INDEX
SR
Description
1
Section I
Internal Order ( Example)
2
Internal Order Functionality
3
Internal Order (Technical Types)
4
Internal Order – Real order (Business Case)
5
Internal Order – Statistic Order (Business Case)
6
Types of Internal Order (Function Type)
Section II
1
Types Of Internal Order
2
Order Settlement Process
Section III
1
Internal Order Planning & Budgeting
2
Planning Scope of Internal Order
Cost Object Comparison : Budgeting & Commitment
Internal Order (Example)
• Used as a bucket managing costs other than Cost Center.
e.g., The planning department, sales department, and public relations department jointly held an event to exhibit new
products. The total cost for lunch during the exhibition was 600,000 yen.
It is difficult to know how much money was spent on the entire exhibition and to enter it
separately for each department when posting expenses, collect the expense as the
exhibition temporarily and allocate to the departments afterwards.
Cost Center: Planning
Meal expense
100,000
Cost Center: Sales
I/O: Exhibition
200,000
100,000
600,000
200,000
300,000
Cost Center: PR
300,000
Inform: Proposal
Internal Orders Functionality
– Planning
(Forecasting)
– Budgeting
Real IO
Statistical IO
Real IO
Statistical IO
– Actual posting
• Postings flowing from upper stream business transaction
Real IO
• Reposting of Primary Costs and Revenues
Real IO
• Direct Activity Allocations
Real IO
• Record Statistic Key Figure
Real IO
– Period end closing
Statistical IO
Real IO
• FI adjustment
• Settlement
Cost
planning
Request
budget
Approve
budget
Allocate
budget
Actual
posting &
budget
control
Settlement &
Reporting
3
Inform: Understand
Internal Orders (Technical Types)
•
Internal Orders can be technically separated into two types:
–
Real internal order, be used as interim cost collectors, settlement rule required, company code level
controlling
–
Statistical internal order, be used together with real CO objects and cannot be used independently, settlement
rule not applicable, cross company code controlling applicable
–
Both types can hold budgets and control the costs vs budgets
4
Inform: Understand
Internal Orders – Real order (Business Case)
•
Business case – Other expense – Annual party – Example 1
•
Expense is processed in a co object centrally first. In month-end, distribute the amount to each
responsible cost center.
•
Settlement allows percentage or ratio but no variable portion
Internal Order – Annual Dinner Event
Other expense staff $0.5 M
Annual Dinner 0.5 M
Employee bonus $1.5 M
Lucky draw $ 1.5 M
Account
Account
Settlement
Cost center – Sales dept.
Cost center – R&D dept.
Cost center – G&A dept.
Allocation
Profitability
analysis
Total $ 2M
Cost center – MFG dept.
5
Inform: Understand
Internal Orders – Statistic Order (Business Case)
•
Business case – Other expense – Annual party – Example 2
•
Expense is booked in each responsible cost center directly as well as a statistical IO in parallel. Review the total cost
through IO reporting function in the month-end. No Settlement in month-end
Cost center – Sales dept.
Other expense staff $ 0.1 M
Annual Dinner $ 0.1 M
Employee bonus $ 0.4 M
Lucky draw $ 0.4 M
Cost center – G&A dept.
Account
Account
Account
Other expense staff $ 0.5 M
Sales Annual Dinner 0.1 M
R&D Annual Dinner 0.1 M
G&A Annual Dinner 0.1 M
MFG Annual Dinner 0.2 M
Employee bonus $1.5 M
Sales Lucky draw $ 0.4 M
R&D Lucky draw $ 0.2 M
G&A Lucky draw $ 0.3 M
MFG Lucky draw $ 0.6 M
Account
Total $ 2M
Total $ XX
Cost center – R&D dept.
Other expense staff $ 0.1 M
Annual Dinner $ 0.1 M
Employee bonus $ 0.2 M
Lucky draw $ 0.2 M
Settlement
Total $ XX
Statistic Internal Order – Annual Dinner
Event
Account
Other expense staff $ 0.1 M
Annual Dinner $ 0.1 M
Employee bonus $ 0.3 M
Lucky draw $ 0.3 M
Account
Account
Total $ XX
Account
Cost center – MFG dept.
Other expense staff $0.2 M
Annual Dinner 0.2 M
Employee bonus $ 0.6 M
Lucky draw $ 0.6 M
Account
Account
Total $ XX
6
Types of Internal Orders (Function Type)
 Overhead Order
Used to manage expenses incurred for special purposes, such as the operation expenses of trade fairs, or project
expenses, such as maintenance, R&D, and repairs.
→Settlement target: FI-GL (Accounting documents are generated.)
 Investment Order
Used to manage the costs incurred in connection with the construction of fixed assets, such as buildings and devices.
→Settlement target: FI-AA (Fixed asset should be created)
 Accrual Order
Used to post offsetting costs to the cost center.
→Settlement target: CO (Secondary cost element is posted by CO document)
 Revenue Order
Used as an alternative cost calculation of customer sales order to collect expense and revenue, or else, for monitoring
the profit that is insignificant effect on the core business. (e.g., percentage-of-completion method)
Section II
Benefits, Usage and differrent Internal Order type
Scenarios Explanation (with Examples)
Overhead Internal Order
 Characteristics of Overhead Order
Settlement cost posted to FI-GL (Account Document).
 e.g., R&D Order
The cost of materials and other costs in daily operations are posted in this R&D order.
At the time of settlement at month-end, a journal entry is posted to record these accumulated costs as R&D
expenses.
R&D Order
CO
GL
Cost Center
Material cost
Transfer to
Labor cost
Subcontract cost other account
R&D cost
Cr.) R&D Cost
Dr.) Transfer to other account
This figure shows the main uses of Overhead orders in Overhead Cost Management Accounting (CO-OM)
•
In the first case, you post costs for the two trade fairs directly to the cost center responsible for supporting these events.
Because external costs and internal activities are handled with the same cost elements in the same cost center, you cannot
easily determine which event created which costs. Therefore, you cannot carry out further comparison analyses of the two
trade fair events.
•
If each event is assigned its own overhead cost order, as in the second case, the costs can be collected separately. The
settlement function allocates the order costs to the cost center responsible for supporting the trade fairs to provide you with an
organizational view of the costs. This approach allows you to analyze and compare the results for the trade fairs even after
settlement to the cost center.
Overhead Internal Order as Internal Cost Object
• The order can be settled in different ways, depending
on what kind of jobs it is used to monitor.
• If a job is for a single product, you could settle the
costs directly to the cost center responsible. The next
step is to allocate the costs from the cost center to
Profitability Analysis (CO-PA).
• If the job is generic and concerns the whole company,
it would be difficult to find the appropriate cost center
to debit. In such a situation, it is appropriate to settle
directly to CO-PA.
Investment order
Characteristics of Investment Order
By Settlement, the fixed asset is created.
e.g., Facility investment Order
The activities (costs) to create an asset in daily operations are posted in the orders, and when the asset is still under
construction (REL) at the month-end settlement, “Asset under Construction” account is created, or a fixed asset is created
when the asset is completed (TECO).
Investment Order
CO
Various costs
Fixed asset
Transfer
construction-in-progress
Settlement(REL)
GL
Settlement(TECO)
Dr.) construction-in-progress
Cr.) transition to construction-in-progress
Dr.) Machinery/Facility
Cr.) transition to construction-in-progress
construction-in-progress
AA
constructionin-progress
constructionin-progress
Fixed Asset
Machinery/
Facility
Investment Order scenario
•
•
The Investment Management (IM) component provides functions that support the planning, investment, and financing
processes involved in capital investment measures in your enterprise.
You can control projects that your company undertakes for the purpose of producing long-term assets for its own use, and
which must be entered in the balance sheet as assets under construction. A prerequisite for this is an investment profile that is
stored in the order master record.
•
Projects are represented in the system by either internal orders or work breakdown structure (WBS) elements. You can
create an internal order that automatically includes an asset under construction. A prerequisite for this is the investment
profile in the order master data.
•
In the construction phase, you post all transactions to the order. During periodic settlement, all debits that do not have to be
capitalized are settled to a Management Accounting receiver, such as a cost center. All items that require capitalization are
settled directly to the asset under construction. The monthly evaluation balances show the capital investment undertaking in
the asset inventory.
•
Full settlement takes place when the capital investment project is completed. You enter the final assets that the asset under
construction will be settled to in the order settlement rules. The debits settled to the asset under construction are reposted
to the final assets and the asset under construction is automatically credited.
•
The settlement for this particular order type can be done by line item in addition to the standard settlement methods for
internal orders.
Accrual order
Characteristics of Accrual Order
Internal orders that do not post FI at the time of settlement, but flow to the cost center or other cost objects by
transfer within the CO (secondary cost elements).
e.g., Order for transferring to Cost Center
When only one cost object can be specified at the time of posting, such as depreciation, it can be posted to this
order and transferred to other cost objects (cost center) only by transfer in the CO without creating an
accounting document at the time of settlement.
Cost Center A
Depreciation
Cost
I/O for transferring to Cost Center
CO
Depreciation
Cost
Depreciation
Cost
Internal
Settlement
Cost Center B
Depreciation
Cost
Calculation of Accrued Cost
You can use the percentage method or the
target=actual method to calculate accrued
costs.
With the percentage method, you determine accrued costs based on an overhead percentage rate applied to a reference cost
element or group of cost elements.
When an accrual is calculated, the system debits the cost centers with the accrual cost amounts. The effective actual costs are
credited on the accrual object (cost center or internal order) to calculate, analyze, and allocate any balances between expenses
from FI and accrued costs from Management Accounting.
In the target=actual method, you can also use an internal order for collecting the credits. Accrual calculation requires order
category 02 (accrual calculation order). In this case, the distribution of costs to periods is based on plan values entered on the
internal order.
Revenue Order
Characteristics of Revenue Order
In addition to the transfer of the costs in closing, posting revenue is possible.
e.g., Order for percentage-of-completion method
Plan costs and revenues in advance, and post costs to the POC order in daily operations.
In the case of incomplete work (REL) at the time of settlement, revenue commensurate with the level of progress can
be posted along with the work-in-progress. In addition, at the time of completion (TECO), it is possible to measure the
costs and revenues related to this internal order by cancelling the previous revenues and posting the original
revenues from SD, etc.
Order settlement (status: REL)
Degree of progress: 50%
Order for
percentage-of-completion method
CO
Cost
200
Transfer to COGS
200
Dr.) COGS
Cr.) Transfer to COGS
GL
Dr.) AR (PoC)
Cr.) Sales (PoC)
200
200
250
250
Plan Data
Cost
400
Sales
500
PL
Sales
250
Sales(SD)
0
Sales(PoC)
250
COGS
COGS
200
200
Order settlement (status: TECO)
Degree of progress: 100%
Order for
percentage-of-completion method
Cost
200
Transfer to COGS
200
Cost
200
Transfer to COGS
200
Dr.) COGS
Cr.) Transfer to COGS
Dr.) Sales (PoC)
Cr.) AR (PoC)
200
200
250
250
Plan Data
Cost
400
Sales
500
PL
Sales
500
Sales(SD) 500
Sales(PoC)
0
COGS
COGS
Profit
400
400
We can also use them to monitor costs and revenues for activities that are not part of your company’s core business. Using the
Revenue postings allowed checkbox the order type, you specify whether revenues can be posted to an order.
Orders with revenues are settled at the end of the period in the following ways:
Costs can be settled to any valid receiver, like all other order types
Revenues can be settled to the following objects:
Profitability segments
Other orders with revenues
G/L accounts
WBS Elements with revenues
Sales Orders
Internal Order Type Summarization (Data Flow)
Order Settlement
• Transfer the expenses posted to the internal order in daily operations to the settlement receiver in
accordance with the internal order status and the settlement rules in the monthly processing.
I/O: exhibition
Fixed Asset
100,000
100,000
200,000
600,000
300,000
Order
Settlement
Cost Center: Sales
200,000
COPA
300,000
顧
客
Main settlement receivers
• Fixed asset
• Cost Center
• CO-PA
• WBS
Internal Order Settlement Rule
Different receivers can be set for
different settlements.
e.g., PA segment, GL account, Cost
center, etc.
It can be either PER or FULL.
-PER: All costs within the selected
periods will be settled.
-FUL: All cumulative costs by the
selected period will be fully settled.
Section III
Planning & Budgeting functionality
under Internal order
Internal Order Planning & Budgeting
Planning
Budgeting
• Cost Oriented (Cost elements, activity types, period
values and multiple planning versions
• Easily Changed; line Item created as required
• Funds-oriented (original, supplements and returns)
• Funds Required
• Binding values; line item for each change
• Availability Check
• Funds Approved
•
During order planning, you enter costs, activities, and business processes that you expect to incur during the life cycle of an order.
You can also compare plan and actual costs and carry out differentiated variance analysis.
•
You administrate the approved cost framework for an order or an order group by using budget management. The budget is the
approved cost structure for an order and differs from the cost plan because it is binding. The budget is the device by which
management approves the expected costs for an order over a given time frame.
•
You can enter the order budget manually or copy budget information from any plan version.
23
Planning Scope of
Internal Order
Internal order planning provides the
following levels of cost planning:
• Overall planning is the simplest method of
planning costs for orders. You can estimate
overall and annusal values for an order
separately from cost element planning.
•
•
When detailed information is available for an internal order, you can use primary and secondary cost and revenue planning. This
level covers the planning of primary costs, activity inputs, and revenues in manual planning.
In automatic planning, you can charge the order with overhead costs, distribution costs, periodic reposting costs, assessment costs,
indirect activity allocation costs, process costs, and settlement costs. If the order is integrated into planning, you can carry out a plan
credit by using periodic reposting's or settlement.
•
If you have access to detailed information on sources of supply, quantities, and pricing, you can perform unit costing. With unit
costing, you can plan one level below the cost element level.
•
You can plan statistical key figures as a basis for allocations and as a means to calculate the management key figures for your orders.
24
Cost Object Comparison : Budgeting & Commitment (1/2)
•
Inform: Understand
Budgeting function – comparison
Budget functionality
Cost Center
Internal Order
WBS
Budget availability check value
Annual totals
Annual totals
Annual totals
Budget availability check at
Account group level
Y
N/A
N/A
Budget availability check at budget
carrying object level
Y
N/A
Y
Bottom – Top Budget availability
check
( adding actual cost line item from
lower nodes)
N/A
N/A
Y
Naming/Coding
External Numbering /Flexible
coding
Internal/External
Numbering/Flexible coding
External Numbering/Follow
Coding mask
Hierarchy structure
Y
N
Y
Universal Allocation
Y
N
Y
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Inform: Understand
Cost Object Comparison : Budgeting & Commitment (2/2)
Budget functionality
Cost Center
Internal Order
WBS
Budget entry
Fiori file upload
GUI transaction (KO22)
GUI transaction (CJ30)
Budget entry at account level
Y
N/A
Y
Budget on P&L
Y
Y
Y
Budget on AuC.
N/A
Y
Y
Budget supplement & return
Y
Y
Y
Budget transfer
Y
N/A
Y
Commitment
Y
Y
Y
Budget base period
Monthly base
Yearly base
Monthly base
Budget currency
Company code currency
Controlling area currency
(Group Currency)
Transaction currency
Company code currency
Controlling area currency
(Group Currency)
Transaction Currency
Company Code Currency
Controlling Area Currency
(Group Currency)
Budget year-end carryforward
N
Y
Y
Budget Top-Down Distribution
N
N
Y
26