Financial Accounting (FI)

General

75. Explain ‘Financial Accounting (FI)’ in SAP.

The ‘FI (Financial Accounting)’ module of SAP is the back-bone, which records, collects, and processes financial transactions or information on a real-time basis to provide the necessary inputs for external (statutory) reporting. The module is integrated with other modules (such as Material Management (MM), Sales & Distribution (SD), Human Resources (HR), Production Planning (PP), Controlling (CO), etc.). The module FI has several submodules that are tightly integrated.

76. What are the ‘Submodules’ within FI?

FI-AA Asset Accounting

Integrated with FI-GL, FI-AR, FI-AP, CO, MM, PP and PM, this module manages the financial side (depreciation, insurance, etc.) of the assets throughout their entire lifecycle starting with procurement of assets and ending with scrapping or sales.
FI-AP Accounts Payable

Integrated with FI-GL, FI-AA, FI-TR and MM, this submodule manages vendor transactions by linking with material management, asset accounting, travel management, etc. Notable is the ‘payment program’ for making payments to vendors.
FI-AR Accounts Receivable

Integrated with FI-GL, FI-AA, FI-TR, MM and SD, this submodule manages customers and receivables, and integrates with SD. It is well-known for credit management functionalities and the ‘dunning’ program.
FI-BL Bank Accounting
FI-FM Funds Management
FI-GL General Ledger Accounting

This submodule is integrated with all other submodules within FI and outside FI.
FI-SL Special Purpose Ledger

This submodule is used to provide the summary information from multiple applications at a level of detail that the user defines.
FI-LC Legal Consolidations

This submodule helps in the central task of combining the financial operating results of the companies within a group to provide overall results for the group.
FI-TM Travel Management

77. Name the Submodules Within FI, from Which FI-GL Gets Simultaneous Postings.

Accounts Receivable (FI-AR)
Accounts Payable (FI-AP)
Asset Accounting (FI-AA)

78. Name Three Distinct Characteristics of FI-GL.

Multi-currency capability
Flexible real-time reporting

Real-time transaction entries

Global and Enterprise Settings

Before getting into the questions, please look into the FI organization structure depicted below. When moving through the questions, at any point in time if you need clarification on the arrangement of the various organizational elements, do visit this page again. To be successful as an FI/CO consultant you need to have a thorough grasp of this basic fundamental block in SAP FI/CO.

Figure 14: FI Organization Structure

79. What do You mean by ‘Organizational Units’ in SAP?

The ‘Organizational Units’ in SAP are the elements or structures representing business functions, and are used in reporting. For example, Client (across the various modules) Company Code (FI), Controlling Area (CO), Plant (logistics), Sales Organization (SD), Purchasing Organization (MM), Employee Group (HR), etc.

80. What are the Important ‘Organizational Units’ in FI?

Company
Company Code
Business area

81. What is a ‘Company’?

A ‘Company’ in SAP is represented by a 5-character alphanumeric code and usually represents the enterprise or the group company. A Company can include one or more Company Codes. The creation of a Company, in SAP, is optional.

Figure 15: Company and Company Code

Figure 16: Define a Company

82. What is a ‘Company Code,’ and how is this different from a ‘Company’?

A ‘Company Code’ in SAP is the smallest organizational unit for which you can draw individual Financial Statements (Balance Sheet and Profit & Loss Account) for your external statutory reporting. It is denoted by a 4-character alphanumeric code. The creation of a Company Code is mandatory; you need to have at least one Company Code defined in the system, for implementing FI.

Figure 17: Define a Company Code

You may define a Company Code by copying from an existing one (Copy, Delete, Check Company Code Option).

You may also define the Company Code anew (the second option in the following figure), from scratch.

Figure 18: Options to define a Company Code

83. What are the Important ‘Global Settings’ for a Company Code?

General data:

Company Code
Company Name
City
Address
Currency
Country
Language

Global data:

Chart of Accounts
Credit Control Area
Fiscal Year Variant
Field Status Variant
Posting Period Variant

84. Can You Assign more than One ‘Company Code’ to a ‘Company’?

All the Company Codes within a Company should use the same Chart of Accounts and the same Financial Year, though they all can have different Local Currencies.

85. What is a ‘Business Area’?

‘Business Areas’ correspond to specific business segments of a company, and may cut across different Company Codes (for example, product lines). They can also represent different responsibility areas (for example, branch units). The Business Areas are optional in SAP.

Figure 19: Business Area

The financial statements drawn per business area are for internal reporting purposes. You need to put a check in the check box in the configuration for the company for which you want to enable business area financial statements.

Figure 20: Enable Business Area Financial Statements

When transactions are posted in FI, you have the option of assigning the same to a Business Area so that the values are properly captured for internal financial statements.

86. Can You Attach a ‘Business Area’ to a Transaction?

Yes. The Business Area can also be derived from other account assignments; for example, cost center. But to do this, you need to define the Business Area in the master record of that particular cost center.

87. How do You Post Cross-company Code Business Area postings?

By using a cross-Company Code transaction, you should be able to post to different ‘Business Areas’ and cut across various Company Codes. Any number of ‘Business Area-Company Code’ combinations is possible.

88. What is the ‘Credit Control Area’ in SAP?

The ‘Credit Control Area’ in SAP helps administer credit management functions relating to customers. This organizational unit is used both in SD and FI-AR modules. By definition, you can have more than one credit control area in a Client, but each Company Code is assigned to one credit control area. However, it is true that you can attach many Company Codes to the same credit control area.

Figure 21: Credit Control Area

89. What is a ‘Chart of Accounts’?

A ‘Chart of Accounts’ is the list of GL accounts used in one or more Company Codes. All the GL accounts in a chart of accounts will have an account number, account name, and some control information. The control information decides how the GL account can be created.

90. What are all the Major Components of a ‘Chart of Accounts’?

A ‘Chart of Accounts’ includes the following components:

Chart of account key
Name
Maintenance language
The GL Account Number
Controlling integration
Group chart of accounts (consolidation)
Block indicator

91. What is an ‘Operating Chart of Accounts’?

This chart is used for day-to-day postings and is also known as an ‘Operative’ or ‘Standard’ chart of accounts. Both FI and CO use a chart of accounts. It is mandatory that the chart of accounts be assigned to a Company Code.

92. How does ‘Group Chart of Accounts’ Differ from ‘Operating Chart of Accounts’?

The ‘Group Chart of Accounts,’ also known as the Corporate Chart of Accounts, is used for consolidating all Company Codes (with a dissimilar Operative Chart of Accounts) falling under a Company. This is the ‘universe’ of all-inclusive GL accounts from where the Operative Chart of Accounts is derived. A Company Code is not mandatory.

93. What is a ‘Country Chart of Accounts’? Why do You need This?

This chart of accounts, also known as an Alternate Chart of Accounts, contains the GL accounts necessary to meet the specific statutory/legal requirements of a company from which a Company Code operates. The assignment of this chart of accounts to a Company Code is also optional. It is possible that both the operative and the country chart of accounts are one and the same. In this case, you will not need two different charts of accounts.

In cases where the operative and country chart of accounts are different, a link needs to be established by entering the GL account number from the ‘Country Chart of Accounts’ in the GL master record (under the Company Code section) of the ‘Operative Chart of Accounts’ in the field ‘Alternate Account Number.’

94. Can one ‘Chart of Accounts’ be Assigned to Several Company Codes?

Yes. One chart of accounts can be assigned to several Company Codes. However, the reverse is not possible; i.e., you will not be able assign more than one chart of accounts to a single Company Code.

95. What is a ‘Fiscal Year’ and ‘Fiscal Year Variant’?

A ‘fiscal year’ is the accounting period, which normally spreads over 12 months. Financial statements are drawn for a fiscal year. The fiscal year, in SAP, is defined as a ‘Fiscal Year Variant.’ All Calendar Year Fiscal Year Variants, in standard SAP, are denoted usually as K1, K2, etc.

Figure 22: Fiscal Year Variant

The fiscal year may or may not correspond to the calendar year. In the standard SAP system, the Non-Calendar Fiscal Year Variants are denoted V1, V2, etc.

Figure 23: Fiscal Year Variant (non-calendar year)

It is also possible that the fiscal year may be shorter than 12 months, and this is called a ‘Shortened Fiscal Year’ (R1, in Figure-1).

96. How do You Assign a ‘Fiscal Year Variant’ to a Company Code?

One ‘Fiscal Year Variant’ can be assigned to one or more Company Codes.

Figure 24: Assign Fiscal Year Variant to a Company Code

97. What is a ‘Posting Period’?

A fiscal year, in SAP, is divided into various ‘Posting Periods,’ with a start and end date defined for each of these periods. Any document posting is possible only when the ‘posting periods’ are in place in the system. Normally there will be 12 posting periods. A posting period consists of a month and year.

98. How does the System Identify a ‘Posting Period’?

Based on the posting date entered into the system while posting a document, the system automatically determines the period by looking at the document date and the year. However, for this to occur you should have properly defined the fiscal year variant.

99. What Happens when You Post to Year 2006 when You are in 2007?

First of all, to post a document relating to a previous year, say 2006 when you are in 2007, the relevant posting period should be ‘open’ in the system. When such a posting is done, the system makes some adjustments in the background:

One: the carry-forward balances of the current year, already done, are updated in case the posting affects balance sheet items.

Two: if the posting is going to affect the Profit & Loss accounts, then the system adjusts the carried forward profit or loss balances to the Retained Earnings account(s).

100. What do You Mean by ‘Opening/Closing’ Posting Periods?

Postings in SAP are controlled by the ‘opening’ or ‘closing’ of posting periods. Normally, the current posting period is open for document posting and all other periods are closed. At the end of the period (month), this posting period is closed and the new one is opened for postings. This way it provides better control.

It is, however, possible to keep all the periods or select periods open.

101. What is a ‘Posting Period Variant’?

A ‘Posting Period Variant’ is useful in ‘opening/closing’ posting periods across many Company Codes at one time. You define a posting period variant and assign it to various Company Codes. Since the posting period variant is cross-Company Code, the opening and closing of the posting period is made simple. Instead of opening and closing individually for different Company Codes, you just need to open or close the posting period variant.

102. Can You Selectively ‘Open’ and ‘Close’ accounts?

Yes. It is possible to selectively control the ‘opening’ and ‘closing’ for various types of accounts. Usually, a ‘+’ is mentioned in the top-most entry indicating that all the account types are allowed for posting. Now, for the GL(S) accounts, you will need to specify the period which needs to be opened. This ensures that all the account types are open for the current period, indicated by ‘+,’ and only the GL accounts are open for the previous period.

Select account types can also be opened or closed for a specific period; select accounts within an account type can also be opened or closed.

103. Why is it not Possible to Post to a Customer A/C in a Previously Closed ‘Period’?

When you want to selectively ‘close’ or ‘open’ the posting period of some accounts (account range), there will be no problem with that if you are doing it for GL accounts. But, if it is a subledger account (such as the customer), it has to be achieved via opening or closing the account interval of the ‘reconciliation account’ of that account type.

104. Can You Open a ‘Posting Period’ only for a Particular User?

Yes. SAP allows you to open or close the posting period only for specific users. This can be achieved by maintaining an authorization group at the document header level.

105. What is a ‘Special Period’? When do You Use it?

Besides the normal posting periods, SAP allows for defining a maximum four more posting periods, which are known as ‘Special Periods’ as these are used for year-end closing activities. This is achieved by dividing the last posting period into more than one (maximum four) period. However, all the postings in these special periods should fall within the last posting period.

The special periods cannot be determined automatically by the system based on the posting date of the document. The special period needs to be manually entered into the ‘posting period’ field in the document header.

106. What is the Maximum Number of ‘Posting Periods’ in SAP?

Under GL accounting, you can have a maximum of 16 posting periods (12 regular plus 4 Special Periods). However, you can have up to a maximum of 366 posting periods as is the case in ‘special purpose ledgers.’

107. What is a ‘Special Purpose Ledger’?

‘Special Purpose Ledgers’ (FI-SL) are used in reporting. These are basically user-defined ledgers, which can be maintained either as GL or subsidiary ones with various account assignment objects (with SAP-dimensions such as cost center, business area, profit center, etc., or customer-defined dimensions such as region, area, etc.).

Once defined, this functionality helps you to report at various levels. Ideally you collect the information, combine it, and create the totals. This is something such as an additional reporting feature, and use of this feature will have no effect on the regular functionalities of SAP.

108. What Variations are Possible when Defining a ‘Fiscal Year’?

The Fiscal Year is the same as a Calendar Year

The fiscal year starts on January 1 and there are 12 posting periods; the posting periods correspond to the calendar months; there is no need to define each of the posting periods.

Open table as spreadsheet

Posting Period	Start Date	End Date
1	1–Jan	31–Jan
2	1–Feb	28/29 Feb
3	1–Mar	31–Mar
4	1–Apr	30–Apr
5	1–May	31–May
6	1–Jun	30–Jun
7	1–Jul	31–Jul
8	1–Aug	31–Aug
9	1–Sep	30–Sep
10	1–Oct	31–Oct
11	1–Nov	30–Nov
12	1–Dec	31–Dec

The Fiscal Year is NOT the same as a Calendar Year

In this case, you need to specify how many posting periods you want and how the system should derive the posting period. Since the posting period does not correspond to the calendar month, the start and end date of each of the posting periods need to be maintained.

109. What is known as ‘Year Shift/Displacement’ in a Fiscal Year?

When the fiscal year is not the same as the calendar year, we need to define a ‘displacement factor’ for each of the posting periods to correctly identify the number of posting periods.

For example, consider the fiscal year variant V3 (Figure 25). The fiscal year starts on April 1^st and ends on March 31^st of the next calendar year so the displacement factor or year shift from April to December is ‘0,’ and for January to March, it will be ‘−1’. By defining it this way, the system is able to recognize the correct posting period. A posting made on January 25^th, 2006 will then be interpreted as the 10^th posting period in fiscal year 2005.

Figure 25: Year shift/displacement in Fiscal Year Variant

110. Can You have ‘non-Calendar’ Months as ‘Periods’ in a ‘non-Calendar’ Fiscal Year?

Yes. The ‘non-calendar fiscal year’ can either correspond to calendar months or to non-calendar months.

In the case of non-calendar months as the posting periods, you need to specify the start and end date of these posting periods. Consider a fiscal year starting on April 16^th, 2005 and ending on April 15^th, 2006. Here, the posting period-1 starts on April 16^th and ends on May 15^th and so on. Note that the posting period-9 will have 2 displacements (0 and −1) as indicated below in the Table:

Open table as spreadsheet

Posting Period	Start Date	End Date	Year	Year Displacement
1	16–Apr	15–May	2005	0
2	16–May	15–Jun	2005	0
3	16–Jun	15–Jul	2005	0
4	16–Jul	15–Aug	2005	0
5	16–Aug	15–Sep	2005	0
6	16–Sep	15–Oct	2005	0
7	16–Oct	15–Nov	2005	0
8	16–Nov	15–Dec	2005	0
9	16–Dec	31–Dec	2005	0
9	1–Jan	15–Jan	2006	−1
10	16–Jan	15–Feb	2006	−1
11	16–Feb	15–Mar	2006	−1
12	16–Mar	15–Apr	2006	−1

As a result, a posting made on December 27^th, 2005, as well as the posting made on January 14^th, 2006 are correctly identified as postings corresponding to period-9.

111. What is a ‘Year-dependent’ Fiscal Year?

A calendar year fiscal variant, when defined as ‘year-dependent,’ is relevant and valid only for that year.

112. What Precautions should you Take while Defining a ‘Shortened Fiscal Year’?

Note that the ‘Shortened Fiscal Year’ is always year-dependent. This has to be followed or preceded by a full fiscal year (12 months). Both the shortened and the full fiscal year, in this case, have to be defined using a single fiscal year variant.

113. Tell me more about a ‘Shortened Fiscal Year.’

As mentioned already, a ‘Shortened Fiscal Year’ is one containing less than 12 months. This kind of fiscal year is required when you are in the process of setting up a company, or when you switch over one fiscal year (e.g., calendar year) to another type of fiscal year (non-calendar).

114. How do You Open a new ‘Fiscal Year’ in the System?

You do not need to ‘open’ the new fiscal year as a separate activity. Once you make a posting into the new fiscal year, the new fiscal year is automatically opened. Or, the new fiscal year is automatically opened when you run the ‘balance carry-forward’ program.

However, you need to have (1) the relevant posting period already open in the new fiscal year, (2) completed the document number range assignment if you are following a year-dependent number range assignment, and (3) defined a new fiscal year variant if you follow the year-dependent fiscal year variant.

115. How do you ‘Carry-Forward’ Account Balances?

If you have already posted into the new fiscal year, you do not need to ‘carry-forward’ the balances manually. But you can use the various ‘carry-forward’ programs supplied by SAP for this task.

116. Can You Explain how ‘Carry-Forward’ Happens in SAP?

Sure. For all the Balance Sheet items, the balances of these accounts are just carried forward to the new fiscal year, along with account assignments if any. This also true for customer and vendor accounts.

In the case of Profit & Loss accounts, the system carries forward the profit or loss (in the local currency) to the Retained Earnings account, and the balances of these accounts are set to ‘0.’ No additional account assignments are transferred.

117. Is there a Prerequisite for ‘Carry-Forward’ Activity?

Yes, for Profit & Loss accounts, you should have defined the Retained Earnings account in the system. Additionally, you should have also specified the ‘Profit & Loss Account Type’ in the master record of each of these for Profit & Loss accounts.

There are no such requirements for GL accounts, customer and vendor accounts.

118. How many ‘Retained Earnings’ A/C can be Defined?

You can define as many ‘Retained Earnings Accounts’ as you need. But normally, companies use only one retained earnings account. Remember, to define more than one, you should use the profit & loss account type.

119. Can You have Multiple ‘Retained Earnings’ A/C?

Normally it is sufficient if you use one ‘retained earnings’ account. However, if you are configuring for a multinational company where the legal requirements require treating some of the tax provisions differently from other countries, then you will need more than one retained earnings account.

120. How do You Maintain ‘Currency’ in SAP?

‘Currency’ (the legal means of payment in a country) in SAP is denoted by a 3-character Currency Code, maintained per ISO standards. Example: USD (U.S. Dollars), INR (Indian Rupee), GBP (Great Britain Pound), etc. Each currency code in the system will have a validity defined.

A currency is defined in SAP using the IMG path: General settings>Currencies >Check exchange rate types.

121. What is a ‘Local Currency’?

When you define a Company Code, you also need to mention in which currency you will be maintaining the accounts/ledgers in financial accounting. This currency is called the ‘Local Currency.’ This is also known as ‘Company Code Currency.’

122. What is a ‘Parallel Currency’?

When defining the currencies for a Company Code, it is possible to maintain, for each of these company Codes, two more currencies in addition to the ‘Local Currency.’ These two currencies are called the ‘Parallel Currencies,’ which can be the:

Group Currency
Hard Currency
Global Company Currency
Index-based Currency

To translate the values from one currency to the other, you will need to maintain an exchange rate for each pair of the defined currencies in the system. When parallel currencies are defined, the system maintains the accounting ledgers in these currencies as well, in addition to the local currency.

123. What is a ‘Group Currency’?

This is the currency defined at the Client level.

124. What is the ‘Global Company Code Currency’?

The currency defined for the Company (or the Consolidated Company) is called the ‘Global Company Code Currency.’

125. What is an ‘Account Currency’?

When defining the GL accounts in the system, you are required to define a currency in which an account will be maintained, and this is called the ‘Account Currency.’ This is defined in the ‘Company Code’ area of the GL master record, and is used for postings and account balance display.

126. What are all the Prerequisites for Posting in a ‘Foreign Currency’?

The following are the prerequisites you need to consider before posting in a foreign currency:

Local currency already defined for the Company Code (in the global parameters)
Foreign currency defined in the currency code Table
Exchange rate defined for the foreign currency and the local currency
Translation Ratio maintained for the local and foreign currency

127. How are ‘Exchange Rates’ Maintained in SAP?

An ‘Exchange Rate’ is defined for each pair of currencies, and for each ‘exchange rate type’ defined in the system. The exchange rate is defined at the document header level.

128. What is an ‘Exchange Rate Type’? List some of them.

The ‘Exchange Rate Type’ is defined according to various purposes such as valuation, translation, planning, conversion, etc. The commonly used exchange rate types include:

Figure 26: Exchange Rate Types

129. What is known as the ‘Translation Factor’?

The relation between a pair of currencies per ‘exchange rate type’ is known as the ‘Translation Factor.’ For example, the translation factor is 1 when you define the exchange rate for the currencies USD and INR:

130. Is there an Easy Way to Maintain Exchange Rates in SAP?

SAP offers a variety of tools to maintain exchange rates on an on-going basis. The tools include:

Exchange Rate Spreads
Base Currency
Inversion

Use the SAP supplied program, RFTBFF00, for populating the exchange rate table automatically from an input file in a multi-cash format from a commercially available input file.

131. What is known as an ‘Exchange Rate Spread’?

The difference between the ‘bank-buying rate’ and the ‘bank selling rate’ is known as the ‘Exchange Rate Spread,’ which remains almost constant. When you maintain the exchange rate spread, it is sufficient if you maintain the ‘average rate’ for that currency in question in the system as you will be able to deduce the buying/selling rate by adding/subtracting the spread to/from the average rate.

132. Explain the use of ‘Direct’ or ‘Indirect Quotations.’

It is possible to maintain the exchange rates, in SAP, by either of these two methods. What determines the use of a particular type of quotation is the business transaction or the market standard (of that country).

SAP adopts two prefixes to differentiate direct and indirect quotes during entering/displaying a transaction:

‘’—Blank, no prefix. Used in Direct Quotation
‘/’—Used in Indirect Quotation

When there is no prefix entered, (blank), the quotation is construed as the ‘direct quote’ by the system. Possible scenarios include:

The company in question is mainly using the ‘Indirect Quotation.’

Use ‘’ (blank) as the prefix for default notation for indirect quotation. Use ‘*’ as the prefix for the rarely used direct quotation. If someone tries entering a transaction using direct quotation, but without the ‘*’ in the exchange rate input field, the system will issue a warning.
The company in question is mainly using the ‘Direct Quotation.’

You do not need any specific settings as the default is the ‘’ (blank) prefix for the direct quotation, and ‘/’ for the indirect quotation. So, unless you make a transaction entry with ‘/’ prefix, the system takes all the entries as that of direct quotation.
There could be instances where you are required to configure in such a way that a prefix is mandatory irrespective of the type of quotation. In this case, define the direct quotation prefix as ‘*’, and the indirect one as the system default ‘/’ prefix. This necessitates a prefix each of the entries either by ‘*’ or ‘/.’ Otherwise, the user will get a warning to correct the entry.

133. Explain how ‘Taxes’ are Handled in SAP.

SAP takes care of tax calculation, tax postings, tax adjustments, and tax reporting through the three FI components; namely GL, AP, and AR. The processing of the following kinds of taxes is possible:

Tax on Sales and Purchases
1. Input Taxes (Purchase Tax)
2. Output Taxes (Sales Tax)

Additional Taxes (these are country specific and in addition to the tax on sales and purchases)
Sales Tax
Withholding Tax
1. Classic Withholding Tax
2. Extended Withholding Tax

SAP allows taxation at three levels:

National level or federal level (Europe, South Africa, Australia, etc.)
Regional or jurisdiction level (USA)
National and Regional level (India, Canada, Brazil etc.)

134. How is Tax Calculated in SAP?

SAP uses a technique called ‘Condition Method’ to calculate taxes (except Withholding Tax) in the system. The system makes use of ‘Tax (Calculation) Procedures’ defined in the system together with the Tax Codes for calculating the quantity of tax.

The Tax Code is the starting point in the tax calculation. The tax code is country specific, with every country having a country specific Tax Procedure defined in the standard system, which is used as the template for defining various tax codes. The system uses the tax code to verify the following:

Figure 27: Condition Type (Tax Processing)
1. Tax type
2. Amount of tax calculated/entered
3. GL account for tax posting
4. Calculation of additional tax portion, if any

Tax Rates are defined for each of the tax codes. The tax rates are then associated with Tax Types, which are included in the tax procedures. (Because of this relationship, it is technically possible that a single tax code can have multiple tax rates for various tax types.)
The tax code is assigned to a Tax Procedure, which is tagged to a GL master record. A particular tax procedure is accessed whenever that GL account is used in document processing.

Figure 28: Steps in Tax processing

A Tax Procedure contains the following:

Steps— To determine the sequence of lines within the procedure.
Condition Types— Indicates how the tax calculation model will work (whether the records are for fixed amount or percentages and whether the records can be processed automatically, etc.)
Reference Steps— Where the system obtains the amount/value it uses in its calculation (for example, the base amount)
Account/Process Keys— Provide the link between the tax procedure and the GL accounts to which tax data is posted. This helps in automatic tax account assignments. To enable that these keys have the necessary information for automatic assignment, you need to define the following:
- Posting keys (unless you have a specific requirement, it will be sufficient to use the GL posting keys: Debit: 40, Credit: 50)
- Rules to determine on which fields the account determination is to be based (such as the tax code or country key)
- Tax accounts to which the postings need to be made

SAP comes with a number of predefined account/process keys, and it is recommended that the standard keys be used.

The Access Sequence helps in identifying the sequence of Condition Tables to be used and identifying which field contents are the ‘criteria’ for reading the Condition Tables (a group of Condition Types).
The tax amount so calculated is normally posted to the same side as the GL posting that contains the tax code. When exchange rate differences occur (due to tax adjustments in foreign currencies) these differences are generally posted to the specific account(s) for exchange rate differences. However, it is possible to specify (per Company Code) that the exchange rates for tax items can also be entered manually or determined by the posting or the document date, and the resulting differences posted to a special account.

Figure 29: Account/Process Key for tax processing
R/3 has a number of predefined account keys, and it is recommended that the standard keys be used.

135. Explain the Configurations Required for Taxes in SAP.

You need to define the following to customize SAP for this purpose:

Base Amount for Tax Calculation

For each Company Code you need to define whether the Base Amount includes the cash discount as well. If the base amount includes the discount, then the tax base is called ‘Gross,’ otherwise, it is ‘Net.’ You may also define a similar base amount for calculating the ‘Cash Discount.’ This also has to be maintained for each of the Company Codes.
Tax Codes

The Tax Code is a 2-digit code specifying the percentage of tax to be calculated on the base amount. While defining the tax code, you will also specify the ‘Tax Type’ to classify a tax code relating to either ‘Input Tax’ or ‘Output Tax.’ The tax types are country specific and determine how a tax is calculated and posted.
Tax Rate

The Tax Rate is the percentage of tax to be calculated on a base amount. You will be able to define tax rates for one or more tax types when you define a single tax code.
Check Indicators

By using the check indicators, you configure the system to issue Error/Warning Messages when the tax amount entered manually is incorrect.

136. What is a (Tax) ‘Jurisdiction Code’?

A ‘Jurisdiction Code,’ used in countries such as the United States, is a combination of the codes defined by tax authorities. It is possible to define up to four tax levels below the federal level. The four levels can be the:

Sub-city level
City level
Country level
State level

Before you can use the jurisdiction codes for tax calculation, you need to define the following:

Access Sequence (to include the country/tax code/jurisdiction fields)
Condition Types (which references the access sequence as defined above)
Jurisdiction Codes

The tax rates are defined in the tax code by jurisdiction. When posting taxes with a jurisdiction code, note that the taxes may be entered per jurisdiction code or per tax level.

137. Tell me about the ‘Tax Reports’ in SAP.

SAP comes delivered with country-specific default ‘Tax Reports’ to meet your tax-reporting requirements. However, it is not uncommon to use third-party software for the same purpose. As a process, it is recommended that the ‘closing operations’ are completed before running the tax reports. This will ensure that the system makes relevant adjustment entries (between payables and receivables, exchange rate differences, etc.) so that the correct tax amounts are reported.

138. How is ‘Master Data’ different from ‘Transaction Data’?

There are three kinds of data residing in any SAP system:

Table Data
Transaction Data
Master Data

Table Data refers to the customized information for a particular Client. This includes data such as payment terms, discounts, pricing, tolerance limits, etc., which you do not normally change on a day-to-day basis.

Transaction Data is the day-to-day recording of business information such as purchase orders, sales returns, invoices, payments, collections, etc. This includes both system-generated data (tax, discount, etc., automatically calculated by the system during document posting) as well as user-generated data.

Master Data is the control information required to decide how transaction data gets posted into various accounts (such as customers, vendors, GL, etc.). The master data is usually shared across modules (for example, customer master records are common both to FI and SD in SAP) obviating the need for defining it in various application areas. The master data remains in the system for fairly a long period.

In the case of GL Master Records, the data is created in two areas:

Chart of Accounts Area (common to all Company Codes: Chart of accounts, GL account number, account name (short and long text), B/S or P&L indicator, account group, etc.).
Company Code Area (specific to that particular Company Code: Company Code, tax code, currency, open item management, line item display, sort key, etc.).

In the case of the Customer/Vendor Master Record, the data is created in two areas:

Client Specific (general data such as account number, name, telephone, bank information, etc., which is common to all the Company Codes using this master).
Company Code Specific (valid only for the Company Code, this includes: terms of payment, dunning procedure, reconciliation account, sort key, sales area, purchasing information, etc.).

139. Can You Post an A/C Document if the ‘Credit’ is not Equal to the ‘Debit’?

In general, unless the ‘debits’ equal the ‘credits’ in a document, you will not be able to post the document. However, the system allows you to post some of the documents, even if this not true, which includes the following:

Noted items: this will contain only a debit or credit. Since there is no updating of accounting entries, the system will allow you to go ahead with the posting of these items.

General Ledger Accounting

140. What is a ‘Document’ in SAP?

SAP is based on the ‘document principle’ meaning that a document is created out of every business transaction in the system. The Document is the result of a posting in accounting in SAP, and is the connecting link between various business operations. There are two types of documents:

Original Documents: these documents relate to the origin of business transactions such as invoices, receipts, statement of accounts from bank, etc.
Processing Documents: These include ‘accounting documents’ generated from postings in the system, ‘reference documents,’ ‘sample documents,’ etc. The processing documents other than the accounting ones are also known as ‘special documents’ and they aid in the simplification of document entry in the system.

Every document consists of:

A Document Header
Two or more Line Items

Before attempting to enter a document, call up the relevant document entry function as the system provides a variety of ready-made document entry templates suited to different transactions such as regular GL entry, customer invoice posting, etc. The details entered in a document can be simulated and displayed before the document is actually posted in the system. You may also choose to ‘park’ the document and post it later.

141. What is a ‘Document Header’?

The ‘Document Header’ contains information that is valid for the whole document such as:

Document Date
Document Type (Control Information)
Document Number
Posting Date
Posting Period
Company Code

Besides the above, the document header also has information (editable, later on) such as (a) trading partner, (b) document header text, (c) reference, (d) cross-Company Code number, etc.

142. What is a ‘Document Type’?

SAP comes delivered with a number of ‘Document Types,’ which are used in various postings. The document type helps to classify an accounting transaction within the system, and is used to control the entire transaction and determine the account types a particular document type can post to. For example, the document type ‘AB’ allows you to post to all the accounts, whereas type ‘DZ’ allows you to post only the customer payments. Every document type is assigned a number range.

The common document types include:

Open table as spreadsheet

Doc. Type	Description	Doc. Type	Description
AA	Asset posting	KG	Vendor credit memo
AB	Accounting document	KN	Net vendors
AF	Depreciation postings	KR	Vendor invoice
DG	Customer credit memo	KZ	Vendor payment
DR	Customer invoice	KG	Vendor credit memo
DZ	Customer payment	SA	GL account document
X1	Recurring entry doc.	X2	Sample document

143. How is ‘Account Type’ Connected to ‘Document Type’?

The ‘Document Type’ is characterized by a 2-character code such as AA, DG, etc., whereas an ‘Account Type’ is denoted by a 1-character code such as A, D, etc., specifying which accounts a particular document can be posted to. The common account types include:

A Assets
D Customer (Debtor)
K Vendor (Creditor)
M Materials
S GL

Figure 30: Document and Account Types

144. What do You mean by ‘Net’ Postings’?

Usually, when a transaction is posted, for example, a vendor invoice (document type: KR), the system posts the ‘Gross’ amount with the ‘tax’ and ‘discount’ included. However, SAP provides you the option of posting these items as ‘Net.’ In this case, the posting excludes ‘tax’ or ‘discounts.’ Remember to use the special document type KN. (Similarly, you will use the document type DN for ‘customer invoice-Net’ compared to the normal invoice postings for the customer using the document type DR.) For using this ‘net method’ of posting you should have activated the required settings in the customization.

145. Explain the Various ‘Reference Methods.’

SAP recommends ‘Reference Methods’ as a ‘document entry tool’ to facilitate faster and easier document entry into the system, when you are required to enter the same data time and again. Besides making the document entry process less time-consuming, this also helps in error-free document entry.

The various Reference Methods used in SAP include:

Reference Documents
Account Assignment Models
Sample Documents

146. What is the ‘Document Change Rule’?

The functionality ‘Document Change Rules’ configured in the system maintains the information relating to ‘what fields can be changed?’ and ‘under what circumstances?.’ As you are already aware, SAP’s document principle does not allow changing the ‘relevant’ fields once a document is posted; any changes can only be achieved through ‘Reversal’ or additional postings. Fields such as company code, business area, account number, posting key, amount, currency, etc., can never be changed once the document is posted. However, SAP allows changing some of the fields in the line items such as payment method, payment block, house bank, dunning level, dunning block, etc. These can be changed document by document or by using ‘mass change’ for a number of documents in a single step.

The changes to ‘master data’ are tracked and stored per user for an ‘audit trail.’

147. Differentiate between ‘Account Assignment Model,’ ‘Recurring Entries,’ and ‘Sample Document,’

‘Account Assignment Model’ is a ‘reference method’ used in document entry when the same distribution of amounts to several Company Codes, cost centers, accounts, etc., is frequently used. Instead of manually distributing the amount among accounts or Company Codes, you may use equivalence numbers for distributing both the credit and debit amounts. A cross-Company Code account assignment model can also be created.

The account assignment model may contain any number of GL accounts. The GL account items need not be complete. The model can be used across several Company Codes, and can even include Company Codes from non-SAP systems.

Figure 31: Account Assignment Model

You can use the account assignment model while ‘parking’ a document (but you cannot use a ‘reference document’ for ‘parking’).
The use of account assignment models is limited to GL accounts.

Unlike a ‘Sample Document,’ an account assignment model may be incomplete and can be completed during document entry by adding or deleting or changing the data already saved in the model.

The ‘Recurring Entry’ original document is used by the system as a ‘reference document’ for enabling posting of periodically recurring postings such as loan repayments, insurance premium payments, rent, etc. Since this document is not an accounting document, the account balances are not affected. In a recurring entry original document, you will not be able to change the (a) posting key, (b) account, and (c) amount. The recurring entry documents are defined with a special number range (X1). Unlike an account assignment model, these documents cannot be used for cross-Company Code postings.

The recurring entry document does not update transaction figures, per se, but acts only as a reference and as the basis for creating accounting documents. The SAP program SAPF120 creates the accounting documents from the recurring entry original document. There are two ways to set the exact date when this document should be posted to:

Posting frequency: enter the day of the month and the period (in months) between two postings.
Scheduled run: configure the ‘run schedule’ specifying the calendar days on which the program should post these documents.

A Sample Document is like a template, which is created and stored so that the information contained therein can be easily copied into new documents and posted in the system. But once a sample document is created note that you will not be able to change the ‘line items’ already contained in that document; all you can do is change the amounts in that sample document. But you can overcome this by defining a new sample document that can contain other line items or you may add new line items to the FI document, which is created by copying from the original sample document.

Sample documents have separate number ranges (X2).

148. What is a ‘Line Item’?

The ‘Line Items’ contain information relating to account number, amount, debit/ credit, tax code, amount, etc. SAP allows a maximum of 999 line items in a single document. Besides the one entered by you during an document entry, the system may also create its own line items called ‘system generated line items,’ such as tax deductions, etc. Irrespective of the number of line items entered, ensure that the total of these is always zero (that is, total debits should equal total credits). Otherwise, the system will not allow you to post the document.

149. What is a ‘Posting Key’?

A ‘Posting Key’ in SAP is a 2-digit alphanumeric key that controls the entry of line items. SAP comes with many posting keys for meeting the different business transaction requirements: 40 (GL debit), 50 (GL credit), 01 (customer invoice), 11 (customer credit memo), 21 (vendor credit memo), 31 (vendor payment), etc.

The posting key determines:

What account can be posted to
Which side of the account (debit or credit) to be posted to, and
What ‘layout’ screen needs to be used for that particular transaction.

It is a normal practice not to change any of the default posting keys in the system, as you would very rarely require additional posting keys.

150. Differentiate between the ‘Parking’ and the ‘Holding’ of Documents.

The ‘Parking of a Document’ in SAP is one of the two preliminary postings (the other being the ‘Holding’ of documents) in the system and refers to the storing of incomplete documents in the system. These documents can later be called on for completion and posting. While ‘parking’ a document, the system does not carry out the mandatory ‘validity checking.’ The system does not also carry out any automatic postings (such as creating tax line items) or ‘balance checks.’ As a result, the transaction figures (account balances) are not updated. This is true in the case of all financial transactions except in the area of TR-CM (Cash management) where ‘parked’ documents will update the transactions.

The parking of documents can be used to ‘park’ data relating to customers, vendors, or assets (acquisition only). When a cross-Company Code document is ‘parked,’ only one document is created in the initial Company Code; when this ‘parked’ document is posted all other documents relevant for all other Company Codes will also be created. However, it is to be noted that substitution functionality cannot be used with document ‘parking,’ as substitution is activated only on transaction processing.

The added advantage is that a document ‘parked’ by an accounting clerk can be called on for completion by someone else. The ‘parked’ documents can be displayed individually or as a list from where the required document can be selected for completion and posting. The number of the ‘parked’ document is transferred to the posted document. The original ‘parked’ document, if necessary, can be displayed even after it has been posted to.

During a transaction when you do not have a piece of required information, you can ‘Hold the Document’ and complete it later. As in the case of ‘parked’ documents, here also the document does not update the transaction figures.

The essential difference between these two types of preliminary postings can be summarized as follows:

Open table as spreadsheet

Attribute	‘Park’ document	‘Hold’ document
View the document in ‘Account Display’?	Yes	No
Changes to the document?	Any user can access, view, and/change the document	No other user, except the creator, will be able to access, view, and/change the document
Document number?	System assigned	Manually entered by the user
Use of data in the document for evaluation purposes?	Possible	Not possible

151. What is an ‘Automatic Posting’?

When you post documents in SAP, there are instances where the system also adds some more line items (such as tax, cash discount, gain/loss from foreign exchange transactions, etc.) besides the ones you have entered in the document. This helps to reduce your work as the system calculates these automatically. However, you need to define accounts you want the system to automatically post to; this will ensure that no manual posting is allowed to any of these accounts.

152. What is ‘Clearing’?

‘Clearing’ in SAP refers to squaring-off open debit entries with that of open credit entries. Clearing is allowed in GL accounts maintained on an ‘open item’ basis and in all customer/vendor accounts. The clearing can either be manual or automatic. In the case of manual clearing, you will view the open items and select the matching items for clearing. In the case of automatic clearing, a program determines what items need to be cleared based on certain pre-determined open item selection criteria and proposes assignments before clearing these assigned items. Whatever the type of clearing, the system creates a clearing document with the details and enters the ‘clearing number’ against each of the cleared open items. The clearing number is derived from the document number of the clearing document.

You will also be able to do a ‘partial clearing’ when you are unable to match open items exactly; in this case, the balance amount not cleared is posted as a new open item. You may also configure clearing tolerance and also define rules on how to tackle the situation where the net amount after clearing is not zero (such as, writing off, posting the difference to a separate ‘clearing difference’ account, etc.).

In the case of customers who are also vendors, you will be able to clear between these two provided it is duly configured in the relevant master data (by entering the customer number in the vendor master record and the vendor number in the customer master record).

153. Explain ‘Reversal of Documents’ in SAP.

If you need to change some of the accounting information relating to an already posted document, you can only achieve this by ‘Reversing’ the original document and posting a new one with the correct information. However, reversal is possible only when:

The origin of the document is in FI (not through SD or MM, etc.)
The information such as business area, cost center, etc., is still valid (that you have not deleted these business objects)
The original document has no cleared items
The document relates only to the line items of customer/vendor/GL

While reversing, the system automatically selects the appropriate document type for the reversal, and defaults the relevant posting keys. (Remember that the document type for the reversal document would have already been configured when the document type was defined in the configuration.) Also note that if you do not specify the posting date for the reversal document, the system defaults to the posting date of the original document.

154. Explain ‘True Reversal,’ How is it different from regular ‘Reversal’?

As you are aware, any reversal results in opposite postings to the credit/debit sides of the original posting, leading to an increase in the account balances and the ‘trial balance’ is automatically inflated on both the sides. This is against the law in some countries such as France where it is required that even after reversal, there should not be an increased account balance. As a result, SAP came out with ‘True Reversal’ which overcomes this problem by ‘negative postings’ to the same line item(s) during reversal. The account balance, which was originally increased, is restored to the actual balance during the reversal:

Open table as spreadsheet

Type of Reversal	Type of Posting	Account 100000		Account 200000
Type of Reversal	Type of Posting	Debit	Credit	Debit	Credit
Traditional Reversal	Original Posting	$2500			$2500
Traditional Reversal	Reversal		$2500	$2500
‘True’ Reversal	Original Posting	$2500			$2500
‘True’ Reversal	Reversal	−$2500			−$2500

155. What is ‘Fast Entry’?

Instead of the regular document entry screens, SAP provides ‘Fast Entry’ screens for facilitating a quick way of entering repetitive line items in a transaction. For achieving this, you need to define a Fast Entry Screen Layout, which will specify what fields you will require for data entry, and in what order. You may configure these fast entry screen layouts for GL account line items, credit memos, and customer/vendor invoices. Each of these fast entry screen layouts will be denoted by a 5-character screen variant in the system. Fast entry screens are used in complex (general) postings.

SAP’s enjoy postings are also meant for similar data entry screens, but the difference is that in the case of ‘fast entry’ you will start from scratch when identifying the fields, positioning them in the line item, etc., whereas in enjoy postings, the system comes with all the fields activated and you will select the fields that you do not want to be made available for data entry.

156. How do You Create ‘GL Account Master Data’?

‘GL Account Master Data’ can be created using any one of the following methods:

Manually
Creating with reference
Through Data Transfer Workbench
Copying from existing GL accounts

The Manual Creation of GL account master records is both laborious and time consuming. You will resort to this only when you can’t create master records using any of the other methods listed above.

You will follow the second method, Creating With Reference, when you are already in SAP and have an existing Company Code (Reference Company Code) from which you can copy these records to a new Company Code (Target Company Code). You will be able to do this by accessing the Menu: ‘General Ledger Accounting>GL Accounts>Master Data>GL Account Creation> Create GL Accounts with Reference.’ While doing this, you can copy the ‘account assignments’ as well ensuring that the integration of GL with other applications is intact. SAP facilitates so that you can (i) limit the number of GL records thus copied to the target Company Code, (if) create new records if necessary, and (iii) change the account number/name.

When your GL accounts are in a non-SAP system and you feel that these accounts will meet your requirements you will then use the ‘Data Transfer Workbench’ of SAP to transfer these records into SAP, and change them to suit the SAP environment. Since this will not have ‘Account Assignment’ logic as defined in SAP, you need to be careful when defining these assignments.

You will resort to the last option of Copying from Existing GL Accounts only when you feel that there is a Chart of Accounts in the system that meets your requirements 100%. Otherwise, follow the second method described above.

157. What is ‘Collective Processing’ of GL Accounts?

‘Collective Processing’ helps you to make systematic changes to a number of GL accounts in a single step. For example, you have used the ‘creating with reference’ method to create GL accounts in a new Company Code and you want to change the account names as well as the ‘GL account type’ (P&L or B/S). Then you will use the mass processing method. You can make changes to:

Chart of accounts data
Company Code data

Use Menu Path: ‘Accounting>Financial accounting>General ledger accounting>Master records>Collective processing.’ This can be achieved in IMG through: ‘Financial Accounting>General Ledger Accounting>GL Accounts> Master Data>GL Account Creation>Change GL Accounts Collectively.

Remember that the ‘collective processing’ helps only to edit and you cannot use this method if you need to create new master records.

158. What is ‘Individual Processing’ of GL Accounts?

In contrast to the ‘collective processing’ of GL accounts where you edit a number of accounts in a single step, Individual Processing helps to edit or create GL account master records one at a time. Here you can edit (including display, change, block, unblock, and delete) or create a new GL account in three different ways:

Centrally: You will be editing or creating a GL account master record in both the Chart of Accounts area and Company Code area in one step. This is also known as ‘one-Step’ GL creation.
In the Chart of Accounts area: you first edit or create the record here before doing it in the Company Code area.
In the Company Code area: you edit or create the record here after it has been done in the Chart of Accounts area.

Put together, steps 2 and 3 relate to the ‘step-by-step’ creation of GL account master records.

159. Is it Possible to Change an Existing B/S GL A/C to the P&L Type?

Technically, you will be able to change all the fields, except the account number, of a GL account in the Chart of Accounts area. However, in this particular instance when you change the ‘GL account type’ from ‘B/S’ to ‘P&L,’ make sure that you again run the ‘balance carry-forward’ program after saving the changes so that the system corrects the account balances suitably.

160. Why doesn’t the System allow You to Change the ‘Tax Category’ in a GL A/C Master?

You will be able to change the ‘Company Code’ related fields such as tax category, currency, etc., provided that there has not been any posting to these accounts. Pay attention to the following:

If you need to denote an existing GL account to later be managed on an ‘open item basis’ or vice versa, then make sure that the account balance is zero in either case.
If you are trying to change an existing ‘reconciliation account’ (to a regular GL), then make sure that the account has not been posted to.
If you are attempting to denote an existing ordinary GL account into a ‘reconciliation account,’ ensure that the account has a zero balance.

161. What is an ‘Account Group’?

The ‘Account Group’ (or GL Account Group), a 4-character alphanumeric key, controls how the GL account master records are created in the system. This helps to ‘group’ GL accounts according to the ‘functional areas’ to which they must belong. Account group is mandatory for creating a master record. The same account groups can be used by more than one more Company Code if they all use the same Chart of Accounts. Each GL account is assigned to only one account group.

The Account Group determines:

The number interval that is to be used while creating the master record.
The screen layout that is to be used while creating the master record in the Company Code area.

While defining the account groups in the system, you also need to define the corresponding field status for each of these groups. Otherwise, you will not be able to see any fields as all these would be hidden by default.

SAP comes delivered with a number of ‘account groups’ such as:

SAKO (GL accounts general)
MAT. (Materials Management accounts)
FIN. (Liquid Funds accounts)

Figure 32: GL Account Group

In most situations, you will not require additional groups other than the ones already available in the standard system. However, if you need to create a new one, it is easier to copy an existing one and make modifications to it instead of creating one from scratch.

162. Describe ‘Number Range Interval.’

A ‘Number Range’ refers to a number interval defined in the system so that when documents are posted, the system assigns a number from this range. You will define different number ranges for different document types. Each document in SAP is uniquely identified by the combination of (a) document number, (b) company code, and (c) fiscal year.

The number range for a document type can be defined:

Per fiscal year or
Until a fiscal year in future.

If defined to last only one fiscal year, then the number range needs to be defined every year. When number ranges are defined every year, the system starts from the first number in the range for that particular year, which helps to prevent reaching the upper limit too fast.

Figure 33: Document Number Range

If you specify the fiscal year as ‘9999,’ then the document number range is valid forever (well, almost!) and you do not have to do this exercise of maintaining number ranges every fiscal year. But every year the system starts from the last number used up in the previous year and if a small number range is defined for a document type, you could easily run out of the number range fast.

The document numbers can either be:

Internally assigned by the system or
Externally input when the same is created.

The number ranges can be defined in such a way that the system generates the number automatically when a document is created. This is known as ‘internal number assignment.’ Under this, the system stores the ‘last number’ used for a document in the ‘Current Number’ field and will bring up the next number when another document is created.

If ‘external numbering’ is used, the user needs to input a document number every time a document is created in the system. Since the user supplies the number every time, the subsequent numbering may not be sequential. Unlike an internal numbering, the system does not store the ‘last number’ in the ‘Current Number’ field.

The numbers in a number range can either be numeric or alphanumeric. If numbers are numeric, the system will prefix the number with the required zeros to make the number length uniform at 10 digits. If you are using alphanumeric numbering, then the number is padded with zeros from the right. If you are following ‘year-specific’ numbering, it is better not to mix numeric and alphanumeric numbering for a particular document type in various fiscal years.

The system creates a minimum of one document when a transaction is created/completed. SAP recommends ‘filing’ original documents (under the number of the processing document (the document generated in SAP)). The best practice is to enter the (external) number of the ‘original document’ in the ‘Reference’ field of the document created in the SAP system. For easy cross-reference, the SAP document number thus created needs to be noted on the ‘original document.’

The following are the activities you need to complete for configuring the number ranges properly in the system:

Defining the number ranges
Copying the number ranges to Company Code(s)
Copying the number ranges to fiscal year(s)

163. What is a ‘Screen Layout’?

The ‘account group’ determines which ‘Screen Layout’ should be used while creating a GL account master record. For each of the account groups, you can define different screen layouts, which essentially determine the ‘Field Status’ of a field.

The field status refers to whether the field is:

Suppressed (field is invisible, hidden from display)
Required (display on, entry mandatory)
Optional (display on, entry not mandatory)

Figure 34: Field Status

All the above three are shown as ‘radio buttons’ against each of the fields in the screen layout, and you should select any one to set the status to that field; by default all the fields are ‘suppressed.’

There are two levels of controls of field status:

Field status at the account group level
Field status at the activity (create/change/display) level (i.e., at the transaction level).

You may also have the field status defined for posting keys (40-debit and 50-credit for the GL account postings). Also remember to define the field status for ‘reconciliation accounts’ as you will not be able to define any such status in the subledger accounts (for example, customer or vendor).

SAP has built-in rules, called link rules, to link these two levels and to decide the final status of a field in the ‘screen layout.’ The link rules also help to overcome the field-status setting differences arising out of different settings at the Client level (field status for posting keys) and the Company Code level (field status settings at the account group level).

164. What is a ‘Field Status Group’?

The ‘field status’ of an individual field or a group of fields is marked in a ‘Field Status Group,’ which is then assigned to individual GL account master records. You may attach field status groups to a field status variant so that the ‘field status groups’ are used in various Company Codes.

Figure 35: Field Status Variant (FSV)

The Field Status Variant is named similar to the Company Code. For example, if your Company Code is 1000, the field status variant is also named 1000, and it is assigned to the Company Code.

Figure 36: Assign a FSV to Company Code

165. What do You mean by ‘Balances in Local Currency’ Only?

When you create GL account master records, it is necessary to decide whether you want an account to have the transactions updated only in local currency. You will set this indicator accordingly in the ‘Company Code area’ of the master record. Make sure to set this indicator for clearing accounts such as:

Cash discount clearing accounts
GR/IR clearing accounts

Note that you need to set this indicator ‘on’ for all the ‘clearing accounts’ where you use the local currency to clear the line items in various currencies so that the transactions are posted without posting any exchange rate difference that otherwise might arise.

Example: Consider an invoice for USD 1,000, which on that day translates into an amount of INR 45,000 with an exchange rate of I USD=INR 45. Imagine that when the goods are received, the exchange rate was 1 USD=INR 44.

If the indicator is set, the system ignores the exchange rate as if the line items have been maintained only in the local currency (INR), and the items are cleared.
If the indicator is NOT set, the system makes a posting for the ‘exchange rate difference’ (INR 1, 000) before clearing the two line items.

166. What is ‘Line Item Display’?

To display line items of an account, you need to set the indicator ‘Line Item Display’ to ‘on’ in that account’s master record. This is mandatory for customer and vendor accounts. The line items can be displayed using the classical display or the SAP List Viewer (ALV). You can also use several ‘display variants’ to display various fields when you feel that the Standard Variant is not meeting your requirements.

167. What is ‘Archiving’? How does it differ from ‘Deletion’?

‘Archiving’ refers to deleting data from the documents in the database and storing the data in a file, which can be transferred to an ‘archiving system’ later on. Archiving does not physically delete the documents. ‘Deletion’ actually removes the documents from the database. To proceed with archiving and deletion you need to:

Block posting to these archived master records.
Mark (the master records) for deletion: Mark for deletion at the ‘Chart of Accounts area’ to delete the records from all the Company Codes. However, if you do not want to delete from all the Company Codes, but only from one or more Company Codes then do the same in the ‘Company Code area’ of the master record(s).
Archive all the transaction figures from the relevant documents.
Call up a special program to ‘delete’ the records: The program will check whether that particular document could be deleted. If yes, it will proceed to ‘archive’ and then to ‘deletion.’

168. Tell me the Two uses of ‘Blocking’ an Account.

You may use ‘Blocking’ to:

Block an account from further postings.
Block the creation of the account itself (at the Company Code level or Chart of Accounts area).

169. How do You Configure the GL A/C for the ‘House Bank’?

A ‘House Bank’ is defined using transaction code FI12. A ‘bank key’ represents the bank. The house bank can contain several accounts; for each of these accounts you need to maintain a GL account. The bank determination, for an automatic payment program, is configured using the Transaction Code FBZP.

170. What is an ‘Intermediate Bank’?

‘Intermediate Banks’ are used in SAP in addition to the house banks and partner banks for making or receiving payments from business partners abroad. The payment processing, involving an intermediate bank, makes use of the ‘bank chain,’ which may consist of a house bank, a partner bank, and a maximum of intermediate banks.

171. Explain ‘Intercompany Postings.’

‘Intercompany Postings’ arise when a Company Code, for example, in a centralized procurement, pays for itself and on behalf of other Company Codes. When posted, the transaction results in three documents: (1) one for the paying Company Code (say, 1111) (2) one for the other Company Codes (say, 2222 and 4444), and (3) one for the intercompany transaction itself.

Before making intercompany transactions, you need to configure both ‘intercompany payables’ and ‘intercompany receivables.’ For each combination of these Company Codes, you will be required to maintain a ‘clearing account,’ which must be referenced in each of these Company Codes. You will also be able to configure whether you manually input the transaction number or allow the system to automatically assign the numbers. In the case of system-generated transaction numbers, this 16-digit number consists of (1) a 10-digit document number (1222222222) of the paying Company Code, followed by (2) 4 digits representing this paying Company Code (1111), and (3) 2 digits representing the last two digits of the financial year (07) (for example, 1222222222111107).

172. How can You Manually ‘Clear’ ‘Open Items’? When?

Under ‘Manual Clearing,’ you will select the open items, based on the incoming payment so that the selected ‘open items’ are ‘cleared’ (knocked-off). In cases like refunds from a vendor or transactions involving bank sub-accounts and clearing accounts, etc., you will use manual clearing. When cleared, the system flags these line items as ‘cleared,’ creates a clearing document, and enters the clearing document number and clearing date in these open items. Besides the clearing document, the system may also generate ‘additional documents’ in cases such as partial or residual processing, and for posting the loss/gain to the assigned GL account.

While doing this, if there is a payment difference, it can be treated the way it is configured in the system:

If the difference is within the tolerance limit, defined in the system using the tolerance groups (defined at the Company Code level), the cash discount is adjusted or the system automatically posts the difference to a gain/loss GL account.
When the payment difference exceeds the limits of defined tolerance, then the incoming amount may be processed as a partial payment (the original open item is not cleared, but the incoming payment is posted with a reference to that invoice) or the difference is posted as a residual item (the original open item is cleared and a new open item is created by the system for the difference amount) in the system.

You may also use the Menu Path: Accounting>Financial Accounting> Account Receivable>Document entry>Incoming payment>Post or Accounting >Financial Accounting>GL>Document entry>Incoming payment>Post

173. How do You Perform ‘Period Closing’ in SAP?

You do a ‘(Period) Closing’ in SAP in three steps:

Completing the Pre-closing activities
Financial Closing
Managerial Closing

174. What is ‘Pre-closing’?

You need to ensure the following as part of the ‘Pre-closing’ activities:

Post all the Recurring Entries for expenses and accruals.
Ensure that all the interfaced programs have been run so that the required data have been transferred to the system.
Post all the depreciation, material receipts, invoices, salaries, etc. In short, ensure that all the transactions for the period in question have been duly recorded and posted into the system.

175. Explain ‘Financial Closing.’

‘Financial Closing’ involves completing the following activities and taking out the financial statements for the period concerned:

Revaluate/Regroup:
- Revalue Balance Sheet items managed in foreign currencies—use the report RFSBEW00 to valuate GL Balance Sheet Accounts managed in a foreign currency. (The report generates a Batch Input session to post the revenue or expense resulting from any exchange rate differences.)
- Clear Receivables or Payables with the ‘exchange rate difference.’
- Valuate all the Open Items using the report SAPF100. This is used to valuate all the open receivables and payables, using the period-end exchange rates. Here also, the report generates a Batch Input session to post the entries resulting from any exchange rate differences.
- Regroup GR/IR using the program RFWERE00 to allocate the net balance (depending on whether the balance is a net debit or credit) in the GR/IR Account to one of two GL Accounts (created to actually depict the net effect of the balance in the GR/IR Account).

Ensure accounting accuracy:

Use the program SAPF190 to compare the totals created by the system in the (1) indexes (customers, vendors, and GL) and documents (customers, vendors, and GL) with that of the (2) account balances (customers, vendors, and GL) to ensure the transaction accuracy.
Run required reports:

Generate the financial statements (balance sheet and profit & loss account) using the financial statement versions. You may also generate the key figure/ ratio reports (use the GL account information system).

176. What is a ‘Financial Statement Version’?

A ‘Financial Statement Version’ helps to define the Financial Statements (both the Balance Sheet and Profit & Loss statements). When you copy the settings from an existing Company Code to a new one, you will also be copying the financial statement version defined for the ‘source’ Company Code.

Figure 37: Financial Statement Versions

You may also define a new financial statement version and build the financial statements from scratch. You may create the financial statements both for external reporting (Company Code financial statements) and internal reporting (business area financial statements).

You may also create the balance sheets for a group of Company Codes using FI-SL (Special Purpose Ledgers). The financial statements may be defined to provide information from a period accounting point of view (GL account groups wise) or a cost of sales point of view (functional area financial statements).

All the above statements can be configured and defined to provide different levels of detail:

Figure 38: Financial Statement Version—BAUS

A financial statement version can have a maximum of 10 hierarchy levels, with each level assigned with an item (account category). As you go down the hierarchy, you define the account categories in more detail, with the lowest level being represented by the GL accounts. The system displays the relevant amount for each of these items.

177. What Items are Required in a ‘Financial Statement Version’?

Irrespective of the details you require in a ‘Financial Statement Version,’ it is mandatory that you have, at least, the following items defined:

Assets
Liabilities
1. Net Result: Profit
2. Net Result: Loss

P/L result (during annual closing, when you run the program RFBILA00, the system calculates the profit or loss by subtracting the ‘total liabilities’ from ‘total assets’ and updates the relevant Net Result item—Profit or Loss).
Not assigned (posted amounts but not yet assigned to any of the account groups).

178. How do You Ensure ‘Correct’ Balances in the ‘Financial Statement Version’?

In order to have a balanced statement (Profit & Loss and Balance Sheet) you need to ensure that the accounts are correctly and completely assigned to the nodes of the Financial Statement Version. You may do this by resorting to the necessary assignments at the account balance level or node balance level.

At the account balance level, you need to ensure that the account is shown in two different nodes, but you will turn “ON” the ‘debit indicator’ of the account on one node and turn “ON” the ‘credit indicator’ on the other node. Imagine that you have a bank current account 10001000. When you turn “ON” the debit indicator, this account shows only the debit balances and is construed as the asset. On the other hand, when the credit indicator is turned “ON,” the balances on this node now indicate that you owe to the bank (overdraft).

You may also use the node-level assignment. In this case, the system uses the ‘debit/credit shift’ and shows only the ‘effective’ balance at the node and not at the individual account level.

179. How do You Perform ‘Annual Closing’ in SAP?

‘Annual Closing’ is like any other ‘period closing’ and you will be performing all the activities that are required for a period-end-close. In addition to those activities, you will also:

Carry forward Vendor and Customer accounts
Carry forward the GL account balances of all the Balance Sheet items
Close the Profit & Loss Accounts and carry forward the balance (profit or loss) to the retained earnings account(s)

For a GL account ‘carry forward,’ use the program SAPF011.

180. Explain ‘Managerial Closing.’

In ‘Managerial Closing’ you will:

Do a preliminary Controlling period closing
Settle/re-allocate costs across Controlling organization
Draw and review internal reports
Re-open the Controlling period
Correct and adjust the accounting data, if required
Reconcile FI and CO by running the FICO Reconciliation Ledger
Run re-adjustment programs to ensure that the Business Areas and the Profit Centers are balanced
Draw reports and analyze

181. What is the ‘New FI-GL’ in FI in ECC?

The traditional or ‘Classic FI-GL accounting’ in FI has been focused on providing comprehensive external reporting by recording all business transactions in the system. However, to meet modern-day requirements, this has now been enhanced, called the ‘New FI-GL,’ and includes the following:

Parallel accounting: Maintaining several parallel ledgers to meet different accounting principles.
Integrated legal and management reporting: Unlike the traditional GL, the ‘New FI-GL’ enables you to perform internal management reporting along with legal reporting. So you are in a position to generate Financial Statements for any dimension (for example, profit center) in the business.
Segment reporting: With the introduction of the Segment dimension, SAP now enables you to produce Segment Reports based on IFRS (International Financial Reporting Standards) and the GAPP (Generally Accepted Accounting Principles) accounting principles.
Cost of sales accounting: It is now possible to perform cost of sales accounting in the ‘New FI-GL.’

However, the following functions are not yet supported in the ‘New FI-GL’:

Transfer Price
SKF (Statistical Key Figure)
Euro Translation
AIS (Audit Information System)
Archiving
Data Retention Tool

The ‘New FI-GL’ needs to be activated in the system before you start using the IMG Menu Path:>Financial Accounting (New)->Financial Accounting Global Settings (New)/General Ledger Accounting (New).

In the standard system, the tables from ‘classic general ledger accounting’ (GLT0) are updated as well as the tables in ‘New FI-GL’ during the activation. This enables you to perform a ‘ledger comparison’ during the implementation of ‘New FI-GL’ to ensure that your ‘new GL accounting’ has the correct settings and is working correctly. To compare ledgers, in Customizing choose Financial Accounting Global Settings (New)->Tools->Compare Ledgers.

It is recommended that you ‘deactivate’ the update of tables for ‘classic GL accounting’ once you have established that ‘New FI-GL’ is working correctly. To do this, in Customizing choose Financial Accounting Global Settings (New)-> Tools->Deactivate ‘Update of Classic General Ledger.’

Figure 39: New FI-GL

Accounts Receivable

182. Explain ‘Customer/Vendor Master Records.’

There are three categories of data maintained in a typical master record for a customer:

General Data
Company Code Data
Sales Area Data (for customers)/Purchasing Organization Data (for vendors)

Figure 40: Vendor Master—Various Data

General Data includes general information such as account number, name, telephone, bank information, trading partner, vendor (if the customer is also a vendor), group key, bank key, bank account, alternate payee, etc., which are common to all the Company Codes using this master.

Company Code Data comprises terms of payment, payment methods, tolerance group, clearing with vendor, dunning data (dunning procedure, dunning recipient, dunning block, dunning clerk, etc.), reconciliation account, sort key, sales area (purchasing organization in the case of vendor master), head office, etc. Except for sales (purchasing) related information, all other details are usually maintained for the finance people who can also access the sales data when the master is maintained ‘centrally.’

Sales Area Data in the Company Code area of a Customer master record contains the following:

Order-related data (sales district, sales office, sales group, customer group, etc.)
Price-related data (pricing group, pricing procedure, etc.)
Shipping data (shipping strategy, delivery priority, etc.)
Billing data (payment terms (different from the payment terms maintained at the Company Code level), account assignment group, etc.)

Purchasing Organization Data in the Company Code area of a Vendor master record contains the following:

Conditions (order currency, payment terms, Incoterms, minimum order value, etc.)
Sales data (a/c with Vendor)
Control data (as in the screen shot below)

During creation of a master record, the system checks for ‘duplicates’ for the same customer which is achieved by the system through the ‘Search-Id’ (Match Code) configured on the customer’s address information.

As in the case of the GL account master record, the creation of the customer/ vendor master record is also controlled by the ‘Account Group,’ which is called ‘Customer Account Group/Vendor Account Group’ (CPD/CPDL/KREDI/LIEF) and controls the numbering of customer/vendor master records, field status, whether an account is a regular one or a ‘One-Time’ account, etc.

Open table as spreadsheet

Activity	In Accounting		Centrally
Activity	Customer	Vendor	Customer	Vendor
Create	FD01	FK01	XD01	XK01
Change	FD02	FK02	XD02	XK02
Display	FD03	FK03	XD03	XK03
Block/Unblock	FD05	FK05	XD05	XK05
Mark for Deletion	FD06	FK06	XD06	XK06

Figure 41: Purchasing Data

183. Who is an ‘Alternate Payee’?

A customer who pays on behalf of another customer is known as an ‘Alternate Payee’ (or Alternate Payer). Though the alternate payee pays on behalf of another, the system maintains all the transaction details in the account of the original customer. Designating ‘alternate payee’ does not absolve the customer of his/her obligation for payment.

The ‘alternate payee’ can be maintained in Client-specific data or in the Company Code area. When maintained in the Company Code area you can use that payer only in that Company Code; if defined at the Client level you can use it across all Company Codes.

There are three ways to ‘select’ the alternate payee when an invoice is processed:

The alternate payee (say, 1000) entered in the customer master record is the one selected by the system as the default.
When there is more than one alternate payer (say, 1000, 1900, 2100, etc.) defined for a single customer in the master record (you will do this by clicking on the ‘allowed payer’ button and create more than one payer), you may select a payer (say, 2100) (other than the default, 1000) while processing the invoice. Now the system will ignore the alternate payer (1000) coming from the master record.
If you have put a check mark in the ‘individual entries’ check box in the ‘alternate payer in document’ section in the customer master record, then this will allow you to propose a new alternate payer, say, 3000 (other than those already defined in the system). Now, after defining this alternate payer you can use it to process the invoice. In this case, the alternate payer (3000) takes precedence over the payers (1000 and 2100) in step 1 and 2 above.

184. What is the ‘Trading Partner’ concept?

The ‘Trading Partner’ concept is used to settle and reconcile ‘inter-company transactions,’ both sales and purchases. This is generally achieved by entering the Company-ID (not the Company Code) to which a customer belongs in the ‘trading partner’ field under the tab ‘Account Control’ in the customer master record. You can do a similar entry in the vendor master record.

185. Explain ‘Tolerance’ in Transaction Processing.

‘Tolerances’ are defined in the system to facilitate dealing with the differences arising out of accounting transactions and to instruct the system on how to proceed further. Normally, you define tolerances (either in ‘absolute terms’ or in ‘percentages’) beyond which the system will not allow you to post a document should there be a difference.

In SAP, tolerances are defined per Company Code and there are several types:

Employee tolerance
Customer/vendor tolerance
GL account clearing tolerance

You will define an ‘employee tolerance group’ in the system and assign the employees to these groups. While defining the tolerance group you will specify:

Upper limits for various posting procedures
- Amount per document
- Amount per open account item
- Cash discount, in percentage

Permitted payment differences

How much over or under payment an employee is allowed to process. This is defined both in absolute values and in percentages.

Figure 42: FI Tolerance Group for Users

Besides defining the above two, at the Company Code level, you will also define similar tolerances for customer/vendor tolerance group. Once defined, each of the customers (vendors) is assigned to one of these groups. Here also, you define the ‘permitted payment differences’:

Figure 43: Customer/Vendor Tolerances

While processing, the system compares the tolerance of an employee against the customer tolerance (or vendor tolerance or the GL) and applies the most restrictive of the two.

186. What is ‘Dual Control’ in Master Records?

‘Dual Control’ helps to prevent unauthorized changes to the important and ‘sensitive’ fields in the master records in the system. (All such sensitive fields are defined in the Table T055F when customizing the application. And these fields are defined per Company Code and per Client.) Consider, for example, a sensitive field such as ‘payment block’ in a vendor master record. When a user changes this field’s content, the system requires another user (usually of higher authority) to approve this change and an audit trail is maintained of all such changes. Unless ‘ the change is approved, in this example, this particular master is blocked by the system for considering the same in the next ‘payment run.’

Open table as spreadsheet

Activity	Customer	Vendor
Display changes (accounting area)	FD04	FK04
Display changes (centrally)	XD04	XK04
Confirm changes, individually	FD08	FK08
Confirm changes, in a list	FD09	FK09

187. What is a ‘Bank Director’ in SAP?

SAP stores the master data (details such as bank key, bank name, bank country, bank address, and so on) relating to the banks in the ‘Bank Directory’ (Table: BNKA). Remember, the ‘bank masters’ are not created in the application but in the implementation side using the IMG. (Of course, you can also create the bank master in the application side in FI-TR and not in FI-GL or AP or AR.) However, if you are in the process of creating a master record for a vendor or a customer and you enter some bank details, which the system does not find in the ‘Bank Directory,’ then the system automatically brings in the relevant screens for you to maintain and update the bank details in the bank directory.

You may create the bank directory in two ways:

Manually (IMG path: Financial Accounting>Bank Accounting>Bank Accounts>Define ‘House Banks’)
Automatically (by importing the bank details using a special program)

188. What is a ‘House Bank’?

A ‘House Bank’ is the bank (or financial institution) in which the Company Code in question keeps its money and does the transactions from. A house bank in SAP is identified by a 5-character alphanumeric code. You can have any number of house banks for your Company Code, and the details of all these house banks are available in the ‘bank directory.’

Figure 44: Bank directory

Each ‘house bank’ in the system is associated with a country key (U.S., IN, etc.) representing the country where the bank is located, and a unique country specific code called a ‘bank key.’ The system makes use of both the ‘country key’ and the ‘bank key’ to identify a ‘house bank.’

For each of the ‘house banks,’ you can maintain more than one bank account; each such account is identified by an account ID; i.e., Chek1, Check2, Pybl1, etc. Here, ‘Chek1’ may denote Checking account 1, ‘Pybl1’ may denote Payables account 1, and so on. You may name the accounts in a way that it is easily comprehensible. The ‘Account ID’ is referenced in the customer/vendor master record and it is used in the payment program by the system.
For each ‘account ID’ you will also specify the bank account number (maximum length of this identifier is 18 characters). You may name this in such a way that it is also easily comprehensible.
For each ‘bank account number’ so defined in the ‘house bank,’ you need to create a GL account master record, and while doing so you will incorporate the ‘house bank id’ and the ‘account id’ in that particular GL master record.

189. Explain a ‘Sales Cycle’ in SAP.

A ‘Sales Cycle’ comprises all activities including quotation/inquiry, sales order, delivery, billing, and collection. The following are the various processes within SAP that complete a sales cycle:

Figure 45: Sales Cycle

Typically, the following are the documents created during a sales cycle:

Inquiry
Quotation
Sales Order
Delivery Note
Goods Issue
Order Invoice
Credit/Debit Note

190. Explain ‘Automatic Account Assignment’ in SD.

During goods issue in the sales cycle, the system is usually configured to update the relevant GL accounts automatically and to create the relevant accounting documents. This customization in IMG is also called material account assignment and is achieved through a number of steps as detailed below:

Determine ‘valuation level’ (Company Code or plant).
Activate ‘valuation grouping code’ and link it with the ‘chart of accounts’ for each ‘valuation area.’
Link ‘valuation class’ with ‘material type’ (FERT, HAWA, HALB, etc.) with the ‘account category reference’ (combination of valuation classes).
Maintain ‘account modification codes’ for ‘movement types.’
Link ‘account modification codes’ with ‘process keys’ (transaction/event keys).
Maintain a GL account for a given combination of ‘chart of accounts’+ ‘valuation grouping code ‘+’ account modification code ‘+’ valuation classes.’

Figure 46: Automatic account determination in a sales cycle

The process of Automatic Account Determination is as follows:

Depending on the ‘plant’ entered during goods issue (GI), the ‘Company Code’ is determined by the system which in turn determines the relevant ‘Chart of Accounts.’
The plant thus entered in goods issue determines the ‘valuation class’ and then the ‘valuation grouping code.’
The ‘valuation class’ is determined from the ‘material master.’
Since the ‘account modification code’ is assigned to a ‘process key’ which is already linked to a ‘movement type,’ the ‘transaction key’ (DIF, GBB, AUM, BSX, etc.) determines the ‘GL account’ as posting transactions are predefined for each ‘movement type’ in ‘inventory management.’

191. Explain ‘Revenue Account Determination’ in SD.

The billing documents created during the sales cycle results in automatic postings to GL accounts on the FI side. In general, ‘Account Determination’ is based on the following five factors:

Chart of accounts
Sales organization
Account assignment group of the customer
Account assignment group of the material
Account key

The system determines the ‘chart of accounts’ from the company code in the ‘billing document,’ and the ‘sales organization’ is determined from the corresponding ‘sales order.’ The ‘account assignment group’ is taken from the respective masters of customer/material. The ‘account key’ helps the user to define the various GL accounts, and this key is assigned to the ‘condition type’ (KOFI) in the ‘pricing procedure.’

These GL accounts are automatically determined when you make the following configuration in the system:

Assigning an ‘account determination procedure’ to a ‘billing document type’
Assigning this ‘account determination procedure’ to a ‘condition type’
Assigning this ‘condition type’ to an ‘access sequence’
Configuring the ‘condition tables’

Table	Description
001	Customer /Material Grp./AccKey
002	Cust. Grp/AccKey
003	Material Grp/Acc Key
004	General
005	Acc Key
Application	Condition Type	Chart of a/c	Sales Org	AcctAsg Grp	Acc Asgmnt	A/c Key	GL a/c
001	Customer grp/Material Grp./AccKey: Details
V	KOFI	COMP	1000	01	10	ERL	5012100000
V	KOFI	COMP	1000	01	10	ERS	5012100000
V	KOFI	COMP	1000	02	10	ERL	5012200000
V	KOFI	COMP	1000	02	10	ERS	5012200000
V	KOFI	COMP	2000	01	20	ERL	5013100000
V	KOFI	COMP	2000	01	20	ERS	5013100000
V	KOFI	COMP	2000	02	20	ERL	5013200000
V	KOFI	COMP	2000	02	20	ERS	5013200000
005	Acc Key: Details
V	KOFI	COMP	1000			MWS	2470000000
V	KOFI	COMP	2000			MWS	2470000000

Open table as spreadsheet

Figure 47: Revenue account determination

192. Outline ‘Credit Management’ in SAP.

‘Credit Management’ helps to determine credit limits of customers, aids in the creation of ‘credit check’ policies, as well as helps companies monitor and evaluate their customers. This is a cross-functional responsibility in SAP, covering both the Sales and Distribution and Financial Accounting modules.

As in the case of any automated process such as dunning, payment, etc., credit management in SAP requires certain prerequisites be defined beforehand:

Customer master data has been created both in SD and FI.
Credit control area has been defined and assigned to a Company Code.

SAP makes use of the concept ‘credit control area’ for credit management. As explained elsewhere, the credit control area is an organizational element defined to which one or more Company Codes are attached. In the case of customers defined under more than one Company Code, they may fall under different credit control areas. But note that:

A Client can have more than one credit control area, but the converse is not true: one credit control area cannot be assigned to more than one Client.
A credit control area can be assigned to more than one Company Code, but the converse is not true: one Company Code cannot be assigned to more than one credit control area.

Figure 48: Client—Credit Control Area—Company Code—Customer

While defining the credit limit for a customer:

- You will define a maximum limit per credit control area (Example: Credit Control Area AAAA->USD 500,000, Credit Control Area BBBB ->USD 200,000)
- You will define a global maximum limit for all credit control areas put together (USD 600,000)

Credit data (per credit control area ‘maximum limit’ as well as the ‘total’ for all areas, in the control data screen) for the customer has been created.
Risk categories have been defined and assigned to customers.
Credit groups (document credit group) for document types have been defined. Document credit groups combine order types and delivery types for credit control.
Defined, in SD, at what time (when order is received or when a delivery is made, etc.) the credit check should happen.

The credit management process starts when a sales order is entered in SD. Imagine that this results in exceeding the credit limit defined for the customer. Now:

The system creates three comparison totals considering (1) open receivables, (2) sales order values, value of goods to be delivered and the billing document value from SD, and (3) special GL transactions (e.g., ‘down payments’ and ‘bills of exchange’).
Based on (a) above the system throws an (1) error message and prevents saving the order or (2) a warning message, and the system does not prevent saving, but the order is ‘blocked.’
The Credit representative, using information functions (SD information system, FI information system, credit overview, credit master list, early warning list, oldest open item, last payment, customer master, account analysis, etc.), processes this blocked order either (1) from the ‘blocked SD documents list’ or (2) the mailbox, and releases the order, if necessary.
Delivery is created, the billing document is generated and posted, and A/R is updated.
Customer pays the invoice and A/R is posted.

193. What is a ‘Credit Check?

A ‘Credit Check’ is defined for any valid combination of the following:

Credit control area
Risk category
Document credit group

194. Differentiate ‘Static Credit Check’ from ‘Dynamic Check.’

Under ‘Static Credit Check,’ the system calculates the credit exposure of a particular customer as the total of:

Open order (delivery not yet done)
Open delivery (value of deliveries yet to be invoiced)
Open billing documents (not transferred to accounting)
Open items (AR item not yet settled by the customer)

Customer’s credit exposure is not to exceed the established credit limit.

The ‘Dynamic Credit Check’ is split into two parts:

Static limit: Total of open items, open billing, and open delivery values.
Dynamic limit (Open Order Value): The value of all undelivered and partially delivered orders totalled and stored on a time-scale in the future (10 days, 1 week, etc.) known as a ‘horizon date.’

During the ‘dynamic credit check,’ the system will ignore all orders beyond the ‘horizon date.’ The sum total of ‘static’ and ‘dynamic’ limits should not exceed the credit limit established for the customer.

195. List the Reports in ‘Credit Management.’

SAP provides you with the following Reports in Credit Management:

RFDKLI10 Customers with missing Credit Data
RFDKLI20 Re-organization of Credit Limit for Customers
RFDKLI30 Short Overview of Credit Limit
RFDKLI40 Overview of Credit Limit
RFDKLI41 Credit Master Sheet
RFDKLI42 Early Warning List (of Critical Customers)
RFDKLI43 Master Data List
RFDKLI50 Mass change of Credit Limit Data
RVKRED06 Checking Blocked Credit Documents
RVKRED08 Checking Credit Documents which reach the Credit Horizon
RVKRED09 Checking the Credit Documents from Credit View
RVKRED77 Re-organization of SD Credit Data

196. How does ‘Partial Payment’ differ from ‘Residual Payment’?

When processing the ‘incoming payment’ to apply to one or more of the ‘open items’ of a customer, there may be a situation where the incoming payment is more than the ‘tolerances’ allowed. In this case, you can still go ahead and process the payment by resorting either to a Partial Payment or a Residual payment.

A Partial payment results in posting a credit to the customer’s ‘open item,’ but leaves the original item intact. As a result, no open item is cleared. During partial payment, the system updates the ‘invoice reference’ and ‘allocation’ fields.

In contrast to a partial payment, the Residual payment clears the particular ‘open item’ against which the payment is applied. However, since there are not enough amounts to clear the entire open item, the system creates a new open item, which is the difference between the original invoice item and the payment applied. Note that the new invoice/open item created by the system will have the new document date and new baseline date though you can change these dates.

197. What is ‘Payment Advice’?

‘Payment Advice’ helps in the automatic searching of ‘open items’ during the ‘clearing’ process to find a match for an ‘incoming payment.’ This is possible because you can use the ‘payment advice’ number instead of specifying parameters in the ‘selection screen.’ A typical payment advice may contain details such as document number, amount, currency, reason for underpayment, etc. The payment advices are of various categories; the first 2 digits of the payment advice number help to differentiate one payment advice from another:

Bank advice
EDI advice
Lockbox advice (created during the clearing process, available in the system whether clearing was successful or not)
Manual advice
Advice from a bank statement

Most of the payment advices are deleted as soon as the clearing is successful in the system.

198. Describe ‘Lockbox’ Processing.

‘Lockbox’ processing (configured in the FR-TR module) of incoming payments is used predominantly in the United States. Here, the bank receives the checks from customers as incoming payments, creates payment advice for each of these customer check payments, and informs the payee of the payment, in BAI file format. This lock box file is sent to the payee who imports the details into the system using this electronic file. The system updates the payments into the GL by way of ‘batch input’ processing.

199. How can ‘Reason Codes’ Help with Incoming Payment Processing?

‘Reason Codes’ configured in the system help to handle the ‘payment differences’ of individual open items in an invoice (either using payment or advice or in the normal course). To each of the reason codes, you will define the ‘posting rules’ and the GL accounts in the IMG.

Once done, when there is a payment difference against a particular open item, the system looks for the reason code:

When the ‘charge-off indicator’ has been set for that reason code, then the system posts the payment difference to a GL account. When this indicator is not set, then a new open item is created for the payment difference.
When ‘disputed item indicator’ has been set, then the system ignores these line items when counting for the customer’s credit limit.

200. What is ‘Dunning’ in SAP?

The SAP System allows you to ‘dun’ (remind) business partners automatically. The system duns the open items from business partner accounts. The dunning program selects the overdue open items, determines the dunning level of the account in question, and creates dunning notices. It then saves the dunning data determined for the items and accounts affected. You can use the dunning program to dun both customers and vendors. It may be necessary to dun a vendor in the case of a debit balance as a result of a credit memo.

Dunning is administered through a Dunning Program, which uses a dunning key (to limit the dunning level per item), a dunning procedure, and a dunning area (if dunning is not done at the Company Code level).

Figure 49: Dunning Key

201. What is a ‘Dunning Procedure’?

SAP comes equipped with a number or ‘Dunning Procedures,’ which you can copy, or you can create your own:

Figure 50: List of Dunning Procedures

A dunning procedure controls:

Dunning interval/frequency
Grace days/minimum days in arrear
Number of dunning levels (at least one level)

Figure 51: Dunning Levels
Transactions to be dunned
Interest to be calculated on the overdue items
Known or negotiated leave, if any, which needs to be considered when selecting the overdue items
Company Code data such as (a) Is dunning per ‘dunning area’? (b) Is dunning per ‘dunning level’? (c) Reference Company Code, (d) Dunning Company Code, etc.
Dunning forms/media to be selected for the dunning run

Figure 52: Control Information in a Dunning Procedure

202. What is the ‘Dunning Area’?

The ‘Dunning Area’ is optional and is required only if dunning is not done at the Company Code level. The Dunning area can correspond to a sales division, sales organization, etc.

203. Describe the ‘Dunning’ Process.

The ‘Dunning Process’ involves three major steps:

Maintaining the parameters for the dunning run
Creating/editing the dunning proposal generated by the system

Printing dunning notices

Maintaining Dunning Parameters

As the first step in dunning, you need to maintain certain parameters, which identify the current dunning run. Entering the date of execution and the dunning run identifier is the starting point, after which you will continue to maintain other parameters such as:
1. Dunning date to be printed on the notice
2. Document posted up to
3. Company Code
4. Account restrictions (optional)
Now, you can save the parameters and display the log generated (to see if there were any errors), the dunning list (list of accounts and items), and some dunning statistics (blocked accounts/items, etc.).

Creating a Dunning Proposal

Once scheduled, the ‘dunning program’ prepares the ‘dunning proposal’ as described below:
1. The Dunning Program determines which accounts to dun:
  1. System checks the fields ‘Dunn.procedure’ and ‘Last dunned’ in the customer master record to determine whether the arrears date or the date of the last dunning run lies far enough back in the past.
  2. Checks whether the account is blocked for dunning according to the dunning block field in the customer master record.
  3. Program processes all open items relating to the accounts thus released in (ii) above that were posted to this account on or before the date entered in the field ‘Documents posted up to.’
  4. Program checks all the open items, as released in (iii) above, in an account to decide:
    - Is the item blocked?
    - Is it overdue according to the date of issue, the base date, the payment conditions, and the number of grace days granted?
  1. Program then proceeds to process all open items thus released in (iv):
    - How many days the item is overdue
    - Which ‘dunning level’ for a particular open item
  1. The program determines the highest ‘dunning level’ for the account based on (v) above. The highest ‘dunning level’ determined is stored in the master record of the account when you print the letters. This ‘dunning level’ determines the ‘dunning text’ and a ‘special dunning form,’ if defined.
  1. The program then proceeds to check each account:
    - Does the customer/vendor have a debit balance with regard to all open overdue items selected?
    - Is the total amount to be dunned and the percentage of all open items more than the minimum amount and percentage defined in the ‘dunning procedure’?
    - Is the ‘dunning level’ for the account or the overdue items higher than it was for the last ‘dunning run’? If not, are there new open items to be dunned (with a previous dunning level of 0)? If not, does the ‘dunning procedure’ for this level specify that dunning be repeated?
1. The program creates the dunning proposal list
2. Edit dunning proposal list
  1. You can edit the Dunning Proposal to:
    - Raise or lower the ‘dunning level’ of an item
    - Block an item from being dunned
    - Block an account for the current ‘dunning run’ or remove the block
    - Block an account in the master record for dunning or remove the block
    - Block a document for dunning or remove the block
  1. You can view the sample print out to ascertain how the printed notice will look (a maximum of 10 notices can be seen on the screen).
  2. You may also display ‘logs’ to see the changes made in the editing earlier, as a confirmation of what you wanted to change in the systemgenerated proposal earlier. If necessary, you can go back and change the proposal.

Print Dunning Notices

You can use a ‘single form’ or ‘multiple forms,’ which will have different text, based on the ‘dunning levels.’ There may also be a requirement to use a completely different form for ‘legal dunning.’ Once the print option is activated, the program prints the notices, and the dunning related information such as ‘dunning level,’ ‘last dunned,’ etc., are updated in the customer/vendor masters. SAP provides the option of optically ‘archiving’ the notices as the system prints the dunning notices. There is also a provision to re-start the printing if it is interrupted before completing the printing.

204. Can you ‘dun’ customers across ‘Clients’ in a Single ‘Dunning Run’?

No. All the data processing is carried out per Client.

205. What differentiates one ‘Dunning Level’ from Another?

The ‘Dunning Level’ determines the ‘dunning text’ and (if one is required) a ‘special dunning form.’ The ‘dunning program’ determines what ‘dunning level’ should be used in the ‘dunning run.’ The dunning level so determined is stored in the master record of the account when the ‘dunning letter’ is printed. The dunning level may also determine whether there will be some ‘dunning charges.’

206. How many ‘Dunning Levels’ can be Defined?

You may define up to nine dunning levels. If there is only one dunning level, then it is called a ‘payment reminder.’

Accounts Payables

207. Explain the ‘Account Payables’ Submodule.

‘Accounts Payables,’ a submodule under Financial Accounting (FI), takes care of vendor-related transactions as the module is tightly integrated with the purchasing transactions arising from the ‘Procurement Cycle.’ The module helps in processing outgoing payments either manually or automatically through the ‘Automatic Payment Program.’ It also helps in ‘Vendor Evaluations.’

208. What Documents Result from ‘Procurement Processes’?

In Materials Management (MM):

PR: Purchase Requisition (manual or automatic using MRP)
PO: Purchase Order

In Financial Accounting (FI):

Invoice Verification
Vendor Payment (manual or automatic)

Both MM and FI areas:

Goods Receipt

You may also group these documents into (1) Order documents, (2) GR (Goods Receipt) documents, and (3) IR (Invoice Receipt) documents. While GR/IR documents can be displayed both in MM and FI views, the order documents can only be viewed in MM view.

209. Describe a ‘Purchase Cycle.’

A ‘Purchase Cycle or Procurement Cycle’ encompasses all activities including purchase requisition, purchase order, goods movement, goods receipt, invoicing, invoice verification, payment to vendors, and ends with the updating of vendor account balances.

Figure 53: Procurement Cycle

210. What is a ‘Purchase Requisition’ (PR)?

A ‘Purchase Requisition,’ PR, is the document that outlines a company’s purchasing needs of a material/service from vendor(s). A PR, typically an internal document that can be created automatically or manually, identifies the demand for a product and authorizes the purchasing department to procure it. In the automatic creation of a PR, this is done as a result of MRP (Material Requirements Planning). The PR, after identifying the vendor, is processed further to result in a RFQ (Request for Quotation) or directly to a Purchase Order (PO).

211. What is a ‘Request for Quotation’ (RFQ)?

A ‘RFQ (Request for Quotation),’ which can be created directly or with reference to another RFQ or a PR or an Outline Agreement, is actually an invitation to vendor(s) to submit a ‘quotation’ for supplying a material or service. The RFQ will contain the terms and conditions for supply. You may send the RFQ to single or multiple vendors, and you can monitor it by sending reminders to those who have not responded to the RFQ.

212. What is an ‘Outline Agreement’?

An ‘Outline Agreement,’ a declaration binding both the buyer and seller, is the buyer’s intention to purchase a material/service with certain terms and conditions agreed to by both parties. The essential difference between the ‘outline agreement’ and ‘quotation’ is that the outline agreement does not contain details such as delivery schedule or quantities. Outline agreements can be contracts or scheduling agreements.

213. What is a ‘Contract’?

A ‘Contract,’ also referred to as a ‘Blanket Order,’ is a long-term legal agreement between the buyer and the seller for procurement of materials or services over a period of time. The contract, created directly or with reference to a PR/RFQ or another contract, is valid for a certain period of time with start and end dates clearly mentioned. There are two types of contracts: Quantity Contracts and Value Contracts.

214. What is a ‘Release Order’?

A ‘Release Order’ is a ‘purchase order’ created against a Contract. The release orders usually do not contain information on quantities or delivery dates and are also called ‘Blanket Releases,’ Contract Releases,’ or ‘Call-Offs.’

215. What is a ‘Scheduling Agreement’?

A ‘Scheduling Agreement’ is also a long-term agreement with the buyer and seller for procurement of certain materials or services subject to certain terms and conditions. These agreements can be created directly or with reference to other documents such as another scheduling agreement, or an RFQ or PR. These agreements help in promoting Just-In-Time (JIT) deliveries, less paperwork, they reduce supply lead times, and ensure low inventory for the buyer.

216. What is a ‘Quotation?

A ‘Quotation’ contains information relating to the price and other conditions for supply of a material or a service by a vendor, and is the vendor’s willingness to supply the same based on those conditions. You will be able to compare the data from quotations using a Price Comparison List and will help in identifying the most reasonable vendor for supply of that item(s). After you receive the quotations, you will typically enter the quotation data (pricing/delivery) in RFQ. The SAP system can easily be configured to automatically print ‘Rejections’ for vendors whose quotation are not selected.

217. What is a ‘Purchase Order’ (PO)?

A ‘Purchase Order’ (PO) is a legal contract between a vendor and a buyer concerning the material/service to be purchased/procured on certain terms and conditions. The order mentions, among other things, the quantity to be purchased, price per unit, delivery related conditions, payment/pricing information, etc.

A PO can be created:

Directly or
With reference to a PR/RFQ/contract or another PO. Remember, all items on a PO should relate to the same Company Code.

218. What is a ‘PO History’?

The ‘Purchase Order History’ (PO History) lists all the transactions for all the items in a PO such as the GR/IR document numbers.

219. Will the FI Document be Created with the Purchase Order (PO)?

No. There will not be any document created on the FI side during creation of a PO. However, there can be a document for posting a ‘commitment’ to a Cost Center in CO. (The offsetting entry is posted at the time of GR.)

220. Explain FI-MM Integration.

FI-MM Integration is based on the following:

Movement Types
Valuation Class
Transaction Keys
Material Type

The Movement Type is the ‘classification key’ indicating the type of material movement (for example, goods receipt, goods issue, physical stock transfer). The movement type enables the system to find pre-defined posting rules determining how the accounts in FI (stock and consumption accounts) are to be posted and how the stock fields in the material master record are to be updated.

Figure 54: Movement Types

The Valuation Class refers to the assignment of a material to a group of GL accounts. Along with other factors, the valuation class determines the GL accounts that are updated as a result of a valuation-relevant transaction or event, such as a goods movement. The valuation class makes it possible to:

Post the stock values of materials of the same material type to different GL accounts.
Post the stock values of materials of different material types to the same GL account.

The Transaction Key (also known as the ‘Event Key or Process Key’) allows users to differentiate between various transactions and events (such as physical inventory transactions and goods movements) that occur within the area of inventory management. The transaction/event type controls the filing/storage of documents and the assignment of document numbers.

The Material Type groups together materials with the same basic attributes, for example, raw materials, semi-finished products, or finished products. When creating a material master record, you must assign the material to a material type. The material type determines:

Whether the material is intended for a specific purpose, for example, as a Configurable Material or Process Material.
Whether the material number can be assigned internally or externally.
The Number Range from which the material number is drawn.
Which screens appear and in what sequence.
Which user department data you may enter.
What Procurement Type the material has; that is, whether it is manufactured in-house or procured externally, or both.

Together with the plant, the material type determines the material’s inventory management requirement, that is:

Whether changes in quantity are updated in the material master record.
Whether changes in value are also updated in the stock accounts in financial accounting.

221. What Happens, in SAP, when You Post a ‘Goods Receipt’?

When you post a ‘Goods Receipt’ (GR), the stock account is debited (stock quantity increases) and the credit goes to the GR/IR Clearing Account, which is the intermediate processing account, before you actually process the vendor invoice or payments to the vendor:

Debit: Inventory Account
Credit: GR/IR Clearing Account

During this (1) a material document is created, (2) an accounting document to update the relevant GL account is created, (3) PO order history is updated, and finally (4) the system enables you to print the GR slip.

222. Explain ‘Invoice Verification’ (IV) in SAP.

‘Invoice Verification’ involves:

Validating the accuracy of the invoices (quantity, value, etc.).
Checking for ‘blocked’ invoices (which vary to a great extent from that of the PO).

Matching of invoices received from vendors with that of the Purchase Order/ Goods Receipt. At this point in time, the PO History is updated for the corresponding PO Line Item(s) of the matched invoice.
Passing of matched invoices to the FI module. The system posts the following entries:
- Debit: GR/IR Clearing Account
- Credit: Vendor a/c (Accounts Payable open line item)
- Credit: GL Reconciliation Account
The different scenarios in invoice verification include:
1. GR-based Invoice Verification indicator is not set in the PO detail screen: Although this setting enables you to post the invoice referenced to a PO prior to making a GR, the system will block the invoice for payment (this kind of posting results in a Quantity Variance as there has not been a GR).
2. GR-based Invoice Verification indicator is set in the PO detail screen: When the PO number is referenced the system brings up all the unmatched items of GR in the selection screen. You will not be able to post the invoice for its full value, unless the PO has been fully received.

223. How do You Deal with ‘Tax’ when You Post an Invoice?

When you enter an invoice, based on the configuration settings, the system checks the Tax Code and calculates the applicable tax or validates the Tax Amount entered by you:

Manual Entry: Input the Tax Code and the Tax Amount. The system will validate and issue a message in case it does not find the tax code or if the amount is different.
Automatic Entry: Leave the Tax Code and Tax Amount fields blank. Check the ‘Calculate Tax’ indicator. The system picks up the corresponding tax code and calculates the tax amount automatically.

224. What ‘Variances’ do You come Across in Invoice Verification?

The system needs to be configured properly with ‘Tolerances’ so that you are not hampered with variances when you try Invoice Verification. You need to define the lower and upper limits for each combination of the Company Code and the tolerance key defined for the various variances. The system then checks these tolerance limits and issues warnings or prevents you from proceeding further when you process an invoice.

‘Variances’ arise because of mismatch or discrepancies between the invoice and the PO against which the invoice has been issued. Normally you will encounter:

Price variances: If there is a discrepancy in invoice price and PO item prices.
Schedule variances: If the planned delivery date is later than the invoice postings.
Quantity variances: If the delivered quantity (or delivered quantity less the previously invoiced quantity) is not the same as that of the invoiced quantity. When the invoiced quantity is more than the GR, the system requires more GRs to square off the situation.

225. Outline ‘Vendor Payments’ in the SAP System.

The payments to single or multiple vendors can either be handled in a manual process or through an ‘Automatic Payment Program.’ The open liability item created for the vendor during the invoice verification will be squared off when you make the vendor payment or when you run the automatic payment program. The payment program in SAP is designed to allow you to enjoy the maximum discount allowed by that vendor.

226. Explain ‘Automatic Payment Program.’

The ‘Automatic Payment Program’ in SAP helps to process payment transactions both with customers and vendors. AR/AP/TR/Bank Accounting uses the payment program.

The ‘automatic payment program’ helps in determining:

What is to be paid? To do this, you specify rules according to which the open items to be paid are selected and grouped for payment.
When is payment to be carried out? The due date of the open items determines when payment is carried out. However, you can specify the payment deadline in more detail via configuration.
To whom the payment is made? You specify the payee (the vendor or the alternate payee as the case may be).
How the payment is made? You determine rules that are used to select a payment method.
From where the payment is made? You determine rules that are used to select a bank and a bank account for the payment.

227. Explain ‘Automatic Payment Program’ Configuration.

Before you are ready to run the ‘Automatic Payment Program,’ the following should have been defined/configured in the system:

House Bank and the corresponding bank accounts.
Payment Methods to be used for the Company Code. SAP comes with predefined payment methods, both for AR and AP. The following payment methods are available for you to select from depending on the requirements:
1. Accounts Payable
  - Check (S)/Transfer/Postal Giro transfer/Bill of exchange
1. Accounts Receivable
  - Bank collection/Bank direct debit/Refund by check/Refund by bank transfer/BE payment request

Bank Chain defined, if necessary. Bank chains are used to make payment via more than one bank, for example, via the correspondence banks of the house bank, the recipient bank, or the intermediary banks. You can define up to three banks.
Payment Forms defined. SAP delivers standard forms, which can be modified, or new forms can be created for use.

Figure 55: Customizing Automatic Payment program using FBZP

You may do most of the configurations by using the Transaction Code FBZP and branching to individual sections thereon. Or you may use the following Transaction Codes for individually doing it:

(Sending) Company Code specifications
1. Sending the Company Code—if Company Code ‘A’ is making payments on behalf of ‘B,’ then ‘B’ is the Sending Company Code. Otherwise, the sending Company Code is considered the paying Company Code (both are one and the same).
2. Tolerance days
3. Paying Company Code specifications
  - Minimum amounts for incoming and outgoing payments.
  - Forms for payment advice and EDI.
  - Bill of Exchange parameters

Payment Methods/Country and Bank determination
1. Payment Methods/Country
  - Payment Method for outgoing/incoming?
  - Payment Method classification
  - Master data requirements
  - Posting details—document types
  - Payment medium details—Print programs
  - Permitted currencies (leave blank to allow all currencies)
1. Bank Determination
  - Ranking Order
    - Per Payment Method:
      - Which bank should be used first, second, etc.
      - Currency
      - Bill of Exchange
  - Bank accounts
  - Available amounts
    - Per House Bank and Payment Method combination:
      - Offset a/c for subledger posting
      - Available funds in each bank
      - Clearing accounts for Bill of Exchange
  - Value date
  - Charge

Payment methods per Company Code
1. For each Payment Method and Company Code you need to define:
  - Minimum/maximum payment amounts
  - Whether payment abroad or in foreign currency is allowed
  - Payment Media
  - Bank optimization

House Bank

228. How do You Execute an ‘Automatic Payment Program’?

The following are the series of events happening in the system when you try to execute an ‘Automatic Payment Program’:

Maintain Payment Parameters

To start with, you need to maintain the parameters required such as date of execution of ‘payment run,’ ‘payment run identifier,’ etc. Once this is done, you need to specify the ‘posting date’ of these payments, the ‘document date’ up to which the program should consider the items, the paying Company Code, payment methods to be considered, the ‘next posting date,’ is there certain accounts which need to be excluded from the run, etc. The payment run then needs to be scheduled either immediately or at a specified time/date.

Payment Proposal

The system creates a ‘payment proposal’ based on the payment parameters maintained in (1) above. The system selects the eligible Open Items based on the following sequence:
1. Due date is determined via the Base Line Date and the Terms of Payment for each of the line items.
2. Program calculates the Cash Discount Period and due date for the Net Payment.
3. Grace Periods are then added to this due date.
4. Which Special GL accounts are to be included, based on what you have already maintained as the parameters in (1) above.
5. The system will determine whether to include an item during the current run or for the future one based on the specifications you made in (1).
6. Blocking an item.
  
  The payment proposal can be displayed for further processing; the ‘log’ can be checked to see the system messages, and the exception list can be generated for further evaluation.

Payment Proposal

With the payment proposal available, you can now edit the proposal to:
1. Change House Bank, from what was maintained earlier
2. Change Payment Method, if necessary
3. Change Payment Due Date to relax or restrict certain open items
4. Block/Unblock line items

Payment Run

After the payment proposal has been edited, you can run the Payment Program that creates the payment documents and prepares the data for printing the forms or creating the tape or disk. Before printing the forms, check the logs to determine that the payment program run was successful.
Print Run

Payment Medium Programs use the data prepared by the payment program to create forms (payment advice, EDI accompanying sheet, etc.) or files for the data media. The data created by the payment program is stored in the following tables:

REGUH

Payee or Payment Method data

REGUP

Individual Open Items data

REGUD

Bank Data and Payment Amounts data

You need to define Variants for print programs, which need to be defined:
1. Per Payment Method per country->assign a Print Program
2. To run the Print Program->at least one Variant per Print Program per Payment Method

229. Can You Pay a Vendor in a Currency Other than the Invoice Currency?

With release 4.5A, you can pay a vendor in a currency that is different from that of the transaction/invoice currency. This is achieved by entering the required currency code directly in the open item. Prior to this release, to pay in a different currency, you had to manually process the payment.

230. What is a ‘Payment Block’?

A ‘Payment Block’ prevents you from paying an open item of a vendor. The payment block is entered in the ‘Payment Block’ field in a vendor master record or directly in the open line item.

Use the payment ‘Block Indicators’ to define the ‘Payment Block Reasons.’ You may use the SAP delivered payment block indicators (A, B, I, R, etc.) or create your own. An indicator such as ‘*’ is used when you want to skip the particular account, and a blank indicator indicates that the account/item is free for payment. However, for each of these ‘block indicators,’ you need to configure whether changes would be allowed while processing the payment proposal. Then, it is also possible to block a payment or release a blocked one while processing the ‘Payment Proposal.’

You may also propose a ‘payment block indicator’ while defining Terms of Payment.

231. How do You Release ‘Blocked Invoices for Payments’?

The system will block an invoice if it comes across with an item with a ‘Blocking Reason.’ The blocking reason may be due to variances or inspection-related issues. When the system blocks an invoice for payment, the ‘payment block’ field is checked by the system.

You will use an ‘Invoice Release Transaction’ to select the blocked invoices for processing further. The ‘release’ of blocked invoices for payments can be handled either manually or automatically.

232. What is the ‘Account Assignment Category’?

The ‘Automatic Account Assignment’ logic takes care of posting to the correct GL accounts for ‘Stock Material’ with the ‘Material Type’ permitting inventory management, and the material master contains information as to which GL account needs to be updated. But there are material line items (‘Non-Stock’ materials) created manually in the Purchase Requisition/Purchase Order/Outline Agreement for which someone needs to decide the account assignment data and manually enter it in the Purchase Requisition. Here, the Account Assignment Category determines where to allocate the costs relating to such materials. The account assignment category helps you to define the type of account assignment (Sales Order-C, Project-P, Cost Center-K, etc.) and which accounts are to be posted to when GR/IR is posted to.

233. What is a ‘Credit Memo’?

A ‘Credit Memo’ is issued by a vendor who has earlier supplied you some services or materials. The occasion is necessitated when the delivered goods are damaged or you have returned some of the goods back to the vendor. The system treats both the invoices and the credit memo in the same way, except that the postings are done with the opposite sign.

If the credit memo is for the entire invoiced quantity, the system generates the credit memo automatically. However, if the credit memo relates to a portion of the invoiced quantity, you need to process it manually in the system.

234. What are ‘Special GL Transactions’?

‘Special GL Transactions’ are not directly posted to the GL (Reconciliation Accounts) though these are related to subledger accounts such as AR/AP. The transactions to these accounts are shown separately in the balance sheet. There are specific posting keys/indicators defined in the system to regulate the postings to these items. You need to specify a Special GL Indicator (such as a F-Down Payment Request, A-Down Payment) for processing such a transaction. And the system will make use of the specially defined posting keys (09-customer debit, 19-customer credit, 29-vendor debit, and 39-vendor credit) for posting these special GL transactions.

There are three types of Special GL transactions:

Free Offsetting Entries (Down Payment)
Statistical Postings (Guarantee)
Noted Items (Down Payment Request)

Figure 56: Special GL Indicators

235. Differentiate ‘Free Offsetting Entry’ from a ‘Statistical Posting.’

‘Free Offsetting Entry’ postings are part of the regular postings but with a freely definable offsetting entry, and relate to the On-Balance Sheet Items. On the other hand, in a Statistical Posting, you will always be posting to the same offsetting entry, and these are all the Off-Balance Sheet Items.

236. What is a ‘Noted Item’

‘Noted Items’ are never displayed on Financial Statements as they serve only as reminders of a financial obligation such as outstanding payments to be made or due to us, such as a ‘Down Payment Request.’ This kind of posting does not update any GL account in the system but helps to keep track of such obligations for easy follow-up. This is also sometimes referred to as a ‘Memo Entry.’

It is interesting to note that while the Special GL Indicator for a Down Payment Request is ‘F,’ you need to enter the indicator ‘A’ as the target Special GL indicator while you are in the Down Payment Request Entry Screen. When you post this entry, the system creates a one-sided memo entry for the customer or vendor but does not update the GL.

Asset Accounting

237. Explain ‘Asset Accounting’ (FI-AA).

The ‘Asset Accounting’ (FI-AA) submodule in SAP manages a company’s fixed assets, right from acquisition to retirement/scrapping. All accounting transactions relating to depreciation, insurance, etc., of assets are taken care of through this module, and all the accounting information from this module flows to FI-GL on a real-time basis.

Figure 57: FI-AA integration with other modules

You will be able to directly post (the goods receipt (GR), invoice receipt (IR), or any withdrawal from a warehouse to a fixed asset) from MM or PP to FI-AA. The integration with FI-AR helps in direct posting of sales to the customer account. Similarly, integration with FI-AP helps in posting an asset directly to FI-AA and the relevant vendor account in cases where the purchase is not routed through the MM module. You may capitalize the maintenance activities to an asset using settlements through the PM module. FI-AA and FI-GL has real-time integration where all the transactions such as asset acquisition, retirement, transfer, etc., are recorded simultaneously in both the modules. However, batch processing is required to transfer the depreciation values, interest, etc., to the FI module.

The FI-AA and CO integration helps in:

Assigning an asset to any of the Controlling Objects such as cost center, internal order/maintenance order, or an activity type. Internal Orders act as a two-way link to the FI-AA: (i) they help to collect and pass on the capital expenditure to assets, and (ii) they collect the depreciation/interest from FI-AA to controlling objects. (Note that when there is a situation where the asset master record contains an internal order and a cost center, the depreciation is always posted to the internal order and not to the cost center.)
The depreciation and the interest are passed on to the cost/profit centers.

238. What is a ‘Lean Implementation’ in FI-AA?

A ‘Lean Implementation’ is the scaled-down version of the regular FI-AA configuration in IMG, with minimal configuration required to enable asset accounting. This is suitable for small companies using the standard functionalities of asset accounting, and also in situations where the Asset Catalog is not that large.

Figure 58: Lean implementation in FI-AA

You should not opt for lean implementation if:

You need more than Depreciation Areas
You need to Depreciate In Foreign Currencies as well
You have Group Assets
You need to define your own Depreciation Keys/Transaction Types/ Reports
You need a Group Consolidation

239. What are the kinds of ‘Assets’ in SAP?

An asset can be a Simple Asset or Complex Asset. Depending on the requirement, assets are maintained with Asset Main Numbers and Asset Subnumbers. A complex asset consists of many Sub-Assets; each of them identified using an asset subnumber. You may also use the concept Group Asset in SAP.

240. Explain ‘Complex Assets’ and ‘Asset Subnumbers.’

A ‘Complex Asset’ in SAP is made up of many master records each of which is denoted by an ‘Asset Subnumber.’ It is prudent to use asset subnumbers if:

You need to manage the ‘subsequent acquisitions’ separately from the initial one (for example, your initial acquisition was a PC, and you are adding a printer later).
You want to manage the various parts of an asset separately even at the time of ‘initial acquisition’ (for example, an initial purchase of a PC where you create separate asset master records for the monitor, CPU, etc.).
You need to divide the assets based on certain technical qualities (keyboard, mouse, etc.).

When you manage a complex asset, the system enables you to evaluate the asset in all possible ways such as (i) for a single subnumber, (if) for all subnumbers, and (iii) for select subnumbers.

241. What is a ‘Group asset’ in SAP? When You will use This?

A ‘Group Asset’ in SAP is almost like a normal asset except that it can have (any number of) sub-assets denoted by Asset Subnumbers. The concept of group asset becomes necessary when you need to carry out depreciation at a group level, for some special purposes such as tax reporting. Remember that SAP’s way of depreciation is always at the individual asset level. Hence, to manage at the group level, you need the group asset. Once you decide to have group assets, you also need to have ‘special depreciation areas’ meant for group assets; you will not be able depreciate a group asset using a normal depreciation area.

Unlike Complex Assets, you can delete a group asset only when all the associated subnumbers have been marked for deletion.

242. What is a ‘Asset Super Number’ in SAP?

The concept of ‘Asset Super Number,’ in FI-AA, is used only for reporting purposes. Here, you will assign a number of individual assets to a single asset number. By using this methodology, you will be able to see all the associated assets with the asset super number as a single asset (for example, brake assembly line) or as individual assets (for example, machinery, equipment in the brake assembly line).

243. What is a ‘Chart of Depreciation’? How does it differ from a ‘Chart of Accounts’?

A ‘Chart of Depreciation’ contains a list of country-specific depreciation areas. It provides the rules for the evaluation of assets that are valid in a given country or economic area. SAP comes supplied with default charts of depreciation that are based on the requirements of each country. These default charts of depreciation also serve as the ‘reference charts’ from which you can create a new chart of depreciation by copying one of the relevant charts. After copying, you may delete the depreciation areas you do not need. However, note that the deletion must be done before any assets are created.

You are required to assign a chart of depreciation to your Company Code. Remember that one Company Code can have only one chart of depreciation assigned to it, even though multiple Company Codes can use a single chart of depreciation.

The chart of accounts can be global, country specific, and industry specific based on the needs of the business. The chart of depreciation is only country specific. The charts are independent of each other.

Open table as spreadsheet

Chart of Depreciation	Chart of Accounts
Established by FI-AA.	Established by FI.
A chart of depreciation is a collection of country specific depreciation areas.	The chart of accounts is a list of GL accounts used in a Company Code. The chart of accounts contains the chart of accounts area and the Company Code area.
The chart of depreciation is country specific. Usually you will not require more than one chart of account. SAP comes delivered with many country specific charts of depreciation as ‘reference charts’ which can be copied to create your own chart of depreciation.	Depending on the requirement you may have an ‘operating chart of accounts,’ ‘country specific chart of accounts,’ ‘global chart of accounts,’ etc.
One Company Code uses only one chart of depreciation.	One Company Code uses only one chart of accounts.
Many Company Codes, in the same country, can use the same chart of depreciation.	Several Company Codes within the same country can use the same chart of accounts.

244. How do You Create an ‘Asset Accounting Company Code’?

Define the Company Code in FI configuration, and assign a chart of accounts to this Company Code.
Assign a chart of depreciation to this Company Code in FI-AA configuration.
Add necessary data for the Company Code for use in FI-AA, and your ‘asset accounting Company Code’ is now ready for use.

245. What is ‘Depreciation’? Explain the Various Types.

‘Depreciation’ is the reduction in the book value of an asset due to its use over time (‘decline in economic usefulness’) or due to legal framework for taxation reporting. The depreciation is usually calculated taking into account the economic life of the asset, expected value of the asset at the end of its economic life (junk/ scrap value), method of depreciation calculation (straight line method, declining balance, sum of year digits, double declining, etc.), and the defined percentage decline in the value of the asset every year (20%, or 15%, and so on).

The depreciation can either be planned or unplanned.

Planned depreciation is one which brings down the value of the asset after every planned period; say every month, until the asset value is fully depreciated over its life period. With this method, you will know what the value of the asset at any point of time in its active life.

On the contrary, unplanned depreciation is a sudden happening of an event or occurrence not foreseen (there could be a sudden break out of a fire damaging an asset, which forces you to depreciate fully as it is no longer useful economically) resulting in a permanent reduction of the value of the asset.

In SAP, you will come across three types of depreciation:

Ordinary depreciation, which is nothing but ‘planned depreciation.’
Special depreciation, which is over and above ‘ordinary depreciation,’ used normally for taxation purposes.
Unplanned depreciation, which is the result of reducing the asset value due to the sudden occurrence of certain events.

246. Define ‘Depreciation Areas.’

Fixed assets are valued differently for different purposes (business, legal, etc.). SAP manages these different valuations by means of ‘Depreciation Areas.’ There are various depreciation areas such as book depreciation, tax depreciation, depreciation for cost-accounting purposes, etc.

Figure 59: Depreciation Area

A depreciation area decides how and for what purpose an asset is evaluated. The depreciation area can be ‘real’ or a ‘derived one.’ You may need to use several depreciation areas for a single asset depending on the valuation and reporting requirements.

The depreciation areas are denoted by a 2-character code in the system. The depreciation areas contain the depreciation terms that are required to be entered in the asset master records or asset classes. SAP comes delivered with many depreciation areas; however, the depreciation area 01—Book Depreciation is the major one.

Figure 60: Details of 01-Book Depreciation

The other depreciation areas are:

Book depreciation in group currency
Consolidated versions in local/group currency
Tax balance sheet depreciation
Special tax depreciation
Country-specific valuation (e.g., net-worth tax or state calculation)
Values/depreciations that differ from depreciation area 01 (for example, cost-accounting reasons)
Derived depreciation area (the difference between book depreciation and country-specific tax depreciation)

247. How do You Set up ‘Depreciation Area postings’ to FI from FI-AA?

You need to define how the various depreciation areas need to post to FI-GL. It can be any one of the following scenarios:

Post depreciation through ‘periodic processing.’
Post both the APC (Acquisition and Production Costs) and depreciation through periodic processing.
Post the APC in ‘real time’ but depreciation through periodic processing.
No values are posted.

However, you need to ensure that at least one depreciation area is configured to post values automatically to the FI-GL. Normally, this depreciation area will be 01 (book depreciation). For the rest of the depreciation areas, it may be configured that they derive their values from this area and the difference thus calculated is automatically posted to FI-GL. There may also be situations where you may define depreciation areas just for reporting purposes, and these areas need not post to the GL.

248. What is an ‘Asset Class?

An ‘Asset Class’ in SAP is the basis for classifying an asset based on business and legal requirements. It is essentially a grouping of assets having certain common characteristics. Each asset in the system needs to be associated with an asset class.

Figure 61: Asset Class

An asset class is the most important configuration element that decides the type of asset (such as land, buildings, furniture and fixtures, equipment, assets under construction, leased assets, low-value assets, etc.), the document number range, data entry screen layout for asset master creation, GL account assignments, depreciation areas, depreciation terms, etc. An asset class is defined at the Client level and is available to all the Company Codes of that Client.

The asset class consists of:

A header section—control parameters for master data maintenance and account determination.
A master data section—default values for administrative data in the asset master record.
A valuation section—control parameters for valuation and depreciation terms.

The asset class can be:

Buildings
Technical assets
Financial assets
Leased assets
AuC (assets under construction)
Low value assets

249. Why do You need ‘Asset Classes’?

An ‘Asset Class’ is the link between the asset master records and the relevant accounts in the GL. The account determination in the asset class enables you to post to the relevant GL accounts. Several asset classes can use the same account determination provided all these asset classes use the same chart of accounts and post to the same GL accounts.

250. What is an ‘Asset Class Catalog’?

An ‘Asset Class Catalog’ contains all the asset classes in an enterprise and is therefore valid across the Client. Since an asset class is valid across the Client, most of the characteristics of the asset class are defined at the Client level; however, there are certain characteristics (such as the depreciation key, for example), which can be defined at the chart of depreciation level.

251. Is it Possible to Create ‘Asset Classes’ Automatically?

One of the benefits of lean implementation configuration is the ability to create asset classes automatically from the asset GL accounts. This tool selects only necessary system settings so that the asset classes are created automatically in a very short time. During the process of creation, the system allows you to delete all the existing objects (i.e., asset classes, number ranges, account allocations, field selections, etc.) before creating the new ones.

The prerequisites for automatic asset class creation include:

Company Code must be assigned to a chart of depreciation
Depreciation areas have already been defined
GL account number is not more than 8 digits (otherwise you need to assign the classes manually)

Also note that you may need to maintain the GL account for ‘accumulated depreciation’ manually. The system maintains the necessary account assignment only with regard to the depreciation area 01 (book depreciation). If you need more areas, you may need to do that manually in the IMG.

252. What is an ‘Asset Value Date’?

The ‘Asset Value Date’ is the start date of depreciation for the asset. The ‘planned depreciation’ is calculated by the system based on this depreciation start date and the selected ‘depreciation term’ for that asset. Be careful with the posting date and asset value date. Both dates need to be in the same fiscal year.

253. What is an ‘Asset Master’?

An ‘Asset Master’ can be created by copying an existing asset in the same Company Code or another Company Code; it can also be created from scratch when it is done for the first time. Again, while creating the master, SAP allows you to create multiple assets in one step, provided all such assets are similar (having the same asset class and all belonging to the same Company Code).

From Release 4.5, the transaction codes for creating an asset master have been changed to the AS series instead of the earlier AT series (for example, create asset is code AS01 (AT01 before), change asset is AS02 (AT02 before), and so on. If you are more comfortable with the creation of assets using the conventional screen than with the ‘tab’ feature available now in the AS transaction series, you can do so, but you cannot find these transactions under ‘ASMN’!

Each asset master contains the necessary information to calculate the depreciation:

Capitalization date/acquisition period
Depreciation areas relevant for the asset
Depreciation key
Useful life/expired useful life
Change over year, if any
Scrap value, if any
Start date of (ordinary depreciation)

254. Explain the Two Ways used to Create ‘Asset Masters.’

Copy an existing asset as a reference for creating the new one.
From an existing asset class create a new asset so that this asset class provides the default control parameters for the new asset.

255. Is it Possible to Create Multiple Assets in a Single Transaction?

SAP enables you to create multiple (but similar) assets in one transaction. What you need to know is that all these assets should belong to the same asset class and the same Company Code. Enter the number of assets you need to create in the ‘Number of similar assets’ field. After creating the assets, you will be able to change the individual descriptions/inventory numbers when you are about to save the master records. When you save the master records, the system assigns a range of asset numbers.

Figure 62: Create multiple assets

The only drawback of using this method of creating assets in bulk is that you will not be able to create long text for any of these assets.

256. What is the ‘Time-dependent Data’ in an Asset Master?

All the cost accounting assignment-related data such as cost center, internal orders or investment projects, etc., need to be maintained as ‘Time-dependent Data’ in asset masters. Additionally, the information related to asset shut-down and shift operation also needs to be maintained as time dependent. SAP maintains all the time-dependent data for the entire life span of the assets.

257. Explain ‘Asset Acquisition.’

‘Asset Acquisition’ can be through any one of the following three routes:

External Acquisition through Purchase

External acquisition of assets will be primarily from vendors, who are either your business partners or third parties. It can also be from your affiliated companies (use Transaction Code: ABZP). The external asset acquisition can be done several ways:
1. The asset can be posted in the MM module.
2. The asset can be created in FI-AA with automatic clearing of the offsetting entry (Transaction Code: ABZON). This can be achieved either of the following ways:
  1. The posting is made initially in FI-AP and the clearing account cleared when the posting is made to the asset (FI-AA).
  2. Post the asset with the automatic offsetting entry (FI-AA) and then clear the clearing account through a credit posting by an incoming invoice (FI-AP).
1. When not integrated with FI-AP, you may acquire the asset in FI-AA with an automatic offsetting entry without referencing a Purchase Requisition (PR). This kind of acquisition is necessary when:
  1. You have not yet received the invoice or
  2. When the invoice has already been posted in FI-AP
1. When integrated with FI-AP, acquire the asset in FI-AA using an incoming invoice but without a reference to a Purchase Order (PO).

In-house Production/Acquisition

In-house Asset Acquisition is primarily the capitalization of goods/services produced by your company. The costs associated with the complete or partial production of the goods/services from within the company needs to be capitalized into separate asset(s). Usually, the capitalization is done as follows:
1. Create an order/project (in Investment Management) to capture the production costs associated with the goods/services produced in-house.
2. Settle the order/project to an AuC (Asst under Construction).
3. Distribute/Settle the AuC so created into new asset(s). You will be using the Transaction Type 110 for asset acquisition from in-house production.

Subsequent Acquisition

When the asset/vendor accounts are posted, the system updates the corresponding GL accounts (FI-AP and FI-AA) through relevant account determinations. SAP uses various kinds of ‘transaction types’ to distinguish the different transactions. During acquisition the system makes the following entries in the asset master data:
- Date of initial acquisition/period and year of acquisition.
- Capitalization date of the asset.
- Start date for ordinary depreciation (the start date is determined from the asset value date/period/year of acquisition).
- Vendor is automatically entered in the ‘origin.’

258. What are Automatically Set in the Asset Masters During ‘Initial Acquisition’?

Date of capitalization
Acquisition period
Posting date of original acquisition
Depreciation start date (per depreciation area)

259. Why it is Necessary to ‘Block’ an Asset Master Record?

In case you decide that you do not want to post any more acquisitions to an existing asset, then it is necessary for you to set the Block Indicator in the asset master record. This is usually the case with AuC, where after the capitalization you no longer want any further additions to the asset. The block indicator prevents only further postings but not transfers or retirements or depreciation; even after an asset is blocked, you can continue to depreciate it as in the case of other assets.

260. How do you ‘Delete’ an Asset Master?

You can ‘Delete an Asset Master’ record from the system only when there are no transactions posted to it. The system will not allow you to delete the master record if there are transactions against the asset, even if you reverse all the previous transactions pertaining to the asset and bring down the asset value to zero. However, unlike FI-AR, FI-AP, or FI-GL where archiving is a prerequisite to delete the master records, you may delete the asset master records without archiving. When deleted, the system also deletes the asset number.

261. What is an ‘(Asset) Transaction Type’ in FI-AA?

‘Transaction Types’ in FI-AA identify the nature of an asset transaction (acquisition or transfer or retirement) to specify what is updated, among (a) Depreciation area, (b) Value field, and (c) Asset accounts (in B/S).

Figure 63: (Asset) Transaction types

The following are some of the common transaction types used:

100 Asset Acquisition—Purchase
110 Asset Acquisition—In-house Production
200 Asset Retirement—Without revenue
210 Asset Retirement—With revenue

The transaction type is extensively used in most asset reports, including the asset history sheet, to display the various asset transactions differentiated by the transaction types. SAP comes with numerous transaction types, which will take care of almost all your requirements. However, should there be a specific case, you may also create your own transaction type.

Every transaction type is grouped into a Transaction Type Group (for example, 10 -> Acquisition), which characterizes the various transaction types (for example, transaction types 100 and 110) within that group. The system makes it possible to limit the transaction type groups that are associated with certain asset classes.

262. Explain ‘Assets under Construction’ (AuC) in SAP.

The goods and/or services produced, in-house, can be capitalized into asset(s). But, there are two distinct phases during this process:

Construction phase (AuC)
Utilization phase (useful or economic life phase)

It then becomes necessary to show the assets under these two phases in two different balance sheet items:

The ‘construction phase’ is one in which you start producing or assembling the asset but it is not yet ready for economic utilization. SAP categorizes these kinds of assets into a special asset class called ‘Assets under Construction’ (AuC).

The AuC is managed through a separate asset class with a separate asset GL account. SAP allows posting ‘down payments’ to AuC. It is also possible to enter credit memos for AuC even after its complete capitalization, provided you are managing this asset class and allowing negative APC (Acquisition and Production Costs). The IM (Investment Management) module helps to manage internal orders/projects for AuC. It is necessary to use the depreciation key ‘0000’ to ensure that you are not calculating any depreciation for AuC. But you can continue to have special tax depreciation and investment support even on these assets.

263. How do You Capitalize AuC in SAP?

An ‘Asset under Construction’ can be managed in two ways as far as the asset master is concerned:

As a ‘normal’ asset.
As an asset with ‘line item management.’

Later on, the AuC is capitalized and transferred to regular asset(s) by ‘distribution’/‘settlement.’ While doing so, the system, with the help of different transaction types, segregates the transactions relating to the current year with that of the previous years. The capitalization can be:

Lump sum capitalization.
With line item settlement (when capitalized using line item settlement, it is not necessary to settle all the line items and 100% in a particular line item).

In the case of integration with SAP-IM (Investment Management), capital investments can be managed as an AuC by:

Collecting the production costs associated with an order/project.
Settling the collected costs to an AuC.
Capitalizing the AuC into new assets by distribution/settlement.

264. What do You mean by ‘Low Value Assets’?

SAP uses the term ‘Low Value Assets’ to denote assets that will be depreciated in the year of purchase or in the period of acquisition. This categorization usually follows the statutory requirements of the country of the Company Code, wherein you define a monetary limit and consider all those assets falling below the value, say $1,000, as low value assets. You have the flexibility of managing these assets either on an individual (individual check) basis or a collective basis (quantity check).

SAP uses a special depreciation key called LVA, and the expected useful life of such an asset is considered to be one period (month).

265. Explain ‘Asset Transfer’ in SAP.

There are two types of ‘Asset Transfers,’ namely:

Inter-company asset transfer
Intra-company asset transfer

Inter-company Asset Transfer is between Company Codes, resulting in the creation of the new asset in the target Company Code (the receiving one). The transaction posts the values per the ‘posting method’ selected during the transfer. In doing so the system:

Retires the asset in the source/sending Company Code by asset retirement.
Posts acquisition in the new/target Company Code by asset acquisition, and creates the new asset in the target Company Code.
Posts inter-company profit/loss arising from the transfer.
Updates FI-GL automatically.

An inter-company asset transfer is usually necessitated when there is a need for physically changing the location from one company to the other or there is an organization restructuring and the new asset is to be attached to the new Company Code. You may use the standard Transfer Variants supplied by SAP. The selection of a suitable transfer variant will be based on the legal relationship among the Company Codes and the methods chosen for transferring the asset values.

Inter-company asset transfers can be handled:

Individually using the normal transaction for a single asset.
For a number of assets using the ‘mass transfer.’

If you need to transfer assets cross-system, you need to use ALE functionality.

Intra-company Asset Transfer is the transfer of an asset within the same Company Code. This would be necessitated by:

Change in the asset class or business area, etc.
Settlement of an AuC to a new asset.
Transfer of stock materials into an asset (by posting a GI to an order through MM or settlement of a production order to an asset).
Splitting an existing asset into one or more new assets.

266. What is a ‘Transfer Variant?

A ‘Transfer Variant’ is dependent on whether the Company Codes involved are legally dependent or independent. Transfer variants specify how the transferred asset will be valued at the receiving Company Code and the type of transaction (acquisition or transfer) used for the transaction.

Figure 64: Transfer variant

267. Explain ‘Asset Retirement’ in FI-AA.

‘Asset Retirement’ is an integral part of asset management. You may retire an asset by sale or by scrapping. In the case of sales, it can be with revenue or without revenue; again, the asset sale can be with the customer or without the customer.

Figure 65: Asset Retirement

During asset sales transactions, the system removes the APC (Acquisition and Production Costs) and also the corresponding accumulated depreciation, then the profit or loss arising from the sale is recorded in the system. Even in the case of ‘partial retirement’ or ‘partial sales,’ the system records the proportionate gain/ loss arising from the transaction. Any tax posting arising from the transaction is automatically created by the system.

SAP provides various ways of posting retirement in the system, which includes:

Mass retirement
Asset retirement with revenue
- With customer (involving integration with FI-AR)
  - Debit customer, credit assets
- Without customer

Asset retirement without revenue
- With customer
  - Debit clearing account, credit asset
  - Debit customer in A/R, credit the clearing account

Asset retirement using GL document posting

268. Describe Transfer of ‘Legacy Asset Data’ to SAP.

One of the challenges in the implementation of FI-AA is the transfer of ‘Legacy Asset Data’ from your existing systems to SAP FI-AA. Though SAP provides multiple options and appropriate tools to carry out this task, you need a carefully planned strategy for completing this task. You may have to transfer the old asset values through any one of the following ways:

Batch data inputs (large number of old assets)
Directly updating the SAP Tables (very large number of old assets)
Manual entry (few old assets)

Normally, you will not have to use the manual process as it is time consuming and laborious; however, you may do this if you have a very limited number of assets. Otherwise, you may use either of the other two options, though batch data input with error handling is the preferred way of doing it. You need to reconcile the data transferred, if you resort to any of the two automatic ways of transferring the data. You may also use BAPIs (Business Application Programming Interface) to link and process the asset information in SAP FI-AA from non-SAP systems.

The transfer can be done at the end of the last closed fiscal year, or during the current fiscal year following the last closed fiscal year. You will be able to transfer both master data as well as accumulated values of the last closed fiscal year. If required, you can also transfer asset transactions, including depreciation, during the current fiscal year. It is important to note that the GL account balances of the old assets need to be transferred separately.

269. Outline ‘Automatic Transfer of Old Assets’

SAP provides you with the necessary interfaces for converting your ‘legacy asset data’ into prescribed formats for upload into the SAP system. The data transfer workbench allows you to control the entire data transfer process.

Figure 66: Legacy asset transfer to SAP FI-AA

These interface programs convert the data so that it is compatible with SAP data dictionary tables such as BALTD for master data and BALTB for transactions. If you have more than 10 depreciation areas, then you need to change the transfer structures for both BALTD and BALTB.
The converted data is stored in sequential files.

Use the data transfer program RAALTD01 (for batch input) or RAALTD11 (direct table update) for transferring the data to SAP.
- Do a test run. This will help to correct errors if any.
- Do a production run, with a few asset records, to update the relevant tables in FI-AA.
- Reset the values in the asset Company Code.
- Continue with the production run for all the assets.

All the asset records without errors will be updated immediately through background processing in relevant tables such as ANLH, ANLA, ANLB, ANLC, etc.
The records with errors will be stored in a separate batch input session, which can be processed separately.

270. What is an ‘Asset Transfer Date’?

The ‘Asset Transfer Date’ refers to the ‘cut-off’ date for the transfer of old assets data from your existing system. Once established, you will not be able to create any old assets in SAP before this reference date. Any transaction happening after the transfer date but before the actual date of asset transfer needs to be created separately in SAP after you complete the old asset transfer.

271. Describe ‘Mass Change/How do You Achieve this?

‘Mass Change’ enables you to make changes (such as mass retirements, changes to incomplete assets, etc.) in FI-AA to a large number of asset master records at one time. The mass change functionality is achieved through work lists, which are FI-AA standard tasks pre-defined in the system. These tasks are assigned with ‘work flow objects,’ which can be changed according to your specific requirements. The work lists are created in several ways from asset master records, asset value displays, from the asset information system, etc.

To make a mass change you need to:

Create a substitution rule(s) in which you will mention what fields will be changed. This rule will consist of an ‘identifying condition’ (for example, if the cost center=1345), and a ‘rule to substitute’ new values (for example, replace the ‘field’ cost center with the ‘value’ ‘1000’).
Generate a list of assets that need to be changed.
Create a ‘work list’ to carry out the changes.
Select the appropriate ‘substitution rule’ (defined earlier in step 1 above).
Process the ‘work list.’ You may also release it to someone else in the organization so that he/she can complete the task.
Run a ‘report’ to verify the changes.

272. What is ‘Periodic Processing’ in FI-AA? Explain.

‘Periodic Processing’ in FI-AA relates to the tasks you need to carry out at periodic intervals to plan and post some transactions. The tasks include:

Depreciation calculation and posting.

As you are aware, SAP allows automatic posting of values from only one depreciation area (normally 01 -book depreciation). For all other depreciation areas, including the derived ones, you need to perform the tasks periodically so that FI is updated properly.
Planned depreciation/interest for CO primary cost planning.
Claiming and posting of ‘investment support’ (either ‘individually’ or through ‘mass change’).

273. What is a ‘Depreciation Key’?

Depreciation is calculated using the ‘Depreciation Key’ and Internal Calculation Key in the system. Depreciation keys are defined at the chart of depreciation level, and are uniform across all Company Codes, which are attached to a particular chart of depreciation. The depreciation key contains all the control amounts defined for the calculation of planned depreciation. The system contains a number of predefined depreciation keys (such as LIMA, DWG, DG10, etc.) with the controls already defined for calculation method and type. A depreciation key can contain multiple internal calculation keys.

Figure 67: Depreciation Key

274. What is an ‘Internal Calculation Key’?

‘Internal Calculation Keys’ are the control indicators within a ‘depreciation key.’ Together with the depreciation key, these calculation keys help in determining depreciation amounts. Each internal calculation key contains:

Depreciation type (ordinary or unplanned)
Depreciation method (straight-line or declining balance)
Base value
Rate of percentage for depreciation calculation
Period control for transactions (acquisition, retirement, etc.)
Change-over rules (in case of declining/double declining methods of calculation)
Treatment of depreciation after useful life period

275. What is known as a ‘Depreciation Run’ in SAP?

The ‘Depreciation Run,’ an important periodic processing step, takes care of calculating depreciation for assets and posting the corresponding transactions in both FI-AA and FI-GL. The depreciation calculation is usually done in sessions, and the posting session posts the different depreciation types, interest/re valuation, and also writing-off/allocating special reserves. The depreciation run should be started with a ‘test run’ before making it the ‘production run,’ which will update the system. The system will restart a run session should there be problems in the earlier run. The depreciation run needs to be completed per period. During every depreciation run, the system will create summarized posting documents per business area and per account determination; no individual posting documents are created.

276. Explain the Various Steps in a ‘Depreciation Run.’

Maintain the parameters for the depreciation run on the initial screen of the Transaction AFAB (Company Code, fiscal year, and posting period).
Select a ‘reason’ for the posting run (repeat run, planned posting run, restart run, or unplanned run).
Select the appropriate check boxes in the ‘further option’ block if you need a list of assets, direct FI posting, test run, etc. Please note that it is a good practice to select the ‘test run’ initially, see and satisfy the outcome of the depreciation run, then remove this ‘check box’ and go for the ‘productive run.’
Execute the test run (if the assets are less than 10,000, you may then do the processing in the foreground; otherwise execute the run in the background).
Check the results displayed.
Once you are convinced that the test run has gone as expected, go back to the previous screen, uncheck the ‘test run’ check box, and execute (in the background).
Complete the ‘background print parameters,’ if prompted by the system. You may also decide to schedule the job immediately or later. The system uses the ‘depreciation-posting program’ RABUCH00, for updating the asset’s values and generating a batch input session for updating FI-GL. The ‘posting session’ posts values in various depreciation areas, interest, and revaluation, besides updating special reserves allocations and writing-off, if any. If there are more than 100,000 assets for depreciation calculation and posting, you need to use a special program, RAPOST00.
Process the ‘batch input session’ created by the system in step-7 above. You may use the Transaction Code SM35. Again, you have the option of processing the session in the foreground or in the background.
System posts the depreciation in FI-GL.

277. How does the System Calculate ‘Depreciation’?

The system takes the ‘depreciation terms’ from the asset master record and calculates the annual depreciation for the asset taking into account the ‘useful life’ and the ‘depreciation key.’ The start date for depreciation is assumed to be the first date of acquisition of the asset.
The system may also calculate other values such as interest, revaluation, etc.
The depreciation and other values are calculated for each of the depreciation areas.

278. Explain ‘Derived Depreciation.’

‘Derived Depreciation’ is a separate depreciation area that is ‘derived’ from two or more ‘real depreciation’ areas using a pre-determined rule. You may use this to calculate something such as special reserves or to show the difference in valuation between local and group valuation, etc. Since the values are derived, the system does not store any values in the database, but updates the derived values whenever there are changes in the real depreciation area or its depreciation terms. You may also use the derived depreciation only for reporting purposes.

279. What is known as a ‘Repeat Run’ in the Depreciation Process?

A ‘Repeat Run’ is normally used at the end of the fiscal year to carry out posting adjustments or corrections that may arise due to changes in depreciation terms or manual depreciation calculations. However, you can also use this to repeat but within the same posting period. The ‘repeat run’ also provides the flexibility to restrict the calculations to specific assets.

280. What does ‘Restart a Depreciation Run’ Mean?

Restart Depreciation Run is used only when there has been a problem with the previous run resulting in the termination of that run. To make sure that all the steps in a depreciation run are completed without errors, the system logs the status at every stage of the processing and provides ‘error logs’ to find the problem. This ‘restart’ option is not available during the ‘test run’ mode.

281. What is ‘Depreciation Simulation’?

‘Depreciation Simulation’ refers to a ‘what if valuation of assets. This is achieved by changing and experimenting with the ‘parameters’ required for depreciating the assets. The simulation helps you to ‘foresee’ the depreciation should there be changes in various ‘depreciation terms.’ You may simulate to see the valuation for future fiscal years. Sort versions and options for totals report are also available in simulation. The depreciation simulation can be applied to a single asset or your entire asset portfolio.

282. What is a ‘Sort Version’?

A ‘Sort Version’ defines the formation of groups and totals in an asset report. You can use all the fields of the asset master record asset group and/or sort criteria for defining a sort version. The sort version cannot have more than five sort levels.

283. Can you select ‘Direct FI Posting’ for a ‘Depreciation Run’?

If the check box to enable ‘Direct FI Posting’ is clicked then the system will not create the ‘batch input session’ for a depreciation posting; instead, the FI-GL is posted directly. Be careful when checking the Direct FI Posting check box because there will not be an opportunity to correct mistakes, if any, in accounts and account assignments such as business area, cost objects, etc., when you execute the depreciation run. Also, you will not be able to check and correct postings. Note that if this option is selected during a depreciation run, and if the run is terminated for any reason and needs to be restarted, this has to be kept checked during that time as well.

The standard system comes with the document type ‘AF’ (number range defined as ‘external numbering’) configured to be used in ‘batch input.’ Hence, with this default configuration, you will get an error when you try a depreciation posting run by selecting the option ‘direct FI posting.’ You can, however, overcome this by not restricting the same FI-AA customization. (Use Transaction Code OBA7 and remove the check mark from ‘Batch input only’ check box.)

284. Explain ‘Year Closing’ in FI-AA.

The year-end is closed when you draw the final balance sheet. But, to reach this stage, you need to ensure that the depreciation is posted properly; you can achieve this by checking the ‘depreciation list’ and also the ‘asset history sheets.’ After this is done, draw a test balance sheet and profit and loss statement and check for the correctness of the depreciation. Correct the discrepancies, if any, with adjustment postings. You need to re-run the depreciation posting program if you change any of the depreciation values.

When you now run the ‘Year-End Closing Program,’ the system ensures that the fiscal year is completed for all the assets, depreciation has fully posted, and there are no errors logged for any of the assets. If there are errors, you need to correct the errors before re-running the year-end program. When you reach a stage where there are no errors, the system will update the last closed fiscal year, for each of the depreciation areas for each of the assets. The system will also block any further postings in FI-AA for the closed fiscal year. If you need to re-open the closed fiscal year for any adjustments postings or otherwise, ensure that you re-run the year-end program so that the system blocks further postings.

285. Explain ‘Asset History Sheet.’

SAP comes delivered with country-specific ‘Asset History Sheets,’ which meet the legal reporting requirements of a specific country. The asset history sheet is an important report that can be used either as the year-end report or the intermediate report whenever you need it. Asset history sheets help you to freely define the report layout, headers, and most of the history sheet items.

Figure 68: Configuring Asset History Sheet

You may create various versions of the Asset History Sheet:

Figure 69: Asset History Sheet Versions

For each of the versions, you will be able to define various columns according to your requirements:

Figure 70: Field Positions in an Asset History Sheet Version

286. What is an ‘Asset Explorer’?

‘Asset Explorer’ is a handy and convenient single interface transaction that helps you to display asset values, depreciation details, etc., in a very user friendly way. Gone are the days where you had to move to different pages and re-enter the same transaction many times to display the details of different assets.

Using asset explorer you have the convenience of:

Moving from one asset number to the other effortlessly.
Displaying asset values, both planned and posted, for any number of depreciation areas from the same page but in various tab pages.
Jumping to the asset master or cost center master or GL account master.
Calling up various asset reports.
Currency converted views.
Looking at the various transactions relating to an asset.
Looking up all the values for different fiscal years.
Distinguishing between real and derived depreciation areas with two differentiating symbols.
Displaying the depreciation calculation function, and if necessary, recalculating depreciation.

Asset explorer is designed for easy navigation, with the following sections:

Asset values window

The top-left area/window is the ‘asset values’ window, which is in a tree-like structure expanding to various depreciation areas such as 01, 03, 10, etc. By selecting any one of these depreciation areas, you will be able to view the value of an asset in the ‘asset value details window.’
Objects related to asset window

This is also on the left-hand side of the display page, just below the ‘asset values window.’ With a drill-down tree-like structure you will be able to navigate between cost centers and GL accounts relating to the asset.
Asset value detail window (with tab pages)

This is the main window on the right, usually occupying most of the page area. Here, you will see information such as Company Code, asset number selected, fiscal year, etc. This window is made of two components that are completely re-sizeable: the top area displaying the asset values and the bottom showing the asset transactions.

Figure 71: Asset Explorer

287. Explain ‘Production Set-up’ in FI-AA.

The ‘Production Set-up’ is a collection of logical steps in FI-AA to ensure that all the required configuration and activities are in place for making the asset accounting Company Code ‘productive.’ This includes:

Consistency check

This will enable you to analyze errors, if any, in FI-AA configuration in the charts of depreciation, assignment of Company Code to the chart of depreciation, definition of depreciation areas, asset classes, GL account assignments, etc.
Reset Company Code

As you will have test data, before the Company Code becomes productive, resetting the company is necessary to delete all this data. Note that this is possible only when the Company Code is in ‘test’ status. All the master records and values will be removed only from FI-AA. You need to remove all the FI and CO values separately as the resetting of the asset account Company Code does not remove these. Resetting will not remove any configuration settings of FI-AA.
Reset posted depreciation

This step is required when there had been errors during a previous depreciation run. This is also possible only when the asset Company Code is in test status.
Set/reset reconciliation accounts

Define the GL accounts for FI-AA reconciliation, if not done already. You may also reset already defined reconciliation accounts in the case of wrong account assignments earlier.
Transfer asset balances

Transfer the asset balances to the GL accounts that have been defined as the asset reconciliation accounts.
Activate asset accounting Company Code

This is the last step in the production set-up. All the previous statuses of the Company Code (test status/transfer status) become invalid now. No more transfer of old asset data is allowed when the asset Company Code becomes productive.

REGUH	Payee or Payment Method data
REGUP	Individual Open Items data
REGUD	Bank Data and Payment Amounts data

technicalguide

SAP FI/CO – Financial Accounting (FI)

Financial Accounting (FI)

General

75. Explain ‘Financial Accounting (FI)’ in SAP.

76. What are the ‘Submodules’ within FI?

77. Name the Submodules Within FI, from Which FI-GL Gets Simultaneous Postings.

78. Name Three Distinct Characteristics of FI-GL.

Global and Enterprise Settings

79. What do You mean by ‘Organizational Units’ in SAP?

80. What are the Important ‘Organizational Units’ in FI?

81. What is a ‘Company’?

82. What is a ‘Company Code,’ and how is this different from a ‘Company’?

83. What are the Important ‘Global Settings’ for a Company Code?

84. Can You Assign more than One ‘Company Code’ to a ‘Company’?

85. What is a ‘Business Area’?

86. Can You Attach a ‘Business Area’ to a Transaction?

87. How do You Post Cross-company Code Business Area postings?

88. What is the ‘Credit Control Area’ in SAP?

89. What is a ‘Chart of Accounts’?

90. What are all the Major Components of a ‘Chart of Accounts’?

91. What is an ‘Operating Chart of Accounts’?

92. How does ‘Group Chart of Accounts’ Differ from ‘Operating Chart of Accounts’?

93. What is a ‘Country Chart of Accounts’? Why do You need This?

94. Can one ‘Chart of Accounts’ be Assigned to Several Company Codes?

95. What is a ‘Fiscal Year’ and ‘Fiscal Year Variant’?

96. How do You Assign a ‘Fiscal Year Variant’ to a Company Code?

97. What is a ‘Posting Period’?

98. How does the System Identify a ‘Posting Period’?

99. What Happens when You Post to Year 2006 when You are in 2007?

100. What do You Mean by ‘Opening/Closing’ Posting Periods?

101. What is a ‘Posting Period Variant’?

102. Can You Selectively ‘Open’ and ‘Close’ accounts?

103. Why is it not Possible to Post to a Customer A/C in a Previously Closed ‘Period’?

104. Can You Open a ‘Posting Period’ only for a Particular User?

105. What is a ‘Special Period’? When do You Use it?

106. What is the Maximum Number of ‘Posting Periods’ in SAP?

107. What is a ‘Special Purpose Ledger’?

108. What Variations are Possible when Defining a ‘Fiscal Year’?

109. What is known as ‘Year Shift/Displacement’ in a Fiscal Year?

110. Can You have ‘non-Calendar’ Months as ‘Periods’ in a ‘non-Calendar’ Fiscal Year?

111. What is a ‘Year-dependent’ Fiscal Year?

112. What Precautions should you Take while Defining a ‘Shortened Fiscal Year’?

113. Tell me more about a ‘Shortened Fiscal Year.’

114. How do You Open a new ‘Fiscal Year’ in the System?

115. How do you ‘Carry-Forward’ Account Balances?

116. Can You Explain how ‘Carry-Forward’ Happens in SAP?

117. Is there a Prerequisite for ‘Carry-Forward’ Activity?

118. How many ‘Retained Earnings’ A/C can be Defined?

119. Can You have Multiple ‘Retained Earnings’ A/C?

120. How do You Maintain ‘Currency’ in SAP?

121. What is a ‘Local Currency’?

122. What is a ‘Parallel Currency’?

123. What is a ‘Group Currency’?

124. What is the ‘Global Company Code Currency’?

125. What is an ‘Account Currency’?

126. What are all the Prerequisites for Posting in a ‘Foreign Currency’?

127. How are ‘Exchange Rates’ Maintained in SAP?

128. What is an ‘Exchange Rate Type’? List some of them.

129. What is known as the ‘Translation Factor’?

130. Is there an Easy Way to Maintain Exchange Rates in SAP?

131. What is known as an ‘Exchange Rate Spread’?

132. Explain the use of ‘Direct’ or ‘Indirect Quotations.’

133. Explain how ‘Taxes’ are Handled in SAP.

134. How is Tax Calculated in SAP?

135. Explain the Configurations Required for Taxes in SAP.

136. What is a (Tax) ‘Jurisdiction Code’?

137. Tell me about the ‘Tax Reports’ in SAP.

138. How is ‘Master Data’ different from ‘Transaction Data’?

139. Can You Post an A/C Document if the ‘Credit’ is not Equal to the ‘Debit’?

General Ledger Accounting

140. What is a ‘Document’ in SAP?

141. What is a ‘Document Header’?

142. What is a ‘Document Type’?

143. How is ‘Account Type’ Connected to ‘Document Type’?

144. What do You mean by ‘Net’ Postings’?

145. Explain the Various ‘Reference Methods.’

146. What is the ‘Document Change Rule’?

147. Differentiate between ‘Account Assignment Model,’ ‘Recurring Entries,’ and ‘Sample Document,’

148. What is a ‘Line Item’?