introduction to financial accounting processes
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Introduction to Financial Accounting Processes. Categories of Accounting (1). Financial Accounting (FI) is concerned with recording the financial impacts of business processes (transactions) as they occur Usually external sources are interested in these outcomes - PowerPoint PPT PresentationTRANSCRIPT
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Introduction to Financial Accounting
Processes
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Categories of Accounting (1) Financial Accounting (FI) is concerned
with recording the financial impacts of business processes (transactions) as they occur Usually external sources are interested in
these outcomes Financial statements for shareholders Tax and regulatory requirements for
governmental agencies
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Categories of Accounting (2) Managerial Accounting (controlling)
(CO) is of interest to the business itself Managerial reporting
Allocation of costs and revenues Internal financial statements
I’ll talk about each in turn but this lecture is about financial accounting
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Background For this lecture, I assume that you have
taken your core accounting classes. You should be familiar with T accounts GL / AP / AR Account categories
Asset / Liability / Capital / Income / Expense Refer to my Web site link at
www.middlecity.com for an accounting tutorial
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Financial Accounting Tasks General Ledger Accounts Receivable Accounts Payable Asset accounting Withholding tax
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Enterprise Global Settings The following are not completely in the
financial accounting domain but occur prior to FI configuration Company Code Business Area Functional Area Credit Controlling Area
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Organizational Data (Company Code) Financial statements are usually
prepared at the company code level (US00) (DE00) for Global Bike so they can
prepare financial statements for the US or German company
It’s the smallest unit of financial accounting
We meet the regulatory and reporting requirements of a particular country
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Company Tables Table T000 stores the company codes
Here we see how the Global Bike simulation works
Table T001 stores the company code / GL assignment
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Organizational Data (Company Code) Use transaction
OX02 (IMG)
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Organizational Data (Division) A division is an OU based on sales of materials
and services There are OUs for sales and distribution They are assigned to sales organizations
(another OU) Global Bike has two divisions
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Organizational Data (Business Area) We often need internal financial accounting
across company codes (legal boundaries) A business area is an internal division of
a company used for internal reporting You can create internal financial
statements by business areas Use business areas to
Organize (report by) product lines Organize geographically (usually reserved
for business segment)
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Business Area (Illustration) Global Bike has one business area
(BI00) Business area 0001 is part of the default
SAP installation (US 0X03)
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Assignment of Business Areas to Transactions When a transaction is recorded, we post
to a FI / GL account We assign the transaction to a business
area or segment too This can be done manually Or automatically through automatic
assignment of plant, division, sales areas, distribution channels, and cost centers
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Business Area Plant Assignment We can connect a plant and division to a
business area through configuration
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Organizational Data (Segment) Segments are responsible for
monitoring performance and profitability Similar to a business area
Typically used for product line reporting Use with business areas to internally
report by geography or product line
Global Bike does not use segment accounting
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Functional Area Used for cost-of-sales accounting
Functional areas are used to classify expenses
Finance, marketing, production, HR, etc.. Global Bike does not define functional
areas
Functional areas are implemented by means of a special purpose ledger
We will not discuss them further here
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Organizational Data(Credit Control Area) Defines the area of responsibility for
credit monitoring (of companies) Again, the CCA can be centralized or
somewhat decentralized One CCA for multiple company codes
(centralized) One CCA for each company code
(decentralized) Global Bike is centralized
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Organizational Data (Credit Control Area)
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Credit Control Area (Global Bike) Define credit control area (OB45)
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Credit Control Area (Global Bike)
Assign credit control area – GB has one for both companies
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Required FI Org Units
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Financial Accounting Global Settings (STEPS) Define fiscal year Define posting periods Define field status variant Define tolerance groups Define document types and number
ranges Define posting keys Assign all of the above to company code
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Fiscal Year A period (usually 12 months) for which a
company produced financial statements Fiscal year need not correspond to a
calendar year
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Fiscal Year VariantsGlobal Bike uses K1
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Fiscal Year Variants Assign fiscal year variant to company
code Both Global Bike companies use the
same fiscal year variant (K1)
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Posting Periods A period within a fiscal year to which
transactions are posted Every transaction has a posting period A posting period must be “Open” to post
transactions A posting period (variant) has a
beginning and an end
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Posting Periods IMG posting periods (OBBO)
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Posting Periods (Define Variant) Use IMG transaction OBBO Global bike uses variant GL00
This is not the operating ledger GL00
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Posting Periods (Open and Close) IMG transaction code OB52
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Tolerance Groups Tolerance groups exist throughout SAP They define an accepted deviation from
specified values The chief accountant will likely have
higher tolerances than accounting clerks, for example
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Tolerance Groups for Users IMG transaction code OBA4
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Document Types Document types classify accounting
documents The document types appears in the
header record for accounting documents Document number ranges are based on
the document type
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Document Types (Example) The document type SA is the G/L
Account Document WA is for goods issue (goods out) WE is for goods receipt (goods in)
Trans code OBA7
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Document Types (Example)
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Posting keys A two-character numerical key that
controls the entry of a line item in an accounting document
Posting keys are defined by SAP but new keys can be added
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Posting Keys (OB41) Posting key 40 is a G/L debit
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Posting Keys
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General Ledger Accounting Define chart of accounts Define account groups and number
ranges Define retained earnings account Create GL master records
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Financial Accounting Processes Primary Ledger
General Ledger (GL) contains the primary source data used in financial reporting
Subsidiary ledgers Accounts payable accounting is concerned
with procurement (Chapter 4) Accounts receivable accounting is
concerned with fulfillment (Chapter 5) Asset accounting is concerned with keeping
track of asset acquisition, depreciation, and disposal
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General Ledger Accounting (FI-GL) Provide a comprehensive view of financial
accounting The GL is a COMPLETE record of all FI
transactions Transactions are available in “real time”
Some G/L transactions are posted manually (we’ll do that today)
Some G/L transactions are posted automatically
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GL Illustration
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SAP GL Tables
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SKB1 Company Code Segment
(K) Client (K) Company Code (K) Account Number Specific company accounts For Global Bike (US00) and (DE00)
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SKA1 Client Segment (SKA1)
(K) Client (K) Chart of Accounts (K) Account number Balance sheet, PL, OR other account
(Account Group)
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SKAT It’s the GL account master record
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Organizational Data (Company Code – G/L) (Options) Centralized
Cross company code accounting Multiple operational chart of accounts are
assigned to a group chart of accounts Decentralized
One chart of accounts for each company code
No cross company code accounting is possible
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Accounting Master Data (COA) An ordered listing of accounts is called
the Chart of Accounts (COA) This is the same COA that you are familiar
with Instead of one, SAP supports up to three
charts of accounts Operative Country specific Group
You should be familiar with the standard numbering scheme for account types
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Accounting Master Data (Operative COA) Operative (COA) – This is the primary GL
Day-to-day postings are recorded here Shared by FI and CO
In other words, it’s used by cost accounting Two company codes can use the same
operative COA The operative COA is required
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Organizational Data (Company Code) Illustration The general ledger GL00 is shared by
both company code US00 and DE00
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Accounting Master Data (Optional COAs) Country-specific operative (COA) – Used
to meet country-specific reporting requirements Optional Additional accounts are added to the
ledger to support local requirements Must be assigned to a company code!
Group (COA) – Used to consolidate financial statements
Optional
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COA Illustration
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COA (Creating) IMG transaction OB13 (Global Bike)
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Chart of Accounts (Configuring)
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Account Groups An account group defines how a GL
account behaves and the screens that are available
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Retained Earnings Account Every P&L account is assigned to a
retained earnings account At the end of a fiscal year, the P&L
accounts are transferred to the corresponding retained earnings account
There has to be at least one retained earnings account but there can be many
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Retained Earnings Account Transaction code OB53 Global Bike has one retained earnings
account
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Clearing Accounts These are temporary accounts that hold
data until moved to another account These are typically AR and AP accounts Subsidiary ledgers and reconciliation
accounts
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The Recon Account Process A/R is a reconciliation account
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The Recon Account Process And it’s a recon account for customers
(as opposed to vendors)
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Accounts Receivable Accounting Here we are concerned with customer
purchases (fulfillment) Each customer typically has a
reconciliation account in the sub-ledger See Figure 3-16 on page 65
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Accounts Payable Accounting A/P accounts are reconciliation accounts Transactions are automatically posted to
the corresponding GL account For Global Bike, the AP reconciliation
account is #300000
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Accounts Payable
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GL Accounting Processes Some postings are made manually Most are made as a result of a business
transaction Procurement (goods receipt) / fulfillment
(goods issue) SAP has rules that define how these
automatic postings are performed (We will not get into those rules here but will later)
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Asset Accounting Organizations (hopefully) have assets
Tangible (physical) assets Intangible assets (goodwill, patents,
trademarks) Financial assets (financial instruments,
mortgages due, …) We will do little with asset accounting in
this course
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Financial Accounting Outcomes The result of GL accounting is financial
statements Balance sheet Income statement (profit and loss) Statement of cash flows
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Cost Centers (Using) When posting selected GL transactions,
we allocate expenses (costs) to a particular cost center More next time when we talk about
controlling accounting (CO)