Lecture 3
Introduction to SAP Finance (FI)
FIN419
Learning Objectives
Review of basic Finance management topics
Understand the goal of SAP Finance (FI)
Understand the purpose, master data and reporting of New GL
Understand the purpose, master data and reporting of AR
Understand the purpose, master data and reporting of AP
Understand the purpose, master data and reporting of AM
Understand the integration points between FI and the rest of the FI submodules.
2
Finance Review
Financial Statements
Statement of financial position - Balance Sheet
Reports the firm’s assets, liabilities and equity at a given point of time
Income Statement
Reports the firm’s income, expenses, and profits over a period of time
Statement of cash flow
Reports the firm’s cash flow activities (operation, investing and financing)
Statement of changes in equity
Explain the changes of the firm’s equity over a period of time
Finance Review
Balance Sheet
The Balance Sheet Reports the firm’s assets, liabilities and equity at a given point of time
Assets
Current (life less than one year)
Fixed (life longer than one year)
Liabilities and Owners’ Equity
Current (life less than one year)
Long term ( life longer than one year)
Balance Sheet Identity
Assets = Liabilities + Stockholders’ Equity
Assets
Fixed
Liabilities+ Equity
Equity
Current
Current
Long term
Finance Review
Working Capital and Liquidity
Net working capital
Difference between Current Assets and Current Liabilities
It indicate whether the firm has sufficient short term assets to cover its short term obligations
Liquidity
It refers to the speed and ease in which an asset can be converted to cash without significant loss of value
Liquidity is valuable in avoiding financial distress
Net working capital
Assets
Fixed
Liabilities+ Equity
Equity
Current
Current
Long term
Finance Review
Debt vs. Equity
Debt and Equity are sources of financing for the firm
The use of debt in a firm’s capital structure is called financial leverage
The more leverage, the higher the risk of financial distress
Assets
Fixed
Liabilities+ Equity
Equity
Current
Current
Long term
Finance Review
Income Statement
The income statement measures performance over a specified period of time (period, quarter, year).
Income Statement Equation(s):
EBIT = Net sales – COGS – Operating expense
Net Income = EBIT – Interest - Tax
Addition to REA = Net income - dividends
Net income elements
Dividends paid to shareholders
Addition to retained earnings
Sales (Revenue)
Net income
Dividends
Return to Equity
COGS
Operating exp (General expenses, depreciation, etc)
Interest
Tax
Gross Profit
EBIT
Finance Review
Market versus Book Value
Book value corresponds to the balance sheet value (according to US GAAPs) of the assets, liabilities, and equity and is generally not what they are actually worth.
Market value or true value corresponds ...
Lecture 3Introduction to SAP Finance (FI)FIN419 Lear.docx
1. Lecture 3
Introduction to SAP Finance (FI)
FIN419
Learning Objectives
Review of basic Finance management topics
Understand the goal of SAP Finance (FI)
Understand the purpose, master data and reporting of New GL
Understand the purpose, master data and reporting of AR
Understand the purpose, master data and reporting of AP
Understand the purpose, master data and reporting of AM
Understand the integration points between FI and the rest of the
FI submodules.
2
Finance Review
Financial Statements
Statement of financial position - Balance Sheet
Reports the firm’s assets, liabilities and equity at a given point
of time
Income Statement
Reports the firm’s income, expenses, and profits over a period
2. of time
Statement of cash flow
Reports the firm’s cash flow activities (operation, investing and
financing)
Statement of changes in equity
Explain the changes of the firm’s equity over a period of time
Finance Review
Balance Sheet
The Balance Sheet Reports the firm’s assets, liabilities and
equity at a given point of time
Assets
Current (life less than one year)
Fixed (life longer than one year)
Liabilities and Owners’ Equity
Current (life less than one year)
Long term ( life longer than one year)
Balance Sheet Identity
Assets = Liabilities + Stockholders’ Equity
Assets
Fixed
Liabilities+ Equity
Equity
Current
3. Current
Long term
Finance Review
Working Capital and Liquidity
Net working capital
Difference between Current Assets and Current Liabilities
It indicate whether the firm has sufficient short term assets to
cover its short term obligations
Liquidity
It refers to the speed and ease in which an asset can be
converted to cash without significant loss of value
Liquidity is valuable in avoiding financial distress
Net working capital
Assets
4. Fixed
Liabilities+ Equity
Equity
Current
Current
Long term
Finance Review
Debt vs. Equity
Debt and Equity are sources of financing for the firm
The use of debt in a firm’s capital structure is called financial
leverage
The more leverage, the higher the risk of financial distress
6. The income statement measures performance over a specified
period of time (period, quarter, year).
Income Statement Equation(s):
EBIT = Net sales – COGS – Operating expense
Net Income = EBIT – Interest - Tax
Addition to REA = Net income - dividends
Net income elements
Dividends paid to shareholders
Addition to retained earnings
Sales (Revenue)
Net income
Dividends
Return to Equity
COGS
7. Operating exp (General expenses, depreciation, etc)
Interest
Tax
Gross Profit
EBIT
Finance Review
Market versus Book Value
Book value corresponds to the balance sheet value (according to
US GAAPs) of the assets, liabilities, and equity and is generally
not what they are actually worth.
Market value or true value corresponds to the price at which
the assets, liabilities, or equity can actually be bought or sold
and it is relevant for managers and investors.US Firm
Balance Sheets Book vs. Market ValueAssetsLiabilities and
EquityBMBMCurrent100300Current70100Net fixed
8. assets500600Long term200200Equity330600Total
Assets600900Total L&E600900
Finance Review
Difference between Accounting Income and Cash Flow
Income Statement is not a measurement of Cash Flow
Accrual Basis Accounting
Recognize revenue when it is fully earned, not when cash is
received
Net Sales of $5,000 but AR increase of $1,500. Cash from sales
= $3,500 ($5,000 - $1,500)
Recognized expenses needed for the generation of revenue, not
when cash is paid
Inventory cost of $3,000 but AP increase of $500. Cash to
vendors = $2,500 ($3,000 - $500)
Noncash Items in the Income Statement
Expenses charged against revenue that do not affect cash flow.
The most important is depreciation.
Finance Review
Statement of Cash Flow
The Statement of Cash flow identify the sources of cash over a
period of time and its use. It is classified by:
Financing:
Loans or financing activity
Operating.
From the operation of the company
Investing.
Asset investing
Financing
9. Operating
Investing
SAP Finance (FI)
Goal
Financial accounting is designed to collect the transactional
data that provides a foundation for preparing the standard
portfolio of reports.
In general, these reports are primarily, but not exclusively,
directed at external parties.
Standard reports include:
Balance Sheet
Income Statement
Statement of Cash Flows
11
Internal
Executives
11. SAP Finance (FI)
Organizational Structure
Client
An independent environment in the system
Company Code
Represents an independent legal accounting unit
Balanced set of books, as required by law, are prepared at this
level
A client may have more than one company code
Chart of Accounts
A classification scheme consisting of a group of general ledger
accounts
Provides a framework for the recording of values to ensure an
orderly reporting
Credit Control Area
An organizational entity which grants and monitors a credit
limit for customers
It can include one or more company codes
Represents the legal and/or organizational views of an
enterprise and it forms a framework that supports the activities
of a business in the manner desired by management
SAP Finance (FI)
Organizational Structure (Cont)
Ledger (leading and parallel)
An organization unit that allows you to produce financial
statements according to different accounting principles
12. Chart of Depreciation
An organization unit that allows you to control the legal
valuation of assets. They are usually country specific and can be
assigned to multiple company codes.
Business Area (could be use for regional reporting)
An organizational unit that represents separate areas of
operations or locations within an organization
Segment (could be use for divisions)
An organizational unit that represents separate areas of a
company with activities that generate expenses and revenues
SAP Finance (FI)
Company Code and Currencies
Company codes can have independent currencies and share one
for financial consolidation purposes (group currency).
You can use up to four currencies in financial accounting
Company code (local) currency
Group currency
Hard currency
Transaction currency
Transaction
Document currency
Local
Reporting currency
13. Group
Consolidation currency
SAP Finance (FI)
Global Bike Finance Structure
Two company codes
One chart of accounts
One business area
One credit control area
SAP Finance (FI)
Reflection
What currencies would be involved in a FI transaction on
Global Bike Inc?
What currencies would be involved in a FI transactions on
Global Bike Germany?
14. What would be the most likely currency for the GBI financial
consolidation and why?
What type of regulations may apply the setting of currencies
and its configuration at the company code level?
SAP Finance (FI)
Sub-modules
New General Ledger (GL) use to record the financial impacts of
business process steps. It constrains the data for financial
reporting.
Accounts Receivables (AR) is associated with the fulfillment
process and is used to manage money owned by customers for
good and services sold
Accounts Payables (AP) is associated with the procurement
process and is used to managed money owned by vendors for
the purchase of materials and services
Asset Management (AM) is used to record data related to the
purchase, use and disposal of assets.
Bank Ledger (BL) is used to record the transactions related to
the deposits and disbursements of cash
SAP Finance (FI)
Master Data Summary
Finance consists of all master data, configuration, and reporting
required to analyze external oriented financial statements. This
includes the following master data:
General Ledger – financial transactions (balance sheet, P&L)
Customer Master – AR sub ledger
Vendor Master – AP sub ledger
Asset Master – Asset sub ledger
15. New General Ledger
Introduction
The central task of G/L accounting is to provide a
comprehensive picture of external accounting and accounts.
The general ledger serves as a complete record of all business
transactions.
Managed at the company code level, where all accounting-
relevant transactions are recorded here
Benefits
Parallel accounting to recognized multiple GAAP’s
Segment reporting in adherence with US GAAP and IAS
Document splitting
Integration of FI and CO data
Procurement to Pay
Order to Cash
AR
AP
GL
Stock
Vendor invoice
Vendor paymt
Customer paymt
17. New General Ledger functionality that allows organizations to
split documents line
Advantages
Reduces the time and effort for the user to enter documents by
deriving segment from profit center which can be derived from
a cost object
cost center,
internal order, or
project
Allow a company to create real time balance sheets for
segments
New General Ledger
Document Principle
Each business transaction impacting FI writes data to the SAP
database creating a uniquely numbered electronic document.
The document number can be used to recall the transaction at a
later date.
It contains, for example, such critical and necessary information
as:
Responsible person, date and time of transaction, commercial
content
Once written to the SAP database, a financial document (one
impacting the financial position of the company) can not be
deleted from the database, although it can be changed to some
degree.
The SAP document principle provides a solid and important
framework for a strong internal control system – a requirement
of law for companies that operate in the United States and in
most other countries in the world.
18. New General Ledger
Transactions
FS00, FSP0, FSS0. GL master record
FB50L Enter GL account document for ledger group
FB03 Display document
FB08, FB80 Reverse document and mass reversal
FAGLL03 GL Account line items
FAGLB03 Display balances
S_ALR_87012284 or F.01 Run Financials
FAGL_FC_VAL Foreign Currency Valuation
FBB1 Post Foreign Currency
New General Ledger
Master Data (FS00)
General Ledger Account are master data that in the GL that
belongs to the Chart of Account (CoA).
Client level
Company code level
Account
Description
Currency and tax data
19. Account group
Group accounts depending of a defined criteria
P&L or Balance sheet
Reconciliation account
Control sub ledgers
Field status group
It controls fields requirements during posting
Line control
Open item management
Line item display
20. New General Ledger
Master data: Account Group
Classify G/L account into user defined segments
Determine the number range of the accounts that will fall into
these segments
Determine field status (suppress, required, display, and optional
New General Ledger
Master Data: Reconciliation account
For each sub ledger account you must keep at least one
reconciliation account in the general ledger.
Sub ledger postings automatically posts to the corresponding
reconciliation account in the general ledger.
You can not manually post directly to reconciliation accounts.
Ensures real-time integration of sub ledger accounts and the
general ledger
New General Ledger
Document entry (FB50L)
Company code
Posting & Document date
Currency
Document type
Ledger
Line items
GL accounts
Posting key
Amounts
21. New General Ledger
Document entry: Document type
Two character alphanumerical key that distinguish different
business transactions and classify accounting documents
Controls
Document ranges
Account types allowed
Type of transactions allowed
*List on the right is a sample of the document type list
New General Ledger
Document entry: Posting Key
Two character numerical key that controls the entry of line
items
Determines
Account type
D for customers
K for vendors
S for GL
A for assets
M for materials
Debit/credit posting
Field status of additional data
Layout of entry screens
New General Ledger
Document entry: Simulate, Parking, Post
Simulate. It allows you to review a document before posting or
parking it.
22. Parking. It allows you to save a document in a transit space
allocating a document but not creating a financial effect.
Post. It saves the document in the system allocating a document
and creating a financial effect.
Simulate
Park
Post
New General Ledger
Run Financials (F.01)
Chart of Accounts
Company Code
Financial Statement Version
Reporting Year and comparison periods
List output
23. New General Ledger
Run Financials: Financial Statement Version
To meet various reporting requirements, various financial
statement versions have been created in the system.
You define exactly which accounts appear in which line items
of the financial statement
New General Ledger
Reflection
What implications/benefits/uses may have document splitting
functionality for finance?
What functionality or functionalities of the new GL would your
recommend to implement to address GAAP differences between
countries and why?
What internal control benefits would you highlight from the
implementation of SAP ECC?
Accounts Receivable
Introduction
Records and manages accounting data of all customers.
Integral part of Order to Cash business process.
All billing and cash collections are executed by AR sub-module
allowing to report on AR activity.
Postings made to accounts receivable are also recorded directly
in the G/L.
AR is integrated with SD and Treasury (order to cash process)
24. GL
Customer payment
Billing
Accounts Receivable
Transactions
XD01 or FD01. Customer master record
FB70 Enter Invoice
FB03 Display document
F-28 Incoming payments
FB08, FB80. Reverse document and mass reversal
FBL1N AR Account line items
FK10N Display balances
Accounts Receivable
Master Data (FD01)
25. Customer Master Account is data needed to conduct business
with customers and execute transactions related with fulfillment
process.
General (Client)
Accounting (Company code)
Account
Name
Address
Bank information
Payment terms
Payment method
Reconciliation account
Cash management group
26. Accounts Receivable
Credit Management
Accounts are processed on the basis of credit segment in the
customer master record. This is maintained in a separate data
basis in SAP credit management.
Credit data includes all information about a business partner
that is required to monitor credit risk
Credit profile data
Credit segment data
Credit Profile
Contains the procedure for scoring and credit limit calculation,
the internal scoring, and sometimes external business partner
ratings.
Also includes risk class, check rules for controlling credit limit
check, and notes.
Credit Segment
Contains all the data required for checking credit when a sales
order is accepted and the resulting order-related credit decision.
You can define a main credit segment as well as additional
credit segments for company codes.
Accounts Receivable
Invoice entry (FB70)
Company code
Customer and Reference
Posting and Invoice date
Document type
Amount and currency
Line items
27. GL accounts
Posting key
Amounts
Additional info tabs
Accounts Receivable
Incoming Payments (F-28)
Company code
Posting & document date
Document type
Currency
Bank Data (debit)
Value Data (collection date)
Customer Data (credit)
Additional selections for line items identification
38
Accounts Receivable
Display Balances (FK10N)
Customer
Company Code
Fiscal Year & Currency
Outcome
Beginning balance
Debits and Credits per period
Balance
Ending Balance
Sales related transactions
28. Drilldown capability
Accounts Payable
Introduction
Records and manages accounting data for all vendors
Integral part of the Procure to pay business process
All invoices and payments are executed by AP sub-module
allowing to report on AP activity
Postings in accounts payable are simultaneously recorded in the
G/L
AP is integrated with IMWM and Treasury (procurement to pay
process)
GL
Stock
Vendor invoice
Vendor payment
29. Accounts Payable
Transactions
XK01 or FK01. Vendor master record
FB60 Enter Invoice
FB03 Display document
F-53 Outgoing payments
F110 Mass payments
FB08, FB80 Reverse document and mass reversal
FBL5N AR Account line items
FD10N Display balances
Accounts Payable
Master Data (FK01)
Vendor Master Account is data needed to conduct business with
vendors and execute transactions related with the purchasing
process
General (Client)
Accounting (Company code)
Account
30. Name
Address
Payment terms
Payment method
Bank information
Reconciliation account
Accounts Payable
Invoice entry (FB60)
Company code
Vendor and Reference
Posting and Invoice date
Document type
Amount and currency
Line items
GL accounts
31. Posting key
Amounts
Additional info tabs
Accounts Payable
Outgoing Payments (F-53)
Company code
Posting & document date
Document type
Currency
Bank Data (credit)
Value Data (payment date)
Vendor Data (debit)
Additional selections for line items identification
44
Accounts Payable
Mass Payments (F110)
Run date
Payment ID
Parameters
Posting date
Doc entry date reference
Company code
Payment terms
Next payment
Vendor range
32. Select printout/data medium
45
Accounts Payable
Display Balances (FD10N)
Vendor
Company Code
Fiscal Year & Currency
Outcome
Beginning balance
Debits and Credits per period
Balance
Ending Balance
Purchase related transactions
Drilldown capability
Account Payable and Receivable
Reflection
What recommendations would you give to a new SAP
implementation in regards the settings for vendor and customer
master records?
What are the benefits of AP and AR subledger?
How do you link the AP and AR sub-ledger and the postings to
FI?
What are the benefits of the open item management
functionality in accounts payable and accounts receivable?
Why the multi-currency functionality of SAP is one of its
greatest benefits?
33. Asset Management
Introduction
Records and manage accounting data for all fixed assets
All asset transactions (acquisitions, transfers, sells, retirement,
depreciation) are controlled by asset management during its life
and calculate asset depreciation
AM is integrated with AR and AP
Postings in AR and AP are simultaneously recording in asset
management
Postings in asset management are simultaneously recorded in
the G/L
GL
Vendor invoice
Billing
Asset Acct
Depreciation
Retirement
34. Asset Management
Transactions
AS01 Asset master record
F-90 Acquisition with vendor
AW01N Asset Explorer
F-92 Retirement with customer
AFAB Depreciation run
AB08 Reverse document
Asset Management
Master Data (AS01)
Asset Master Record contains data to track the financial
consequences associated with the entire lifecycle of an asset.
35. General (Company code)
Dep. Areas (Chart of Depreciation)
Description
Depreciation key
Account determination
Controls the GL postings based on the asset class
Asset class
Cost centers and plant
Origin data
Useful life
Dep. Start date
36. Change over year
Asset Management
Master data: Asset Class
Grouping of assets with possess similar characteristics
Asset classes created at client level (apply to all company
codes)
Each asset class is associated to a reconciliation account via
account determination
Each asset has to be assigned to an asset class.
There is at least one special asset class for assets under
construction and one for low-value assets.
Asset Management
Master data: Account Determination
It create the link between the asset master record and the GL
Each asset class is assigned to an account determination but it is
possible to have unique account determination per chart of
depreciation
Each account determination is associated with a depreciation
area
Each account determination holds the GL accounts for
Acquisitions, depreciation and retirement
37. Asset Management
Master data: Dep. areas and dep. keys
Depreciation area
Chart of depreciation specific
Used to calculate different values in parallel for each fixed
asset for different purposes an can be linked to different
ledgers.
Various data is stored in the asset master record for
depreciation areas which control the calculation of normal and
special depreciation for the special depreciation areas.
Depreciation key
Depend from the depreciation area
Can use different depreciation method for general business
procedures from the depreciation method required by tax
authorities.
CoD
Dep area 01
Dep area 02
Dep area 03
GL
Dep keys
Dep keys
Dep keys
Asset Management
Acquisition with vendor (F-90)
Company code
Posting and document date
Document type
Line items
Vendor account
38. Posting key (31 for vendor and 70 for asset debit)
Transaction type to classify the asset transaction
Amount
Asset Management
Depreciation run (AFAB)
Only after the depreciation posting run has been completed is
the depreciation actually posted in asset accounting and in the
General Ledger
The depreciation is posted to the corresponding depreciation
accounts in the General Ledger and to the assigned CO cost
object assigned to the asset master record.
Asset Management
Retirement with customer (F-92)
Company code
Posting and document date
Document type
Line items
Customer account
Posting key (01 for customer and 75 for asset credit)
Transaction type to classify the asset transaction
Amount
Asset Management
39. Asset Explorer (AW01N)
Offers a clear overview of the activity for an asset.
You can see transactions that have been posted to the asset plus
planned and posted depreciation per depreciation area, per
period for each fiscal year.
You can drill down to the details of the FI transactions
It is possible to branch to master data, other cost objects, and
perform simulations
Asset Management
Reflection
What is the relevancy of the asset master records in the asset
life cycle process?
What role do you think the chart of depreciation play to address
GAAP differences between countries and why?
How do you link the asset sub-ledger and the postings to FI?
SAP Finance (FI)
Reflection
It is month end at GBI and the accounting group is working on
its month end close, what activities would you need to review in
each of the areas below
Accounts Receivable
Accounts Payable
Asset Management
General Ledger
40. Lecture 4
Introduction to SAP Controlling (CO)
FIN419
Learning Objectives
Understand the goal of SAP Controlling (CO)
Understand the purpose, master data and reporting of CCA
Understand the purpose, master data and reporting of PCA
Understand the purpose, master data and reporting of Internal
orders
Understand the purpose, master data and reporting of Product
Costing
Understand the purpose, master data and reporting of
Profitability Analysis
Understand the integration of CO and FI
2
SAP Controlling (CO)
Goal
41. The purpose of the Controlling (CO) module in SAP is to
provide organizations with a method of slicing and dicing data
to view costs from an internal management perspective and
provide a view of profitability beyond that of basic financial
reporting.
Controlling allows an organization to plan and track overhead
costs within the company's specific organizational structure.
Standard reports include:
Cost center performance
Profit center performance
Budget analysis
3
SAP Controlling (CO)
Organizational Structure
Client
An independent environment in the system
Company Code
Represents an independent legal accounting unit
Balanced set of books, as required by law, are prepared at this
level
A client may have more than one company code
Controlling Area
The controlling area identifies a self-contained organizational
structure for which costs and revenues can be managed and
allocated.
May contain one or more company codes, which can operate in
different currencies.
Company codes within a controlling area must all use the same
operational chart of accounts and fiscal year variant
42. Represents the legal and/or organizational views of an
enterprise and it forms a framework that supports the activities
of a business in the manner desired by management
SAP Controlling (CO)
Organizational Structure (Cont)
Operating Concern
It represents an organizational unit in your company for which
the sales market data has a uniform structure
(characteristics/dimensions)
It is the valuation level for profitability analysis (CO_PA)
Multiple controlling areas can be assigned to one operating
concern
Plant
The plant represents a production unit and is the central
organizational unit in Materials Management and Production
Planning.
A plant is assigned to a company code.
Cost Center Hierarchy
It is a tree structure representing all the cost centers belonging
to a controlling area from a controlling perspective
Profit Center Hierarchy
It is a tree structure representing all the profit centers belonging
to a controlling area from a controlling perspective
SAP Controlling (CO)
Controlling Area and Currencies
By assigning more than one company code to a controlling area
you can perform cost accounting for all company codes
The controlling area and company codes can have different
currencies
The currency of the controlling area can be the same as that for
43. a company code or different from all the company codes
assigned to the controlling area.
Currencies on CO
You can use three currencies in management accounting
Controlling area currency
Company code currency or local currency
Transaction currency
By default, cross-company code cost accounting displays the
company code currency as the object currency
SAP Controlling (CO)
Global Bike Controlling Structure
One operating concern
Two company codes
Two controlling areas
North America link with US company
Europe link with EUR company
SAP Controlling (CO)
Reflection
What currencies would be involved in a CO transaction on
Global Bike Inc?
What currencies would be involved in a CO transaction on
Global Bike Germany?
Under the GBI Controlling org structure, what needs the
financial management team has and why?
SAP Controlling (CO)
Sub-modules
44. Cost Element and Cost Center Accounting (CCA)
Profit Center Accounting (PCA)
Internal Orders
Product Costing (CO-PC)
Profitability Analysis (CO-PA)
SAP Controlling (CO)
Master Data Summary
Controlling consists of all master data, configuration, and
reporting required to analyze both spend and revenues, both
within and across organizations. This includes the following
master data:
Cost Elements - cost and/or revenue accounts
Cost Centers - departmental units
Profit Centers - business lines, product lines or divisions
Internal Orders - projects or events
Statistical Key Figures - non financial statistics for allocating
or measuring financial costs
Activity Types - Labor or other activity costs
SAP Controlling (CO)
Cost and Statistical Objects
Cost Objects
True cost objects can act as sending or receiving objects during
cost allocation.
Cost centers, real internal orders, real projects, networks, make-
to-order production orders, cost objects, and profitability
segments.
Statistical Cost Objects
Statistical objects cannot allocate cost to other objects.
45. Statistical orders, statistical projects, and profit centers.
Cost Element & Cost Center Accounting
Introduction
Financial Accounting is a primary source of data for
Management Accounting.
Most expense postings in the general ledger result in a cost
posting in Management Accounting.
These expense postings to the general ledger can be journal
postings, vendor invoices, or depreciation postings from Asset
Management
Cost center
Responsible cost containment
Common use
Finance
Planning
Shipping
Quality
Cost Element & Cost Center Accounting
Transactions
KA01 Create primary cost element
KA06 Create secondary cost element
OKEON Cost center hierarchy
KS01 Create cost center
KL01 Create activity type
KK01 Create statistical key figures
XXXX Budget entry
46. S_ALR_87013611 Cost Centers: Actual/Plan/Var
KSB1 Cost center actual line items
Cost Element & Cost Center Accounting
Master Data: Primarily Cost Element (KA01)
When an expense is occurred in FI it is passed into CO by cost
element accounting as a single sided posting.
Primary cost elements have to exist in the FI GL maser record
before they can be created as primary cost elements in CO.
Primary cost elements create the link between FI and CO
Finance
Controlling
GL Master Record
Primary Cost Element to link FI and CO
P&L accounts
Controlling area
Validity
47. Category (1 or 11)
Cost Element & Cost Center Accounting
GL account link with Primary Cost Element
When an entry is posted in FI to a G/L Account that is a cost or
revenue account and a corresponding primary cost element
exists in CO, then a corresponding entry is posted in CO.
This is a one sided entry to get the expense or revenue into CO.
A controlling object needs to be specified in the FI document to
define where to post the costs in CO
Cost Element & Cost Center Accounting
Master Data: Secondary Cost Element (KA06)
Exist only in CO but not in FI.
Used in conjunction with various allocation techniques in CO
Used for internal allocations within CO.
Do not have any corresponding G/L accounts in FI
Used in CO to redistribute costs and these costs must be
balanced
Controlling
Controlling
48. Primarily Cost Element
Secondary Cost Element
Controlling area
Validity
Category
Cost Element & Cost Center Accounting
Primary Cost Element link with Secondary Cost Element
Any transactions that create cost movements within CO are
balanced entries.
When a cost is moved from one controlling objet to another, the
sending object is credited and the receiving object is debited for
the same amount.
Cost Center Accounting
Cost Center Hierarchy (OKEON)
Cost Centers require a formal structure called a hierarchy
The standard hierarchy is a tree structure representing all the
49. cost centers belonging to a controlling area from a controlling
perspective
You can combine cost centers into cost center groups
You can then create cost center hierarchies from these groups
by combining the groups according to decision making area,
area of responsibility, or management area
Cost Center Accounting
Master Data: Cost Center (KS01)
Use cost center for differentiated assignments of overhead costs
to organizational activities based on utilization of the relevant
areas and for differentiated controlling of costs arising in an
organization
Define a cost center for each low-level organizational unit that
has responsibility for managing costs.
The cost center is an organizational unit in a controlling area
representing a clearly delimited location where costs occur
Basic Data
Name and description
Cost Center Hierarchy
Profit Center
Company Code
50. Responsible person
Business Area
Other
Category
Currency
Cost Center Accounting
Master Data: Activity Types (KL01)
Usually measured in a time or unit increment
Used to allocate cost only from cost centers.
Rent
Power
Telephone
CO impact: Costs can flow to other cost objects such as cost
centers, internal orders, production orders, ABC processes, etc.
It is the productive output of a cost center and transfer cost
between cost centers.
Basic Data
51. Name and description
Allocation type
Allocation
Activity unit
Cost center category
Allocation cost element
Price indicator
Cost Center Accounting
Master Data: Statistical Key Figures (KK01)
Can be defined as either fixed values or total values.
Examples
Number of employees
Square footage
CO impact: None, used for reporting and allocation purposes
Represent numerical measures used as a basis for internal cost
52. allocations and can be used by cost centers, profit centers,
internal orders.
Cost Center Accounting
CO postings: Types of Allocation
Distribution
Method for periodically allocating primarily cost elements
Primarily cost elements maintain their identifies in both the
sending and receiving objects
Sender and receiver cost centers are fully documented in a
unique controlling (CO) document
Assessment
Method of allocation both primarily and secondary cost
elements
Primary and/or secondary cost elements are grouped together
and transferred to receiver cost centers through use of a
secondary cost element.
Sender and receiver cost centers are fully documented in a
unique Controlling (CO) document.
Cost Center Accounting
CO postings: Components of the Distribution Cycle
A number of segments can be combined into an allocation cycle,
which is typically executed in a batch job usually at month end.
Segments indicate the cost sender, the cost elements to be
allocated, the receivers, and weighting factors called tracing
factors and tracing factor rules.
Segments within a cycle are usually processed in the most
efficient manner the system determines.
Allocations with dependencies should be setup in separate
cycles and must be done at the highest levels first
53. Cost Center Accounting
CO postings: Distributions
The purpose is to allow a cost center to charge a cost object for
services or activities provided using a planned rate.
Cost allocations do not affect the General Ledger
Deals with the measurement, posting, and allocation of an
organizational activity.
You need to create the corresponding tracing factors known as
activity types in cost center accounting.
Cost Center Accounting
CO postings: Assessment
Assessment affords a higher level of summarization for
allocations where the receiving cost center manager has no
control over reducing the expense at the sender cost center.
All the debits and credits posted to the cost center will be
combined on a secondary cost element for allocation.
The only way to further allocate secondary costs is to use
assessments.
Cost Center Accounting
Budget (Planning)
Involves entering plan figures for costs, activities, prices, or
statistical key figures for a particular cost center and a
particular planning period.
Goal
Calculate planning costs to define deviations later and to
54. prepare the allocation to the cost bearers.
Based on absorption costing, it allocates all the costs in
overhead area to the cost bearers in a company using different
procedures
Objectives
To plan the structure of the organization’s future operations for
a clearly defined period.
To control business methods within the current settlement
period using plan/actual or target/actual comparisons
To monitor the efficiency after the completion of the settlement
period using plan/actual or target/actual comparisons
To provide a basis for the valuation of organizational activities
independent of random fluctuations
Cost Center Accounting
Budget vs Actuals (S_ALR_87013611)
Controlling area
Fiscal year
From to Period
Plan Version
Cost centers
Cost elements
Cost Center Accounting
Cost center reporting (KSB1)
Controlling area
Cost center
Cost element
Posting date
55. Cost Center Accounting
Reflection
Which currencies would you think a Global Bike Germany
profit center document would have?
What would you recommend GBI in Germany to be its cost
center structure and hierarchy and why?
What examples can you provide for GBI distribution process?
What examples can you provide for GBI allocation process?
What would you say is the main purpose of having the
distribution and allocation process in SAP?
What benefits you can derive for having your cost center budget
in SAP?
Profit Center Accounting
Introduction
Purpose is to determine profit for internal areas of
responsibility and it is integrated to the New GL
Responsible for revenue regeneration and cost containment
Common use
Region
Function
Product
Profit center
56. Revenue
Cost
Profit Center Accounting
Transactions
KE51 Create profit center
KCH1 Create profit center hierarchy
KE5Z Profit center actual line items
Profit Center Accounting
Master Data: Profit Center (KE51)
Profit center accounting is a statistical accounting component
It takes transaction data posted in other components and
represents it from a profit-center-oriented point of view.
By assigning balance sheet items to profit centers you can
analyze your company’s fixed assets by profit centers making it
possible to analyze a number of key figures by profit center,
thus using them as investment centers
57. An organizational unit in accounting that reflects a
management-oriented structure of the organization for purpose
of internal controls
Basic Data
Controlling area
Validity
Name & description
Company codes
Other
Responsible
Hierarchy group
Profit Center Accounting
Data Flow
Profits centers can receive data from:
Direct postings from GL
Automatically generated for AR and AP from document
splitting
Direct posting from revenue
Derived posting from expenses
59. Fiscal Year
Profit center
Account
Document number
Profit Center Accounting
Reflection
Which currencies would you think a Global Bike Germany
profit center document would have?
What do you think GBI can use profit center accounting for
considering they are a manufacturing company.
Internal Order
Introduction
Interim cost collector
Usually used to break costs out below the cost center level.
Common use
Project cost
Campaign cost
Travel cost
Used for tracking individual or recurring events where several
cost centers may share the expense
Usually short term and gets set to zero at the end.
Overhead Orders
Used to monitor costs incurred for a particular purpose
Investment Orders
Used to monitor costs incurred in the production of a fixed asset
Accrual Orders
60. Used to offset postings of accrued costs to cost centers
Orders with Revenue
Used to replace the cost accounting parts of SD customer orders
if SD is not being used.
Internal Order
Transactions
KO01 Create order
Planning
Posting and settlement
KOB1 Actual line items
Internal Order
Master Data (KO01)
It can settle cost at its end of its life into:
Fixed assets
Projects
Profit centers
Is a self-contained mini project cost object with an interim life.
Basic Data
Order and description
Category
Other
61. Company code
Controlling area
Plant
Profit center
Responsible
Currency
Internal Order
Planning
During internal order planning, you enter costs, activities, and
business processes that you expect to incur during the lifecycle
of an order.
Using internal order planning, you can compare plan and actual
costs, and carry out a differentiated variance analysis
Planning levels
Overall planning is simplest level for planning order costs
62. which allows you plan overall and annual values irrespective of
the cost elements.
Primary/secondary cost and revenue planning can be used if you
have detailed information about the internal order which allows
you to plan primary costs, activity inputs, and revenues.
Unit Costing can be used to carry out more detailed planning
than is possible on cost elements.
Internal Order
Posting and Settlement
Posting
An internal order is a bucket that allows a better view of costs
that could not be itemized in detail in a cost center.
An order can be real or statistical (informational postings only).
If it is a statistical posting, the cost object for that the internal
order is attached to would receive the real posting
Settlement
Another form of periodic cost allocation.
Internal orders must be settled because they are interim
collectors of costs.
The order will be periodically credited and a receiver will
debited with cost.
Can occur at the end of each period or at the end of the order’s
life.
Internal Order
Settlement Rule
Settlement rule establishes the sender and receiver relationship
as well as how much each receiver will receive during
63. settlement.
Receivers must be defined as valid in customizing and no
impending system restrictions (such as locks) prevent
settlement.
Cost centers, other orders, projects, profitability segments,
fixed assets, sales order with cost collector, and G/L accounts
Orders
Cost center
Other orders
Projects
CO-PA
FI-FA
Cost collectors
64. Internal Order
Reporting (KOB1)
Controlling area
Order
Cost element
Posting date
Internal Order
Reflection
What would you say is the difference between a cost center and
an internal order?
What would you recommend the GBI team to use internal orders
for?
What the “settlement” activity has to do with the interim life of
an internal order?
65. Product Costing
Introduction
Concerned with all aspects of planning the cost of producing
products or services, as well as tracking and analyzing actual
costs and consist of the following three components:
Product Cost Planning
Cost Object Controlling
Actual Costing and Material Ledger
Material
Cost of material
Labor
Cost of labor
Overhead
Cost of overhead
66. Product Costing
Introduction: Product Cost Planning
Used to estimate the costs to produce goods or services.
If a quantity structure (bill of material and routing) is available
in manufacturing Planning, then the system can automatically
create a cost estimate based on this data.
If no quantity structure is available you can either enter the cost
items manually with the unit costing tool or transfer them
automatically from a non-SAP system using batch input.
Product Costing
Introduction: Actual Costing
Used to provide actual costs for each material at the end of the
period.
Materials and their movements are valuated with a standard
price during the period.
Any variances with respect to this standard are collected in the
material ledger when invoices are received or orders settled.
During period end closing, the variances are used to calculate
an actual price for the material in the closed period.
Product Costing
Transactions
CK40N Costing run
CKMLCP Actual costing run
67. Product Costing
Master Data: Material Master
Contains all of the key information a company needs to manage
a material within its organization.
The material master defines, among other things, how a product
is sold, manufactured, purchased, inventoried and costed.
Information is grouped into views that are organized by
business function.
The majority of views of master data are stored at the plant
level.
Basic Data
Material
Valuation class
Accounting and Costing
Unit of measure
Material group
Description
Controls account determination
Price control
Price per unit
Standard price
Previous price
Last price change
Profit center
Cost estimate
68. Product Costing
Costing Run (CK40N)
Once you have carried out a cost estimate for a material, you
can transfer the costing results to the material master as prices.
Three steps
Mark the standard cost estimate
Release
Update
Product Costing
Costing Run (CK40N)
Release Standard Cost
The system transfers the result of the standard cost estimate into
the material master record as the material standard price.
The price is then active for Financial Accounting and is used for
the valuation of the material until the next time a standard cost
estimate is released.
You can release a standard cost estimate only once per period,
unless you delete the previously released standard cost estimate
from the database.
Mark Standard Cost
The system writes the result of the cost estimate into the costing
view of the material master record as the future standard price.
You can use this price to valuate a material component in the
cost estimate.
69. Product Costing
Costing Run: Cost Itemizations
Itemizations show detailed information about the origin of
costs.
Cost element itemizations groups the individual cost items into
cost elements. The cost element group the costs in order of
appearance.
Cost component split groups the cost elements into cost
components.
Product Costing
Costing Run: Reporting (S_ALR_87099930)
Costing run
Costing date
Plant
Product Costing
Reflection
What it means to “estimate the cost”?
What is the inventory effect after a costing run?
What impact would you have in your cost of goods sold when
the engineering team may have revisions to the BOM.
70. Profitability Accounting
Introduction
Enables you to evaluate contribution margins of external market
segments which can be classified according to:
Products,
Customers,
Orders
Strategic business units,
Sales organizations or
Business areas,
Profitability Accounting components are integrated with
Overhead Management and Product Cost Controlling.
Profit Center Accounting receives statistical cost postings from
all other management accounting components.
Profitability Analysis can receive cost assessments from cost
centers and Activity-Based Costing processes, settlements of
costs from internal orders, and production variances settled
from cost objects.
Profitability Accounting
Introduction: Data Flow
Data from sales order management is one of the key sources of
information.
In costing-based profitability analysis information can be taken
when an order is created or changed and when an invoice is
generated for the order.
In account-based profitability analysis information can be taken
when a goods issue is posted and when an invoice is generated
for the goods issue.
71. Profitability Accounting
Transactions
KE30 Execute report
KE24 Line items display
Profitability Accounting
Reporting (KE24)
Currency type
Period/year
Document number
Company code
Dimensions
Cost element
CO order
Sales order
Customer
Product
Profitability Accounting
Reflection
What would be your recommendation for the GBI tem on how to
use CO-PA?
What type of data would you expect to see on the CO-PA
document?
SAP Controlling (CO)
72. Reflection
It is month end at GBI and the managerial accounting group is
working on its month end close, what activities would you need
to review in each of the areas below
Cost center accenting
Profit center accounting
Internal order accounting
Product costing
Profitability analysis