Introduction to Financial Accounting Management EGN 5622 Enterprise Systems Integration (Professional MSEM) Fall, 2011 Introduction to Financial Accounting Management EGN 5622 Enterprise Systems Integration (Professional MSEM) Fall, 2011

Introduction to Financial Accounting Management Theories & Concepts EGN 5622 Enterprise Systems Integration (Professional MSEM) Fall, 2011 Introduction to Financial Accounting Management Theories & Concepts EGN 5622 Enterprise Systems Integration (Professional MSEM) Fall, 2011

January 2007 (v1.0) © 2007 by SAP AG. All rights reserved. SAP University Alliance. The Rushmore Group, LLC3 Financial Accounting (FI) Financial accounting is designed to collect transactional data that provides the foundation for preparing a standard portfolio of reports In general, these reports are, primarily but not exclusively, directed at external parties Standard reports include: ◦Balance Sheet ◦Income Statement ◦Cash Flows (Statement)

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.4 Target Audience Internal Executives Senior Management Account managers Administration Staff Employees External Legal Authorities Banks Auditors Shareholders Insurance Taxing Authorities Media Financial Analysts

January 2007 (v1.0) © 2007 by SAP AG. All rights reserved. SAP University Alliance. The Rushmore Group, LLC5 FI Organizational Objects Represent legal and organizational views of an enterprise Form a framework to support business activities in a manner desired by the management Accurately collect and organize business information Enable and support business planning and decisions

January 2007 (v1.0) © 2007 by SAP AG. All rights reserved. SAP University Alliance. The Rushmore Group, LLC6 FI Organizational Objects Chart of Accounts General Ledgers (G/L) ◦Customer Accounts and Accounts Receivable (A/R) ◦Vendor Accounts and Accounts Payable (A/P)

January 2007 (v1.0) © 2007 by SAP AG. All rights reserved. SAP University Alliance. The Rushmore Group, LLC7 Chart of Accounts It is a classification scheme consisting of a group of general ledger (G/L) accounts. It provides a framework for the recording of values to ensure an orderly rendering of accounting data. It contains the G/L accounts used by one or more company codes.

January 2007 (v1.0) © 2007 by SAP AG. All rights reserved. SAP University Alliance. The Rushmore Group, LLC8 General Ledger (G/L) Accounts General Ledger is a data storage area created with a unique combination of Company Code and Chart of Accounts General Ledger contains a listing of transactions effecting each account in the Chart of Accounts and the respective account balance It is used for preparing financial accounting statements

January 2007 (v1.0) © 2007 by SAP AG. All rights reserved. SAP University Alliance. The Rushmore Group, LLC9 General Ledger (G/L) Accounts Each account with a unique account number is designated into a balance sheet account group and profit and loss account group. Balances in balance sheet accounts are carried forward into the same account, and balances in the profit and loss accounts are carried forward into different, specified accounts (for example, retaining earning account).

January 2007 (v1.0) © 2007 by SAP AG. All rights reserved. SAP University Alliance. The Rushmore Group, LLC10 General Ledger (G/L) Accounts Balance sheet accounts include assets, liabilities, and equity. Profit and loss accounts include revenue and expenses.

January 2007 (v1.0) © 2007 by SAP AG. All rights reserved. SAP University Alliance. The Rushmore Group, LLC11 General Ledger (G/L) Accounts Assets: A company owns, such as cash, inventory of materials, land, and buildings. ◦Current assets:  Cash/bank  Receivable  Inventory  Prepaid expenses ◦Fixed assets  Land  Building

January 2007 (v1.0) © 2007 by SAP AG. All rights reserved. SAP University Alliance. The Rushmore Group, LLC12 General Ledger (G/L) Accounts Liability: A company owes to others, including money owed to vendors (payables) and loans from financial institutions. ◦Short term:  Payable ◦Long term:  Loans

January 2007 (v1.0) © 2007 by SAP AG. All rights reserved. SAP University Alliance. The Rushmore Group, LLC13 General Ledger (G/L) Accounts Equity: ◦Returned earnings ◦Stocks owned by shareholders Assets = Liability + Equities

January 2007 (v1.0) © 2007 by SAP AG. All rights reserved. SAP University Alliance. The Rushmore Group, LLC14 Balance Sheet – Sample Assets Cash1,000 Accounts Receivable3,000 Equipment 500 Total Assets4,500 Liabilities Accounts Payable2,250 Taxes Payable 250 Total Liabilities 2,500 Equity Common Stock1,750 Retained Earnings 250 Total Equity2,000 Total Liabilities and Equity4,500

January 2007 (v1.0) © 2007 by SAP AG. All rights reserved. SAP University Alliance. The Rushmore Group, LLC15 Income Statement Presentation of an organization’s 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

January 2007 (v1.0) © 2007 by SAP AG. All rights reserved. SAP University Alliance. The Rushmore Group, LLC16 General Ledger (G/L) Accounts Expenses: ◦Cost of Goods Sold (COGS) ◦Payroll ◦Utilities ◦Taxes ◦Interest Net Income before TAX= Revenue–Expenses Net Income after TAX= Revenue-Expenses -Tax

January 2007 (v1.0) © 2007 by SAP AG. All rights reserved. SAP University Alliance. The Rushmore Group, LLC17 Income Statement - Sample Revenue Sales11,000 Deductions -750 Total Revenue10,250 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

January 2007 (v1.0) © 2007 by SAP AG. All rights reserved. SAP University Alliance. The Rushmore Group, LLC18 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)

January 2007 (v1.0) © 2007 by SAP AG. All rights reserved. SAP University Alliance. The Rushmore Group, LLC19 Subsidiary Ledgers (Sub-ledgers) and Reconciliation Accounts Sub-Ledgers: Some financial data are not directly maintained in the general ledger. For example, customers accounts, which track the amounts customers owe and payments they paid, are maintained separately for each customer. Similarly, data about each vendor are maintained in separate accounts. Such accounts are called sub-ledgers, and don’t show up in the general ledger.

January 2007 (v1.0) © 2007 by SAP AG. All rights reserved. SAP University Alliance. The Rushmore Group, LLC20 Subsidiary Ledgers (Sub-ledgers) and Reconciliation Accounts Reconciliation accounts : part of general ledger accounts that consolidate data from a group of related sub-ledger accounts, such as customers and vendors. The reconciliation account for customers is accounts receivable. The reconciliation account for vendors is accounts payable. Transaction data must be posted to sub- ledger accounts, and then they are automatically posted to the corresponding reconciliation account.

January 2007 (v1.0) © 2007 by SAP AG. All rights reserved. SAP University Alliance. The Rushmore Group, LLC21 Subsidiary Ledgers (Sub-ledgers) and Reconciliation Accounts The balance in the reconciliation account (for example accounts receivable and accounts payable) is the sum of the postings in the related sub-ledger accounts (for example, customers and vendors, respectively).

January 2007 (v1.0) © 2007 by SAP AG. All rights reserved. SAP University Alliance. The Rushmore Group, LLC22 Customer and Vendor Accounts Customer and Vendor Account balances are usually maintained in FI through integrated accounts receivable and accounts payable (sub-modules) Financial postings for Customers and Vendors are usually made directly to their respective individual accounts and concurrently to the General Ledger

January 2007 (v1.0) © 2007 by SAP AG. All rights reserved. SAP University Alliance. The Rushmore Group, LLC23 Customer Accounts Accounts Receivable Sub-Module ◦Information with respect to customers who purchase the enterprise’s goods and services such as sales and payments made ◦Substantive and important integration between Sales and Distribution (SD) and FI ◦Billings in SD generate FI journal entries for sales activity

January 2007 (v1.0) © 2007 by SAP AG. All rights reserved. SAP University Alliance. The Rushmore Group, LLC24 Customer Accounts Accounts Receivable (General Ledger) Customer Customer Customer Customer 189

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.25 Accounts Receivable Integration Revenue Increase to A/R Goods Issue Sales Order Invoce Income Statement Balance Sheet COGS Decrease to Inventory SD Sales and Distribution

January 2007 (v1.0) © 2007 by SAP AG. All rights reserved. SAP University Alliance. The Rushmore Group, LLC26 Vendor Accounts Accounts Payable Sub-Module ◦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 FI ◦Purchase and goods receipt activities in MM generate FI journal entries

January 2007 (v1.0) © 2007 by SAP AG. All rights reserved. SAP University Alliance. The Rushmore Group, LLC27 Vendor Accounts Accounts Payable (General Ledger) Vendor Vendor Vendor Vendor

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.28 Accounts Payable Integration Increase to A/P Decrease to GR/IR Goods Receipt Balance Sheet Increase to Inventory Increase to GR/IR Invoice Receipt

January 2007 (v1.0) © 2007 by SAP AG. All rights reserved. SAP University Alliance. The Rushmore Group, LLC29 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

Introduction to Financial Accounts Management SAP Implementation EGN 5622 Enterprise Systems Integration (Professional MSEM) Fall, 2011 Introduction to Financial Accounts Management SAP Implementation EGN 5622 Enterprise Systems Integration (Professional MSEM) Fall, 2011

R/3 SAP Module View Integrated Solution Client / Server Open Systems Financial Accounting Controlling Fixed Assets Mgmt. Project System Workflow Industry Solutions Production Planning Sales & Distribution Materials Mgmt. Plant Management Quality Maintenance Human Resources

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.32 Components of Financial Accounting Financial Accounting (FI) Accounts Receivable Accounts Payable Special Purpose Ledger Fixed Assets Banks General Ledger

Business Processes Integration January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.33 MM PP SD Org Data Rules MM PP SD Master Data MM PP SD FISD MM FI PP

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.34 Business Processes Integration ◦Financial Accounting (FI) ◦Materials Management (MM) ◦Sales and Distribution (SD) ◦Production Planning (PP)

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.35 Integration Procurement Process (Procure-to-Pay) Purchase Requisition Payment to Vendor Notify Vendor Shipment Invoice Receipt Goods Receipt Purchase Order

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.36 Sales Order Process (Order-to-Cash) Integration Sales Order Entry Post Goods Issue Invoice Customer Pick Materials Receipt of Customer Payment Pack Materials Check Availability

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.37 Schedule and Release Shop Floor Documents Goods Receipt Order Settlement Goods Issue Production Proposal (Planning/Other) Completion Confirmation Capacity Planning Production Process (Make-to-Stock)

Financial Accounting Module January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.38 Org Data Rules Master Data FI

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.39 Financial Accounting Module Organization Data Master data Rules Transaction Data

Financial Accounting Module January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.40 Org Data FI

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.41 Organizational Data A hierarchy in which the organizational units in an enterprise are arranged according to functions and tasks Are static data and are rarely changed Once the organizational structure is decided, it is not easy to change it The definition of organization units is a fundamental step; it is a critical factor in how the company will be structured

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.42 Organization Structures (Review) ◦Client ◦Company ◦Company code ◦Chart of accounts ◦Fiscal year variant ◦Credit control area

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.43 Client (review) Highest hierarchical level in an SAP environment A complete database containing all the tables necessary for creating a fully integrated information system Master records are created at the client level

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.44 Company (Review) At the company level, consolidated financial statements are created. A company can include one or more company codes All company codes in a company must use the same chart of accounts and fiscal year Company is not required in the definition of an enterprise (it is optional)

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.45 A legally independent entity The smallest organizational unit for which accounting can be carried out Business transactions are processed at this level Accounts are managed at this level Legal financial statements, such as the balance sheet and the income statement, are generated at this level using the General Ledger balances Company Code (Review)

January 2007 (v1.0) © 2007 by SAP AG. All rights reserved. SAP University Alliance. The Rushmore Group, LLC46 Company Code (Review) A legally independent entity. Represents an independent legal accounting unit. The smallest organizational unit for which accounting can be carried out Business transactions are processed at this level Legal financial statements, such as the balance sheet and the income statement, are generated at this level using the General Ledger balances Liabilities & Owners Equity Assets

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.47 Client Company Code Organizational Structure

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.48 Chart of Accounts (review) 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

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.49 Company Code 010 Company Code 038 Company Code 110 Company Code 117 United States Chart of Accounts Canadian Chart of Accounts Chart of Accounts

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.50 Client Company Chart of Accounts Company Code Organizational Structure

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.51 Fiscal Year Variant Specifies the accounting fiscal year for reporting purposes Special periods are created to aid in the quarterly or year-end adjusting process completed prior to preparing financial statements A single fiscal year variant is assigned to each company code

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.52 Client Company Chart of Accounts Fiscal Year Variant Company Code Organizational Structure

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.53 Credit Control Area An organizational unit or area of responsibility created to control customer credit limits A company code is assigned to one and only one credit control area Multiple company codes can be assigned to one credit control area

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.54 Client Company Chart of Accounts Company Code Fiscal Year Variant Credit Control Area Organizational Structure for Financial Accounting

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.55 Consolidation and Business Areas Company A company is an organizational unit in Financial Accounting which represents a business organization according to the requirements of commercial law in a particular country. Business Areas A unit in an enterprise that groups product and market combinations as homogeneously as possible for the purpose of developing unified business policy.

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.56 Client General Motors GM Corp. Chart of Accts GMCCadillacChevrolet Corporate Fiscal Year Var. GM–Corporate Credit CA Cars Trucks Business Areas Consolidation of Company Codes Optional Organizational Structures

Financial Accounting Module January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.57 Master Data FI

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.58 Master Data (Review) Master data is relatively fixed ◦General Ledger master data ◦Material master data ◦Vendor master data ◦Purchasing information record Before making the master data configurations, you must have completely defined the organizational structure

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.59 Master Data Chart of Accounts Material Master Vendor Master Customer Master

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.60 Master Data Financial Accounting General Ledger Accounts Material Master Vendor Master Customer Master Material Management Vendor Master Material Master Customer / Purchasing Info Records Sales & Distribution Customer Master Material Master Pricing Credit Limits Customer Material Info Records Item Proposal

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.61 FI Master Data General Ledger Master Data ◦Chart of Accounts Data ◦Company Code Data ◦Reconciliation Accounts  Accounts Receivable  Accounts Payable  Goods Receipt/Invoice Receipt General Ledger Account Balances

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.62 General Ledger – Master Data General Ledger accounts are created at the client level A unique master record is created for each General Ledger account Business transactions are posted to the portfolio of General Ledger accounts made available to a company through the assignment of a specific Chart of Accounts

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.63 General Ledger – Master Data (continued) Contains control information for: ◦Data entry ◦Data processing Specifies what is in: ◦The balance sheet, and ◦The income statement

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.64 General Ledger Organization of the Data Contains one or more Chart of Accounts specific information areas Contains one or more Company Code specific information areas In this way, a General Ledger master account can be shared by several combinations of Charts of Accounts and Company Codes

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved CPEN X BS Account number Chart of accounts Account group P&L statement acct type Balance sheet account General Ledger Chart of Accounts Data Account number Name of the Chart of Accounts Account group provides information that controls the creation of the master record for a company code

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.66 General Ledger Company Code Data Local currency Foreign currency Tax category Open item management Line item display Sort key

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.67 General Ledger Company Code Data (continued) Local currency ◦Specify the currency in which the account is to be posted ◦Transaction figures are always updated and displayed in local currency

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.68 General Ledger Company Code Data (continued) Foreign currency ◦Specify the alternative currency in which the account is to be posted ◦It is possible to select up to two alternative currencies ◦Transaction figures will be updated in both the local and alternative currencies

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.69 General Ledger Company Code Data (continued) Tax category ◦Specify the type of tax on purchase and sales (input or output taxes) that can be posted to the account ◦If the account is not tax relevant, do not make a specification in this field

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.70 General Ledger Company Code Data (continued) Open item management ◦Indicates that the account is subjected to an affirmative clearing process involving the matching of debits to credits with the purpose of closing each individual line item ◦For example, reconciliation accounts ◦You can only archive an accounting document if all of its individual line items have been cleared

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.71 General Ledger Company Code Data (continued) Line item display ◦Select if it is desirable to view all the debit and credit detail for the account ◦Remember that when posting items to such accounts and displaying line items, additional storage space and system time are required

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.72 General Ledger Company Code Data (continued) Line item display should not be used for the following accounts: ◦Reconciliation accounts ◦Accounts that have a summation function and are analyzed by another application such as revenue or stock accounts ◦Output and input tax accounts, since tax information is required only in connection with the document

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.73 General Ledger Company Code Data (continued) Sort Key ◦Necessary when line item display is selected ◦Determines the data field that will be used to sort the line items  Posting date  Document date  Cost center

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.74 General Ledger Company Code Data (continued) Reconciliation accounts ◦When you post to a sub-ledger, the system automatically concurrently posts to the corresponding reconciliation account in the general ledger ◦In this way, the general ledger is automatically updated and remains in balance with the individual account totals

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.75 Subsidiary Ledger Accounts A/R, A/P, GR/IR General Ledger Reconciliation Accounts A/R, A/P, GR/IR General Ledger Company Code Data (continued) Debit Credit A/P Debit Credit A/R Debit Credit GR/IR $$ General Ledger

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.76 Line Item Display Line Item Display Account number Bank Account Company code C999 PeriodDebitCredit DC bal. Balance C/f bal. 750, Period 1 5, , , , Period 225, , , , Period 1 Doc. no.DT Doc.dateCurrencyAmount KZ01/05/04 USD 1, KZ01/06/04 USD SA01/08/04 USD – DZ01/14/04 USD 5,250.00

Financial Accounting Module January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.77 Rules FI

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.78 Rules (Review) Defines the parameters for Master Data and Transactions Determines functionality for Master Data and Transactions Relatively fixed Changes as policy changes

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.79Rules Account Groups  BS – Balance Sheet Account Group  PL – Income Statement Account Group  RA – Reconciliation Account Group Field status variant ◦Field status groups Automatic Account Assignments Posting Periods Tolerance Groups for Account Postings Accounts Payable Settlement Document Numbers

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.80Rules Financial Accounting Account Groups Field Status Variant Fiscal / Posting Periods Tolerance Groups Document Types Number Ranges Automatic Account Assignment Valuation Area Grouping Parameter IDs Material Management Fiscal Periods Account Groups Material Types Plant Parameters Purc./Rec./Inv. Tolerances Automatic Account Assignment Reservations Material Group Loading Group Sales & Distribution Account Groups Pricing Procedure Determination Shipping Point Determination Revenue Account Determination Define Availability Check Define Credit Check Document Types

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.81 Account Groups Chrt/accts Acct group Description From To CHRT BSBalance Sheet CHRT PLIncome Sheet CHRT RAReconciliation

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.82 Account Groups Control which fields must be entered when an account is created Determine a valid number interval for each of the groups (types) of General Ledger accounts that have common attributes Must be created before General Ledger Chart of Accounts master records can be created You must assign each account to an appropriate account group

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.83 Account controlSuppress Req. entry Opt. entry Display Currency Tax category Reconciliation account … Account Group BS Account control Account management Document entry Bank/financial details Interest calculation Joint venture Account Groups

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.84 Field Status Field status controls how the data will be entered for a field when an accounting master record is being used in a transaction Determining whether a field is required, optional, suppressed, or display only Field status controls are also relevant to a specific activity — create, change, or display

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.85 Field Status Variant Fld status group Text ZALLAll Accounts ZBSABalance Sheet Accounts ZEXPExpense Accounts ZGRIMaterial Management (GR/IR) Accounts ZRCNReconciliation Accounts ZREVRevenue Accounts

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.86 Field status variant (V000) - Group ZBSA - Balance Sheet Acct. General data Additional account assignments Materials management Payment transactions Asset accounting Taxes... General DataSuppress Req. entry Opt. entry Display Assignment number Text Invoice reference … Field Status Variant

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.87 Automatically posted to Reconciliation Account Postings to sub-ledgers (such as accounts receivable or accounts payable) are automatically concurrently posted to the corresponding reconciliation account in the General Ledger In this way, the General Ledger is automatically updated and remains in balance with the customer and vendor individual account totals

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.88 Posting Periods Before it is possible to post documents, it is necessary to define posting periods Fiscal years are divided into one or more posting periods Each posting period is delimited by both a start and finish date A common division of a fiscal year involves defining 16 posting periods months and 4 quarter ending posting periods

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.89 Tolerances Groups for Account Postings Internal control – amount limits that serve to define the maximum authorization levels for your employees ◦Must be at least one entry for every company code ◦Can be defined for an employee group with employees being assigned to a given group to effect the control ◦Can be undefined at the group level meaning that the control is effective for everyone who is not a member of a group

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.90 Tolerances Groups for Account Postings (continued) Internal control – amount limits that serve to define the maximum authorization levels for your employees with respect to: ◦A single transaction ◦A customer or vendor account line item ◦Discount percentage granted to a line item ◦Payment differences that can be accepted in settlement of an account (e.g., accounts payable)

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.91 Accounts Payable Settlement Purchase Order Goods Receipt Invoice Receipt Debit Credit Payment Program Verification

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.92 Accounts Payable Settlement (continued) Select payment method and bank Select items for payment Calculate the payment amount, taking account of cash discount periods Post the payment document Print payment medium

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.93 Accounts Payable Settlement Process Determines: ◦Open items to be paid ◦When they will be paid ◦Bank from which payment will be made ◦Payment medium ◦Who will get paid Payment process creates a financial accounting document to record the transaction

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.94 Document Numbers All posted transactions must have a unique number assigned to it Usually these numbers are system generated The numbers serve to specifically identify the business content of a transaction so that it may be recalled at a later time The actual system stored document number includes information respecting the year, date, and company codes

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.95 Document Numbers – (continued) Before any documents can be posted to a company or company code, there must be a number range assigned to the document type New transaction document number ranges must be created at the start of each new fiscal year

Financial Accounting Module January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.96 FI

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.97 Transaction Data Includes transactions that describe business activities Unlike master data, aggregate transactional data is dynamic - it constantly changes, usually many times per day – each transaction is unique Transactions use organizational structure, master data, and rules

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.98 Transaction Overview Document Principles Document Types Posting Keys Monthly Rent Cycle Invoice Receipt Invoice Entry Account Payable Process Account Receivable Process

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.99 Document Principles Each completed accounting transaction writes data to the database and creates a unique electronic document Each document contains information such as: ◦Responsible person ◦Date and time of the transaction ◦Commercial content including company codes

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.100 Document Principles – (continued) An accounting document captures the entire transaction in a manner that facilitates recall for reporting purposes It remains as a complete unit in the system until archived Once created, a document can not be deleted from the database

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.101 Document Principles – (continued) The SAP R/3 document principle provides a solid framework for a strong internal control system Audit trails allow an accountant to begin with an account balance on a financial statement and trace through the accounting records to the transactions that support the account balance or to trace individual transactions to the effected account balance(s) on a financial statement

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.102 Document Principles – (continued) Each posted accounting document has a header

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.103 Document Principles – (continued) Each posted accounting document has at least two lines (e.g., debit and credit)

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.104 Document Types A way to categorize different transactions ◦Many different document types are supplied in the system Document types are associated with number ranges ◦All documents of the same document type are stored in the system by document number Determine the type of account that can be posted to

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.105 Document Types – (continued) SA – General ledger account documents DR – Customer invoices DG – Customer credit memos DZ – Customer payments KR – Vendor invoices KG – Vendor credit memos KZ – Vendor payments KN – Vendor net invoices and credit memos

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.106 Posting Keys Determine whether the item to be posted is a debit or a credit Determine the type of account that can be posted

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.107 The posting key (PK) has a control function that pertains to the document line items. It determines the following: Account type for posting the line item Debit or credit posting of line items Field status for additional information Posting Keys – (continued)

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.108 Assets 7075 General Ledger 4050 Material 8999 Customers 01 Vendors 23 Common Posting Keys Posting Keys – (continued)

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.109 Rental Agreement Accounts Payable Invoice Receipt Monthly Rent Cycle

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.110 Invoice Receipt Invoice Receipt Invoice Verification

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.111 Vendor Information Invoice Entry

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.112 Accounts Payable Settlement Process Determines: ◦Open items to be paid ◦When they will be paid ◦Bank from which payment will be made ◦Payment medium ◦Who will get paid Payment process creates a financial accounting document to record the transaction

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.113 Goods Receipt / Invoice Receipt Reconciliation Account (review) Purchase requisition Purchase order Materials Management (MM) and Financial Accounting (FI) via automatic account assignment Goods receipt No impact on Financial Accounting (FI) Dr Cr Inventory $100 Dr Cr GR / IR $100

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.114 Goods Receipt / Invoice Receipt Reconciliation Account (review) Amount owed is assigned and transferred to vendor account payable Invoice receipt Dr Cr Vendor (sub-ledger) $100 Dr Cr GR / IR $100 Dr Cr A/P $100

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.115 Vendor Payment (review) Amount owed is paid to vendor and account payable is reduced Bank Dr Cr A/P $100 Dr Cr Bank $100 Vendor (sub-ledger) Dr Cr $100

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.116 (FI – MM) Integration Points (review) Invoice Receipt Payment Program Goods Receipt (Vendor) Dr Cr GR / IR $100 Bank Dr Cr Inventory $100 Dr Cr $100 AP Dr Cr $100

Goods Issuing Reconciliation Account (review) Sales quotation Sales order Materials Management (MM) and Financial Accounting (FI) Delivery/Goods Issuing No impact on Financial Accounting (FI) Dr Cr Inventory (Trading, F/G) $1,000 Dr Cr COGS $1,000

Dr Cr Sales Revenues $1,250 Billing Reconciliation Account (review) Billing amount is assigned and transferred to customer account receivable Billing Dr Cr Account Receivable (AR) $1,250 Dr Cr Customer (sub-ledger) $1,250

Customer Payment (review) Amount is paid by Customer and account receivable is reduced Bank Dr Cr Account Receivable (A/R) $1,250 Dr Cr Bank $1,250 Customer (sub-ledger) Dr Cr $1,250

January 2008 © SAP AG - University Alliances and The Rushmore Group, LLC All rights reserved.120 (FI – SD) Integration Points (review) Billing Payment Program Goods Issue (Customer) Dr Cr COGS $1,000 Bank Dr Cr Inventory (F/G) $1,000 $1,250 Dr Cr $1,250 AR Dr Cr $1,250 Dr Cr Revenue

Exercises: 1. Display chart account 2. Review a listing of the general ledger (G/L) accounts 3. Create general ledger account 4. Post transfer of funds to alternate bank account 5. Post purchase of operating supplies 6. Display general ledger account balance 7. Display multiple general ledger account balances 8. Display individual items while displaying general ledger account balances 9. Change financial accounting document 10. Display change to financial accounting documents 11. Create invoice receipt for rent expense 12. Display and review general ledger account balances and individual line items 13. Display and review accounts payable balances and individual line items

Exercises: 14. Post payment to landlord 15. Display and review general ledger account balances and individual line items 16. Display and review accounts payable balances and individual line items 17. Run balance sheet/profit and loss statements