Introduction to Financial
Accounting Management
EGN 5622
Enterprise Systems Integration
Spring, 2015
Introduction to Financial
Accounting Management
Theories & Concepts
Financial Accounting (FI)

Financial accounting
Designed to collect transactional data
for preparing a standard portfolio of
reports
January 2007 (v1.0)
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3
FI Organizational Objects

Represent legal and organizational views of an
enterprise

Form a framework to support business activities
desired by the management

Accurately collect and organize business
information

Enable and support business planning and
decisions
January 2007 (v1.0)
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FI Organizational Objects

Chart of Accounts
◦ It is a classification scheme consisting of a
group of general ledger (G/L) accounts.
◦ It contains G/L accounts used by one or
more company codes.

General Ledgers (G/L)
◦ A unique combination of Company Code
and Chart of Accounts used for preparing
financial accounting statements
◦ Each G/L account with a unique account
number is designated into a balance sheet
© 2007 by SAP AG. All rights
account group and profit and loss
account
reserved. SAP University Alliance.
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group.
5
Subsidiary Ledgers (Sub-ledgers)
and Reconciliation Accounts
Sub-Ledgers:
Some financial data are not directly maintained
in the general ledger. For example, customers
accounts, which track the amounts customers
owe and payments they paid, are maintained
separately for each customer. Similarly, data
about each vendor are maintained in separate
accounts. Such accounts are called sub-ledgers,
and don’t show up in the general ledger.
January 2007 (v1.0)
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Subsidiary Ledgers (Sub-ledgers)
and Reconciliation Accounts
Reconciliation accounts:
Part of general ledger accounts that consolidate
data from a group of related sub-ledger
accounts, such as customers and vendors.
The reconciliation account for customers is
accounts receivable (A/R).
The reconciliation account for vendors is
accounts payable (A/P).
Transaction data must be posted to subledger accounts, and then they are
automatically posted to the corresponding
reconciliation account.
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Subsidiary Ledgers (Sub-ledgers)
and Reconciliation Accounts
The balance in the reconciliation account
(for example accounts receivable and
accounts payable) is the sum of the
postings in the related sub-ledger
accounts (for example, customers and
vendors, respectively).
January 2007 (v1.0)
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Vendor Accounts and A/P
Vendor 100234
200
Vendor 100435
250
Accounts Payable (A/P)
(General Ledger)
850
Vendor 100621
100
Vendor 100846
300
January 2007 (v1.0)
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9
Accounts Payable Integration
MM
Materials
Mgmt.
Goods
Receipt
Invoice
Receipt
FI
FI
Financial
Accounting
Financial
Accounting
Debit to Inventory account
Credit to GR/IR account
MM
Materials
Mgmt.
Debit to GR/IR
Credit to A/P account
FI
Financial
Accounting
Balance Sheet
January 2008
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Customer Accounts and A/R
Customer 189
100
Customer 142
300
Accounts Receivable (A/R)
(General Ledger)
950
Customer 135
400
Customer 123
150
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Accounts Receivable Integration
MM
Materials
Mgmt.
Issue
Sales
Order
Invoice
Goods
Issue
FI
FI
Financial
Accounting
Debit to COGS account
Credit to Inventory account
SD
Sales and
Distribution
Financial
Accounting
FI
Financial
Accounting
Credit to Revenue account
Debit to A/R account
Income Statement
Balance Sheet
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Accountants and Audit Trails

Audit trails allow an auditor to begin with an
account balance on a financial statement and
trace through the accounting records to the
transactions that support the account balance

Audit trails enable an auditor to trace individual
transactions to the effected account balance(s) on
a financial statement
January 2007 (v1.0)
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Introduction to Financial
Accounts Management
SAP Implementation
SAP Module View
Sales &
Distribution
Financial
Accounting
Materials
Mgmt.
Controlling
Fixed Assets
Mgmt.
Production
Planning
Human
Resources
Quality
Maintenance
Integrated Solution
Client / Server
Open Systems
Plant
Management
Project
System
Workflow
Industry
Solutions
Components of Financial
Accounting
Accounts
Receivable
Financial
Accounting
(FI)
General
Ledger
Fixed
Assets
Accounts
Payable
Banks
Special
Purpose
Ledger
January 2008
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Business Processes Integration
FI MM PP SD
Rules
FI
MM
PP
SD
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Business Processes Integration
 Financial Accounting (FI)
 Materials Management (MM)
 Sales and Distribution (SD)
 Production Planning (PP)
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Integration
Procurement Process
(Procure-to-Pay)
Purchase
Requisition
Purchase
Order
Notify
Vendor
Payment
to Vendor
Invoice
Receipt
January 2008
Vendor
Shipment
Goods
Receipt
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reserved.
19
Integration
Sales Order Process
(Order-to-Cash)
Check
Availability
Sales Order
Entry
Pick
Materials
Receipt of
Customer Payment
Invoice
Customer
Pack
Materials
Post Goods
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Integration
Production Process (Make-to-Stock)
Production
Proposal
(Planning/Other)
Capacity
Planning
Schedule
and Release
Shop Floor
Documents
Order
Settlement
Finished Goods
Receipt
Raw
Materials
Issue
Completion
Confirmation
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21
Financial Accounting Module
FI
Rules
FI
January 2008
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Financial Accounting Module
Organization Data
 Master data
 Rules
 Transaction Data

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Financial Accounting Module
- Organization Data
FI
January 2008
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Organizational Data

A hierarchy in which the organizational units in
an enterprise are arranged according to
functions and tasks

They are static data and rarely changed
 Once the organizational structure is decided, it
is not easy to change it

The definition of organization units is a
fundamental step; it is a critical factor in how the
company will be structured
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Optional Organizational Structures
GM Corp.
Chart of Accts
Client
GM–Corporate
Credit CA
General
Motors
Corporate
Fiscal Year Var.
Consolidation of Company Codes
Chevrolet
GMC
Cadillac
Business Areas
Cars
Trucks
Cars
Trucks
Trucks
January 2008
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Business Areas (review)
Business Areas

An enterprise organizational unit within financial
accounting. It corresponds to a defined business
segment or area of responsibility, to which you
can assign value movements recorded in
Financial Accounting.

Business areas may also group product and
market combinations as homogeneously as
possible for the purpose of developing unified
business policy.
January 2008
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Financial Accounting Module
- Master Data
FI
January 2008
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Master Data (review)
Financial Accounting
• General Ledger
Accounts
• Material Master
• Vendor Master
• Customer Master
Material Management
• Vendor Master
• Material Master
• Customer /
Purchasing Info
Records
Sales & Distribution
• Customer Master
• Material Master
• Pricing
• Credit Limits
• Customer Material
Info Records
Manufacturing Process • Item Proposal
• Material Master
• BOM
• Routing
• Work center
• PRT (Production
Resource/Tools)
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FI Master Data

General Ledger Master Data
◦ Chart of Accounts Data
◦ Company Code Data
◦ Reconciliation Accounts
 Accounts Receivable (A/R)
 Accounts Payable (A/P)
 Goods Receipt/Invoice Receipt (GR/IR)
January 2008
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General Ledger – Master Data

General Ledger accounts are created at the
client level

A unique master record is created for each
General Ledger account
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General Ledger – Master Data
(continued)

Contains control information for:
◦ Data entry
◦ Data processing

Specifies what is in:
◦ the balance sheet, and
◦ the income statement
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Financial Accounting Module
FI
Rules
FI
January 2008
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Rules (Review)

Defines the parameters for Master Data and
Transactions

Determines functionality for Master Data and
Transactions

Relatively fixed

Changes as policy changes
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Rules
Financial Accounting
• Account Groups
• Field Status Variant
• Fiscal / Posting
Periods
• Tolerance Groups
• Document Types
• Number Ranges
• Automatic Account
Assignment
• Valuation Area
Grouping
• Parameter IDs
Material Management
• Fiscal Periods
• Account Groups
• Material Types
• Plant Parameters
• Purc./Rec./Inv.
Tolerances
• Automatic
Account
Assignment
• Reservations
• Material Group
• Loading Group
January 2008
Sales & Distribution
• Account Groups
• Pricing Procedure
Determination
• Shipping Point
Determination
• Revenue Account
Determination
• Define Availability
Check
• Define Credit
Check
• Document Types
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Rules







Account Groups., for example,
 BS – Balance Sheet Account Group
 PL – Income Statement Account Group
 RA – Reconciliation Account Group
Field status variant
◦ Field status groups
Automatic Account Assignments
Posting Periods
Tolerance Groups for Account Postings
Accounts Payable Settlement
Document Numbers
January 2008
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An Example for Account Groups
in GBI
Chrt/Accts
GL##
Acct
Group
BS
GL##
GL##
GL##
GL##
FA
LA
MA
PL
GL##
RA
January 2008
Name
From acct To account
## Balance Sheet
Accounts
## Fixed Assets
## Liquid Assets
## Material Accounts
## Profit & Loss
Accounts
## Reconciliation
Accounts
100000
399999
220000
100000
200000
400000
300000
101999
200600
999999
110000
310000
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reserved.
37
Account Groups
Control which fields must be entered
when an account is created
 Determine a valid number interval for
each of the groups (types) of General
Ledger accounts that have common
attributes
 Must be created before General Ledger
Chart of Accounts master records can be
created
 You must assign each account to an
appropriate account group

January 2008
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Field Status
Field status controls how the data will be
entered for a field when an accounting
master record is being used in a
transaction
 Determining whether a field is required,
optional, suppressed, or display only
 Field status controls are also relevant to a
specific activity — create, change, or
display

January 2008
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Field Status Variant
Fld status group
Text
ZALL
All Accounts
ZBSA
Balance Sheet Accounts
ZEXP
Expense Accounts
ZGRI
Material Management (GR/IR) Accounts
ZRCN
Reconciliation Accounts
ZREV
Revenue Accounts
January 2008
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Posting Periods

Before it is possible to post documents, it is
necessary to define posting periods

Fiscal years are divided into one or more posting
periods

Each posting period is delimited by both a start
and finish date

A common division of a fiscal year involves
defining 13 posting periods -- 12 months and 1
quarter ending posting periods
January 2008
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Financial Accounting Module
FI
January 2008
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Transaction Data

Includes transactions that describe business
activities

Unlike master data, aggregate transactional data
is dynamic - it constantly changes, usually many
times per day – each transaction is unique

Transactions use organizational structure, master
data, and rules
January 2008
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Transaction Overview







Document Principles
Document Types
Posting Keys
Invoice Receipt
Invoice Entry
Account Payable Process
Account Receivable Process
January 2008
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Document Principles



Each completed accounting transaction writes
data to the database and creates a unique
electronic document
A financial accounting document records the
impact (either debit or credit, and in which
account) of a transaction step on financial
accounting
Each document contains information such as:
◦ Responsible person
◦ Date and time of the transaction
◦ Commercial content including company codes
January 2008
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Document Principles – (continued)
An accounting document captures the
entire transaction in order to facilitates
recall for reporting purposes
 It remains as a complete unit in the
system until archived
 Once created, a document can not be
deleted from the database

January 2008
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Document Types

A way to categorize different
transactions
◦ Many different document types are supplied in
the system
A document type is two-digit code that
identifies the specific business process
 Document types are associated with
number ranges

◦ All documents of the same document type are
stored in the system by document number

Determine the type of account that can be
posted to
January 2008
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Document Types – (continued)
Common used document types:
 SA – General ledger account documents
 DR – Customer invoices
 DG – Customer credit memos
 DZ – Customer payments
 KR – Vendor invoices
 KG – Vendor credit memos
 KZ – Vendor payments
 KN – Vendor net invoices and credit
memos
 WA – Goods issue
 WE – Goods receipt
January 2008
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Document Numbers

All posted transactions must have a unique
number assigned to it

Usually these numbers are system generated

The numbers serve to specifically identify the
business content of a transaction so that it may
be recalled at a later time

The actual system stored document number
includes information respecting the year, date,
and company codes
January 2008
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Document Numbers – (continued)
Before any documents can be posted to a
company or company code, there must be
a number range assigned to the document
type
 New transaction document number ranges
must be created at the start of each new
fiscal year

January 2008
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Posting Keys
The posting key (PK) has a control function that
pertains to the document line items.
It determines the following:
• Account type for posting the line item
• Debit or credit posting of line items
• Field status for additional information
Account Types:
D – Customer
K – Vendor
A – Assets
M – Material
S – G/L Accounts
January 2008
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Accounting Document (-continued)
Posting Key Examples:
Posting Key
Debit/Credit
Account Type
40 (debit)
50 (credit)
Debit
Credit
G/L account
G/L account
31 (invoice)
25 (payment)
Credit
Debit
Vendor
Vendor
89 (Stock In)
99 (Stock out)
Debit
Credit
Material
Material
01 (invoice)
15 (payment)
Debit
Credit
Customer
Customer
52
Posting Keys – (continued)
General Ledger
40
50
Vendors
Common
Posting
25
31
Keys
Assets
70
Material
75
89
Customers
99
01
January 2008
15
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Accounts Payable Process
Purchase
Order
Payment
Program
Debit Credit
Invoice
Receipt
Verification
Goods
Receipt
January 2008
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Goods Receipt / Invoice Receipt
Reconciliation Account
Purchase requisition
Purchase order
No impact on
Financial Accounting (FI)
Materials Management (MM)
and Financial Accounting (FI)
via automatic account
assignment
Goods receipt
Inventory
GR / IR
Dr
Dr
$100
Cr
Cr
$100
January 2008
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Goods Receipt / Invoice Receipt
Reconciliation Account
Amount owed is
assigned and transferred to
vendor account payable
Invoice receipt
GR / IR
Dr
Cr
Vendor (sub-ledger)
Dr
Cr
$100
$100
A/P
Dr
Cr
$100
January 2008
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Vendor Payment
Amount owed is paid to
vendor and account payable
is reduced
Bank
Bank
Dr
Cr
Vendor (sub-ledger)
Dr Cr
$100
$100
A/P
Dr Cr
$100
January 2008
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(FI – MM) Integration Points
Goods
Receipt
Inventory
Dr
$100
Invoice
Receipt
Payment
Program
(Vendor)
GR / IR
Cr
Dr
$100
Cr
$100
Dr
Bank
Cr
$100
Dr
$100
Cr
$100
AP
Dr
Cr
$100
$100
January 2008
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Accounts Receivable Process
Sales
Order
From
customer
Post
Payment
Issue
Goods
Issue
Invoice
January 2008
Debit Credit
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Goods Issuing
Reconciliation Account
No impact on
Financial Accounting (FI)
Sales quotation
Sales order
Materials Management (MM)
and Financial Accounting (FI)
Delivery/Goods
Issuing
Inventory (Trading, F/G)
Dr
Cr
$1,000
COGS
Dr
$1,000
Cr
Billing
Reconciliation Account
Billing amount is
assigned and transferred to
customer account receivable
Billing
Customer (sub-ledger)
Dr
Cr
$1,250
$1,250
Account Receivable (AR)
Dr
$1,250
Sales Revenues
Dr Cr
Cr
Customer Payment
Amount is paid by
Customer and account
receivable is reduced
Customer (sub-ledger)
Dr Cr
$1,250
Account Receivable (A/R)
Dr
Cr
$1,250
Bank
Bank
Dr Cr
$1,250
(FI – SD) Integration Points
Goods
Issue
Inventory (F/G)
Dr
Cr
$1,000
Payment
Program
Billing
(Customer)
COGS
Dr
Cr
$1,000
Dr
Cr
$1,250
$1,250
Bank
Dr
Cr
$1,250
Revenue
Dr
AR
Cr
$1,250
Dr
Cr
$1,250
$1,250
January 2008
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Exercises: (Due date: 2/6/2015)
1. Display chart accounts
2. Run financial statements
3. Post transfer of funds to bank account
4. Post transfer of funds to alternative bank account
5. Create invoice receipt for rent expense
6. Display & review GL accounts and individual line items
7. Display & review accounts payable balances and individual line items
8. Post payment to landlord
9. Display & review accounts payable balances and individual line items
10. Post purchase of operating supplies
11. Run financial statements
12. Create purchase order
13. Create goods receipt
14. Post invoice receipt from vendor
15. Post payment to vendor
16. Run balance sheet/profit and loss statements