This document provides summaries of key SAP finance and accounting concepts: 1) Business areas, controlling areas, reconciliation accounts, and document types are organizational structures and tools for segment reporting, cost management, connecting subsidiary ledgers to the general ledger, and distinguishing accounting documents. 2) The procurement cycle describes the process for demand determination, supplier selection, purchase order handling, goods receipt, invoice verification, and payment processing. 3) Foreign currency valuation, regrouping accounts payable, incoming payments, dunning functions and procedures, and the account receivable information system are processes for handling multi-currency transactions, credit balances, cash receipts, overdue payments, and analyzing receivables data.

2. Business Area
The business segment, or branches, in which a group
operate can be set up in the SAP system as business
areas. Business areas provide an additional evaluation
level for segment reporting. Business area are generally
company-code independent. The business area field
show up as an additional account assignment when
posting to an account as long as the field is turned on in
configuration.

3. Controlling Area
The controlling area is the most important
organizational element in the controlling application.
The latter is used for internal accounting . A controlling
area identifies a self-contained organizational structure
for which costs and revenues can be managed and
allocated. It represents a separate unit of cost
accounting.

4. Reconciliation Account
Reconciliation account connect subsidiary ledger with
the general ledger in real time. This mean that a posting
to a subsidiary ledger posts to the corresponding
reconciliation account in the general ledger at the same
time. The subsidiary ledger, which are connected to the
general ledger via reconciliation account, are the
account payable, account receivable, and asset ledger.

5. Document Type
Document type are used to distinguish between and
order various accounting document easily. Each
document header. Document number are provide by the
document number range assigned to one or more
document type.

6. Procurement Cycle
Demand determination: The department responsible
can register a requirement for material manually via a
purchase order to purchasing.
Determining the source of supply: The purchaser
responsible is supported by the system in determining
possible source supply.
Supplier selection: Comparing the prices in the different
quotation makes selecting supplier easier. Letter of
rejection can be sent automatically.
Purchase order handling: When creating purchase
order, the system provide you in the entry process.

7. Purchase order monitoring: The purchase can monitor
the processing status of the purchase in the system.
Good receipt: The system check the amount of goods
received against the purchase order quantity.
Invoice verification: The vendor invoices are checked to
see if the accounting and the content are correct.
Payment processing: The vendor payment is usually
done in the financial accounting.

8. Foreign Currency Valuation
A foreign currency valuation is necessary if vendor
account contain open item in a foreign currency. The
amount of these open item were translated into the
local currency at the time they were entered using the
exchange rate which was valid on the posting date.

9. Regrouping Account Payable
Account payable and receivable have to be listed
separately in the balance sheet. Since it is possible for
some vendors to have a debit balance, these account
need to be changed to vendors to have a debit balance,
these account need to be change to vendor with a debit
balance prior to creating the financial statement.

10. Incoming Payment
Incoming payment can be dealt with in several ways in
different companies and countries. Incoming payment
are basically posted as shown in this figure.

11. Dunning Function
The SAP system provide you with a tool that
automatically analyze all the open items and duns any
item that are overdue. The system determines a
dunning level, which is in accordance with the number
of days in arrears.

12. Dunning Procedure
Dunning is controlled by the dunning procedure. A
dunning procedure must be entered in every customer
and / or vendor account that is to be included in
automatic dunning. A dunning procedure that is valid
for one-time customer is entered in one-time accounts

13. Dunning Run
During the dunning run, account are selected and
checked for overdue items. The system then checks
wheater dunning notices should be sent and assign the
relevant dunning levels. All dunning data is stored in a
dunning proposal.

14. Account Receivable
Information System
The account receivable information system enable you
to carry out quick analyses of important accounting
data, such as:
- Due date breakdown.
- Customer payment history.
- Currency risk for customer abroad.
- Overdue items.
- Number of days (DSO days) that a customer takes, on
average, to pay an invoice.
- Customer cash discount history (days agreed/days
taken)

15. Sales Process
The sales order forms the basic of the sales process.
Once a customer has placed an order, a sales order must
be created at the start of the process. The sales order is
generated at the distribution chain level. The ordered
items can be from different division. The sales order is a
document in sales order management and does not
cause any posting in financial accounting. When the
sales order has been entered, the system carries out an
availability check for the required delivery date.

16. Assets
Each asset belong to a company code and business area.
All posting made for the asset (acquisitions,
retirements, depreciation, and so on) are posted in the
assigned company code and business area.

17. Asset Valuation
Often asset balance and transaction need to be valuated
differently for various purpose. You may, for example,
use various valuation method for:
- Financial statement based on regional requirements.
- Financial statement for tax purpose (if a different
depreciation method is allowed).
- Controlling (costing).
- Parallel financial reporting for group financial
statements (per IAS, USGAAP, and so on).
- Replacement value (using an index figure).

18. Asset Transaction
Asset transaction (acquisition, retirements) can be
posted in various ways to meet the organizational and
business requirements of the company. In assets
accounting, you can post in the following ways:
- Without a vendor or a purchase order: the offsetting
entry is made to a G/L clearing account.
- To a vendor, but without reference to a purchase
order.
- Via materials management using the functions
purchase order, goods receipt and invoince receipt.

19. Asset Explorer
The asset explorer offers an overview of the activities
for an asset. You can see transaction that have been
posted to the asset plus planned and posted
depreciation area. Per period, each fiscal year. You can
see the details of accounting transaction. Also, you can
conveniently switch to view another asset without
leaving the screen.

20. Bank Directory
The bank directory contains the addresses and valid
control data (such as swift code) of all banks used in the
SAP system.
The bank directory can be:
- Automatically imported, as long as the bank directory
is available on diskette and an import program exist
for this data.
- Manually created.