last regular posting period for closing operations. Irrespective of how we have defined our fiscal year, we can also use special periods. Special periods subdivide the year-end closing period. They therefore merely divide the last posting period into several closing periods. This enables us to create several supplementary financial Statements.

P a g e | 8

A fiscal year usually has 12 posting periods. In General Ledger Accounting, we have defined four special periods so out total accounting periods will be 16 for Greaves Cotton Limited and Premium Energy Transmission Limited. Cost Centre An organizational unit within a controlling area that represents a defined location of cost incurrence. Cost centers would be divided into main groupings. Example: 1) Production 2) Service 3) Administration Cost Centers 4) Selling & Distribution Cost Centers Cost Centre Group We can collect cost centers according to various criteria into groups. This enables us to use cost centers to depict the structure of the organization in the SAP System. We can use the groups to build cost center hierarchies, which summarize the decision-making, responsibility, and control areas according to the particular requirements of the organization. The individual cost centers form the lowest hierarchical level. Profit Centre A profit center is an organizational unit in accounting that reflects a management-oriented structure of the organization for the purpose of internal control. We can analyze operating results for profit centers using either the cost-of-sales or the period accounting approach. By calculating the fixed capital as well, we can use our profit centers as investment centers.

Profit Center Group A profit center group is a hierarchical structure of profit centers. We can use profit center groups to group profit centers together according to company-specific criteria. Use Profit center groups are used for reporting, allocations or in various planning functions, where it does not make sense to enter or display data at the lowest level (with a high level of detail).

P a g e | 9

The standard hierarchy is a special type of profit center group. It has to contain all profit centers belonging to the controlling area and reflect the organizational structure of Profit Center Accounting. We can collect cost centers according to various criteria into groups. This enables us to use cost centers to depict the structure of the organization in the SAP System.

Posting Keys Two character numerical key that controls the entry of line items. The posting key determines:

Account type Debit/credit posting Layout of entry screens

Use When we enter a posting, enter a posting key for each item. This key determines how the item is posted. Posting keys are defined at client level and therefore apply to all company codes. The posting key determines:

P a g e | 10

The data we can enter in the line item How data we post is processed How the system updates the data we enter

Posting keys are differentiated by customer, vendor and G/L accounts. Apart from the General Ledger Accounting (FI-GL) and Accounts Receivable and Payable (FI-AR/AP) components, there are also posting keys for asset and material accounts.

P a g e | 11

Document Type Document types are valid for all clients. We specify a number range key for each document type. We create the desired number range intervals for each number range key based on the company code. This means that we can specify intervals of different sizes for the same number range.

The preset document types cover business transactions in Financial Accounting for:

General ledger accounting Accounts receivable Accounts payable Asset accounting Consolidation

P a g e | 12

Reverse Document Type If there are postings linked to an activity that is to be reversed, you can make reverse postings. If you need to reverse posted flows relating to a transaction, you first have to reverse the activity relating to the transaction. The flows which have been posted are then flagged accordingly. The corresponding functions are offered in the Trading and Back office areas. The flows are flagged to indicate that the related documents have to be reversed.

P a g e | 13

MASTERS A general ledger is a book containing all the accounts for recording transactions relating to a company's assets, liabilities, owners' equity, revenue, and expenses. In an ERP, the general ledger works as a central repository for accounting data transferred from all sub-ledgers or modules like accounts payable, accounts receivable, cash management, fixed assets, purchasing and projects. General Ledger Account Codes A G/L account number identifies the account code in a Chart of accounts and has to be defined for each Company Code before any postings can be made to the same. The GL account has been defined as a 6 digit numerical code having a series as displayed in the slide herein below.

P a g e | 14

Creation of Codes G/L account master data is spread out over a chart of accounts area and an area specific to the company code.

We can use the chart of accounts for one or more company codes. It contains information that applies to master records in the company codes using the chart of accounts. The area specific to the company code contains information that can be different for each company code.

The account number and name are predefined, for example, in the chart of accounts, while the currency the account can use is specified in the company code-dependent area.

Information in the chart of accounts controls how you create a master record in company codes. Therefore, you must first create the master record in the chart of accounts before you can create it in the company code. You can create a master record in two ways:

Create the chart of accounts area first and then, in a second step, create the area specific to the company code.

Create a master record in the chart of accounts and company code in one step.

You should, however, create G/L accounts in two steps if you want to predefine values for creating the area specific to the company code from the head office. Otherwise, you can create G/L accounts in one step.

Charts of accounts are delivered with the standard R/3 System. Before creating G/L accounts, you should determine which specifications to make in the master records. To do this, you should analyze the standard charts and G/L accounts (area specific to the company code). By using the standard examples, you can see which specifications need to be made in your G/L accounts.

The system offers a range of methods for creating G/L accounts. Depending on how your organization is structured, you should select those methods that best fulfill the requirements in your organization.

Primary and Secondary Cost Elements

Primary Cost Elements / Revenue Elements

When creating a primary cost element or revenue element, it must be listed first as a G/L account in the chart of accounts and defined as an account in Financial Accounting. In other words, primary cost elements and revenue cost elements. Primary cost elements are like material costs, personnel costs, energy costs etc. where a corresponding GL account exists in FI to allow costs to flow. When you create a primary cost/revenue element, the SAP System checks whether a corresponding account exists in FI.

P a g e | 15

Secondary Cost Elements

Secondary cost elements are used exclusively in Controlling (CO) and need not be defined in FI. It can be used for internal allocation purpose. Secondary cost elements are like production costs, material overheads, production overheads.

Integration with FI (Financial Accounting)

Cost Elements track the type of costs or spend. They form categories of costs that are independent from external or financial reporting requirements, but help management to track costs according to internal accounting policies. The primary Cost Elements are more or less mirror images (copies) of P&L revenue and expense accounts from the financial chart of accounts. The integrated mass processing moves (and allocates) costs from primary into secondary Cost Elements. Those secondary Cost Elements no longer are tied to the accounts used by financial and tax reporting (chart of accounts).

Vendor Master Data

The vendor master database contains information about the vendors that supply an enterprise. This information is stored in individual vendor master records. A vendor master record contains the vendor’s name and address, as well as data such as:

The currency used for ordering from the vendor Terms of payment Names of important contact persons (sales staff)

Since, to the accounts department, vendors are generally creditors (accounts payable), the vendor master record also contains accounting information, such as the relevant control account (reconciliation account) in the general ledger.

Therefore, the vendor master record is maintained by both Accounting and Purchasing.

The purchasing data pertaining to a vendor must have previously been maintained before you can order from the vendor.

The accounting data pertaining to a vendor must have previously been maintained before you can enter the vendor's invoices in the system for payment.

Customer Master Data

Customer Master Records are divided primarily into General data, Company code Data and Sales Organization data so that each company code and each sales organization can store its own information for doing business with customers.

This data is applicable to every Customer in the company. The General data includes the Customer name, Customer address with Pin Code, E-mail address, Fax number, Language, Telephone number Etc.

P a g e | 16

Information such as Reconciliation account (Customer control account), payment terms, House bank, payment methods, and Withholding tax information are recorded in company code data.

This data is relevant to the sales organizations and distribution channels of a company. Data that is stored in this area includes data on order processing, shipping address, and billing address.

Asset Master Data

Asset master record is the reliable and authoritative data maintained by an organization relating to the various fixed and intangible assets used by it.

Key features of Asset Master Data are

Master data does not change frequently

Fixed number of key attributes can be used to capture the relevant details of the asset for analysis and reporting

A typical asset master record contains:

Data relating to the asset stored in the asset master record in the form of fields

Fields structured together in the asset master record in the form of Tabs

Hence the configurations which determine the fields and tabs available in an asset master data play an important role while designing the asset master data maintenance system.

Asset Master Document is an attempt to analyze.

How exactly are the fields available in the asset master record determined

Bank Master Data

In the R/3 System, bank master data is stored centrally in the bank directory.

The bank directory contains the bank master data. This includes the bank address data and control data, such as the SWIFT Code and Bank Groups. Details for post office banks should be identified specially. The bank directory must contain the master data for all the banks that you require for payment transactions with your business partners. This includes your banks and the banks of your business partners.

P a g e | 17

Account Receivables & Accounts Payables Accounts Receivable application component records and manages accounting data of all customers. It is also an integral part of sales management. All postings in Accounts Receivable are also recorded directly in the General Ledger. Different G/L accounts are updated depending on the transaction involved. The system contains a range of tools that you can use to monitor open items, such as account analyses, alarm reports, due date lists, and a flexible dunning program. The correspondence linked to these tools can be individually formulated to suit your requirements. This is also the case for payment notices, balance confirmations, account statements, and interest calculations. Incoming payments can be assigned to due receivables using user-friendly screen functions or by electronic means, such as EDI. The payment program can automatically carry out direct debiting and down payments. Accounts Payable application component records and manages accounting data for all vendors. It is also an integral part of the purchasing system. Deliveries and invoices are managed according to vendors. The system automatically triggers postings in response to the operative transactions. In the same way, the system supplies the Cash Management application component with figures from invoices in order to optimize liquidity planning. Payables are paid with the payment program. The payment program supports all standard payment methods (such as checks and transfers) in printed form as well as in electronic form (data medium exchange on disk and electronic data interchange). This program also covers country-specific payment methods. Postings made in Accounts Payable are simultaneously recorded in the General Ledger where different G/L accounts are updated based on the transaction involved (payables and down payments, for example). The system contains due date forecasts and other standard reports that you can use to help you monitor open items. You can design balance confirmations, account statements, and other forms of reports to suit your requirements in business correspondence with vendors. There are balance lists, journals, balance audit trails, and other internal evaluations available for documenting transactions in Accounts Payable.

Bank Accounting Addition to the bank details, you must also define the bank accounts that you have at your bank. You define these under an account ID which is unique per company code and house bank. This account ID can incorporate attributes of the bank account, and you are advised to choose an ID that reveals as much information about the account as possible. You will use this ID to be able to refer to your bank account both when entering specifications for the payment program, and in G/L account master records.

P a g e | 18

You can define your business partners' bank details in the customer or vendor master record by entering the bank country, the bank key (this may be the bank number) and the bank account number for each of your business partners' bank accounts. This information can then be used for automatic payment programs. The payment program uses these details to determine the bank address and bank account number for credit transfer forms.

P a g e | 19

Conclusion

After this report we can easily understand the SAP FI module In General perspective; however this is not end yet because SAP FI is a very vast module each & every sub module/component has its own entity & depth but as general & Important Information & details this report contains a very keen knowledge about SP FI module.

References

SAP FI-CO TRAINING MANUAL by Greaves Cotton Limited SAP Financial Information System (FI) Release 4.6C © Copyright 2001 SAP AG All rights reserved SAP General Ledger Accounting (FI-GL) Release 4.6C © Copyright 2001 SAP AG All rights reserved SAP FI Accounts Receivable and Accounts Payable Release 4.6C © Copyright 2001 SAP AG All

rights reserved SAP Bank Accounting (FI-BL) Release 4.6C © Copyright 2001 SAP AG All rights reserved

Appendix A

Swift Code ISO 9362 (also known as SWIFT-BIC, BIC code, SWIFT ID or SWIFT code) is a standard format of Business Identifier Codes approved by the International Organization for Standardization (ISO). It is a unique identification code for both financial and non-financial institutions.

The acronym SWIFT stands for the Society for Worldwide Interbank Financial Telecommunication. When assigned to a non-financial institution, the code may also be known as a Business Entity Identifier or BEI. These codes are used when transferring money between banks, particularly for international wire transfers, and also for the exchange of other messages between banks. The codes can sometimes be found on account statements. The SWIFT network does not require a specific format for the transaction so the identification of accounts and transaction types is left to agreements of the transaction partners.

Appendix B EDI Electronic data interchange (EDI) is a method for transferring data between different computer systems or computer networks. It is commonly used by big companies for e-commerce purposes, such as sending orders to warehouses or tracking their order. It is more than mere e-mail; for

P a g e | 20

instance, organizations might replace bills of lading and even cheque with appropriate EDI messages. It also refers specifically to a family of standards.

In 1996, the National Institute of Standards and Technology defined electronic data interchange as "the computer-to-computer interchange of strictly formatted messages that represent documents other than monetary instruments. EDI implies a sequence of messages between two parties, either of whom may serve as originator or recipient. The formatted data representing the documents may be transmitted from originator to recipient via telecommunications or physically transported on electronic storage media." It distinguishes mere electronic communication or data exchange, specifying that "in EDI, the usual processing of received messages is by computer only. Human intervention in the processing of a received message is typically intended only for error conditions, for quality review, and for special situations.