Overview of Financial Accounting in SAP

UNIT 1 Overview of Financial
Accounting (FI) in SAP ERP
Lesson 1
Outlining Financial Accounting (FI) Components in SAP ERP 3
UNIT OBJECTIVES
● Describe financial accounting (FI) in SAP ERP
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Unit 1
Lesson 1
Outlining Financial Accounting (FI)
Components in SAP ERP
LESSON OVERVIEW
This lesson provides an overview of the basic financial accounting components of SAP ERP.
LESSON OBJECTIVES
After completing this lesson, you will be able to:
FI Components of SAP ERP
Figure 1: Financial Accounting Overview
General Ledger Accounting (FI-GL)

The central task of G/L accounting is to provide a comprehensive picture for external
accounting by means of accounts. Recording all value-related business transactions (primary
postings as well as settlements from internal accounting) in a software system that is fully
integrated with all the other operational areas of a company ensures that the accounting data
is always complete and accurate.
Features of the G/L accounting include the following:
● Free choice of level: corporate group or company
● Automatic and simultaneous posting of all sub-ledger items in the appropriate general
ledger accounts (reconciliation accounts)
● Real-time evaluation of and reporting on current accounting data, in the form of account
displays, financial statements with different financial statement versions, and additional
analyses
Essentially, the general ledger serves as a complete record of all business transactions. It is
the centralized, up-to-date reference for the rendering of accounts. Actual individual

Unit 1: Overview of Financial Accounting (FI) in SAP ERP
transactions can be checked at any time in real-time processing by displaying the original
documents, line items, and transaction figures at various levels, such as:
● Account information
● Journals
● Totals/transaction figures
● Balance sheet/profit and loss evaluations
Accounts Payable (FI-AP)
Figure 2: Financial Accounting Overview (2)
The Accounts Payable application component records and administers accounting data for all
vendors. It is also an integral part of the purchasing system, where deliveries and invoices are
managed according to vendors. The system automatically makes postings in response to the
operative transactions. In the same way, the system supplies the Cash Management
application component with figures from invoices in order to optimize liquidity planning.
Features of accounts payable include the following:
● Payables are paid with the payment program. The payment program supports all standard
payment methods (such as checks and transfers) in printed form as well as in electronic
form (data medium exchange on disk and electronic data interchange). This program also
covers country-specific payment methods.
● If necessary, dunning notices can be created for outstanding receivables (for example, to
receive payment for a credit memo). The dunning program supports this function.
● Postings made in Accounts Payable are simultaneously recorded in the General Ledger,
where different G/L accounts are updated, based on the transaction involved (such as
payables and down payments). The system contains due date forecasts and other
standard reports that you can use to help you monitor open items.
● You can configure balance confirmations, account statements, and other notifications to
suit your correspondence requirements. There are balance lists, journals, balance audit
trails and other evaluations available for documenting transactions in Accounts Payable.
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Lesson: Outlining Financial Accounting (FI) Components in SAP ERP
Accounts Receivable (FI-AR)
Accounts Receivable (FI-AR)

The Accounts Receivable application component records and administers accounting data of
all customers. It is also an integral part of sales management.
Features of accounts receivable include the following:
● All postings in Accounts Receivable are also recorded directly in the General Ledger.
Different G/L accounts are updated depending on the transaction involved (for example,
receivables, down payments, and bills of exchange).
● The system contains a range of tools that you can use to monitor open items, such as
account analyses, alarm reports, due date lists, and a flexible dunning program.
● The correspondence linked to these tools can be individually formulated to suit your
requirements. This is also the case for payment notices, balance confirmations, account
statements, and interest calculations.
● Incoming payments can be assigned to due receivables using user-friendly screen
functions or by electronic means such as EDI and data telecommunication.
● The payment program can automatically carry out direct debiting and down payments.
● There is a range of tools available for documenting the transactions that occur in Accounts
Receivable, including balance lists, journals, balance audit trails, and other standard
reports. When drawing up financial statements, the items in foreign currency are revalued,
customers who are also vendors are listed, and the balances on the accounts are sorted by
remaining life.
● Accounts receivable is not only one of the branches of accounting that forms the basis of
adequate and orderly accounting. It also provides the data required for effective credit
management, (as a result of its close integration with the Sales and Distribution
component), as well as important information for the optimization of liquidity planning
(through its link to Cash Management).

Asset Accounting (FI-AA)
The Asset Accounting (FI-AA) component is used for managing and supervising fixed assets
with the SAP System. In Financial Accounting, it serves as a subsidiary ledger to the General
Ledger, providing detailed information on transactions involving fixed assets.
Features of asset accounting include the following:
● The Asset Accounting component is intended for international use in many countries,
irrespective of the nature of the industry. This means, for example, that no country-
specific valuation rules are hard-coded in the system. You give this component its country-
specific and company-specific character with the settings you make in Customizing. To
minimize the time and energy involved in Customizing, country-specific defaults are
provided in the standard system where possible.
● As a result of the integration in the SAP System, Asset Accounting (FI-AA) transfers data
directly to and from other SAP components. For example, it is possible to post from the
Materials Management (MM) component directly to FI-AA. When an asset is purchased or
produced in-house, you can directly post the invoice receipt or goods receipt, or the
withdrawal from the warehouse, to assets in the Asset Accounting component. At the
same time, you can pass on depreciation and interest directly to the Financial Accounting
(FI) and Controlling (CO) components. From the Plant Maintenance (PM) component, you
can settle maintenance activities that require capitalization to assets.

Lesson: Outlining Financial Accounting (FI) Components in SAP ERP
Bank Accounting (FI-BL)
Bank Accounting (FI-BL)

This component is used to handle accounting transactions that you process with your bank.
Features of bank accounting include the following:
● It includes the management of bank master data, cash balance management (check and
bill of exchange management), and the creation and processing of incoming and outgoing
payments.
● It is possible to freely define all country-specific characteristics, such as the specifications
for manual and electronic payment procedures, payment forms, or data media.

Layout of a Financial Statement
Figure 6: Financial Statement Layout
The figure above shows an example of a country-specific structure. The structure always
depends on customer-specific requirements.
Synonyms for “financial statement” include the following:
● Balance sheet
● Statement of financial condition
Note:
Guidelines for balance sheets of public business entities are given by the
International Accounting Standards Board and numerous country-specific
organizations/companies.
LESSON SUMMARY
You should now be able to:

UNIT 2 General Ledger (G/L)
Accounting
Lesson 1
Outlining Organizational Elements in Financial Accounting (FI) 13
Lesson 2
Maintaining G/L Master Records 21
Lesson 3
Posting Transactions in the G/L 29
UNIT OBJECTIVES
● Assign company codes to a controlling area

● Maintain G/L master records
● Post transactions in the G/L

Unit 2
Lesson 1
Outlining Organizational Elements in Financial
Accounting (FI)
LESSON OVERVIEW
Organizational structures occur in all important functional areas of the SAP system. The most
important organizational element in Financial Accounting is the company code. It is the
smallest organizational unit of Financial Accounting for which a complete self-contained set of
accounts can be drawn up for purposes of external reporting. Other important organizational
elements are the profit center business area and the segment. You can create a fully-
balanced set of financial statements for each profit center business area and segment.
The most important organizational element of the controlling application is the controlling
area. In this lesson, we study, for example, the option for assigning one or several company
codes to a controlling area.
Business Example
The sample company consists of nine companies all over the world. Each company must fulfill
national reporting requirements and is, therefore, represented by a company code.
LESSON OBJECTIVES
Company Code
A company code is an independent accounting entity; the smallest organizational element for
which a complete self-contained set of accounts can be drawn up. An example of a company
code is a company within a corporate group.
A company code has a unique, four-character key, which can be alphanumeric.
Figure 7: Company Code
General Ledger Accounting is kept at the company code level. It is used to create the legally
required balance sheets and profit-and-loss statements for the company code.

Unit 2: General Ledger (G/L) Accounting
The company code must be specified for every financial transaction in SAP ERP. This is done
either manually or by deriving the company code from other data elements.
Multinational Structures
Note:
The IDES enterprise serves as a sample group.
Figure 8: IDES International
IDES operates worldwide and has subsidiaries in North America, Europe, and Asia. Each
affiliate (company code) is a legal entity that is required by law to provide financial records
according to country-specific regulations.

Lesson: Outlining Organizational Elements in Financial Accounting (FI)
IDES Company Codes
Figure 9: IDES Company Codes
The affiliates of IDES are set up as company codes in the SAP ERP system and are uniquely
identified by four-character codes. Each company code has a local currency. The local
currency of IDES AG is EUR . Amounts posted in foreign currencies are automatically
converted to the local currency.
Note:
Affiliated group (IDES International) and corresponding subgroups (IDES North
America and so on) are not set as accounting entities. Consolidated financial
statements of the group will be created by companies in a subsequent step.
Companies are used as a basis for consolidation functions. A company can
contain one or more company codes. The usage of companies is part of
preparation for consolidation.
General Ledger (G/L) Accounts

Many companies not only have to create reports according to one specific accounting
principle, but also need to meet different information requirements (country-specific
requirements, corporate group standards, and so on). This means that financial statements
have to be created, for example, according to local accounting standards like U.S. Generally
Accepted Accounting Principles (GAAP) or the German Commercial Code (HGB) and the
International Financial Reporting Standards (IFRS).

Figure 10: Parallel Financial Reporting – Accounts Approach
The accounts approach is widely used in this context. Different valuation approaches post to
different accounts (only in cases of differences between the principles for topics like
valuation, depreciation, or accruals). When financial statements are created, the financial
statement version is used to evaluate the relevant accounts. For example, financial
statements according to U.S. GAAP, only take into account those accounts that follow this
accounting principle.
Parallel Financial Reporting (Ledger Approach)

As of SAP ERP, new General Ledger Accounting is available. It allows you (within General
Ledger Accounting) to manage multiple “general ledgers” in parallel and in this way create
different financial statements (ledger approach).
Figure 11: Parallel Financial Reporting – Ledger Approach
In new General Ledger Accounting, one ledger has the role of “leading” ledger.

However, as previously in older releases, you can still manage accounts in parallel using
additional accounts (accounts approach), despite new General Ledger Accounting. In this
case, there is only exactly one ledger in new General Ledger Accounting - the leading ledger.
Profit Centers
In new General Ledger Accounting, profit centers can be part of Financial Accounting. That
means that the profit center information is stored in the totals table of FI *. As company
codes, the profit centers function as a dimension for financial reporting. This means that
financial statements can be created for profit centers as standard.
Note:
* In earlier releases, Profit Center Accounting is part of Controlling. The respective
CO component is called Enterprise Controlling - Profit Center Accounting ( EC-
PCA ). It is still possible to use EC-PCA as a controlling component in a new G/L
system, however it is not recommended that both approaches to profit center
accounting are used in parallel.
Figure 12: Profit Center
A profit center can represent many things:

● An organizational unit within the company (such as a plant)
● A line of business
● A geographical location
Remember that this is a "profit" area of responsibility and must not be confused with a cost
center. As of the SAP ERP, profit centers are not separate components but rather an integral
part of General Ledger Accounting itself.
Unlike the other dimensions in new General Ledger Accounting, profit centers are still
considered as master data, despite being organizational units.

Segments
The segment is a new organizational unit available with the new General Ledger Accounting.
Segments can also be used as a dimension for reporting purposes - keyword: segment
reporting in IFRS and U.S. GAAP.
The aim of segment reporting is to:
● Provide an insight into different business activities of a diversified company.
● Provide information about the general environment.
The purpose of segment reporting is to:

● Provide a better overview of a company's economic performance.
● Improve forecasting of the potential sales and financial reserves of a company.
● Better anticipate risks and opportunities of a company.
Figure 13: Segment
According to international accounting principles (IFRS 8) companies are obliged to provide

information in their reports on the financial results of business segments (operating
segments). This is conducted using the Management Approach, which requires that segment
information from internal reporting is constructed in the same way that this information is
used to make decisions on the allocation of resources to segments and to evaluate
performance.
Defining a Segment
According to U.S. GAAP (SFAS 131), a segment is a part of the company that incurs costs,
generates revenue, and has its own financial data with regard to profit and resource
consumption.

Figure 14: Defining a Segment
An ERP system enables you to save a segment in the master data of a profit center. When the
posting is made to the profit center, the posting is made to the segment automatically.
LESSON SUMMARY

Unit 2
Lesson 2
Maintaining G/L Master Records
LESSON OVERVIEW
In this lesson, we examine General Ledger (G/L) accounts in detail. We also discuss the
reasons why a company code may have more than one chart of accounts in certain situations.
Business Example
A company code must be assigned to an operating chart of accounts in order for postings to
occur for that company code. A chart of accounts is a list of G/L accounts to which one or
more company codes may post. In order to post to a G/L account, a company code must
have its own specific segment of the G/L account master record created in addition to the
chart of accounts segment, which just exists once and pertains to all company codes.
Your company has decided to increase capital with corporate funds. In addition, your
company requires a new G/L account for that increase in equity.
LESSON OBJECTIVES
Chart of Accounts
Each general ledger is set up according to a chart of accounts. The chart of accounts contains
the definitions of all G/L accounts in an ordered form. The definitions consist mainly of the
account number, account name, and the type of G/L account, that is, whether the account is
a P&L-type account or a balance-sheet-type account.

Figure 15: Charts of Accounts
You can define an unlimited number of charts of accounts in the SAP system. Many country-
specific charts of accounts are included in the standard system.
Figure 16: Chart of Accounts Assignment
For each company code, you must specify one chart of accounts for the general ledger. This
chart of accounts is assigned to the company code in configuration and is referred to as its
operating chart of accounts.
A chart of accounts can be used by multiple company codes (see diagram). This means that
the G/L accounts of these company codes have an identical structure.

Lesson: Maintaining G/L Master Records
Company Code Settings

Before you can use an account in a company code, you have to maintain the account
definition at the chart of accounts level. You then create company code-specific settings,
which are only valid in the company code. An example of a company code-specific setting is
defining the account currency. Most of the accounts in company code 1000 use the EUR
currency, whereas company code 3000 uses USD for most of its accounts. When the account
currency is the local currency of the company code, one can post to that account in any
currency.
Figure 17: Company Code-Specific Settings

Figure 18: G/L Master Record (Central View)
The Central View of the G/L Master Records shows the chart of account data and the
company code-specific data.
Account groups are used to organize and manage a large number of G/L accounts. Whenever
a new G/L account is created, an account group must be specified for it.
Figure 19: Account Groups for G\L Accounts
Accounts with the same account group normally have similar business functions. You can, for
example, have an account group for:

● Cash accounts
● Expense accounts
● Revenue accounts
● Other balance sheet accounts
The account groups are assigned number ranges. Via the number ranges, you can control
which account numbers are permissible for cash accounts, expense accounts, and so on.
Account groups also control the appearance of the company code segment of G/L accounts.
Account groups control:
● The fields are required for data entry.
● The fields that are optional for data entry.
● The fields that do not show up at all in the company code segment.
Figure 20: Reconciliation Accounts
Reconciliation accounts connect subsidiary ledgers with the general ledger in real time. This
means that a posting to a subsidiary ledger posts to the corresponding reconciliation account
in the general ledger at the same time.
The subsidiary ledgers, which are connected to the general ledger via reconciliation accounts,
are:
● Accounts payable
● Accounts receivable
● Asset accounting

Figure 21: Transaction Figures
A transaction figure describes the total of all postings on an account in debit or credit. One
transaction figure for debit and one transaction figure for credit are always kept for each
account in the SAP system. The financial statements for the company code are calculated
using these transaction figures.
If a G/L account has line item display marked in its master record, one can drill down from the
balance of the account to the line items and then to the documents.
If using profit centers, segments, or business areas, transaction figures are also kept per
profit center, segment, or business area (see figure). If you create a financial statement for
the business area, the transaction figures for that specific business area are used to supply
information for the financial statements.
Financial Statement Versions

A general ledger is kept in order to provide the information needed to create a balance sheet
and a profit-and-loss statement. These reports have to meet country-specific requirements.
IDES (the name of our sample group) would need to create financial statements based on the
German Commercial Code (HGB) for company code 1000 (Germany), and based on U.S.
Generally Accepted Accounting Principles (GAAP) for company code 3000 (USA).
To meet the various reporting requirements, various financial statement versions can be
created in the SAP system. In these financial statement versions, you define exactly which
accounts are to appear in which line items of the financial statement. Many financial
statement versions are included in the SAP system.

Figure 22: Financial Statement Version
When running financial statement reports, select a financial statement version that contains
the details of the report structure.
The IDES company codes use the following charts of accounts:
● INT is used by company codes 1000, 2000, 2100, 2300, and 6000.
● CAUS is used by company codes 3000 and 4000.
● CAFR is used by company code 2200.
● CAJP is used by company code 5000.
Country-Specific Chart of Accounts

It is particularly important to the IDES board of directors that the European company codes –
Germany, United Kingdom, Portugal, and Spain – all belong to the same controlling area. A
great deal of activity takes place among these company codes. Therefore, all four company
codes are assigned to the same operating chart of accounts (INT).
However, in certain countries, financial reports must be submitted to the respective
authorities using the corresponding country-specific chart of accounts. To enable the account
numbers from the individual countries to be used in legal reports, a country-specific chart of
accounts was created for these three company codes. These country-specific charts of
accounts meet the reporting requirements of the respective countries.
In the company code segment of the master record, each G/L account must be assigned to
an account from the country chart of the company code. This is done using the Alternative
account number field.
Every account number from a country-specific chart of accounts can only be used once.
Group Chart of Accounts

Group Chart of Accounts

Not all company codes of the IDES group use the same operating chart of accounts, so a
group chart of accounts (CONS)is used for consolidation purposes. The operating charts of
accounts are assigned to this group chart in configuration.
Once an operating chart has been assigned to a group chart, the Group account number field
becomes required in the chart of accounts segment of the master record.
It is possible to assign several accounts of an operating chart of accounts to one group
account number.
In summary, only the operating chart of accounts is posted. Country chart of accounts and
group chart of accounts assist only for reporting purposes, and if necessary, consolidation
purposes.
LESSON SUMMARY

Unit 2
Lesson 3
Posting Transactions in the G/L
LESSON OVERVIEW
In this lesson, we learn how to create G/L postings using both the Enjoy and the traditional
complex posting screen. First, we analyze the structure of the financial document. Then we
examine the effects of the postings by analyzing the transactions on the posted accounts and
by running the balance sheet. We also identify how to integrate external and internal
Accounting by using cost elements.
Business Example
Accountants create many journal entries as part of their daily work. In SAP, accountants can
use a single-entry Enjoy screen for most of their postings. In some cases, the traditional
complex screen is used. In both methods, G/L account postings are automatically listed in the
income statement report (as long as the accounts are included in the financial statement
version). You can display the respective postings also when querying posted accounts.
Your company is planning to increase capital with corporate funds. This business transaction
will be reflected in a new G/L posting to the new equity account we created in the previous
lesson.
LESSON OBJECTIVES

G/L Posting Transactions
Figure 23: G/L Account Postings
As from SAP E-Commerce for SAP R/3, you can easily create and post a G/L account
document using a single-screen transaction. The entry screen is divided into the following
areas:
Work templates
Here, you can select screen variants, account assignment templates, or held documents
as references. A held document is a document that a user saves without posting it, with
the idea that the user will complete and post the held document later.
To return to the original line layout of the GL document entry table, right-click the screen
and choose Reset screen variant.
Header data
Header data applies to the whole document, such as posting date and document type.
Some of the header data can be in display format only, or hidden from the user via editing
options.
Line item information
Here, the line items of the document are entered.
Information area
Here, the debit and credit balances are displayed by using a traffic light icon.

Lesson: Posting Transactions in the G/L
Figure 24: G/L Document Entry Enjoy Screen
Figure 25: Standard/Complex Postings
Accounting Documents
Complex or general postings correspond to the old, more difficult standard posting
transaction, FB01.

1. In the initial screen, you enter the data for the document header. Additionally, you enter
the posting key and the account for the first line item. The posting key provides the
system with information regarding the account type (G/L account, customer, vendor,
asset and material) and can influence the layout of the entry screen for the line item,
which will be seen in the next screen. The key driver of the layout of the entry screen for
the line item is the field status group of the account that is being posted to.
2. With the information about posting key and field status group of the account to be posted
to, the detailed entry screen for the first line item is set up. When you press ENTER, you
proceed to the next screen. It contains the Amount field and Additional account
assignment fields for the first line item. This includes, for example, business area, cost
center, or profit center.
3. At the bottom of the second screen, you enter the posting key and account for the second
line item of the posting. When you press ENTER, you proceed to the third screen, which
contains the Amount field and Additional account assignment fields for the second line
item.
4. To pass information from Financial Accounting to Management Accounting (Controlling),

a cost element for the expense account to be posted to must exist. A primary cost
element can be created automatically when a new G/L account is created. Cost/revenue
elements only exist for P&L accounts. You can branch to the cost element from the G/L
master record.
Figure 26: G/L Document Entry Complex First Screen

Figure 27: G/L Document Entry Complex Second Screen
FI Document Types
Figure 28: Important Standard Document Types
Document types are used to distinguish between and order various accounting documents
easily. Each document is assigned to a document type, which is entered in the document
header. Document numbers are provided by the document number ranges assigned to one or
more document types.

Note:
For G/L account postings, document type SA is most often used, although other
document types are possible, such as accrual/deferral documents, valuation
documents, and so on.
Posting Keys
Figure 29: Posting Key
Each line item contains exactly one posting key . This instrument is used for internal control
and is entered in the complex posting screen to tell the system:
● Which account type is being posted to
● Whether the line item is a debit or credit posting
In the Enjoy transaction, you no longer need to enter the posting key. Instead,
● debit (d) represents posting key 40
● credit (c) represents posting key 50
These posting keys appear in the document and their control functions are still relevant.

Figure 30: Standard Posting Keys
In the SAP system, there are a large number of standard posting keys . Each posting key is
used for posting either a debit or a credit to one account type.
For postings in the general ledger, you need only two posting keys:
● Posting key 40 for debit items
● Posting key 50 for credit items
Figure 31: Account Information
The balance display and the line item display are provided to display the account data. The
line item display (Display/Change Line Items FBL3N) can be used only for G/L accounts for

which the corresponding function has been activated in the master record. The balance
display (Display/Change Items (New) FAGLL03) is always available.
The balance display is an overview of the saved transaction figures of an account. In the
balance display, you can display a list of the items that make up the balance by double-
clicking.
In turn, you can display the corresponding document from the line item list by double-clicking
an item or selecting the indicator and choosing the Display icon. From there you can see the
complete transaction by selecting Document overview .
Note:
If an original document for the FI document saved in the SAP system exists and it
was archived optically, you can display it as well.
LESSON SUMMARY

Overview of Financial Accounting in SAP

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UNIT 1 Overview of Financial

Accounting (FI) in SAP ERP

● Describe financial accounting (FI) in SAP ERP

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FI Components of SAP ERP

Figure 1: Financial Accounting Overview

General Ledger Accounting (FI-GL)

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Accounts Payable (FI-AP)

Figure 2: Financial Accounting Overview (2)

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Accounts Receivable (FI-AR)

Figure 3: Financial Accounting Overview (3)

Accounts Receivable (FI-AR)

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Asset Accounting (FI-AA)

Figure 4: Financial Accounting Overview (4)

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Bank Accounting (FI-BL)

Figure 5: Financial Accounting Overview (5)

Bank Accounting (FI-BL)

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Layout of a Financial Statement

Figure 6: Financial Statement Layout

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● Assign company codes to a controlling area

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Figure 7: Company Code

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Figure 8: IDES International

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IDES Company Codes

Figure 9: IDES Company Codes

General Ledger (G/L) Accounts

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Figure 10: Parallel Financial Reporting – Accounts Approach

Parallel Financial Reporting (Ledger Approach)

Figure 11: Parallel Financial Reporting – Ledger Approach

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Figure 12: Profit Center

A profit center can represent many things:

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The purpose of segment reporting is to:

Figure 13: Segment

According to international accounting principles (IFRS 8) companies are obliged to provide

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Figure 14: Defining a Segment

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Figure 15: Charts of Accounts

Figure 16: Chart of Accounts Assignment

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Company Code Settings

Figure 17: Company Code-Specific Settings

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Figure 18: G/L Master Record (Central View)

Figure 19: Account Groups for G\L Accounts

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Figure 20: Reconciliation Accounts

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