Bpc fin terminology_final[1] (2)

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Bpc fin terminology_final[1] (2)

  1. 1. Home Work: Foundation for BPC - Financial Accounting Terminology SAP FICO (or Financial Accounting)SAP FICO (or Financial Accounting) Terminology/Building Block has been explained in this presentation Sushma Kulkarni , CA , CPA Financial /Business Intelligence Expert sushma_klkrn@yahoo.com http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  2. 2. 1 Journal Entry All accounting transactions are recorded in the form of a journal entry Accounting journal is a collection of all journal entries All accounting journal entries have two sides, debit andAll accounting journal entries have two sides, debit and credit For each accounting journal entry, the total of debit sides is equal to the total of credit sides i.e. debit side total = credit side total If debit side total is not same as the credit side total, the journal entry does not balance and it is not accurate http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  3. 3. 2 Journal Posting Posting is the process of moving the balances of journal entries to appropriated accounts in the ledger An example of journal entry (Debit) Cash 2,000 ($2,000 debit balance is(Debit) Cash 2,000 ($2,000 debit balance is posted to the cash account in GL) (Credit) Sales 2,000 ($2,000 credit balance is posted to the sales revenue account in GL) http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  4. 4. 3 Journal Opening In BPC, You create and maintain journal entries using the journal entry template that has been built by your administrator. You can reopen one or more journal entries from a previousYou can reopen one or more journal entries from a previous year, and post them to another set of accounts for the following year. When you reopen journal transactions, you define translation information for the dimensions you want to reopen. The translation table defines the source and destination accounts. You typically do this for specific accounts, but you can do translations for other detail dimensions. http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  5. 5. 4 Cash Flow The cash flow statement reports activity in cash and cash equivalents for a period of time The statement of cash flows has four main sections: Three are used to classify the types of cash inflows andThree are used to classify the types of cash inflows and outflows during the period and the fourth reconciles the total cash balance from the beginning to the end of the period. http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  6. 6. 5 Account Transformation You define data transformations so that you can map external data to internal BPC data structures using the following files Transformation file – This file allows you to set up the rulesTransformation file – This file allows you to set up the rules for reading data from an external source and put it in the proper form for your BPC database. Conversion file – This file allows you to map member names from external to internal dimension structures. Examples: The source application is converted as follows Category as Cat, Account as Acc, Entity as Ent, Time as Tim, Rptcurrency as Currency, Intco as Int, Datasrc as Dat
  7. 7. 6 Account Validation Validations exist to help control integrity of data, for example, the test whether the account and cost center is a valid combination http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  8. 8. 7 Income Statement Reports the results of operations for the period ending on a particular date. It reports revenue and expenses during the fiscal periodperiod It has 2 formats Single-step and multiple step net income = total revenue - total expense http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  9. 9. 8 Balance Sheet Balance Sheet reports the financial position at the end of the fiscal period i.e as of certain date Statement of financial position is another name of balance sheetbalance sheet It reports assets, liabilities and stockholders' equity In SAP, one can get a balance sheet for a company code or for a business area. Each account is either a Balance sheet account or a P&L account. http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  10. 10. 9 P&L: Profit and Loss Account This is same as Income Statement or Income and Expenditure statement. Details are explained later. http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  11. 11. 10 Opening Balance Profit and Loss accounts are not carried forward to next year. Only balance sheet accounts are carried forward to next year at closing balance of earlier year. Next year this balance is called opening balance.Next year this balance is called opening balance. http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  12. 12. 11 Closing Balance Closing balances are cumulative balances after all entries are posted to balance sheet accounts. They refer to balances at the end of reporting period. http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  13. 13. 12 Retained Earning Retained earnings represent the amount of the company's past net income retained inside the company (or not paid as dividend to stockholders). If the amount of retained earnings is negative, it isIf the amount of retained earnings is negative, it is called as "accumulated deficit". http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  14. 14. 13 Minority Interest Minority interest is the stockholders’ equity relating to outside equity stake holders in the consolidated financial statement http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  15. 15. GAAP 14 US GAAP, 15 UK GAAP, 16 EUR GAAP GAAP = Generally Accepted Accounting Principles These standards are prerequisites for preparing the financial statements. Each country has its own GAAP There are differences among GAAPThere are differences among GAAP For example, treatment of accounting for goodwill on acquisition US GAAP – Capitalize and amortize over 40 years UK GAAP – Direct write off to reserves German GAAP – Capitalize and amortize over 4 years Switzerland – Direct write off of capitalize
  16. 16. 17 Equity Stockholders’ equity represents the interest of owners in the organization Owners’ Equity = Total Assets – Total Liabilities OrOr Owners’ Equity = Par value of Equity Shares + reserves http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  17. 17. 18 Assets Represent future economic benefits. Examples of types of assets: Cash, Bank, Accounts Receivables, Marketable Securities, Inventories, Property, Plant, and Equipment (PP&E), IntangibleProperty, Plant, and Equipment (PP&E), Intangible Assets, Short term investments e.g. Stock and Mutual Fund Accounts, Foreign Currency accounts http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  18. 18. 19 Liabilities They represent future economic sacrifices. They are divided in Long Term and Short Term Liabilities. Examples of current liabilities are Accounts Payable, Notes Payable, Bonds Payable, Long TermPayable, Notes Payable, Bonds Payable, Long Term Borrowings, Credit Card Accounts Long-term liabilities include liabilities that are expected to be paid after a year from the balance sheet date. http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  19. 19. 20 Subsidiary Subsidiary means an acquired or investee company where the investment is 50% or more of that company’s share capital. http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  20. 20. 21 Cash account Cash account represents cash on hand. However, cash accounts typically represent cash and cash equivalents e.g. money market funds, bank balances in a summarized balance sheet.summarized balance sheet. http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  21. 21. 22 Bank account Bank accounts are cash balances available in the bank. Sometimes clearing accounts are used to include different types of bank accounts. The firm can decide to use dedicated bank accounts for a particularto use dedicated bank accounts for a particular purpose e.g. payroll account, expense account for better control. http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  22. 22. 23 Credit Card account Credit Card accounts are current liabilities for the holder and are represented so in the balance sheet. http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  23. 23. 24 Asset and Liability accounts In addition to the earlier explanation, keep in mind that in the balance sheet total assets must be equal to total liabilities. In other words, Total Assets = Liabilities + Equity.Liabilities + Equity. http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  24. 24. 25 Stock and Mutual Fund accounts These are short term investments parked in short term maturity financial instruments e.g. CD’s or a mutual fund that invests in them. They are used to earn interest that would be lost if the money is kept in ainterest that would be lost if the money is kept in a checking account. http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  25. 25. 26 Income and Expense account Income statement (or P&L or I&E Account) reports the results of operations for a period. It summarizes the profit or loss relating to that period. It is not cumulative and relates to that particular period only.cumulative and relates to that particular period only. Examples of components of Income Statement Revenues: Sales Expenses: Rent, Salaries, Travelling Expenses, Interest Expense Net Income = Revenues - Expenses http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  26. 26. 27 Equity accounts Stockholders’ equity represents the interest of owners in the organization. Components of equity Equity capital or common stock. It represents the owners' equity. Equity is a residual concept. Hence, equity is what's left after subtracting liabilities from assets. Equity = Assets - Liabilities Preference capital. It has preferences in returns e.g. in receiving dividends or in liquidation but they may lack voting rights to control day to day operations Preference capital. It has preferences in returns e.g. in receiving dividends or in liquidation but they may lack voting rights to control day to day operations Additional paid in capital: Paid in capital is the par value of shares in exchange of the shares of common stock or preferred stock. While, additional paid in capital represents premium paid for acquisition of shares in the public offering. Retained earnings: It is sum of net income for the current year plus accumulated in retained earnings. Dividends are paid from retained earnings Equity accounts have normal balances on the credit side. Increases in equity accounts are recorded on the credit side. Decrease in equity accounts are recorded on the debit side. http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  27. 27. 28 Currency Accounts Foreign currency accounts are maintained in the respective currencies and are translated to the reporting currency on the balance sheet date. In SAP the foreign currency tracking should beIn SAP the foreign currency tracking should be enabled without which amounts cannot be tracked in foreign currency. http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  28. 28. 29 Capital Gains Capital gains represent sums (gains) received over and above the cost of acquisition. For example, land acquired at $100,000 is sold for $150,000 will result in capital gain of $50,000. Any asset that is sold can leadcapital gain of $50,000. Any asset that is sold can lead to a capital gain or loss http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  29. 29. 30 Asset Appreciation Asset appreciation represents unrealized gains as of a particular point of time. They do not represent earnings and are ignored for P&L account. The reason behind this treatment is the values do change overbehind this treatment is the values do change over time. Thus, assets appreciation is normally not considered as income unless sold http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  30. 30. 31 Acquisition There are many forms of acquisitions – whole company, departments, vertical, horizontal, etc. For BPC, we are concerned with investment in equity of other companies.other companies. http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  31. 31. 32 Depreciation of Assets Depreciation is the process of allocating the cost of long-lived assets over the useful life of the asset. Depreciation base = cost of the asset - residual value. Amount to be depreciated each period is determined by the depreciation method applied. For example, Entity A purchased an equipment at the cost of $650,000 Useful life = 10 yearsUseful life = 10 years Residual value = $50,000 Using the straight line depreciation method for equipment Annual depreciation = (cost - residual value) / useful life = ($650,000 - $50,000) / 10 = $600,000 / 10 = $60,000 Monthly depreciation = annual depreciation / 12 = $60,000 / 12 = $5,000 Land is not depreciated http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  32. 32. 33 Net income Net income = Revenue – Expenses http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  33. 33. 34 Dividends Dividends are allocation of reserves to shareholders. These can be in cash or in kind (although rare in practice). These are paid to shareholders on the record as of the record date for dividends that is decided byas of the record date for dividends that is decided by the board. http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  34. 34. 35 Shareholders' equity Already covered under equity http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  35. 35. 36 Statement of retained earnings An enterprise needs to (a) classify items of other comprehensive income by their nature in a financial statement and (b) display the accumulated balance of other comprehensive income separately from retainedother comprehensive income separately from retained earnings and additional paid-in capital in the equity section of a statement of financial position. Statement of retained earnings essentially displays additions to and appropriations from retained earnings. http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  36. 36. 37 Joint Stock Company The term implies a company that has limited liability whose controlling interest is divided in equity shares of equal par value. For example, a company has equity with 100,000 equity shares with par of $0.10 will havewith 100,000 equity shares with par of $0.10 will have equity capital of $10,000. A company can have different series of shares with varying rights and varying par value. http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  37. 37. 38 Balance Sheet in Balance In all ERP systems, you cannot post any journal entry that is not balanced. The system validation will not allow this to happen. The system therefore will always produce a balance sheet that is in balance i.e. totalproduce a balance sheet that is in balance i.e. total assets = total liabilities + equity. However, in BPC, you can post entries that are out of balance. This can also happen while revaluing foreign currency for the balance sheet. http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  38. 38. 39 Balance Sheet Out of Balance In line with the above logic, This “out of balance” Balance Sheet needs to be balanced out by making entries. This task must be performed otherwise the result is not acceptable for any accounting /result is not acceptable for any accounting / management analysis. http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  39. 39. 40 Company Code "Company Code (for external purposes) A company code represents an independent balancing/legal accounting entity. An example would be a company with independent accounts within a corporate group. Financial statements required by law can be created at company code level. Therefore, a company code is the minimum structure necessary in mySAP ERP Financials. In anminimum structure necessary in mySAP ERP Financials. In an international business, operations are often scattered across numerous countries. Since most government and tax authorities require the registration of a legal entity for every company, a separate company code is usually created per country. Defining a company code involves 4-charachter company code key and the company name." Chart of accounts are combined with CC
  40. 40. 41 Cost Center Cost centers play important role in controlling costs and analyzing profitability. They need to be defined in SAP before using them. If cost center tracking is enabled, cost center becomes a required field for allenabled, cost center becomes a required field for all journal entry postings both debit and credit. Allocation to cost center based on activity is common practice in Activity Based Costing. http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  41. 41. 42 Controlling Area "Controlling Area is the central organizational unit within CO module. It is representative of a contained Cost Accounting entity where costs and revenues can be managed. A controlling area may include one orbe managed. A controlling area may include one or more company codes which must use the same operative chart of accounts as the controlling area. A Controlling Area can contain multiple company code assignments but a single company code can be assigned to only one controlling area." http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  42. 42. 43 Posting Period The Posting period variant controls which posting periods, both normal and special, are open for each company code. It is possible to have a different posting period variant for each company code in theperiod variant for each company code in the organization. The posting period is independent of the fiscal year variant. http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  43. 43. 44 Fiscal Year In accounting terms fiscal year is a period of 12 months. It need not be calendar year. In the first year of operation, fiscal year can be shorter than 12 months. In SAP, fiscal year is divided in periods and every SAP document is uniquely identified by fiscal year.document is uniquely identified by fiscal year. You can also use the fiscal year variant to make the following system settings: Beginning and end of your fiscal year Number of "normal" posting periods (01-16) Number of special periods (remaining periods up to 16 after selection of normal periods) Posting period length
  44. 44. 45 Transaction Currency A currency in which each transaction originates is called transaction currency. The currency defined in the company code is known in mySAP ERP Financials as local currency. The transactions are effectivelyas local currency. The transactions are effectively posted in local currency. All other currencies are treated as foreign currency. In SAP the foreign currency tracking should be enabled without which amounts cannot be tracked in foreign currency. http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  45. 45. 46 Local Currency The currency defined in the company code is known in mySAP ERP Financials as local currency. http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  46. 46. 47 Group Currency Similar to group chart of accounts, you can define group currency in SAP. It would need to be assigned to a company code before making it either local currency or foreign currency.or foreign currency. http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  47. 47. 48 Reporting Currency The currency used for preparing financial statements is called reporting currency. In SAP this is defined as the local currency while defining company code and used for preparing financial statements. If originalused for preparing financial statements. If original transactions are entered in foreign currency, you can run reports in foreign currency which will be reporting currency for those reports. http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  48. 48. 49 Month End Close Process Closing operations is a periodic task and involves certain activities to be carried out. Usually check lists are maintained to execute all the activities in a systematic manner. The typical activities includesystematic manner. The typical activities include running depreciation on fixed assets, accrue expenses and incomes, enter recurring entries, reconcile bank balances, value AP for payables in foreign currency, print financial statements etc. http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  49. 49. 50 Quarter End Close Process This is similar to month end process. Additional SEC filings like 10Q are required for listed companies. http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  50. 50. 51 Opening Balance Balance Sheet accounts which have closing balances are carried forward to next period. The closing balance of last period becomes opening balance of next period. http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  51. 51. 52 Balance Carry Forward After closing entries are journalized and posted, only balance sheet accounts remain open. The balances are carried forward to the subsequent period, these become opening balances for the subsequent periodbecome opening balances for the subsequent period http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  52. 52. 53 Consolidation on Investment Consolidated FS are prepared when a parent- subsidiary relationship has been formed. An investor is considered to have parent status when more than 50% of the voting stock of the investee has been acquired.of the voting stock of the investee has been acquired. The subsidiary may be acquired for cash, stock, debt securities etc. In consolidated FS, the “investment in subsidiary” in the parent’s books are netted off against “Owner’s Equity” in the subsidiary’s books. http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  53. 53. 54 Trial Balance After posting all transactions from an accounting period, accountants prepare a trial balance to verify that the total of all accounts with debit balances equals the total of all accounts with credit balances. The trialthe total of all accounts with credit balances. The trial balance lists every open general ledger account by account number and provides separate debit and credit columns for entering account balances. http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  54. 54. 55 Flows Workflow management is providing employees with right task, right information at the right time. In SAP, workflows are usually initiated by a triggering event. Events are used to display the changes in statusevent. Events are used to display the changes in status of objects within the system. Like methods, they are defined in the object repository for each object type. Events are initiated in the respective applications. Example: The workflow for account assignment approval (WS0100000) is started by triggering the marking for organizational change event when saving a parked document with the specification of a measure
  55. 55. 56 Transaction Types Following are standard business transaction categories and their postings: Expense (E) Expense/Cash desk Revenue (R) Cash desk/Revenue Cash transfer:Cash transfer: From cash journal to bank (B) Bank/Cash desk From bank to cash journal (C) Cash desk/Bank Accounts receivable (D) Customer payment receipt Cash office / customer Customer outgoing payment Customer / cash office Accounts payable (K) Vendor payment issue Vendor / cash office Vendor incoming payment Cash journal/Vendor
  56. 56. 57 Fiscal Year Variant "The fiscal year variant contains the number of posting periods in the fiscal year and the number of special periods. You can define a maximum of 16 posting periods in the Controlling component (CO). You define the fiscal year variant during customizing of the Financial Accounting component (FI) in the Implementation Guide (IMG). You must also define which fiscalImplementation Guide (IMG). You must also define which fiscal year variant is used in the company code. When you create a controlling area, you must also specify the fiscal year variant. The fiscal year variants used by the controlling area and the corresponding company codes can only differ in the number of special periods used. You must ensure that the fiscal year variants use the same number of equally-defined standard periods. " http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  57. 57. 58 Payables Accounts payable represent the amounts to be paid to vendors from whom the company purchased merchandise. In SAP, payable transactions (both bills and payments) are posted to sub ledger and summarilyand payments) are posted to sub ledger and summarily to Accounts Payable Control Account to reconciliation accounts (account type K). You can also create onetime vendors. http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  58. 58. 59 Receivables Accounts receivables represent the amounts to be collected from the customers who purchased the company's products on credit. In SAP, receivable transactions (both bills and payments) are posted totransactions (both bills and payments) are posted to sub ledger and summarily to Accounts Receivable Control Account to reconciliation accounts (account type D). http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  59. 59. 60 Ledger General ledger is collection of accounts used in the chart of accounts. These represent master records. By assigning a number range to an account group, you can ensure that accounts of the same type are within theensure that accounts of the same type are within the same number range. Number intervals for G/L account master records can overlap. http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  60. 60. 61 Cash In financial terminology cash includes cash equivalents. In SAP separate reconciliation accounts are created for each type of cash or bank account / journal.journal. http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  61. 61. 62 Cash Management Cash management services covers very vast array of services including: Account Reconcilement Services Advanced Web Services Armored Car Services Automated Clearing House Balance Reporting Services including all forms of payment activity, includingBalance Reporting Services including all forms of payment activity, including deposits, checks, wire transfers in and out, ACH (automated clearinghouse debits and credits), investments, etc. Cash Concentration Services to electronically "pull" the money into a single interest-bearing bank account Lockbox services for collecting checks Positive Pay using electronically shared check register of all written checks Sweep accounts move excess funds from a company's bank accounts into a money market mutual fund overnight, and then moved back the next morning. This allows them to earn interest overnight. This is the primary use of money market mutual funds Wire Transfer
  62. 62. 63 Inventory Inventory represents company's merchandise, raw materials, finished and unfinished products which have not yet been sold. These are considered liquid assets, since they can be converted into cash quite easily. Management is responsible for determining andManagement is responsible for determining and maintaining the proper level of goods in inventory. If inventory contains too few items, sales may be missed. If inventory contains too many items, the business pays unnecessary amounts to warehouse, secure, and insure the items, and the company's cash flow becomes one sided- cash flows out to purchase inventory but cash does not flow in from sales.
  63. 63. 64 Invoice Invoices are raised while recording each sale made. Sometimes, orders are met locally but invoices are prepared for central processing with the vendor. Invoices are entered per customer or vendor usingInvoices are entered per customer or vendor using relevant master data. The invoices have line items which typically include items purchased, rate, currency, extended amounts, sub-total, tax etc. In SAP the two document types used are DR for Customer Invoice and KR for Vendor Invoice. http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  64. 64. 65 Credit Memo Credit Memos are issued for goods or services not accepted or returned by customers. In SAP the two document types used are DG for Customer Credit Memo and KG for Vendor CreditCustomer Credit Memo and KG for Vendor Credit Memo. http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  65. 65. 66 Debit Memo Debit Memos are issued for goods or services not accepted or returned to vendors. In SAP the two document types used are DG forIn SAP the two document types used are DG for Customer Credit Memo and KG for Vendor Credit Memo. http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  66. 66. 67 Internal Trading Partners The economic unit concept, however, states that the consolidated balance sheet cannot include payables and receivables from companies within the same group. The balance sheet value in the individual financial statements is due to the legal independence of the internal trading partners. Thelegal independence of the internal trading partners. The consolidation activity 'Elimination of intercompany unit payables and receivables' eliminates group-internal financial relationships. All intercompany profits/losses have to be adjusted including profits on transfer of assets within internal trading partners. Eliminations are always posted in pairs. To enable the system to eliminate IC trading partner relations, therefore, you need to enter the relevant financial statement item data using trading partner account assignments
  67. 67. 68 Sub Ledger For all sub ledgers a reconciliation account is created in the General Ledger. The transactions line items are maintained in the sub ledgers. http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  68. 68. 69 Inter-Company Transfers Refer to Internal Trading Partners. All intercompany profits/losses have to be adjusted including profits on transfer of assets within internal trading partners.trading partners. http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning
  69. 69. 70 Reclassification Reclassification stands for regrouping. It is the process of adjusting the entry to an account at the end of the calendar or fiscal year in order to properly state it for financial statement preparation purposes. Types of required adjustments include accrual or deferral of arequired adjustments include accrual or deferral of a revenue or expense item, reclassification, adjustments to conform book figures to physical counts (i.e., inventory), and reflecting unusual transactions. Normally, the characteristics of the transactions and events are reclassified for presenting the financial statements to conform to GAAP.
  70. 70. Sushma Kulkarni , CA , CPA Financial /Business Intelligence Expert sushma_klkrn@yahoo.com http://www.CloneSkills.com Info@CloneSkills.com Phone: 800.836.5696 CloneSkills, Inc. A Pioneer in EPM/BI/EIM Implementation Learning

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