Chapter 1

Accounting in the SAP-System

Globalization and diversification today force structural changes in organizations
world-wide, making economic processes more complex. These processes are also
made more dynamic through product and process innovation and use of the
information highway. All of this requires more coordination and control with
increasingly shorter response times. Timely decisions must be based on a
continuous supply of current information.

Structural Changes

The SAP R/3 System offers an integrated solution that includes business
applications for all company areas.
The accounting system with its sub-unitsAccounting, Controlling and
Treasuryis a critical part of this solution. By interrelating the various aspects of accounting and integrating them with logistics and human resources
applications, they become a management tool for all company departments.
Interfaces with the logistics chain from procurement to sales allow the optimization of operational processes. Including strategic alliances with customers, suppliers or financial institutions increases the efficiency of such a
solution.

Management Tool

Besides providing accounting data, the accounting system must concentrate

primarily on processing operational data for strategic company decisions.
Planning, controlling and monitoring operations are added to the documentation and administration functions.

Decision-based

This process is not limited by the size of a company. Organizations ranging

from a small sales office to an international corporate group can use these
functions, which are designed to meet the needs of different industries and
countries.
Preconfigured systems are available for the various industries, such as systems with specific charts of accounts.
For international companies, the R/3 system offers flexible software that can be
used in different countries. The system meets the needs of the major industrial
nations of the world with its multilingual approach, flexible currency handling
and country-specific functions for taxes, reporting, and payment transactions.
The R/3 System provides all requirements for developing a uniform accounting
system that can be consolidated across international borders.

International Applications

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Accounting in the SAP-System

EC

Group
Accounting
Group

Subgroup

...

FI

CO

TREASURY

ACCOUNTING

CONTROLLING

Finance Area
Funds Center
Funds

Company Code
Business Area

Controlling
Area
Profit Center

TR

IM

Loans
...

Customers
...

Investment and Financing

Cost Objects
...

Programs
Investment Procedures

Fig. 1-1: Accounting Applications

Main Features

The R/3 Accounting System offers you a complete set of robust applications:
Accounting (FI) with G/L Accounting, Accounts Payable and Accounts
Receivable, Asset Accounting, Legal Consolidation and Special Statistical
Accounting Units
Treasury (TR) with Cash Management, Treasury Management and Funds
Management
Controlling (CO) with Overhead Cost Controlling, Product Cost Controlling
and Profitability Analysis
These features provide the basis for performing operational transactions and
meet the requirements of decision-based reporting for each application area.
The SAP R/3 System offers additional applications to provide powerful integrated solutions for your business:
Investment Management (IM) allows company-wide planning of capital investment programs and controlling of individual capital investment
measures.
Business Planning and Control (EC) includes Management Consolidation,
Profit Center Accounting.
Executive Information System (EIS) provides broad business perspectives.

Whats in this Brochure

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This brochure focuses on SAPs Accounts Payable and Accounts Receivable

modules within the Accounting (FI) application. Major features and benefits
are described to give you a better understanding of how this application can
help you manage your business.

Accounting in the SAP-System

Financial Accounting
Modern, effective financial accounting must satisfy both internal and external accounting requirements.
External accounting requirements are directed toward accounting disclosures and providing information to shareholders, creditors, the work force, and
the public. Efficient corporate controlling must also contain controlling and
disposition functions.
Accounting disclosure requirements are defined by the appropriate regulatory body, be it public or private. Accounting must adhere to statutory as
well as international requirements. The R/3 System meets US accounting
requirements (GAAP) as well as the legal requirements of over 40 industrialized nations. The R/3 FI application guarantees that these regulations are
met, which is an essential requirement for the system's international use.

Propriety

R/3s integrated systems ensure that accounting disclosure requirements are

automatically updated to the fullest extent possible. Business processes that
occur within logistics, such as goods' receipts and shipments, are automatically posted. The R/3 System takes into account fiscal and corporate law
restrictions.

Integration

Increasingly, data exchange with business partners, (such as customers, vendors, banks, insurance companies or credit agencies), takes place electronically. Acquiring information is an important part of every business.
Clearly structured reference data and protocols permit automatic processing,
even with incomplete information (for example, processing final payments).
As a result, only exceptions need to be processed manually.
The SAP R/3 Workflow function helps to:
define periodically recurring tasks
assign them to the appropriate corporate department for disposition
assure that your deadlines are met
All business events in R/3 are captured according to the receipt principle.
This permits a seamless audit trail from the balance sheet to the individual
receipts themselves. Immediately following posting, you can evaluate account displays, totals and account lists. You can also assess balance sheet
and profit and loss statement analyses. Better yet, all of this is done right at
your computer screen.

Receipt Principle

Complete documentation is also an essential element of comprehensive and

integrated controlling. Only complete verification of all business events
guarantees ongoing, up-to-date supervision of all operative and strategic
levels of your organization. The FI application ensures that your controlling
departments are simultaneously provided with the relevant information.

Documentation

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Accounting in the SAP-System

Bank

Foreign Exchange
Management

Finance
Information
System

Cash
Management
and Forecasting

Asset
Accounting
Accounts
Payable

Financial Asset
Management

Accounts
Receivable
Bank Accounts
Payables
Receivables

General Ledger
Special Ledger
Invoice
Verification
Purchasing

Consolidation

Warehouse

Production

Warehouse

Credit
Management
Sales

Fig. 1-2: SAP Financial Accounting

Financial Accounting consists of several modules:

G/L Accounting
Consolidation
Accounts Payable
Accounts Receivable
Asset Accounting
Special Ledgers

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Chart of Accounts

The G/L accounting function uses a chart of accounts which can be installed
in individual companies or in entire corporate groups. If the system must
meet both international corporation and specific national demands, you can
use different charts of accounts side-by-side. SAP's sample charts of accounts
make it easier for you to decide just how to implement this feature. In
addition, you can customize these charts.

Currencies

To satisfy specific statutory requirements at a national level, the system allows you to balance the books of foreign subsidiaries in up to three curren-

Accounting in the SAP-System

cies simultaneously. Every business transaction is recorded at historical

values from local, corporate group, and hard currency perspectives.
The system provides automatic functions that evaluate foreign currency,
reclassify information, and list receivables and obligations according to due
date. This helps you prepare annual and monthly closings.
The R/3 FI application maintains different balance sheets, which are distinguished according to type:

Balance Sheet

list of balances
funds flow analysis
You can also maintain balance sheets by purpose:
closing date balance sheet
annual financial statements

The system even permits you to provide various outside parties such as
banks or the press with appropriate information about the economic wellbeing of your company. Financial transactions in logistics and human resources portions of R/3 also contribute to complete and up-to-date records.
Postings in logistics are automatically booked in financial accounting and, if
necessary, in cost accounting. This guarantees that the value for the logistical
flow of goods received, goods sold, and other key values are maintained
simultaneously in the accounting department. The same is also true for personnel settlements, bonuses, and other transactions.
Besides integrating logistics with accounting functions, it is also essential to
link sub-ledgers with the general ledger itself. All movement involving the
sub-ledger "Debtors" and "Creditors" accounts, as well as the asset accounts,
are immediately reflected in the assigned general ledger balance sheet. As a
result, sub-ledgers are always reconciled with the general ledger.

Sub-ledgers

Consolidated financial statements are becoming more important compared

to individual financial statements. Being able to choose between two or more
valuation methods enables your organization to pursue distinct balance
sheet policies for each company.

Consolidated Financial
Statements

Corporate group consolidated balance sheets are not merely the sum of the
individual balance sheets. Rather, the consolidated balance sheet reflects
reclassifications, reappraisals and the consolidation of equity, receivables,
obligations, profits, and sales revenues.
This feature is graphically portrayed in the SAP R/3 FI Consolidation module. Through integration of the Financial and Asset Accounting systems,
data is directly transferred from individual financial statements. This substantially simplifies the consolidation process. It also reduces transfer errors
that frequently arise when different software is used simultaneously.

Consolidation

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Accounting in the SAP-System

In addition to consolidated financial statements as required by law, the system lets you to perform more frequent closings and consolidations based on
plan values. Moreover, you can define and represent statements from various business perspectives.

Accounts Receivable

The FI Accounts Receivable module is responsible for monitoring and controlling customers accounts within the R/3 System's financial accounting
application.
Account analyses, alarm reports, maturity lists, as well as a flexible dunning
system, make it easier to pursue open items. Associated correspondence can
be adapted to the needs of each firm. This also applies to payment notices,
account confirmations and account excerpts.
Incoming payments can be assigned to uncollected receivables using either
the easy-to-use entry feature or by automatic data transfer. The payment
program automates the debit memo process as well as disbursements.
Interfaces to both Distribution and Cash Management, as well as customerspecific details in the profit and loss statement, provide further information
on each transaction. Consequently, SAPs Credit Management, Liquidity
Planning and Contribution Margin Accounting modules are always provided with current and reconciled information.

Accounts Payable

The R/3 System's FI Accounts Payable module manages accounting data for
all vendors. It is also an integral component of the acquisition process. It
serves as an important information source for the sales department regarding delivery, invoicing and payment values.
Payments take full advantage of discounts, either through standard written
forms or electronically (EDIFACT; EDI). The system supports all international methods of payment. To track open items, the system comes with account analyses, maturity previews and risk assessments (for foreign currencies, for example).
Balance audit trails, account lists and journals document the transactions of
Accounts Payable.

Asset Accounting

New features have been added to the R/3 FI Asset Accounting module. They
reflect the changing demands made on asset management, which include:
increased production automation
rising demands on quality
more complex facilities and growing legislative requirements
R/3 FIs Asset Accounting module covers legal reporting and valuation requirements of all major industrialized nations. Acquisitions, divestitures,
transfers and depreciations are entered, calculated, and processed. Besides
the legal requirements regarding asset valuation, you can define as many
depreciation and valuation methods as desired.

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Accounting in the SAP-System

The system provides flexibility when creating individual value areas to

calculate and represent depreciation, imputed interest, insurance values and
subsidies. This feature also has functions to perform internal analyses of key
figures and ranking lists for significant objects that go beyond obligatory
reporting requirements. User-defined simulations of valuation parameters
assist in optimizing your business planning. The simulation function provides a variable preview of the future, using both realized and planned
investments.
R/3 FIs Special Ledger module provides special calculations for a particular
customer. A ledger is an accounting book that has been expanded to include
various dimensions from the account assignment feature (cost center, product). It maintains and analyzes figures to meet the reporting wishes of the
individual firm. All firm-specific ledgers come with validation and derivation of characteristics features. You can perform planning, allocation and
currency conversion calculations for each ledger. The ledgers are automatically updated whenever business transactions take place. Data collected at a
more detailed level is stored in compressed form using a rollup function.

Special Ledgers

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