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A guide to functional areas and cost of sales P&L reporting in the SAP® General Ledger

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A guide to functional areas and cost of sales P&L reporting in the SAP® General Ledger

  1. 1. © 2012 ERP Corp. All rights reserved.A Guide to FunctionalAreas and Cost-of-SalesP&L Reporting in the SAPGeneral LedgerPaul OvigeleOvigele Consulting
  2. 2. Introduction3• Learn how to activate cost-of-sales (COS) functionality in theSAP General Ledger• Find out how to define and derive functional areas• Receive step-by-step instructions for creating and runningfunctional area reports• Discover tips for easily switching from period-based to COSaccounting using the same report
  3. 3. Topics• Overview of cost-of-sales accounting• Using functional areas for cost-of-sales accounting• Using cost-of-sales accounting with SAP General Ledger• Activating cost-of-sales scenario and deriving functional areas• Creating cost-of-sales financial statements• Summary4Start of first section:List the main points in your presentation and insert this slide atthe start of each new topic. Move the highlighted box down foreach new section. This divides your presentation into easy tofollow sections.
  4. 4. Approaches to Profit and Loss Accounting• Period-Based Accounting• Sales are matched with cost-of-sales forthe period• Cost-of-Sales Accounting• Sales are matched with cost of goodssold regardless of when produced5
  5. 5. Comparing Accounting MethodsPeriod-Based Cost-of-Sales• Revenues• Sales deductions• Changes in stock• Work in process• Revenues• Sales deductions• Cost-of-sales(incl. period variances)Total Output Gross Result• Material Consumption• Salaries• Other Costs• Sales and Distribution• Administration• Research & DevelopmentResult Result6
  6. 6. Extra G/L Accounts Approach• A simpler approach to implement, as every classification isdealt with using general ledger accounts• Could lead to a significantly larger and unmanageable chart ofaccounts• Could make configuration of account assignments morecomplicated• e.g., which depreciation expense account category will youassign to the asset class?7
  7. 7. Costing-Based CO-PA Approach• Value fields are mapped to sales conditions, G/L accounts, andvariance categories to reflect the source of the activities• Characteristics help determine what dimensions to report on;e.g., product line, customer, region, etc.• Reconciliation with FI is sometimes difficult because valuefields are not always updated at the same time as generalledger accounts8
  8. 8. Functional Area Approach• Allows you to classify your expense accounts into the differentfunctional areas in which they occurred• e.g., you can identify whether a payroll expense isproduction or marketing related• With SAP General Ledger you can pull extra characteristics intothe FAGLFLEXT table and hence facilitate evaluations byproduct, customer, country, etc., just as in CO-PA• CO-PA is still more suitable for contribution margin reportingand analyzing fixed vs. variable costs9
  9. 9. Period Accounting Mapped to Functional AreasPeriod AccountingNet Revenue 5000 Production Admin R&DStock Change 50 50Gross Profit 4950Material Costs 600 400 100 100Payroll 800 150 250 400Depreciation 50 25 25Other Costs 150 25 75 50Total Costs 1600 650 425 575Net Profit 3350Cost of Sales AccountingNet Revenue 5000Production 650Cost of Sales 4350Admin 425R&D 575Net Profit 3350Functional Areas10
  10. 10. Topics• Overview of cost-of-sales accounting• Using functional areas for cost-of-sales accounting• Using cost-of-sales accounting with SAP General Ledger• Activating cost-of-sales scenario and deriving functional areas• Creating cost-of-sales financial statements• Summary11Start of first section:List the main points in your presentation and insert this slide atthe start of each new topic. Move the highlighted box down foreach new section. This divides your presentation into easy tofollow sections.
  11. 11. Options for Deriving Functional Areas12Manual EntryInternalOrdersCostCentersCostCollectorsCost ObjectsG/L AccountSubstitutionP&L Account
  12. 12. Functional Areas in Cost ObjectsCost Object• Cost center• Internal order• Product costcollector• WBS element• Network• Profit centerAssignment• Cost Center Category• Cost Center Master Data• Order Type• Internal Order Master Data• Order Type• Cost Collector Master Data• Project Profile• Network Type• Account Assignment13
  13. 13. Multiple Cost Objects in One Line Item• If, for example, a cost center and internal order are entered onone line item, the order is treated as actual and the cost centeras statistical (due to the “actual assignment” rule)• Hence the functional area of the order is derived14Whose functionalarea is derived?
  14. 14. Functional Areas in G/L Accounts/Cost Elements• If the G/L account is also a cost element, you can only enter thefunctional area in the master record of the P&L account• The functional area is then copied to the master data of thecost element• Since several company codes can be assigned to a controllingarea, the functional area field is assigned to the chart ofaccounts area of the G/L account and cost element master data• This ensures that the same functional area is entered in the G/Laccount and its related cost element15
  15. 15. Functional Areas in G/L Accounts/Cost Elements (cont.)Scenario DerivationYou post to a G/L account for whichthere is no cost elementSystem derives the functional areafrom the G/L accountYou post to a G/L account for which acost element existsSystem derives the functional areafrom the G/L accountYou post to a cost element (incontrolling) for which there is no G/LaccountSystem derives the functional areafrom the secondary cost element16
  16. 16. Cost-of-Sales Substitutions• Substitution is a process for checking a value entered in SAPagainst a user-defined prerequisite• If the prerequisite is met, then the value of a specific field isreplaced by substitute values17User defines rulesand field to bereplacedIsprerequisitemet?Replacefield withspecifiedvalueReplacefield withspecifiedvalueNoYes
  17. 17. Substitution vs. Cost Center Categories• Substitutions• Pro: Particularly useful in exceptions to normalcircumstances; for example, you want functional area ABC tobe derived only for postings to a specific cost element in thatcost center• Con: Trickier to modify when business circumstanceschange• Cost Center Categories• Pro: Simpler to set up. Easy way to ensure that all new costcenters have a functional area assigned to them• Con: Doesn’t take into account special situations where thecost center category is not the only driver for the functionalarea assignment18
  18. 18. Manual Entry of Functional Areas• Could be used in very unique circumstances where thefunctional area will not be known until the time of posting• Field status group for posting keys and chart of accountsshould be set to “optional” for functional areas19• This overrides all other methods of derivingfunctional areas, so should be used only whereautomatic derivation does not apply
  19. 19. Topics• Overview of cost-of-sales accounting• Using functional areas for cost-of-sales accounting• Using cost-of-sales accounting with SAP General Ledger• Activating cost-of-sales scenario and deriving functional areas• Creating cost-of-sales financial statements• Summary20Start of first section:List the main points in your presentation and insert this slide atthe start of each new topic. Move the highlighted box down foreach new section. This divides your presentation into easy tofollow sections.
  20. 20. Cost-of-Sales Ledger in SAP General Ledger• With SAP R/3 you needed to activate the Cost of Ledger (0F) inorder to use functional areas. Now with SAP ERP, the Cost-of-Sales Ledger is included in SAP General LedgerSAP ERPSAP R/3•Reconciliation Ledger• EC-PCA• Special Purpose Ledger• Cost-of-Sales Ledger• Consolidation StagingLedger21
  21. 21. Scenarios in SAP General Ledger• A scenario determines what fields in a ledger are updated whenit receives posting from other application components• If you want to update the functional area field in the SAP G/Lview of an accounting document, you need to assign the Cost-of-Sales scenario (FIN_UKV) to the relevant ledger• This updates the sender and receiver functional area fields• Go to IMG path: Financial Accounting (NEW) FinancialAccounting basic settings (NEW) Ledgers Fields DisplayScenarios for General Ledger Accounting22
  22. 22. Examples of Scenarios in SAP General LedgerScenario Description Fields Filled TechnicalField NameFIN_CCA Cost center update Cost centerSender cost centerRCNTRSCNTRFIN_PCA Profit center update Profit centerPartner profit centerPPRCTRPRCTRFIN_UKV Cost-of-salesaccountingFunctional areaPartner functionalareaRFAREASFAREA• If you dont assign scenarios to the leading or non-leadingledgers, the system updates only the account and companycode objects in the FAGLFLEXT table23
  23. 23. Substitutions in SAP General Ledger• When SAP G/L is active, you can activate functional areaderivation on the entry screen• This means that the functional area is derived before you savethe document anytime you hit the “Enter” button• This makes substitution call-up point “6” relevant for activation(with classic G/L call-up point “5” is relevant)• Financial Accounting (New) Financial Accounting GlobalSettings (New) Tools Customer Enhancements EnhanceFunctional Area Determination24
  24. 24. Substitutions in SAP General Ledger (cont.)25This prerequisite statesthat: If the accountnumber is “474240”and the cost centercategory is “5”…..Then the functional areato be derived in the postingis “TEST1”The substitution is activatedfor the relevant companycode with call-up point “6”
  25. 25. Adding Characteristics to CO Totals Records• When you activate SAP G/L, the functional area characteristic isupdated in the totals table of Controlling (CO)• This means that credit postings can be made from the COsender objects using the functional areas duringassessments• The menu path for this is: “Controlling  GeneralControlling  Add Characteristics to CO totals records”26Sender FunctionalArea is now availablein Assessments!!
  26. 26. Account Assignment Objects for Asset Accounting• You can activate the functional area field as an accountassignment object in asset accounting• This means that the functional area field will be availableduring asset postings to the general ledger• You then assign the functional area object to an accountassignment type (either APC posting or Depreciation posting)• This is done per company code and depreciation area• Financial Accounting (NEW)  Asset Accounting  Integrationwith the General Ledger  Additional Account AssignmentObjects  Activate Account Assignment Objects / SpecifyAccount Assignment Types for Account Assignment Objects27
  27. 27. Topics• Overview of cost-of-sales accounting• Using functional areas for cost-of-sales accounting• Using cost-of-sales accounting with SAP General Ledger• Activating cost-of-sales scenario and deriving functional areas• Creating cost-of-sales financial statements• Summary28Start of first section:List the main points in your presentation and insert this slide atthe start of each new topic. Move the highlighted box down foreach new section. This divides your presentation into easy tofollow sections.
  28. 28. Creating and Deriving Functional Areas29
  29. 29. Activating Cost-of-Sales Accounting30• In Preparation This enables the functional area tobe available for input in masterdata such as G/L accounts, costcenters, etc. No postings can be made tofunctional areas• Active This enables the functional areasto be derived and updated duringpostingOptions for Activation per Company Code
  30. 30. Activating Cost-of-Sales Accounting (cont.)31• When cost-of-sales is activated for a company code, the globalparameters will have “2” in the “Cost of sales accounting actv.”field (this can be seen in transaction OBY6)• The Functional Area field is ready for input in all companycodes of a client, provided that the status of cost-of-salesaccounting is either In Preparation or Active for at least onecompany code of the client
  31. 31. Entering Functional Areas in Master Data32Master Data Transaction forupdateAssignment LevelG/L Account FSP2 Chart of AccountsCost Center KS02 Controlling AreaCost CenterCategoryOKA2 ClientInternal Order KO02 Controlling AreaOrder Type KOT2 ClientCost Element KA02 Chart of Accounts
  32. 32. Functional Areas in Cost Center Master33• Advantages of direct entry• Allows for flexibility to change in case the cost centercategories propose placeholder functional areas in thecost center• The business may not want to create as many cost centercategories as there are functional areas• Disadvantages of direct entry• Users can accidentally overwrite the correct functional areathat was derived from the cost center category• May make master data creation more time-consuming
  33. 33. Functional Areas in Internal Orders34• To ensure consistency ofthe functional areas in themaster data of internalorders, define theFunctional area field inthe field selection controlof the order type as anoutput field. This willmake it impossible tomanually enter thefunctional area in theorder type.Is functionalarea entereddirectly in ordermaster?Is functional areaentered directlyin order type?Is functionalarea entered inresponsible costcenter of theorderFunctional arearecorded in ordermasterNoNoYESYESYES
  34. 34. Functional Areas in Secondary Cost Elements35• Be careful when trying to enter functional areas in secondarycost elements• Entering a functional area in a secondary cost element onlymakes sense if, before the assessment, the CO object to becredited was only debited under the functional area that isalso entered in the secondary allocation cost element• Otherwise this could cause reconciliation issues if thesender cost center has been debited with other functionalareas, in which case the functional area balance for this costcenter will not be zero• For assessments or other allocations, it is advisable to derivethe functional area from the cost center or substitution rule
  35. 35. Changes to Functional Areas36• If you want to change the functional area in the master datawhere postings with this functional area have been made, youget the following error:• “Transaction Data already exists”• You can change this setting by either making the Error Message(FH 600) a Warning Message or deactivating the message totally• Go to Menu path : Financial Accounting (New)  FinancialAccounting General Settings (New)  Document  DefaultValues  Change message Control for DocumentProcessing
  36. 36. Functional Areas in Field Status Groups37• Functional Area field status is found in Additional accountassignment section of posting keys transactions (OB41) andchart of accounts (OBC4)• Field statuses can be set to allow functional areas to besuppressed, displayed, or required when documents are posted• Set the field status for functional areas to “suppressed” toeliminate possible user error
  37. 37. Topics• Overview of cost-of-sales accounting• Using functional areas for cost-of-sales accounting• Using cost-of-sales accounting with SAP General Ledger• Activating cost-of-sales scenario and deriving functional areas• Creating cost-of-sales financial statements• Summary38Start of first section:List the main points in your presentation and insert this slide atthe start of each new topic. Move the highlighted box down foreach new section. This divides your presentation into easy tofollow sections.
  38. 38. 39Reporting by Functional Area
  39. 39. 40Options for Reporting by Functional AreaOther ReportOptionsDrill-downReportsReportPainter• Since the functional areafield is made available inthe FAGLFLEXTtable, standard report0SAPBSPL-01 can beexecuted by functional area• Other reporting tools canalso be used to tailor tospecific requirementsStandardReports
  40. 40. 41Financial Statement Versions You must explicitly definefinancial statementversions as beingpermissible by functionalarea allowed indicator inthe configuration settingsof transaction OB58 You then assign thefunctional areas to thelowest nodes• You can assign either a functional area or anaccount to a node in the Financial Statementversion, but not both
  41. 41. 42Standard Report 0SAPBSPL-01• This report can be executedthrough transactionS_PL0_86000028• The functional area fieldis available to selectionin the initial screen• You enter the financialstatement version whereyou set the functionalarea as allowable
  42. 42. 43Standard Report 0SAPBSPL-01 (cont.)• When executed inthe drill-downformat, this reportcan be displayedusing the standarddrilldownfunctionalities• Click on any ofthecharacteristics onthe top left of thescreen to analyzethe data with thatcharacteristic
  43. 43. 44Drill-Down Reports• You can use the standard reports as a template for creatingyour own custom drill-down report• Financial Accounting (New)  General Ledger Accounting(New)  Information System  Drilldown Reports (G/LAccounts)Standard Reportbeing copiedCustom Report
  44. 44. How to Copy and Modify a Standard Report45Identify the library that has the relevantcharacteristics and key figures for Cost-of-Sales reporting (0F1)Create a “Set Variable” if you want to groupthe functional areas into logical groupingsCreate a report from library 0F1 and definethe rows and columns you want to appearin the reportCreate a report group and assign the reportto this report groupGR23GS11GR11GR51
  45. 45. 46Problem with Report Painter Reports• Report Painter reports do not support a financial statementversion with functional areas• This means that in order to group functional areas intoreporting nodes, you need to create sets and replicate thefunctional area financial statement version• This makes the reports more time-consuming to create• It also means that you need to update two structures when businesscircumstances change – the Financial Statement version and the Setthat was created
  46. 46. 47Other Reporting Options• ABAP Reports• Custom reports can be created from tables GLFUNCT andGLFUNCA in classical G/L and FAGLFLEXT & FAGLFLEXA inSAP G/L• BI Reports• Activation of InfoCubes 0FIGL_C02 (Cost of Sales Ledger:Transaction Figures) and 0FIGL_VC2 (Cost of Sales Ledger:Financial Statements)• Query 0FIGL_V10_Q0001 (Financial Statements (New):Actual/Actual Comparison ) is a New G/L financial statementreport which can be viewed by functional areas
  47. 47. Topics48• Overview of cost-of-sales accounting• Using functional areas for cost-of-sales accounting• Using cost-of-sales accounting with SAP General Ledger• Activating cost-of-sales scenario and deriving functional areas• Creating cost-of-sales financial statements• SummaryStart of first section:List the main points in your presentation and insert this slide atthe start of each new topic. Move the highlighted box down foreach new section. This divides your presentation into easy tofollow sections.
  48. 48. Resources• Paul Ovigele, 100 Things You Should Know About FinancialAccounting with SAP (July 2011)• Provides little-known tips to optimize the FinancialAccounting module, including with cost-of-sales accounting• http://help.sap.com/saphelp_erp60_sp/helpdata/en/e1/8e51341a06084de10000009b38f83b/frameset.htm• Go to: ERP Central Component  Financials  FinancialAccounting  General Ledger Accounting  GeneralLedger Accounting  Cost of Sales Accounting• SAP Note 677630 – Correcting functional areas in FI documents• This note can also be used to re-derive the functional areasof accounting documents already posted49
  49. 49. Five Key Ideas• The functional area field is updated by assigning the “cost-of-sales” scenario to the relevant ledgers• Cost –of-sales can be activated as follows:• “In Preparation”– means it is available for entry in masterdata• “Active” – means that it is available for posting• It is best not to allow direct entry of functional areas duringposting in order to avoid manual errors• Standard financial statement reports such as 0SAPBSPL-01 canbe viewed by functional area• Functional areas are derived by manual entry, substitution, G/Laccount, cost element or cost object assignment50
  50. 50. Questions• Now:• Ask questions now for immediate answers• Later:• Contact me at paul@ovigele.com51Q&A
  51. 51. DisclaimerSAP®, R/3, mySAP, mySAP.com, xApps, xApp, SAP NetWeaver®, Duet®, PartnerEdge, and other SAP® products andservices mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP AG inGermany and in several other countries all over the world. All other product and service names mentioned are thetrademarks of their respective companies. ERP Corp is neither owned nor controlled by SAP.

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