UNIT 5 FINANCIAL AND MANAGEMENT ACCOUNTING

UNIT5 : SAP R/3 Accounting: Financial and Management Accounting

Lesson : Accounting Foundation

SAP R/3 Accounting System

           The accounting system with its various sub-units is a credit part of SAP solution. The integration of the various aspects of accounting with each other and with logistics and human resources applications becomes a management tool for all company departments.

Beside providing accounting data, the accounting system must concentrate primarily on processing operational data for strategic company decisions. Documentation and administration functions are generally performed automatically and in the background.

            For international companies, SAP R/3 offers flexible software that can be used in different countries. The system meets the needs of the major industrial nations of the world with its multilingual approach, flexible currenc handling, and country-specific functions for taxes, reporting, and payment transaction. SAP R/3 provides all the necessary functions for developing a uniform accounting system that can be consolidated across international borders.

The SAP R/3 Accounting Sysytem consist of several components:

Financial Accounting (FI) includes:

·         G/L Accounting

·          Accounts Payable and Accounts Receivable

·          Asset Accounting

Corporate Finance Management (CFM) include:

·         Corporate Finance Management (Planning, analysis, decision support, financial transaction, payment, and risk capabilities in various group enviorment)

·         Treasury Management (cash, stocks, bonds, and derivatives) Enterprise Controlling Includes EIS (Executive Information System), Profit Center Accounting, Legal Consolidation, Planning

·         EIS (Executive Information System)

·         Profit Center Acccounting

·         Legal consolidation

·         planning

Profitability and Sales Accounting includes:

·         Profitability Analysis

Product Cost Controlling includes:

·         Product Cost Planning

·         Cost Objects Controlling

Overhead Cost Controlling includes:

·         Cost cnters

·          Internal orders

·         Activity-Based Costing

Investment Management (IM)

Allows company-wide planning of capital investment programs and control of individual capital investment measures.

Project Management

Allows efficient planning, cost-sensitive control, and target oriented implementation of project with comprehensive integration with controlling and Logistic.

            These components provide the basis for performing operational transaction and meet the requirements of decision-based reporting for each application area.

ORGANITATIONAL ELEMENTS
           An effective accounting system includes more than ledgers, accounts, and documents. Organizational structure is also essential component. Structure established the parameters for corporate, tax, and management requirements.
            Assingning all relevant business transactions to these organizational units by using axplicit or implicit account assignment updates the ledgers. The SAP R/3 FI-SL system also conveys actual values for the integrated controling objects contained in SAP R/3’s controling (CO) application.
            The depiction of current corporate structure and future strategies has a bearing on how you use the organizational terms in SAP’s accounting system:

Ø  Corporate group

Ø  Company

Ø  Company code

Ø  Business area

Ø  Functional area

Ø  Profit center

Company :

This represent a legally autonomous entity, composed of one or more company codes

Company Code:

This represent the tax law (national) view the company. Fiscal calendar, local currency, and

tax reporting requirements determine the design complete and reconciled tracking system.

Business Area:

This helps depict internal structures for external segment reporting

Functional Area:

This area displays the profit and loss statement according to cost-of-sales accounting.

Profit Center (Management Accounting):

This controlling term is used to depict internal areas of responsibility. The objectof company’s operating. Consequently, areas of responsibility are more detailed than can be captured by just using the business areas.

Chart of Account:

The F1 components offers a flexible method for setting up a general ledger to meet various goals concering legal eiisues, value flow, and classification of posting. The chart of accounts is a classification system defined by accounting to record values or value flows.

The chart of accounts can be represented in the SAP system as one of three function:

As an operational chart of accounts:
The operational chart of accounts contains the accounts currently used in day-to-day transactions with the system. It allows uniform, company-wide classification of business  transactions.

As a local chart of accounts:
The local chart of accounts contains the accounts that are necessary to fuulfill legal requirements. The posting can be represented based on country-spesific, predefined classification criteria.

 As a group charts of accounts:
The group chart of accounts contains all accounts that apply throughout the corporate group. The posting data can be processed or represented based on the requirements of external group accounting.
Daily document postings are posted from the operational chart of accounts using account numbers. Alternately, you can also perform evaluatiions for a specific country.


Costumer Master-Accounts Receivable
A customers master record contains all the information that a company needs for its business relations with a customer.
Three-part structure of master records makes it possible to flexibly depict the various organizational structures of an operation
1.      General Data
2.      Data for Company Codes
3.      Data for Sales

Vendor Master-Accounts Payable
When postings are made, this number is incorporated into the document and its available for consolidation purposes:

General data

Includes address and telecommunications data, general vendor information as well as bank details.

Company code data

Includes company-specific policies concerning payment transactions, dunning procedures, and correspondeence information.

Purchasing organization data

Includes inquiry, order, and invoice verivication information.

Asset Management
Increasing automation makes planning and monitoring of fixed assets for external and internal accounting purposes ever more important.
Asset classes support the structuring and classification of fixed assets. Central default values, such as classification criteria, depreciations keys and useful life, data on the valuation of the net assets, insurance-related data, and much more are dtored with the assets class

Account Balances
There account balance offers an overview of transaction figures for each period by debits and credits. Possible differentiating criteria include account number, company code, fiscal year, business area, and currency.


Lesson:     Financial Accounting

General Ledger
General Ledger posting may be the result of :

>  Operational transaction : if the SAP Materials Management (MM) system is active and integrated

>  Posting transaction : in subsidiary ledgers (asset acquisition in fixed assets) if the SAP Asset Accounting (FI-AA) system is active and integrated.

>  Transaction originally assigned to the ledger, if the General Legder (FI-GL) system is active.

       At the same time, interrelationship with Controlling and its components can be taken inti account. The extent and type of the integrated system used determine how entris, account assignments and updates are processed for business transaction.
Subsidiary ledgers are completely and comperhensive integrated with G/L accounting on the following levels :

> Maste Data

>  Transaction Data

>  Reporting

Intergration of master data comprises the shared chart of accounys and all acount assigment elements of the subsidiary ledgers including cost accounting. This integration is also teh crusial advantage of complete data integration at individual transaction level.

Accounts Receivable
The FI Accounts Receivable compnent is responsible for monitoring and controlling customers accounts with in SAP R/3’s Finacial Accounting component. Accounts analyses, alarm reports, due date lists and a flexible dunning system all make it easier to keep track of open times.

Accounts Payable
SAP R/3’s FI Accounts Payable component manages accounting data for all vendors. Payment are made so that maximum advanatage is taken of available discount, using either standard written forms or electronic means. The system supports all international methods of payment. Balance aidit trails, accounts balances and journals document transaction in Account payable.


Travel Management and Expense Reimbursement
SAP R/3 Travel Management gives you a flexible, high-performance tool wih you can:

o   Plan trips

o   Book Travels services

o   Approve trips via SAP Business Workflow

o   Record trip data

o   Detemine and valuate reimbursement amounts according to statutory and enterprise-specific provisions

o   Account for travel expneses according to specified statuory provision

Payment and Transfer to Payroll Accounting
Payments of expenses can be accomplished via Finalcial Accounting, Payroll Accounting, or data medium exchange (DME) with credit instituions. SAP R/3 Travels Managment the triggres teh transfer of trvel expenses accounting result.

Lesson: Management Accounting

FI and CO : Standards Versus Flexbility
The mySAP Financials applicatons compnets Conroling (CO) contains all accounting functions necessary for effective conrolling. If an organizations divides accounting into enternal and external viewpoints, CO represent the internal accounting perspective because it provides information for managers –those who are inside an organization and are charged with controlling its operations. CO includes cot and revenue accounting.

Components of Management Accounting
The mySAP Financials key functional area : Management Accounting is comprised of application components in the Controlling (CO) and Enterprise Controlling (EC) areas. This involves recording oth the cumsumption of productio factors of production factors ang the services provied by an organization.
The components of CO and CE include the following key capabilities: key controlling capabilities:

*        Cost center accounting

*        Internal orders

*        Activity-based costing

*        Product cost controling

*        Profitability analysis

Key Enterprise Controling Capabilities:

*         Profit center accounting

*        consolidation

Master Data
The Controlling Area forms a framework within which CO processes cot and revenus elements transactions an all CO documents. The assigment of multiple company codes to a controlling area can be uesed to support centralized cost accounting for an entire organization.
Cost and revenue element accounting records and groups the cost incurred during a particular settlement.

Overhead Cost Controlling
Overhead in planning, monitoring, control and coordination in such areas as research and development, procurement, work scheduling and maintenace is gaining more impotance. The mySAP Financials Overhead Cost Controlling (CO-OM) component helps you plan, allocated, control, and monitor overheadin your organization. You can assign overhead to tehe cost centers where it accurred or to the activities that generated the overhead.

Cost Center Accounting
The cost center accounting determines where cost appear in the organization. You thereby assign cost to their organizational subareas.

Internal Order
Internal order are categorized as eitheir:

*         standard orders used only for monitoring objects in cost accounting

*        productive orders that are value-added, that is, orders that can be capitalized. These orders can be used to assist in decision-making, such as when you need to decide between in-house production and external procurement.

Activity-Based Costing (ABC)
Is a relatively new cost accounting method used by some companies to monitor cost by business process rather than cost centers. The goal of ABC is to determine the cost of performing a business process. This process cost can then be analyzed at the product or customer level by determining how much of the process was used or consumen by an ABC cost object, such as a product.


Product Cost Controling
Is part of my SAP Financial’s Controling application componentand is a tool for managing cost related to the manufacturing process and the rendering of services. Product cost controling uses information form the overhead cost controling components to calculate such cost as labor, machine, or factory overhed, and provides information to profitability analysis so that tool can calculate contribution margins.


Profitability Management

mySAP Financials provides you with two tools for evaluating profitability in such a decentralized environment:

Profitability Analysis (CO-PA)

Provides you with an external view of your profitability. Profitability analysis allows you to monitor and analyze the contribution of your market segments and units, structured according to products, customers, orders, and summarizations of these and other user-defined characteristics.

Profit Center Accounting (EC-PCA)

Provides you with an internal view of your profitability. EC-PCA makes it possible to evaluate the operating profit of different areas or units within your enterprise.

Posting in Controlling

This CO document with its own unique number contains the following details:

·         controlling object posted to

·         the cost element used

·         the amount

·         the date

Integration

All important transactions in the controling application appear in separate controlling documents (or CO documents). In the integrated SAP R/3 sustem, ou can transfer data to cost center accounting from the following application components:

·         financial accounting (FI)

·         Asset accounting (FI-AA)

·         Materials Management (MM)

·         Material Consumption

·         Production planning (PP)

·         Personnel administration and payroll (PA)

Sales and distribution (SD) is a primary source of revenue postings to CO/EC via billing documents. As SD sales order can also be used in conjunction with a make-to-order production scenario in CO to track both cost and revenues, and to evaluate the profitability of fulfilling the order.