Fi Blueprint Qa

FI Module
SAP R/3 IMPLEMENTATION

Xyz co. ltd.
BUSNIESS BLUEPRINT DOCUMENT

Financial Accounting
ABC
ABC Information System Limited

September 12, 2015
______________
______________________
______________________
Sign Off Date
Signature Customer
Signature Consulting
i . exe
FI Module
Table of Contents
A.
B.
C.
Organization.............................................................................................................................. 5
1. Cross-Application/Central Organizational Units..................................................................
1.1.
Client........................................................................................................................... 5
1.2.
Company..................................................................................................................... 6
1.3.
Credit Control Area......................................................................................................
1.4.
Company Code........................................................................................................... 8
1.5.
Business Area............................................................................................................. 10
1.6.
Functional Area...........................................................................................................
1.7.
Controlling Area...........................................................................................................
1.8.
Profit Center................................................................................................................
1.9.
Operating Concern......................................................................................................
1.10.
Material Valuation Area................................................................................................
1.11.
Plant............................................................................................................................
1.12.
Division........................................................................................................................
2. Financial Accounting........................................................................................................... 10
2.1.
Chart of Accounts........................................................................................................ 10
3. Asset Accounting................................................................................................................ 10
3.1.
Depreciation area........................................................................................................ 10
3.2.
Chart of depreciation................................................................................................... 10
3.3.
Asset class.................................................................................................................. 10
Master Data............................................................................................................................... 10
1.1.
G/L Account................................................................................................................. 10
2.1.
Asset master record.................................................................................................... 10
Business Processes................................................................................................................... 10
1.1.
Basic Settings.............................................................................................................. 10
1.1.1.
Fiscal Year and Posting Periods...........................................................................10
1.1.2.
Document............................................................................................................. 10
1.1.3.
Posting Help......................................................................................................... 10
1.1.4.
Tax on Sales/Purchases in SAP System..............................................................10
1.1.5.
Tax on Sales/Purchases in Non-SAP System......................................................10
1.1.6.
Withholding Tax.................................................................................................... 10
1.1.7.
Inflation................................................................................................................ 10
1.2.
General Ledger Accounting.........................................................................................10
1.2.1.
Postings in G/L..................................................................................................... 10
1.2.1.1.
Park G/L Account Document.........................................................................10
1.2.1.2.
G/L Account Posting......................................................................................10
1.2.1.3.
Recurring Entry.............................................................................................10
1.2.1.4.
Document Reversal......................................................................................10
1.2.1.5.
Mass Reversal.............................................................................................. 10
1.2.1.6.
Accrual/Deferral Posting...............................................................................10
1.2.1.7.
Clearing........................................................................................................ 10
1.2.2.
General Ledger Account Analysis........................................................................10
1.2.2.1.
General Ledger Line item Analysis...............................................................10
1.2.2.2.
Balance Analysis........................................................................................... 10
1.2.2.3.
G/L Evaluations............................................................................................. 10
1.2.3.
Account Clearing [GL]..........................................................................................10
1.2.3.1.
Manual Clearing............................................................................................ 10
1.2.3.2.
Automatic Clearing........................................................................................ 10
1.2.4.
Account Balance Interest Calculation (G/L)..........................................................10
1.2.4.1.
Account Balance Interest Calculation for General Ledger............................10
1.2.5.
Closing Operations............................................................................................... 10
1.2.5.1.
Foreign Currency Valuation for Open Items..................................................10
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FI Module
1.2.5.2.
Foreign Currency Valuation for Balances......................................................10
1.2.5.3.
Regroup Receivables/Payables....................................................................10
1.2.5.4.
GR/IR Clearing Account Maintenance..........................................................10
1.2.5.5.
Flat-Rate Individual Value Adjustment due to Default or Credit Risk.............10
1.2.5.6.
Financial Statement Creation........................................................................10
1.2.5.7.
Periodic Reports........................................................................................... 10
1.2.5.8.
Carry Forward G/L Balances.........................................................................10
1.2.6.
Integration............................................................................................................ 10
1.3.
Accounts Payable........................................................................................................ 10
1.3.1.
Vendor Down Payments.......................................................................................10
1.3.2.
Invoices and Credit Memos..................................................................................10
1.3.2.1.
Vendor Document Parking............................................................................10
1.3.2.2.
Invoice Receipt.............................................................................................10
1.3.2.3.
Vendor Credit Memo.....................................................................................10
1.3.2.4.
1.3.2.5.
Recurring Entry.............................................................................................10
1.3.3.
Vendor Account Analysis......................................................................................10
1.3.3.1.
Vendor Line Item Analysis.............................................................................10
1.3.3.2.
Vendor Account Evaluations.........................................................................10
1.3.4.
Vendor Payments.................................................................................................10
1.3.4.1.
Vendor Payment Request.............................................................................10
1.3.4.2.
Release for Payment....................................................................................10
1.3.4.3.
Manual Outgoing Payments..........................................................................10
1.3.4.4.
Automatic Outgoing Payments......................................................................10
1.3.4.5.
Vendor Payment Medium Creation...............................................................10
1.3.5.
Bill of Exchange Payable......................................................................................10
1.3.5.1.
Bill of Exchange Payable..............................................................................10
1.3.6.
Account Clearing [AP]..........................................................................................10
1.3.6.1.
Manual Clearing............................................................................................ 10
1.3.6.2.
1.3.7.
Interest Calculation [A/P]......................................................................................10
1.3.7.1.
Vendor Account Balance Interest Calculation...............................................10
1.3.7.2.
Calculation of Interest on Arrears - Vendors..................................................
1.3.8.
Correspondence with Vendors.............................................................................10
1.3.8.1.
Correspondence with Vendors......................................................................10
1.4.
Accounts Receivable................................................................................................... 10
1.4.1.
Customer Down Payments...................................................................................10
1.4.1.1.
Customer Down Payment.............................................................................10
1.4.1.2.
Customer Down Payment Clearing...............................................................10
1.4.2.
Invoices and Credit Memos..................................................................................10
1.4.2.1.
Customer Document Parking........................................................................10
1.4.2.2.
Outgoing Invoice........................................................................................... 10
1.4.2.3.
Customer Credit Memo.................................................................................10
1.4.2.4.
1.4.2.5.
Recurring Entry.............................................................................................10
1.4.3.
Account Analysis [A/R]......................................................................................... 10
1.4.3.1.
Customer Line Item Analysis.........................................................................10
1.4.3.2.
Balance Analysis........................................................................................... 10
1.4.3.3.
Credit Management Analysis........................................................................10
1.4.3.4.
Customer Evaluations...................................................................................10
1.4.4.
Customer Payments.............................................................................................10
1.4.4.1.
Payment Advice Note Processing.................................................................10
1.4.4.2.
Release for Payment....................................................................................10
1.4.4.3.
Manual Incoming Payments..........................................................................10
1.4.4.4.
Automatic Incoming Payments......................................................................10
1.4.4.5.
Customer Payment Medium Creation...........................................................10
1.4.4.6.
Payment Card Settlement.............................................................................10
1.4.5.
Bill of Exchange Receivable.................................................................................10
1.4.5.1.
Manual Payment by Bill of Exchange............................................................10
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FI Module
1.4.5.2.
Bill of Exchange Usage.................................................................................10
1.4.5.3.
Bill of Exchange Reversal.............................................................................10
1.4.5.4.
Failed Bill of Exchange.................................................................................10
1.4.6.
Account Clearing [AR].......................................................................................... 10
1.4.6.1.
Manual Clearing............................................................................................ 10
1.4.6.2.
1.4.7.
Dunning Notice..................................................................................................... 10
1.4.7.1.
Automatic Dunning........................................................................................ 10
1.4.8.
Interest Calculation [A/R]......................................................................................10
1.4.8.1.
Customer Account Balance Interest Calculation...........................................10
1.4.8.2.
Calculation of Interest on Arrears - Customers.............................................10
1.4.9.
Correspondence with Customers.........................................................................10
1.4.9.1.
Correspondence with Customers..................................................................10
1.5.
Bank Accounting.......................................................................................................... 10
1.5.1.
Incomings............................................................................................................. 10
1.5.1.1.
Cash Journal................................................................................................. 10
1.5.1.2.
Electronic Bank Statement............................................................................10
1.5.1.3.
Manual Account Statement...........................................................................10
1.5.1.4.
Check Deposit Transaction...........................................................................10
1.5.2.
Outgoings............................................................................................................. 10
1.5.2.1.
Payment with Payment Requests.................................................................10
1.5.2.2.
Cash Journal................................................................................................. 10
1.5.3.
Check Management.............................................................................................10
1.5.3.1.
Manage Check Balance................................................................................10
1.5.4.
Account Balance Interest Calculation...................................................................10
1.5.4.1.
Account Balance Interest Calculation...........................................................10
2.1.
Handling Fixed Assets................................................................................................. 10
2.1.1.
Asset Maintenance...............................................................................................10
2.1.1.1.
Creation of Master Record for Tangible Assets.............................................10
2.1.1.2.
Creation of Group Asset................................................................................10
2.1.1.3.
Asset Master Record Change.......................................................................10
2.1.1.4.
Mass Change................................................................................................ 10
2.1.2.
Receipts............................................................................................................... 10
2.1.2.1.
Down Payment on Asset under Construction................................................10
2.1.2.2.
Direct Acquisition of Internal Activity.............................................................10
2.1.2.3.
Processing of Asset Acquisition....................................................................10
2.1.2.4.
Subsequent Acquisition.................................................................................10
2.1.3.
Depreciation......................................................................................................... 10
2.1.3.1.
Creation of Reserves from Gain from Asset Retirement...............................10
2.1.3.2.
Reserves Carryforward.................................................................................10
2.1.3.3.
Depreciation Processing...............................................................................10
2.1.3.4.
Manual Depreciation Planning......................................................................10
2.1.3.5.
Depreciation Posting.....................................................................................10
2.1.3.6.
Unit-of-Production Depreciation....................................................................10
2.1.4.
Business Transactions.........................................................................................10
2.1.4.1.
Settlement of Asset under Construction........................................................10
2.1.4.2.
Post-capitalization.........................................................................................10
2.1.4.3.
Write-up........................................................................................................ 10
2.1.4.4.
Reposting...................................................................................................... 10
2.1.5.
Retirements.......................................................................................................... 10
2.1.5.1.
Retirement.................................................................................................... 10
2.1.5.2.
Mass Retirement........................................................................................... 10
2.1.6.
Closing Operations [Asset Accounting]................................................................10
2.1.6.1.
Multiple Valuations........................................................................................10
2.1.6.2.
Physical Asset Inventory...............................................................................10
2.1.6.3.
Fiscal Year Change.......................................................................................10
2.1.6.4.
Preparations for Year-End Closing in Asset Management............................10
2.1.6.5.
Mass Change................................................................................................ 10
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2.1.6.6.
2.1.6.7.
2.1.6.8.
2.1.6.9.
2.1.6.10.
Recalculation of Depreciation.......................................................................10
Depreciation posting.....................................................................................10
Carry Out Year-End Closing in Asset Management......................................10
Integrated Planning in CO.............................................................................10
Periodic Reports........................................................................................... 10
FI Module
Organization
1.1.
Client
CI template:
1.
General Explanation
The client is the highest level in the R/3 System hierarchy. Specifications made or data
entered at this level are valid for all company codes and for all other organizational
structures, obviating the need to enter this information more than once. Maintaining this
information centrally ensures standardized data.
Each client is a self-contained unit with separate master records and a complete set of
tables. A client key is used in all master records, which ensures that they are stored per
client.
Users must enter a client key when they log on to the system. In so doing, they are telling
the system the client in which they wish to work. All the entries made are stored per client
and data processing and analysis is also carried out per client. Access authorization is
assigned per client/ User.
2.
Naming Convention
The following naming convention has been set up for the clients on the development
server :
Client 100 - For taking up all configuration activities .All requests shall be generated here
and transferred to the production client only after being tested on the client 200 which
shall act like a quality client to know systems behaviour after transportation of requests
from the development client
Client 200 - It would be the quality client and would have a status non modifiable i.e.
configurational activities will not be allowed on this client and will have to be necessarily
be carried out on the client 100 first and then be transported to client 200 and ultimately to
the production client on the production server.
There shall only be one production client on the production server with status non
modifiable and all configurations to be transported to this client would first have to
necessarily flow through the quality client 200 on the development and checked thereat.
Client 300 - It will be used as sandbox for testing & training purposes.
Once the Integration testing is over the Quality client will be copied onto client 500 which
will be our Production server. A copy may be made as client 400 as a back up measure.
The client 400 will be dependant on space availability on the server.
Further to this the Roll out and branch connectivity has to be established which will be
through VSAT linkage as well as VPN networking at Khopoli and branches respectively.
FI Module
3.
Description of Improvements
Transparency in transactions
Efficient control over database.
Common reporting
Effective decision making abilities.
4.
Special Considerations
A strict control would have to be built in so that the flow of all configurational activities and
all development is sequential and is tested on the development server prior to its being
taken up to the production server.
5.
Triggers / Inputs
Not Applicable
1.2. Company
Questions:
Q:
1) Do you want to structure the company into one or more separate legal entities?
A:
We have only one legal entity i.e. XYZ CO. LTD.
Q:
2) Do you have foreign companies?
A:
No
Q:
3) Which companies are going to work with which chart of account?
A:
Since there is only one Company i.e. XYZ CO. LTD. only one Chart of account is
required. Existing Chart of account is attached.
Q:
4) In which currencies are the transactions posted in the companies?
A:
The local currency is INR. However, we require transactions to be posted in few
foreign currencies like USD, DM, EURO, GBP, JYP etc in case of Imports & exports and also
in case of foreign currency loans.
Q:
5) Are all companies managed in FI company codes, and is FI integration used?
A:
Yes
Q:
6) In which form and at which dates do you collect the reported financial data from
the individual companies?
FI Module
A:
Since only one company code exists, there is no such requirement. However,
presently we get data from Branches and plants for consolidation on monthly basis.
Q:
7) Does the divestiture of a company entail a reclassification to another consolidation
group, or is this a final consolidation?
A:
NO
CI template:
1.
General Explanation
A Company is a smallest organizational unit for which individual financial statements can
be drawn up according to the relevant commercial law. A Company can consist of one or
more company codes. All company codes within a company must use the same
transaction chart of accounts and the same fiscal year breakdown. A Company has one
local currency in which its transaction figures are recorded.
One or several company codes can be assigned to a company (consolidation unit). In the
graphic portrayal, the company codes are placed on top of and within the company to
which they are assigned.
2.
Naming Convention
Since there's only one company that would be relevant in XYZ CO. LTD. scenario , it will
be named as "XYZL"
3.
Definition of Organizational Units

The Company " XYZ CO. LTD." will be identified as " XYZL" in SAP system.
4.
Assignment of Organizational Units

Company code would be assigned to the company "XYZL"
5.
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FI Module
(a) Transparency in transactions
(b) Efficient control over database.
(c) Common reporting
(d) Effective decision making abilities.
6.
The Pilot is proposed to GO LIVE on the 1st February 2005. Following the same a ROLL
OUT is planned for KHOPOLI. The branches will follow the Roll Out and XYZL has to
responsibility of the roll outs at the branches
The unit 28/4 is outside the SAP purview though it is part of the company XYZL . The
transactions will have to be mapped in such a way that the required effect can be carried
on to the Financial Statement of the company XYZL
7.
Triggers / Inputs
Not applicable
1.3. Company Code

Questions:
Q:
1) Which legal entities (company codes) will you have and in which countries?
A:
There is only one legal entity i.e. XYZ CO. LTD. Presently we require only one
company code for the same. XYZL is located in INDIA. moreover we would like to keep the
option of multiple company / multiple countries.
Q:
with?
2) What are the legal reporting requirements that these companies have to comply
A:
We have to comply with the requirements of Companies Act, Income Tax Act, Sales
tax Acts, Excise & Customs Act, Service Tax act, RBI, SEBI guidelines ESI, PF, Professional
Tax, & other relevant Act applicable time to time etc
Q:
3) Which companies are required to use a statutory chart of accounts for reporting
purposes?
A:
We require only one Chart of Account.
Q:
4) Do all companies use the same operating chart of accounts?
A:
NA
Q:
5) Will a different chart of accounts be used for consolidation purposes?

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FI Module
A:
NA
Q:
6) Identify legal entities holding minority interest.
A:
NA
Q:
7) Are goods/services exchanged between your different legal entities?
A:
NA
Q:
8) Specify the different levels of consolidation (for example, by country, by region).
A:
NA
Q:
9) Are there any transactions that have to be included, when these segments are
consolidated?
A:
NA
Q:
10) Identify the legal entities that should be excluded from the consolidation process.
Please specify why they have to be excluded.
A:
NA
Q:
11) For which enterprise entities that are not independent legal entities do you require
sub-ledgers (accounts payable ledger, accounts receivable ledger, asset accounting and so
on)? For example, fixed assets per strategic business unit.
).
A:
No separate sub-ledgers are required. However, separate branch-wise and plant-wise
reports are required for Customers, Vendors, Fixed Assets etc
Q:
12) Which functions will be performed on a cross-company level?
A:
NA
CI template:
1.
General Explanation
Company Code is the smallest organizational unit for which a complete self-contained set
of accounts can be drawn up for purposes of external reporting. The process of external
reporting involves recording all relevant transactions and generating all supporting
documents required for financial statements (balance sheets, profit and loss statements
and so on.)
2.
Naming Convention
The identification of the Company has been decided as "XYZL" formed from the initials of
the name of the company i.e. "XYZ CO. LTD.".
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FI Module
3.

In case of XYZ CO. LTD. only one company code "XYZL" will be used.
4.

Company code " XYZL" would be assigned to the company "XYZL"
5.
Centralised management of the company activities
6.
Strategy for 28/4 in terms of the company code will be as per discussions and a document
is annexed herewith.
7.
Triggers / Inputs
NA
1.4. Business Area

Questions:
Q:
1) For which enterprise entities do you wish to create individual internal balance
sheets and/or profit and loss statements or other internal reports? Please provide details of
your reporting requirements.
A:
Presently we get separate Trial balances for Sahibabad & Khopoli plants and also
from Branches which are consolidated. Since SAP will be on line system no separate Trial
Balances are required for branches. However, we require separate Balance Sheet and P&L
accounts as under:
1. Sahibabad - Steel Division
2. Sahibabad - Power Plant
3. Khopoli - Steel Division
4. Khopoli - Power Plant
Q:
2) Are there entities within your enterprise that are not independent legal entities, but
that you treat as independent legal entities?
A:
NO
Q:
3) Do you have to structure your legal reporting as one line of business or as multiple
lines of business?
A:
We require reporting for only Steel and Power separately. Presently there is no
segment reporting but in case the same is made applicable , we would also require separate
Financial Statements for CR & GP within steel
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FI Module
Q:
4) Does the organization have to produce segmented financial statements for public
reporting (e.g. FAS-14 in the US)?
A:
We require reporting for only Steel and Power separately. Presently there is no
segment reporting but in case the same is made applicable , we would also require separate
reporting for CR & GP within steel as per the requirement of the accounting standard.
Q:
5) If yes, to the above question, does the segmentation need to be reported on both
the income statement and balance sheet?
A:
The segmentation needs to be reported on both the Income Statement & Balance
Sheet.
Q:
6) Note for business area:
Explanation: You should check carefully whether company-specific requirements can be met
using the FI business area / Profit Center Accounting component.
A:
We require separate Balance Sheet and P&L accounts as under:
1. Sahibabad - Steel Division
2. Sahibabad - Power Plant
3. Khopoli - Steel Division
4. Khopoli - Power Plant
CI template:
1.
General Explanation
Organizational unit of financial accounting that represents a separate area of operations or
responsibilities within an organization and to which value changes recorded in Financial
Accounting can be allocated. The definition of the business area organizational unit is
optional
Business Areas are used in external segment reporting (over and above company codes)
based on the significant areas of operation (for example, product lines) of a Business
Enterprise. A segment is an isolated area of activity.
All essential balance sheet items, such as fixed assets, receivables, payables, and
inventories and all items of the profit and loss statement can be assigned directly to a
business area. The balance sheet items for banks, capital, and taxes, however, cannot be
directly assigned to business areas. They need to be assigned manually. This means that
business area financial statements cannot be drawn up for commercial and tax law.
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FI Module
Business area balance sheets and income statements are used only for internal reporting
purposes.
The system determines the appropriate business area from information such as the
material, plant, or cost center you enter in a business transaction like a goods movement.
Assignments you make (between cost centers and business areas for example) or the
combination of information you specify (a plant and a particular division for example) is the
basis on which the system determines the appropriate business area
Business areas can be defined independently of other enterprise area structures (like
sales and distribution or purchasing) by entering a four-character alphanumeric key and
the name of the business area. The defined business areas are valid for all company
codes. If you want to draw up a balance sheet and a profit and loss statement by business
area, you must make sure that the Business Area field is contained in all the line items.
For "XYZ CO. LTD.." there will be Four Business Areas as under:
1
2
3
4
2.
Steel - Sahibabad
Power - Sahibabad
Steel - Khopoli
Power - Khopoli
Naming Convention
In SAP system, the Business Area can be identified by a Four Character Code.
3.

For "XYZ CO. LTD.." the Four Business Areas will be identified as under:
1
2
3
4
4.
"SBST"
"SBPW"
"KPST"
"KPPW"
(Steel - Sahibabad)
(Power - Sahibabad)
(Steel - Khopoli)
(Power - Khopoli)

The figures of the Rishikesh, Haldwani, Guwahati, Agra, Varanasi, Jaipur, Kanpur,
Jammu, Chandigarh, Ludhiana, Kullu, Parwanoo, branches will be included under the
Business Area " SBST" and the figures of Gurgaon, Indore ,Pune, Hosur, Aurangabad,
Mumbai will be included under Business Area " KPST" . Since only one power plants
exists each at Sahibabad and Khopoli, two separate Business Areas have been defined
for the same.
5.
In the existing system, Trial Balances of various Branches attached to Sahibabad Plant
and Khopoli plant (after consolidating various branches attached to it) are received
separately and they are consolidated at the Corporate Office on monthly basis. However,
since SAP is an Integrated system, no separate Trial Balances for branches is required
since the information will be available online. Business area wise evaluations, reports will
be available online real time which are in scope of SAP as compared to present structure
where data are available separately and no monitoring of online facility.
6.
Before taking Business Area Balance Sheet transactions "F.5D & F.5E" should be run and
after that Business Area Balance Sheet should be taken otherwise Business Area Balance
Sheet will not show the correct picture.
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FI Module
7.
Triggers / Inputs
Not applicable
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FI Module
2. Financial Accounting
CI template:
1.
General Explanation
The Financial Accounting (FI) application component fulfills all the international
requirements that must be met by the financial accounting department of an organization.
It provides the following features:
1. Management and representation of all accounting data :
All business transactions are recorded according to the document principle, which
provides an unbroken audit trail from the financial statements to the individual documents.
2. Open and integrated data flow:
Data flow between Financial Accounting and the other components of the SAP System is
ensured by automatic updates. Data is available in real time within Financial Accounting.
Postings made in the sub ledgers always generate a corresponding posting in the general
ledger.
3. Preparation of operational information to assist strategic decision-making within
the organization:
The fiscal year closing can be adopted one type only. The Assets Accounting, Accounts
Payable and Accounts Receivable in SAP FI are only Sub ledgers concept.
2.
All accounting-relevant transactions made in Logistics (LO) components are posted realtime to Financial Accounting by means of automatic account determination. This data also
be passed on to Controlling (CO).This ensures that logistical goods movements (such as
goods receipts and goods issues) are exactly reflected in the value-based updates in
accounting which is not happening in the existing system. Every posting that is made in
the sub ledgers generates a corresponding posting to the assigned G/L accounts. This
ensures that the sub ledgers are always reconciled with the general ledger. All data and
reports will be available online for analysis so that it is not necessity to demand data or
reports from cross functional modules manually. This will eliminate the need to duplicate
entries at various levels and also eliminate any errors in the process.
2.1. Chart of Accounts

Questions:
Q:
1) Which companies use the same chart of accounts?
A:
Since there is only one Company i.e. XYZ CO. LTD. only one Chart of account is
required. Existing Chart of account is attached.
Q:
2) How many natural accounts will each chart of accounts contain? (estimated)
A:
Approx 850 other than vendors & customers
Q:
3) What is the document numbering logic?
Explanation: Possible reconciliation with SD/MM
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FI Module
A:
Presently the numbers are assigned externally on daily basis depending on the types
of vouchers, For e.g. Cash vouchers have separate numbering, starting from 1 to --- on daily
basis.
Q:4) Describe how the account number is set up (for example: department, natural account).
A:
The G/L Accounts are numbered in 4 digit according to the nature of account.
Q:
5) Will the chart of accounts need to be approved? If so, by whom?
A:
Yes, by the steering committee
Q:
6) Which maintenance language should be used for each chart of accounts?
A:
English
Q:
7) Which additional languages do you wish to use for your charts of accounts?
A:
NONE
Q:
8) Please provide your current Chart of Accounts.
A:
File attached
CI template:
1.
General Explanation
Chart of accounts is a list of all G/L accounts used by one or several company codes. For
each G/L account, the chart of accounts contains the account number, account name, and
the information that controls how account functions and how a G/L account is created in a
company code. Charts of accounts are assigned to each company code. This chart of
accounts is the operating chart of accounts and is used for the postings in this company
code.
2.
Naming Convention
In SAP system, the Chart of Account is identified by a four digit alphanumeric key. The
General Ledger code can be of maximum of ten numeric characters.
3.

In Case of XYZL only one chart of accounts called Operating Chart of Accounts "XCOA"
will be used. The length of GL accounts will be of six numeric characters. External number
range will be defined for GL accounts based on account groups.
4.

The Chart of Account " XCOA" will be assigned to Company Code i.e. "XYZL"
5.
There will be a common Chart of Accounts for XYZ CO. LTD. which will be used by all
units, Divisions and Branches. The authority of open a new GL account or to make
changes to an existing account will rest with HOD - Balance Sheet department at
Sahibabad.
6.
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FI Module
Utmost care should be taken at the time of making changes to the existing GL account
master especially to the sensitive fields like open item management, line item display,
account currency and other assignments etc since it can have considerable effect on the
data flow to the internal SAP tables.
3. Asset Accounting
Questions:
Q:
1) For which of your legal entities will you be implementing FI-AA?
A:
Since there is only one legal entity and only one company code i.e. XYZ CO. LTD., FIAA will be implemented for the same.
Q:
2) If you have more than one enterprise entity: is a holding company the owner of
assets used in another enterprise?
A:
No
Q:
3) If you have more than one entity, are there affiliated or integrated companies?
Please list all affiliates, subsidiaries, trading partners, shares in other companies and
integrated companies.
A:
Not applicable
CI template:
1.
General Explanation
Asset Accounting (FI-AA)

The Asset Accounting component is used for managing and supervising fixed assets with
the SAP R/3 System. In SAP R/3 Financial Accounting, it serves as a subsidiary ledger to
the FI General Ledger, providing detailed information on transactions involving fixed
assets.
17
FI Module
18
FI Module
Asset accounting encompasses the entire lifetime of the asset from purchase order or the
initial acquisition (possibly managed as an asset under construction) through its
retirement. The system calculates, to a large extent automatically, the values for
depreciation and other purposes between these two points in time, and places this
information at the disposal of the business users in varied form using the Information
System. There is a report for depreciation forecasting and simulation of the development
of asset values.
The system also offers special functions for assets under construction. The system
enables managing values in parallel currencies using different types of valuation.
2.
Naming Convention
The asset number uniquely identifies a fixed asset. It always consists of the main asset
number and the asset sub-number. There are two ways of carrying out number
assignment in the system:
External number assignment
internal number assignment
In the case of external number assignment, the user directly assigns the asset number.
The system displays only the defined number interval, and issues an error message if a
number is already assigned. In the case of internal number assignment, the system
automatically assign consecutive numbers.
In XYZL, internal number assignment will be defined for all asset classes.
3.

We have to define additional features of the FI-AA organizational objects such as chart of
depreciation, depreciation areas, asset classes. In this way, we can represent our
organizational structures that are relevant to Asset Accounting in the system and we can
classify our assets according to asset accounting criteria.
4.

All assets in the system have to be assigned to above mentioned organizational elements
that we define. At the same time, we can also assign assets to other organizational units
in other R/3 components such as cost centers, plants , and so on. This is done when we
create Asset master data, which contain concrete information about the fixed asset.
We define these organizational units in Customizing for the component they belong to
such as Cost Center accounting , Profit center, Plant, Business Area etc.
5.
Presently, Asset accounting is not integrated with other modules like FI, MM etc. In SAP
system, Asset Accounting will be fully integrated with other modules and online
depreciation will be posted automatically.
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FI Module
3.1. Depreciation area
Questions:
Q:
1) Is there a distinction necessary between book depreciation (for external balance
sheet) and tax values (for a tax balance sheet)?
A:
Yes
Q:
2) Do you require additional parallel valuations for your assets, e.g. for consolidated
valuation, for cost accounting purposes or for statutory reasons? If so, please specify
A:
In addition to the requirements of Companies Act and Income tax Act we need parallel
valuation for costing purpose also.
Q:
3) If you have a separate valuation for cost accounting, do you calculate and record
interest?
A:
No
Q:
4) Is there a distinction between taxation values and valuation of net assets?
A:
Yes
Q:
5) Do you need to record depreciation for purposes other than book depreciation?
accounting depreciation - Special reserves for special depreciation ? - N
Explanation: In addition to book depreciation, is there a need to manage depreciation for
other purposes? For example:? - Tax depreciation - Group depreciation - Group currency
- Cost-accounting depreciation - Special reserves for special depreciation ? - Net worth tax
valuation ? - Other ? - Other
A:
Yes, in addition to Book depreciation, we need to manage depreciation for tax and
costing purposes also.
Q:
6) Do you want the values for these other viewpoints to be derived from the book
depreciation area or another depreciation area (for example, the cost-accounting depreciation
area can be derived from indexed book depreciation values)?
A:
No. Independent valuations required for all depreciation areas.
Q:
7) Which depreciation area do you use for calculating cost-accounting depreciation
and passing it on to cost accounting?
A:
Separate depreciation area is required for costing purpose.
Q:
8) If the cost-accounting depreciation area uses its own valuation, is depreciation
calculated from APC or from the replacement value?
A:
Depreciation calculation for cost accounting purposes to be calculated on the basis of
Acquisition & Procurement Cost (APC)
Q:
9) If you claim special tax depreciation, how do you handle it: - Allocation and write-off
amounts individually or balanced with each other? - Using a separate depreciation valuation
area?
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FI Module
A:
Not applicable
CI template:
1.
General Explanation
Depreciation area is an area showing the valuation of a fixed asset for a particular
purpose (for example, for individual financial statements, balance sheets for tax purposes,
or management accounting values). You can manage various depreciation areas in the FIAA component. Along with "real" depreciation areas, you can define derived depreciation
areas. The values for these derived areas are calculated from those of two or more real
areas.
Depreciation areas that are not used can still be activated at a later point in time (after the
production startup). A newly activated depreciation area can take over values from another
depreciation area.
In XYZL's case there would be more than one depreciation area as follows:
Depreciation area 1 for Book depreciation.
Depreciation area 2 for Income Tax depreciation.
Depreciation area 3 for cost accounting purposes.
2.
Naming Convention
The Depreciation areas will be numbered as follows :
01 Book depreciation
15 Depreciation as per Income Tax Act 1961
20 Depreciation for cost accounting purposes.
3.

Depreciation area is a two-digit numeric key used to calculate different values in parallel
for each fixed asset for different purposes. For example, company may require different
types of values for the balance sheet than for cost accounting or tax purposes. Company
can specify the asset-specific depreciation terms for every depreciation area belonging to
the chart of depreciation. Also depreciation terms can be entered in the asset class or
directly in the asset master record of the particular asset. This makes it possible, for
example, for you to use straight-line depreciation for your internal accounting purposes
and use declining-balance depreciation for the balance sheet.
Also both the asset balance sheet values and the depreciation values can be posted from
the individual depreciation areas to separate balance sheet accounts or income statement
accounts in the general ledger.
4.

These three Depreciation areas are grouped together for XYZL into a chart of depreciation
"XCOD" which will be assigned to Company code " XYZL"
5.
The fixed assets data will be available online for all units/divisions/branches with
automatic depreciation calculation and fully integrated with other modules.
6.
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FI Module
1. Depreciation will be charged in the book depreciation area as per SLM /WDV
both methods for Sahibabad and WDV method for Khopoli as per the rates
specified in the Companys Act as per the existing scheme. The depreciation will
be posted on quarterly basis as required by the client.
2. Depreciation will be charged in the IT depreciation area as per rates applicable
under the Income Tax Act.
3. Depreciation in the Cost Accounting depreciation area would be at the rates
defined by XYZL.
7.
Triggers / Inputs
Depreciation will be posted in the books of accounts as per book depreciation only other
depreciation areas remain for information purposes only.
3.2. Chart of depreciation

Questions:
Q:
1) In which countries do you manage fixed assets?
A:
India
Q:
2) Are there any statutory asset valuation requirements which would involve parallel
valuation in your financial accounting?
A:
None
CI template:
1.
General Explanation
Charts of Depreciation are used in order to manage various legal requirements for the
depreciation and valuation of assets. These charts of depreciation are usually countryspecific and are defined independently of the other organizational units.
In general, we are required to calculate Asset Values to cater different needs, both internal
and external (such as book depreciation and Income Tax depreciation). Therefore, the
Asset Accounting component enables you to manage values for assets in parallel in other
depreciation areas. The chart of depreciation, therefore, is a directory of depreciation
areas organized according to business management requirements. You define the
characteristics, and thereby the significance, of the individual depreciation areas in each
chart of depreciation. A depreciation area is always assigned to only one chart of
depreciation. Each company code is allocated to one chart of depreciation. Several
company codes can work with the same chart of depreciation. The chart of depreciation
and the chart of accounts are completely independent of one another. In XYZL's case one
chart of depreciation with three depreciation areas would be required.
2.
Naming Convention
The Chart of Depreciation can be of 4 Character having description of 40 characters.
3.

In XYZL's case, the Chart of Depreciation has been decided as "XCOD" (XYZ - Chart of
Depreciation)
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FI Module
4.

The chart of depreciation " XCOD" shall be assigned to the company code "XYZL'".
5.
Depreciation for all the three depreciation areas can be calculated automatically using the
centralised asset master data automatically.
6.
The chart of depreciation would have three depreciation areas namely,
01 Book depreciation
15 Depreciation as per Income Tax Act 1961
20 Depreciation for cost accounting purposes.
Depreciation run must be executed after ensuring that all the transactions related to
Assets Management have been entered into the system. Also depreciation must be
posted timely so that the system always gives the online status.
3.3. Asset class

Questions:
Q:
1) Describe how your fixed assets are structured in the balance sheet?
A:
Fixed Assets are structured in the Balance Sheet
Gross Block -Fixed Assets
Free hold Land
Leasehold Land
Building
Plant & Machinery
Assets not owned by Company
Furniture & Fixtures
Vehicles
Q:
2) How do you classify your fixed assets at the moment? How do you intend to
classify your assets in the future?
A:
Same as above.
Q:
3) Will you manage financial assets in the asset accounting system?
A:
No
Q:
4) Do you manage low value assets (LVAs) as fixed assets, or do you post them
directly to an expense account?
A:
Low value assets ( value less than 5000/-) are being posted in fixed assets & fully
depreciated at the year end.
Q:
5) Please list, or provide a list of the asset types that you intend to manage in the
Asset Accounting system (e.g. Land, Buildings, Intangibles, etc).
A:
As mentioned in point no.1

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FI Module
Q:
6) For each asset category (asset class), list the default depreciation method and the
period of depreciation you would like to use.
A:
We use SLM / WDV for the Sahibabad , Khopoli plants as per the specified rates by
the Company's Act.
ASSETS
Office Building
Factory Building
Plant & Machinery
-Single Shift
-Double Shift
-Triple Shift
Furniture & Fixture
Generator
Vehicle
Truck & Trailers, LPG
Tanker,Tractors
Cycle ( Less Than Rs 5000 )
AC, Coolers, Fans, Hand Pumps
Computers
Equipments-Lab, Office, Fire,
Tubewell
Weigh Bridge
SLM ( % )
WDV
(%)
1.63
3.34
10.00
20.00
4.75
7.42
10.34
06.33
27.82
09.50
11.31
13.91
20.87
27.82
10.00
25.00
20.00
20.00
100.00
04.75
16.21
04.75
100.00
25.00
60.00
25.00
04.75
25.00
CI template:
1.
General Explanation
Asset class refers to the category to which a particular asset relates to. Classifying
individual assets under different asset classes facilitates proper reporting and ensures
correct depreciation rates being applied.
For each asset class, control parameters and default values can be defined for
depreciation calculation and other master data. Each asset master record must be
assigned to one asset class. There are Special Asset classes also like Assets Under
Construction. Using the FI-AA component, we can automatically update all relevant
transactions to the general ledger. These include all accounting transactions that are
posted to assets, and all changes to asset values that are automatically calculated.
Depending on the functions you want the asset class to have, consider the following when
creating asset classes: The asset class provides default values to all asset master records
in the class. In this way, the asset class functions as a sample master record, and makes
it possible to create new asset master records simply and without errors. The screen
layout, tab layout and the field characteristics (required/optional/suppressed) of the asset
master record can be set for the asset class. The asset class can control the assignment
of asset numbers. The asset class is a selection criteria in all standard reports in Asset
Accounting. In addition, you can also request sorting and totaling by class-specific
characteristics.
2.
Naming Convention
The asset classes shall be opened for XYZL as mentioned above and both SLM/WDV
methods will be followed for the Sahibabad plant & Khopoli plant as per the specified rates
by the Company's Act. In addition to this Asset classes will be opened for group assets as
per the requirements of Income Tax Act.
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FI Module
3.

Assets Classes basically is structuring of Fixed Asset from accounting point of view. It
helps in identifying relevant general ledger accounts and also in assigning default values
such as depreciation terms etc.
4.

Asset Classes are assigned to Chart of depreciation and Chart of accounts
5.
Assets under a particular group can be identified by the Asset class and postings will be
made in GL accounts based on Asset class which can be easily monitored and analysed.
6.
Assets costing less than Rs. 5000/- each are depreciated at the rate of 100% in the year
of purchase. Separate Asset class will be opened for such low value assets.
B. Master Data
1. Financial Accounting
CI template:
2.
General Explanations
The central task of G/L accounting is to provide a comprehensive picture for external
accounting and accounts and recording all business transactions.
G/L account master records contain the data that is always needed by the general ledger
to determine the account's function. The G/L account master records control the posting of
accounting transactions to G/L accounts and the processing of the posting data. Financial
statement figure reports and analyses are available as report types. Financial statement
analyses are based on B/S P&L hierarchical versions structures that are stored in
Financial Accounting. The system gives you the option to perform difference analyses
based on actual and plan data at any time (yearly, half-yearly, quarterly, and monthly
comparisons).
1.1. G/L Account

Questions:
Q:
1) What procedure do you use when you need to create new account numbers?
Explanation: This can occur centrally or decentralized; Sample accounts can be used.
A:
We assign 4 digit numeric code for the main ledger & assign further sub code
depending on the nature of account for the sub ledgers.
Q:
2) Can you define groups of general ledger accounts that require similar information
in the master record?
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FI Module
A:
Yes, as per the attachment enclosed.
Q:
3) How many retained earnings accounts do you have?
A:
One
Q:
4) For which general ledger accounts do you wish to display line items?
A:
All except control accounts
Q:
5) Which accounts do you wish to manage on an open item basis (for example, bank
clearing accounts)?
A:
Account receivable / payable, all banks & clearing account.
Q:
6) Which accounts do you wish to maintain in foreign currency (for example, bank
accounts)?
A:
In addition to INR, we wish to maintain Exim parties, foreign loan accounts in foreign
currency.
Q:
7) Describe any special requirements when posting to particular general ledger
accounts (for example, expense accounts require an associated cost center).
A:
Each element of Exp should be posted to Cost centre & reflected in G/L
Q:
8) What criteria do you use to search for G/L accounts?
Explanation: Match code

A:
Text string in Description and Codification scheme
Q:
9) Which of your General Ledger accounts are not relevant to tax?
A:
All accounts which are not related to sales purchase & in some other exp account.
CI template:
1.
Requirements/Expectations
GL accounts be created considering the existing Chart of Account followed by XYZL and
additional account be created as per the requirement. External number range should be
assigned for GL account master. Only one retained earnings account will be required as
per the existing system.
2.
G/L account master records contain the data that is always needed by the general ledger
to determine the account's function. The G/L account master records control the posting of
accounting transactions to G/L accounts and the processing of the posting data. G/L
account master records are divided into two segments so that company codes with the
same chart of accounts can use the same G/L accounts:1 Chart of accounts segment
The chart of accounts area contains the data that is valid for all company codes, such as
the account number.
2. Company code segment
The company code specific area contains data that may vary from one company code to
another, such as the currency in which the account may be posted. You can block a G/L
26
FI Module
account in the chart of account area and in the company code-specific area. In the chart of
accounts area, you block a master record for creating in the company code a G/L account
for posting. In the company code, you can only block a G/L account for posting Since
there is only one company code, it is recommended to XYZL to use G/L account posting
centrally. Six-digit external number ranges will be followed for chart of accounts of XYZL.
3. Naming/Numbering Conventions
Naming and number range will depend on the "Account Group" under which an account
is being created viz., if an expenses account is opened then the number range as defined
for that category will apply. The name of the account should be such to clearly indicate its
purpose. Account groups will be defined based on the groupings done for preparing
balance sheet as per requirement of Schedule -VI of the Companies Act . The facility to
specify both short and long text of the name is available. The Account Groups and their
number ranges for XYZL will be defined as under:
S. NO.
Particulars
Account
Group
Number Range
From
To
Sources of Funds
Shareholders Funds
1
2
SHARE CAPITAL
RESERVE & SURPLUS
SCAP
RESP
200001
210001
210000
220000
3
4
Loan Funds
SECURED LOANS
UNSECURED LOANS
SECL
USEL
220001
230001
230000
240000
Current Liabilities & Provisions

5
6
7
8
SUNDRY CREDITORS
STATUTORY LIABILITIES
OTHER CURRENT LIABILITIES
PROVISIONS
Application of Funds
SCRE
STLI
OCLI
PROV
240001
250001
270001
260001
250000
260000
290000
270000
9
10
11
Fixed Assets
Capital Work in progress
Investments
FAST
CWIP
INVS
100001
120001
130001
120000
130000
140000
INVT
SDEB
BANK
LOAD
OCAS
130001
140001
150001
170001
180001
140000
150000
170000
180000
199999
MISC
500000
520000
SALE
OTIN
300000
340001
340000
380000
MFGX
ADMX
400001
410001
410000
420000
17
18
Current Assets , Loans &

Advances
INVENTORIES
SUNDRY DEBTORS
CASH & BANK BALANCES
LOANS & ADVANCES
OTHER CURRENT ASSETS
Misc. exp. To the extent not w/off
or adjusted
Income
SALES
OTHER INCOME
19
20
Expenses
MANUFACTURING EXP
ADMINISTRATION EXPENSES
12
13
14
15
16
27
FI Module
21
22
23
24
25
26
27
SELLING & DISTRIBUTION EXP.

PERSONNEL EXPENSES
OTHER OPERATING EXPENSES
CONSUMPTION
INTEREST & FINANCIAL
CHARGES
DEPRECIATION
OTHER EXPENSES
4.
SDEX
PERX
OPEX
CONS
420001
430001
440001
450001
430000
440000
450000
460000
INBC
DEPN
OEXP
460001
470001
480001
470000
480000
499999
Special Organizational Considerations

New GL account should be opened only after necessary approvals and only one person
should be authorised to open a new GL account. Also, no changes should be made to GL
account master and account assignments as this may cause inconsistency in the internal
SAP tables and automatic postings. Also the master data for GL accounts must contain
the full information depending upon the nature of account to have better control and have
more flexible reporting.
5.
Changes to existing Organization

Presently, The GL coding system is that XYZL assigns four digit code for the main account
number and another four digit code for the sub-account or sub-ledger. However, in SAP
GL account will be assigned a six digit code and there is no concept of separate GL code
number for main account and sub-account. However, GL account number ranges will be
defined based on the nature of account i.e. accounts of same nature will be grouped
under same account group and correspondingly fall under that particular number range
only.
6.
Standardised GL accounts and its master will have certain attributes attached with the
nature of account for example there may be few accounts where you cannot post directly
to there may be few accounts which are relevant to tax , line item display, account
currency open item management etc. The system will automatically prompt for entering
the required information or give an error as the case may be thereby reducing chances of
errors and generating the complete and accurate data. Automatic postings will be done to
the relevant GL account once the transaction or program is executed.
7.
Volumetric
Though GL codes exist in the existing system, but the information required for the purpose
of creation of GL master records has to be compiled from scratch.
8.
Authorization and User Roles

Authorisation for creation of new asset master and for making changes to the existing
master record should be available with only one person. XYZL to decide on the
authorization matrix.
2. Asset Accounting
Questions:
Q:
have?
1) How many fixed assets and how many assets under construction do you currently
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FI Module
A:
CAPITAL WORK IN PROGRESS
0721
Site Development Expenses
1030
Freight Capital
1061
Electrical Installation
1100
Capital Work In Progress
1101
Civil Works
1102
Expenditure Pending Allocation
1103
Capital Machinery
3987
Exchange Fluctuation Foreign (Term Loan)
3999
Profit And Loss On Trial Run
4166
Preparatory Work
5100 0640 Labour Charge (Construction)
5100 0113 Site Expenses
5200 0179 Civil Material
5200 0166 Steel Structure
5200 0827 Store Project
5200 0176 Water Tank
We have very large number of Fixed Assets group as given earlier.
Q:
2) Which organizational units do you manage in the asset master record?
A:
Company code , Cost center, Business Area, Profit center, Plant etc.
Q:
3) Do you want asset master record numbering to be internally or externally
assigned?
A:
Internally Assigned
Q:
4) Do you see a business need to use both internal and external number assignment,
depending on the asset class? If so, please specify.
A:
Only Internal numbering required.
Q:
5) If you use external number assignment, do you want to allow the assignment of
alphanumeric numbers?
A:
No
Q:
6) Do you want to represent asset components using asset sub-numbers? If so, for
what purposes do you plan to use asset sub-numbers?
A:
Yes. The Purpose is to identify Assets accessories for the value of machine
Q:
7) Are cost centers (business areas) to be defined in the asset master record on a
time-dependent basis?
A:
Q:
step?
No
8) Do you see a business need to create multiple similar asset master records in one
A:
No
Q:
9) Do you have assets that require increased depreciation due to multiple shift use?
A:
Yes
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FI Module
Q:
10) In your enterprise, is there a requirement to shut down an asset (discontinue
depreciation) for a period of time?
A:
No
Q:
11) How do you archive your asset master records at the present time?
A:
No
Q:
12) How long do you intend to continue to manage assets, which are no longer on
hand physically, in the system?
A:
2.1.
As such No
Asset master record
CI template:
1.
Asset master records would be required before any transaction is posted onto an asset.
Along with it assignment to cost center, Plant, Business Area vendor etc. is required.
Separate asset codes should be opened for each asset.
2.
The varied demands on master data management for Asset Accounting are met in the R/3
FI-AA component by:Asset master records that are structured according to functional and goal-oriented
requirements
Master data maintenance that is organized according to this structure, and allows for
individual adaptation
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FI Module
General Master Data :- This part of the master record contains concrete information
about the fixed asset. The following field groups exist:
General information (description, quantity, etc.)
Account assignment
Posting information (for example, capitalization date)
Time-dependent assignments (for example, cost center)
Information for plant maintenance
Physical inventory data.
Depreciation Area
In addition, long texts for the individual field groups belonging to the general data part of
the asset master record can be created.
Data for Calculating Asset Values
Depreciation terms can be specified in the asset master record for each depreciation
area in the chart of depreciation. In order to make these specifications, the master
record contains an overview of the depreciation areas. In addition, there is a detailed
display available for each depreciation area. If there are depreciation areas that are not
needed for a specific asset, it is possible to deactivate these depreciation areas at the
asset level.
Asset master records will be maintained through 5 sub-processes. These are :
Create Asset Main Number
Create Asset Sub-number
Change Asset
Display Asset
Block/Unblock Asset
Delete Asset
While maintaining an Asset, the user will update all information in various section of
master data screen such as:
General
Text
Manage historic
Time-dependent
Cost Center
Plant
Location
Equipment
Room
Personnel Number
License Number Plate. etc
depending upon the nature of asset and reporting necessities..

3.
Naming/Numbering Conventions
The asset number uniquely identifies a fixed asset. It always consists of the main asset
number and the asset sub-number. There are two ways of carrying out number
assignment in the system:
External number assignment

Internal number assignment
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FI Module
In the case of external number assignment, the user directly assigns the asset number.
The system displays only the defined number interval, and issues an error message if a
number is already assigned. In the case of internal number assignment, the system
automatically assign consecutive numbers.
The asset main number has 12 alphanumeric characters. Number assignment is
controlled by the asset class. You specify the number range for an asset class in the asset
class. In this way you ensure that number assignment is uniform for the asset class. For
XYZL, internal number assignment will be defined for all asset classes with maximum
length of 8 (Eight) numeric characters.
4.

The control creation and maintenance of assets master records would involve correct
maintenance of the required information in the masters so that the transaction details are
proper. It is suggested that responsibility for creation, changing, blocking / unblocking and
deletion of asset masters in the organisation be fixed on a responsible person i.e. master
creation and maintenance should be centralised.
In order to meet the requirement of opening separate asset master for each asset, the
relevant data should be made available.
5.

Presently there is no concept of Asset Master records. This concept will enable
identification and controlling of assets.
6.
We can get Asset wise detail for Business area and Cost Center even depreciation will be
posted to the concerned Cost Center. We can even see the proposed depreciation for the
future years for your analysis purposes and can manage assets with different depreciation
rates and different depreciation methods, which could be helpful to you for your analysis
purposes. But depreciation will be posted as per book depreciation only.
There would be certain fields that are time dependent like cost center , business area ,
fields for physical location of an asset etc. This time dependency would enable transaction
to be recorded for the particular asset based on time periods i.e. to say the master will
record the characteristics in question for e.g. cost center on the basis of time .In other
words for a particular period the field for time dependent cost center can be X and can be
changed to Y for another period and depreciation would be posted to cost centers X and Y
based on the relevant periods
7.
Volumetric
Presently no asset master is existent in XYZL. the preparations for creation of complete
asset master record will have to be started from scratch. The master data needs to be
created for the purposes of meeting the requirements of the Companies Act and the
Income Tax Act (group assets).
8.

Authorisation for creation of new asset master and for making changes to the existing
master record should be available with only one person. XYZL to decide on the
authorization matrix.
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FI Module
C. Business Processes
1.
Financial Accounting
CI template:
1.
Purpose
The main task of G/L accounting is the overall presentation of Financial Accounting. The
general ledger is the complete record of all accounting transactions, and thus represents
the main and current element in the rendering of accounts.
This scenario describes the process by which you define the G/L accounts and plan your
general ledger. It also describes the postings you make in the general ledger.
Posting in the General Ledger
You can use the R/3 System to make the following posting transactions in the General
Ledger:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
1.1.
Standard G/L account postings

Transfer postings with clearing (offsetting)
Document parking
Recurring entries
Closing operations
The R/3 System supports the following closing operations for creating
financial statements:
Regrouping of receivables/payables
GR/IR clearing account maintenance
P&L adjustment
Balance carried forward
Periodic reports
Creating financial statements
Actual B/Sheet comparisons
Basic Settings
1.1.1.
Fiscal Year and Posting Periods
Questions:
Q:
1) Do your posting periods correspond to the calendar months?
A:
Yes
Q:
2) Is your fiscal year identical with the calendar year?
A:
No, its from April to March
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FI Module
Q:
3) If your fiscal year is not identical with the calendar year, please provide a schedule
of period closing for the past, current and next year.
A:
Fiscal year is April to march, e.g. Opening period - 01.04.2004 & closing period 31.03.2005
Past year- 31.03.04
Q:
4) Do all your company codes have the same fiscal year/fiscal year variant? Provide
details if this is not the case.
A:
Yes, only one company code.
Q:
5) When do you close your fiscal year?
A:
31st March
Q:
6) Who is responsible for opening and closing accounting periods (including for
materials management)?
A:
HOD - Balance Sheet Department
CI template:
1.
XYZL is following a financial accounting year starting from 1st April to 31st March with
Annual closing on 31st March. Monthly Financial statements are also prepared for Internal
purposes. XYZL needs to close postings on a monthly basis and have a control on posting
of accounting entries in previous months. Posting periods corresponding to each calendar
month will meet XYZL's requirement as to have control on document postings as well as
to update balances in GL Accounts on a monthly basis.
The accounting period is to be broken down into separate calendar months i.e. twelve
normal periods will be required for monthly reporting. Additionally there will be four special
periods for year end closing activities.
2.
The Fiscal year stands for the Accounting year for which books of accounts are
maintained. Fiscal year is divided into posting periods to enable control and reporting.
Generally a period of 12 months for which the company produces financial statements and
takes inventory. A fiscal year may or may not correspond to the calendar year. XYZ CO.
LTD. follows April to March as the Fiscal Year.
Posting period stands for the period within a fiscal year for which transaction figures are
updated. Every transaction that is posted is assigned to a particular posting period. There
are 12 posting periods in one fiscal year and 4 special periods are given for closing
operations.
Posting periods are defined in fiscal year variants. You can open and close these posting
periods for posting. As many periods as you require can be open for posting
simultaneously. Usually, only the current posting period is open for posting, all other
posting periods are closed. At the end of this posting period, the period is closed, and the
next posting period is opened.
Special periods can be open for closing postings during the period-end closing.
You have the following options for opening and closing posting periods.
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FI Module
Posting Period Variants
You can specify which company codes are open for posting in a posting period variant.
Posting period variants are cross-company code and you have to assign them to your
company codes. The posting periods are then opened and closed simultaneously for all
company codes via the posting period variants.
Account Type
You can differentiate the opening and closing of posting periods by account type. This
means that for a specific posting period, postings can be permitted to customer accounts,
but not to vendor accounts.
For each posting period that should be open, you must always specify at least account
type + (valid for all account types). You can exercise more detailed control by specifying
further account types.
Account Interval
You can differentiate the opening and closing of posting periods by account intervals. This
means that you only open a posting period for posting to a specific account.
User
You can open and close posting periods only for specific users. To do this, enter an
authorization group at document header level.
3.
Explanations of Functions and Events

A fiscal year is divided into posting periods. Each posting period is defined by a start and a
finish date. Before you can post documents, you must define posting periods, which in
turn define the fiscal year. This is controlled by Fiscal year variant. In addition to the
posting periods, you can also define special periods for year-end closing.
Opening and closing of periods is controlled by posting period variants.
4.
Naming convention
Fiscal Year variant is identified by a two digit alphanumeric key. For XYZL Fiscal year
variant " B1" will be defined which will consist of 12 ( twelve) posting periods
corresponding to calendar months and 4 ( four) special periods to facilitate year end
closing.
Posting period variant is identified by a four digit alphanumeric key. For XYZL Fiscal year
variant " XPPV" will be defined.
5.
Triggers / Inputs
Posting periods should be closed immediately after the end of the period in order to
maintain discipline and prevent any back dated entries or changes.
6.

The posting periods must be closed timely and it must be ensured that all the period-end
processes are completed before the closing the periods.
7.

Currently there is no system of closing individual sub ledgers or closing particular sub
ledger only for posting in any periods. Even though the Client is making Monthly reports
35
FI Module
by passing all the required Journal Entries and other entries from various Day Books but
there is no system of Closing Individual Sub Ledgers periodically. In SAP system monthly
posting periods will be closed so as to observe the discipline avoid any back dated entry.
36
FI Module
8.
The organization should observe a strict discipline for opening and closing of posting
periods timely.
9.
Notes on further Improvements

Once a period has been closed you can restrict entries into all Sub-ledgers (Accounts
receivable, Accounts payable, Assets, General ledger) or you can restrict entries into
specific Sub-ledger and remaining other Sub-ledger as open for closing purposes. Main
benefit for having special periods could be at the time of fiscal year change i.e. you can
carry forward balances and keep on doing transactions in last fiscal year opening balance
for next fiscal year will automatically updated.
10.

As per the requirement of the client, the authorisation for opening and closing of the
periods will be given only to HOD - Balance Sheet.
1.1.2.
Document
Questions:
Q:
1) What criteria do you use to classify your documents?
A:
Based on Business transactions like Bank Payment, Vendor Invoice, Cash , Customer
Invoices , Journals etc.
Q:
2) For which types of documents are the document numbers assigned
internally/externally?
Explanation: Are there any legal requirements?
A:
basis.
Q:
3) What is the document numbering logic?
Explanation: Possible reconciliation with SD/MM

A:
basis.
Q:
4) Are the document numbers assigned on a yearly basis?
A:
No. The numbering logic is same as answered in No.2
CI template:
1.
XYZL requires separate number ranges for each type of Transaction viz Cash, bank, GL,
Vendor Invoice, Customer Invoice, Vendor payments, Customer payments etc. Different
number ranges are also required for reversal document for each of the above transaction.
Also separate number range is required for making period end provisions. The document
numbers should be generated internally by the system.
37
FI Module
2.
Using this standard accounting function, one can enter business transactions in the
general ledger and sub-ledgers through an accounting document. Accounting documents
are grouped based on Document types. The document type has the following functions:
1.
Differentiating between business transactions. The document type tells you

instantly what sort of
business transaction is in question. This is useful, for
example, when displaying line items for an account.
2.
Controlling the posting to account types (vendor, customer, or G/L accounts).

The document type determines which account types that particular document can
be posted to.
3.
3.Assigning document numbers. A number range is assigned to every

document type. The numbers for the documents you create are taken from this
number range. The original documents from one number range should be stored
together. In this way, the document type controls document storage.
The following figure illustrates the significance of the document type:
3.

As per XYZL requirements separate document type will be created for transaction type
and its reversal with internal number ranges.
4.
Naming convention
In SAP, Document type is identified by a two digit alphanumeric key. Following SAP
standard document types will be used :
AA
AB
AF
AN
DA
DG
DR
DZ
Asset posting
Accounting document
Dep. postings
Net asset posting
Customer document
Customer credit memo
Customer invoice
Customer payment
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FI Module
KA Vendor document
KG Vendor credit memo
KN Net vendors
KP Account maintenance
KR Vendor invoice
KZ Vendor payment
ML ML settlement
PR Price change
RA Sub.cred.memo stlmt
RE Invoice - gross
RN Invoice - net
RV Billing doc.transfer
SA G/L account document
SB G/L account posting
SK Cash document
SU Adjustment document
UE Data transfer
WA Goods issue
WE Goods receipt
WI Inventory document
WL Goods issue/delivery
WNNet goods receipt
ZA Cash Journal
ZC FI/CO Reconciliation
ZP Payment posting
ZR Bank reconciliation
ZS Payment by check
ZV Payment clearing
ZB GL Provisions
In addition to the above, separate document types will be created for reversal documents
and additional document types may be created, if required at the time of configuration.
5.

In case of XYZ CO. LTD. it has been decided that document number range will be
provided by the system internally on fiscal year basis per document type and they will be
changing number ranges on yearly basis in contrast to the existing practice of assigning
document numbers externally on daily basis.
6.
There will be seamless integration therefore there will be no duplication of work as far as
feeding of purchase and sales documents are concerned. The document numbers will be
assigned Internally.
7.
System Configuration Considerations

As requested by the client, a separate document type be created for passing month end
provisions and reversals so that a separate number range is assigned to these provisional
entries.
1.1.3.
Posting Help
Questions:
Q:
1) Which help for posting do you need (such as account assignment models, sample
documents, control totals, user parameters)?
39
FI Module
A:
At present we are not having any posting helps but we need first sample documents
& Recurring entries for posting.
CI template:
1.
In XYZL repetitive nature of entries exists especially in case of rent, insurance, contract
payments, monthly provisioning JVs etc for which same entries are to be passed every
month and some of them, mostly provisions are reversed in the subsequent month.
Posting help is required to facilitate such repetitive entries.
2.
An account assignment model is a reference for document entry. In contrast to sample
documents, it can contain many numbers of G/L account items that may be left
incomplete. During document entry you can change, add to, or delete the proposed data.
In this case, you simply enter a total amount, which is then distributed, to the items within
the model according to set ratios.
Sample documents are used as a reference when you enter accounting documents
manually. They simplify document entry. A sample document does not update transaction
figures.
Recurring Document is a document containing the fixed data for every recurring posting
(for example the posting key, account, and amount). You set up recurring entry documents
for business transactions that occur on a regular basis such as rental payments and
insurance premiums. These documents are the basis on which the system creates actual
accounting documents, and do not themselves lead to transaction figures being updated.
A recurring document does not update transaction figures.
Requirement for repetitive nature of entries exists especially in case of rent, contract
payments, monthly provisioning JVs. Various document reference methods like Account
Assignment model, Sample documents and Recurring documents will be used for various
posting helps.
3.

Recurring entries are business transactions that are repeated regularly, such as rent or
insurance. The following data never changes in recurring entries:
Posting key
Account
Amounts
You enter this recurring data in a recurring entry original document. This document does
not update the transaction figures. The recurring entry program uses it as a basis for
creating accounting documents.
4.
Triggers / Inputs
In the recurring entry document, you define when a posting is to be created with this
document. You have two options for scheduling. Postings can be made periodically or on
a specific date:
For periodic postings, specify the first and last day of execution, as well as the interval
in months.
If you want to specify certain dates, enter a run schedule in the recurring entry original
document
40
FI Module
5.
Posting help based on Account Assignment model, Sample documents and Recurring
documents will help in accuracy and fast entry of data and eliminate chances of any
mistake.
1.1.4.
Tax on Sales/Purchases in SAP System
Questions:
Q:
1) Value added tax: Which are the current tax rates in the countries of your company
codes?
A:
Sales Tax, Excise, Service Tax, Cess, Customs, TDS, TCS, Entry Tax, turnover Tax
VAT (Haryana) etc.
Q:
2) Value added tax: Do you have non-deductible taxes?
A:
Local & Central Sales Tax, Entry Tax.
Q:
3) How do you handle taxes on imports (tax rate, reporting requirements)?
A:
Detailed procedure attached in the relevant nodes in SD/MM modules.
Q:
4) How do you handle taxes on exports (tax rate, reporting requirements)?
A:
Q:
5) Do you have companies with plants in foreign countries?
Explanation: "Foreign plants" functions (SD/MM integration)

A:
No
Q:
6) What are the tax reporting requirements?
A:
Q:
7) How do you calculate taxes if there are cash discounts?
Explanation: Is tax calculated on the amount after cash discount?

A:
No cash discounts are allowed on Invoices. however cash discounts are given
through credit notes after realisation of payments , net payment after deduction of cash
discount within stipulated period.
Q:
8) To which G/L accounts will taxes be posted?
A:
Excise Duty Paid, Sales tax Payable, CST Payable, TCS Payable and any other tax
payable if any
Q:
9) Do you use a particular exchange rate for taxes? If so, please specify.
A:
Presently separate exchange rates are not taken
CI template:
41
FI Module
1.
XYZL requires automatic calculation and posting of tax on sales and purchase viz Sales
Tax, Excise, Service Tax, Cess, Customs, TDS, TCS, Entry Tax, turnover Tax VAT
(Haryana) etc. TDS etc. Each type of tax should be posted to separate GL account to
facilitate reporting and meeting statutory requirements.
2.
Tax on sales/Purchase is deducted from amounts in G/L account items and not from
amounts in customer items. The tax on sales to customers is output tax and tax on
purchase is input tax and is posted to a tax account. One can enter tax on
sales/purchases for the invoice in the following ways: One can enter the tax manually or
have the system calculate the tax. The system posts one item for every tax code.
Applicability of Taxes :- Which taxes are to be paid and how they are to be posted in the
system depends on the tax regulations defined by law in the country of the company
concerned. The postings made are controlled by the tax code. A distinction is made
between Deductible taxes and Non-deductible taxes. The taxes on sales/purchases
include input tax, output tax, acquisition tax and additional taxes. In addition to tax codes,
percentage rates and tax accounts, you have to specify whether the cash discount amount
reduces the tax base amount, depending on the company code.
3.

To meet the requirements related to taxation " Country India Version" (CIN) functionality
of SAP will be used. Relevant tax procedure, tax codes will be defined in MM/ SD module
and will be integrated with FI module for automatic postings. The processes have been
discussed in detail in MM / SD modules.
4.
When you post a Vendor invoice / Customer invoice, the system automatically posts the
Input / Output tax to the tax relevant G/L account.
5.

Automatic account determination for tax accounts needs to be taken care of at the time of
finalisation of chart of account to facilitate reporting and meeting statutory requirements.
1.1.5.
Tax on Sales/Purchases in Non-SAP System
Questions:
Q:
1) Do you use an external system to calculate tax on sales/purchases?
A:
Yes
1.1.6.
Withholding Tax
Questions:
Q:
1) What are the reporting requirements for contractors, self-employed etc. in your
country?
A:
As per Country India Version functionality.
TDS is to be deducted on invoice booking or payment whichever is earlier.
Sections under which TDS is generally deducted are as follows:
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FI Module
Section 194C:
Section 194I:
Section 194J:
Section 195:
Section 194:
Section 192:
Section 194A:
Payments to Contactors and sub-contractors

Rent
Fees for professional or technical services.
Foreign Remittance etc.
TDS on Dividend To Shareholders
TDS on Salary
TDS on Interest
In addition to this we need to file TDS challans ,Issue TDS certificates and file TDS returns.
Flow chart for TDS
1
The TDS are deducted on both Advances as well as on the Bills whichever is earlier.
In case of advances :
The tax is booked on the advances (with ref to the running bills), the advances could be
paid from any of our offices. When the bills are booked then the TDS on Advances are
adjusted & the TDS is deducted on the balance Amount.
In case of Bills:
In case if the Bills are booked first then the TDS on the bills are deducted & posted.
Further check is made not to deduct TDS on Payments.
2
3
4
5
6
7
8
9
10
There is a separate program for TDS. While accounting for bills & advances the TDS is
vouched for at the same time.
In case of inward freight an acknowledgement of the same is issued to the party.
Since the TDS program is separate, the transactions in which TDS is involved, have to be
punched in the TDS program Separately.
On the monthly basis the balances of TDS program & Accounts are reconciled.
In case of Employees, the tax is calculated at the beginning of the year by the TDS
program
Accordingly the declarations & other details of the employees are collected & punched in
the TDS program.
On the basis of the same the monthly deductions are made from the salaries.
At the end of every month the deductions & deposits of TDS is done through challan
no.281
On yearly basis the following returns are filed
--- Form 24 ( Salary)
--- Form 26 ( Others)
On quarterly basis the following returns are filed
--- Form 27 (Foreign Payments)
11
The TDS certificates are generated from the TDS program & Issued
Flow chart for TCS
The concessional rate or no TCS declarations are recd & fed in the system
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FI Module
2
When the invoices are generated from the system in case sale of particular product
(scrap) TCS @ 1% + surcharge is charged on the invoices, other than parties having
concessional rate or no TCS.
At the end of the month the report is generated from the system for the details of TCS
charged
TCS is deposited at the end of the month.

On half yearly basis the returns for TCS are filed.
--- Form 27 E
The TCS certificates are generated from the program & Issued on half yearly basis
Q:
2) How do you transmit this information to the tax authorities and your vendors?
A:
Following returns are used to transfer TDS information to the taxation authorities:
Nature of payment
1.
2.
3.
4
Return of TDS
Payment to Contractor/
sub Contractor
Rent
Professional or Technical
services
Payment to non-resident
Time Period
Form No. 26
On or before June 30
Form No. 26
Form No. 26
Form No. 27
Within 14 days from

the end of each quarter.
Alternatively, a consolidated
certificate can be issued at
the end of the year by Apr
30th.
The vendors are issued TDS Certificates as follows:

Nature of Payment
1
In case of all the above

Payments
tax
Certificate
Form No. 16A
Time Period
Within
one
month
from
end of month during which
has been deducted or if the

payee so desires, one consolidated
consolidated full year certificate
by April 30th.
PROCEDURE
Deduction and Payment
1
Responsibility for tax deduction lies with the payable section.
TDS entries are input into the ledger after checking, on the basis of the rates in force as
advised by the Taxation section.
The responsibility for deposit of TDS in the prescribed challan, before due date lies with
the taxation section.
The Cash section generates cheque for the same.
Preparation of TDS Certificates

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FI Module
1
TDS Certificates are prepared by entering all prescribed particulars from the Books of
Account.
Particulars relating to the payee like Name, Address and PAN No. are certified by the
concerned party.
3
4
TDS Certificates are reconciled with the ledger account.

Certificates are mailed to the respective parties & proof of dispatch for each certificate is
filed.
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FI Module
TDS Return
1
TDS Return is prepared in the relevant forms.
Tax returns are filed with the Income Tax department by due date.
Enclosures with Tax Return

1.
2.
TDS Certificates in duplicate.

Original Challans for payment of tax.
For vendors physical copy of TDS certificates & for the Tax Authorities in soft copies i.e.
E.TDS Etc.
CI template:
1.
XYZL wants a system that enables them deduction of TDS at the time of invoice booking
and also on payments depending upon the situation. The rates at which tax is to be
deducted shall be those prescribed under the Indian Income Tax Act. System should
ensure deposit of tax to the credit of the Central government thru Challan, Issuance of
TDS certificates, duplicate TDS certificates and filing of annual TDS returns. It should also
provide the necessary reports in this regard.
2.
Tax is to be deducted at source at the time of payment or credit whichever is earlier as per
the provisions of Income Tax Act. However system should ensure that no payment, which
is liable for deduction, can escape deduction of TDS. Rate for deduction of tax be
maintained within the system so that system deduct the tax at the time of entering the
document.
Certain parties has specific rate for deduction of tax. Hence proper rate i.e. party and
period specific should be ensured. Tax deducted is linked with the deposition of the tax.
Provision for PAN, Assessing officer, Rate of TDS, should be in master data. Tax should
be deducted in rounded off to the next rupee.
Two transactions are to be distinguished for TDS (Withholding Tax- SAP Terminology):
a) Invoice entry
b) Invoice payment
Invoice Entry
When entering the invoice, the system determines the base amount for withholding tax
and stores it in the document. Direct entry of the base amount is also allowed. The
Calculates Tax is posted into the specified GL Account in Financial Books.
Invoice Payment
When paying the invoice, the tax amount is calculated from to the base amount and your
specifications for the tax code. If the tax amount is to be paid to the tax office, the system
automatically posts the amount to the tax account. The system reduces the payment
amount to the vendor by the withholding tax to be paid. If the amount is only to be
reported to the tax authorities, no posting is made and the whole invoice amount is paid to
the vendor.
If the tax amount is to be paid to the tax authorities, the system automatically posts the
amount when clearing the item to the tax account. The posting is made when making the
46
FI Module
paying using the payment program or with the manual payment settlement. When clearing
using the general clearing function, you must select a clearing procedure. This transaction
influences the posting of withholding tax.
Withholding tax is posted for all transactions, which are to be paid.
Example:
You received an invoice (For Services etc) from a vendor who is liable to withholding tax
amounting to 1000.
The taxable portion is 100 percent
The tax rate is 30 percent
The tax is to be posted
The posting procedure is as follows:
1 You post the invoice amount of Rs 1000 to the vendor account and to an expense
account.
2 When clearing the open item, the withholding tax (300) is calculated from the base
amount and posted to the withholding tax account.
At the time of receiving of material:
Expense account: Dr. 1000.00
To GR/IR Clearing a/c Cr. 1000.00
At the time receipt of Vendor Invoice
GR/IR Clearing a/c Dr. 1000.00
To Vendor account:
Cr. 700.00
To Withholding tax account: Cr. 300.00
Withholding tax in SAP can be calculated in two ways:
1
2
Classical Withholding tax

Extended Withholding tax
Extended Withholding Tax is applicable incase of XYZ CO. LTD.

3.
Triggers / Inputs
All the requirements of XYZL relating to TDS will be met using the Country India Version
functionalities. TDS Codes are to be created for deducting TDS from vendors from
payment as well as for Invoice .Also, no separate posting for surcharge on TDS is
required by XYZL. TDS alongwith surcharge will be posted to a common GL account.
Also, no separate reporting for surcharge is required.
TDS on payment made to a person other than Companies:

Section
Description
Tax
S/Chg
TDS
Cess
Total
194C
194C
194J
194I
194I
Contractor
Contractor Advt.
Professional Services
Rent to Individual / HUF
Rent to person other
than Individual / HUF
Interest on Securities
Interest on other than
Securities
Commission &
Brokerage
2.00
1.00
5.00
15.00
20.00
0.20
0.10
0.50
1.50
2.00
2.20
1.10
5.50
16.50
22.00
0.05
0.03
0.11
0.33
0.44
2.25
1.13
5.61
16.83
22.44
20.00
10.00
2.00
1.00
22.00
11.00
0.44
0.22
22.44
11.22
5.00
0.50
5.50
0.11
5.61
193
194A
194H
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FI Module
TDS on payment made to Companies:
Section
Description
Tax
S/Chg
TDS
Cess
Total
194C
194C
194J
194I
193
194A
Contractor
Contractor Advt.
Professional Services
Rent
Interest on Securities
Interest on other than
Securities
Commission &
Brokerage
2.00
1.00
5.00
20.00
20.00
20.00
0.05
0.03
0.13
0.50
0.50
0.50
2.05
1.03
5.13
20.50
20.50
20.50
0.05
0.03
0.11
0.41
0.41
0.41
2.10
1.06
5.24
20.91
20.91
20.91
5.00
0.13
5.13
0.11
5.24
194H
TDS at Lower rates :

Section
Description
Tax
S/Chg
TDS
Cess
Total
194C
194C
194C
194C
194C
Contractor
Contractor
Contractor
Contractor
Contractor
0.25
0.10
0.50
0.70
0.17
0.01
0.01
0.02
0.07
0.02
0.26
0.11
0.52
0.477
0.19
0.01
0.01
0.02
0.02
0.01
0.27
0.12
0.54
0.79
0.20
4.

TDS certificate printing would involve changes in the SAP script form for the certificate.
Also the Annual Returns may require changes to the existing reports
5.

Presently, XYZL is passing following entry for TDS :
Expenses A/c Dr
100
Vendor A/c Dr.
10
To Vendor A/c
To TDS payable A/c
100
10
In SAP System:
Expenses A/c Dr
100
To Vendor A/c
To TDS payable A/c
90
10
In the above scheme, the vendor a/c is credited with the full amount and simultaneously
debited with the TDS amount. However, in SAP the vendor a/c will be credited with the net
amount after deduction of TDS. Details of TDS deducted will also be available from
various reports. This will result in reducing the number of entries and XYZL adopting the
best practices followed across the world.
6.

The levy of cess on TDS has to be factored in .The solution delivered by SAP in the form
of notes has to be applied at XYZL
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FI Module
1.1.7.
Inflation
Questions:
Q:
1) Are there legal requirements regarding inflation in your country?
A:
No
Q:
2) If there are legal requirements for inflation, how do they impact financial
accounting: Do you use hard currency or do you use periodic revaluation?
A:
1.2.
Not applicable
General Ledger Accounting
CI template:
1.
General Ledger is the authenticated record based on which the Financial Statements are
drawn. The method of processing this record therefore gains importance and should
ensure complete accounting for all transactions correctly. The procedure of parking,
reversing of a document should be such that without proper authorization they are not
posted in the books. The GL processing at the year-end is complete only after the
necessary closing entries are passed.
Purpose :The main task of G/L accounting is the overall presentation of Financial Accounting. The
general ledger is the complete record of all accounting transactions, and thus represents
the main and current element in the rendering of accounts. This scenario describes the
process by which you define the G/L accounts and plan your general ledger. It also
describes the postings you make in the general ledger. Recording all business
transactions (primary postings as well as settlements from internal accounting) in a
software system that is fully integrated with all the other operational areas of a company
ensures that the accounting data is always complete and accurate.
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FI Module
Posting in the General Ledger:You can use the R/3 System to make the following posting transactions in the General
Ledger:
Standard G/L account postings
Transfer postings with clearing (offsetting)
Document parking
Recurring entries
The SAP FI General Ledger would enable the following:
1.
Automatic and simultaneous posting of all sub-ledger items in the appropriate

general ledger accounts (reconciliation accounts)
2.
Simultaneous updating of general ledger and controlling area
3.
Real-time evaluation of and reporting on current accounting data, in the form
of account displays, financial statements with different financial statement
versions and additional analyses.
Essentially, the general ledger serves as a complete record of all business transactions. It
is the centralized, up-to-date reference for the rendering of accounts. Actual individual
transactions can be checked at any time in real-time processing by displaying the original
documents, line items, and transaction figures at various levels such as:
1
2
3
4
2.
Account information
Journals
Totals/transaction figures
Balance sheet/profit and loss evaluations
There will be no need to check that control accounts has properly been updated in
subsidiary ledger or not because SAP system updated online reconciliation accounts on
real time basis of subsidiary ledger and asset class.
There will be no case of blank document number in the system where internally document
numbering range has been used. However if parked documents has been deleted the
document number always will be in the system due to control of system in respect of
traceability and for purposes of data integrity.
There will be no need of reconciliations within the internal system due to integrated feature
of SAP system. Update records will be maintained in G/L accounts and other Sub-Ledger
accounts that can help in getting Profitability and Balance sheet as and when required.
Further, Special general ledger accounts, which can be combined along with the vendor or
customer, account to avoid creation of a separate GL account.
Examples of special GL accounts :a. Advances to vendor/Customers
b. Tour advance
c. Imprest
d. Other Loans and advances etc.
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FI Module
1.2.1.
Postings in G/L
CI template:
1.
The system adheres to the document principle. This means that each posting is always
stored in the form of a document. Each document then remains in the system as a
coherent unit until it is archived.
Only complete documents can be posted in the system. "Complete" means that the
balance from the debit and credit items is zero. Further conditions for posting a document
are that you must enter the basic account assignment data, such as document date,
posting date, document type, posting key, account number and amount. You must make
entries in all the required fields (these are defined as "required" during system
configuration).
When you enter documents, the system checks whether these conditions have all been
met. It also checks the entries themselves, insofar as this is possible. For example, if you
have entered a key that is not defined in the system, the system issues an error message
to this effect.
2.

In the Legacy system there many areas where Duplication of work exist which would be
eliminated totally in the SAP system.
1.2.1.1.
Park G/L Account Document
Questions:
Q:
1) What is your procedure for parking and releasing documents?
Explanation: Are "Workflow" functions planned?

A:
The vouchers are punched by the junior level staff & this superior passes the
vouchers after verifications. The vouchers are posted in the system thereafter.
CI template:
1.
XYZL requires that vouchers should be posted in SAP system only after they have been
authorised by the appropriate authority and any changes to such vouchers be
accommodated before final posting.
2.
Parking of a document refers to the stage of stalling a document without posting it. It has
the following advantages:
User can update the entries and keep it for any clarifications before posting it. If opted for
the documents would be released for posting only by a higher authority for which the initial
user may not have authorization. You can park a document in Accounts Payable,
Accounts Receivable or General Ledger.
At the time of saving the parked document, You receive a message with the document
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FI Module
number. These numbers are assigned in the same way as in the standard document entry
function. When you save a parked document, transaction figures, asset values and control
totals are NOT updated, and the system does not generate any automatic postings. No
balance checks are made, but the balance is displayed in the parked documents
document overview. You can use the tax amounts determined on the basis of the data in
parked documents. A parked document can be changed and gradually completed. A large
number of header and item fields can be changed during this process, including the
amounts. Certain of the values you cannot change are the currency and the company
code.
3.

XYZL's requirement of authorisation control before final posting can be met by using
standard SAP functionality of document parking and posting the parked documents.
4.

XYZL to provide list of persons authorised for parking documents along with list of persons
authorised for posting the parked documents based on each type of transaction to enable
to give proper authorisations.
5.

In Legacy there is no system of parking the document and the documents are entered into
the system when the same has been manually authorised by the appropriate authority.
SAP will eliminate the manual work and the authorisation can be controlled electronically.
6.
If for some reason the user is unable to enter the complete document and wants to save
the information already entered, this can also be done by using the Park function. When
you save a parked document, the system does not generate any automatic postings.
Document parking can also be used for authorizations i.e. one person is just authorized
for creation of document and another person can check and post it. Necessary
authorisations for parking and posting will be given.
1.2.1.2.
G/L Account Posting
Questions:
Q:
1) What types of general ledger transactions do you process?
Explanation: Check document types

A:
[X] Down payment

[X] Bill of exchange
[X] General ledger
[X] Document journals
[X] Accrued/prepaid expenses
[ ] Cross-company code transactions
[X] Incoming payments
[X] Outgoing payment
Q:
2) Which internal documents do you need to print?
A:
Vouchers, statement of account, GL account & all type of reports,
CI template:
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FI Module
1.
The requirements in this regard are as under:
1.GL account postings should involve display of only the relevant fields at the time of
entry.
2.Easier inputable screens should be made available for faster keying in of data.
3.Processing time for a document should be minimal.
4.GL account display should give a drill down to document line items.
2.
The central task of G/L accounting is to provide a comprehensive picture of external
accounting and accounts. Recording all business transactions (primary postings as well as
settlements from internal accounting) in a software system that is fully integrated with all
the other operational areas of a company ensures that the accounting data is always
complete and accurate.
The FI General Ledger takes care of following features:
Free choice of level

Automatic and simultaneous posting of all sub-ledger items in the
appropriate general ledger accounts (reconciliation accounts)
Simultaneous updating of general ledger and cost accounting areas
Real-time evaluation of and reporting on current Accounting data.
At the time of posting transactions to GL the system creates a document, saves the data
to the database, and then makes the data available for updating. Lot of tools are available
for posting transactions either manually or automatically in the form of batch inputs.
3.

All types of transactions relating to GL account will be configured as per the requirement.
4.
Recording all business transactions, which are fully integrated with all the other
operational areas of a company and ensures that the accounting data is always complete
and accurate.
Automatic and simultaneous posting of all sub-ledger items in the appropriate general
ledger accounts (reconciliation accounts)
Real-time evaluation of and reporting on current accounting data.
1.2.1.3.
Recurring Entry
Questions:
Q:
1) Do you have documents that occur on a regular basis (monthly or quarterly, for
example)?
A:
Yes. monthly basis , e.g. Rent.

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FI Module
CI template:
1.
XYZL needs to pass few repetitive entries on month to month basis for example Rent etc.
These entries should be posted automatically every month.
2.
insurance. The following data never changes in recurring entries: Posting key , Account,
Amounts.
creating accounting documents. A periodically recurring posting made by the recurring
entry program on the basis of recurring entry of original documents.
Prerequisites
To create accounting documents from recurring source documents, you have to either run
the recurring entry program or schedule it to be run. The run dates you enter in the original
recurring documents are not sufficient to create accounting documents. You must run the
recurring entry program at the appropriate intervals and specify, by entering a settlement
period, which original recurring documents are to be included in the run. The recurring
entry program generates a batch-input session. This contains the accounting documents
that are to be created. After running the recurring entry program, process this batch input
session to carry out the postings.
3.

Periodically recurring entries are posted by the recurring entries program based on
recurring entry documents. This process is comparable to the standing order you give to
your bank to deduct your rent, premium payments, or loan repayments. Similar
requirements at XYZL can be handled using this option.
4.
Triggers / Inputs
In the recurring entry document, we can define when a posting is to be created with this
document. We have two options for scheduling. Postings can be made periodically or on a
specific date:
5.
For periodic postings, we need to specify the first and last day of execution, as
well as the interval in months.
If we want to specify certain dates, we can enter a run schedule in the recurring
entry original document
It will help in automatic posting of entries and thereby eliminate the changes of entries
being missed out, which happen periodically. This will also avoid duplication.
1.2.1.4.
Document Reversal
Questions:
Q:
1) How should a document reversal update the balances of the relevant accounts?
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FI Module
Explanation: Negative posting?
A:
By Negative posting.
Q:
2) Do you want do define a specific document type for reverse documents?
A:
Yes. separate category
CI template:
1.
XYZL would like to use the feature of automatic document reversal whereby there will be
no need to pass the reverse entry for mistakes at the time of document entry or reversal of
provisions etc eliminating the need for passing the reversal entry manually. Also negative
posting is required for document reversal with a separate document type.
2.
Document reversal for posted documents allows to reverse documents based on the
document numbers as against making a manual entry and neutralizing the effect of
unwanted entry. The original document is updated with the information of the reversal
document and both of them can be viewed sequentially through the established link. A
document can only be reversed if:
1
2
3
It contains no cleared items

It contains only customer, vendor, and G/L account items
It was posted with Financial Accounting
Its necessary to specify the reasons for the reversal transaction.

Negative posting :
Once a document has been posted in Financial Accounting, the system updates the
transaction figures. If negative posting indicator is set, you can use this document type to
reverse incorrect postings item-by-item by making negative postings and thus eliminate
their effect on transaction figures.
If one of the line items in a document is posted to the wrong account, for example, you
can enter an adjustment document to remove the item from the wrong account with a
negative posting and post it to the correct account with a normal posting.
3.

To meet XYZL's requirements separate reversal document type will be created for each
document type and negative posting will be allowed for reversals.
4.

Authorisation for reversal of documents should be given to very few personnel to have a
better control.
5.
In Legacy there is no system of automatic reversal. Separate GL entry is passed to
reverse a document and there is no facility of negative posting and separate document
numbers. In SAP system, these facilities fast and accurate entries with easy identification
of the reversed documents. The original document will contain the reference of the
reverse document and vice-versa.
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FI Module
6.

Separate document types and number ranges to be configured for reversal documents.
56
FI Module
1.2.1.5.
Mass Reversal
CI template:
1.
There might be situations where documents have been punched in with wrong data and a
facility is required to reverse documents collectively.
2.
Such situations can be overcome in SAP by reversing documents collectively through
transaction F.80
3.
In case large number of documents needs to be reversed, this functionality can be used to
fast and accurate entries.
1.2.1.6.
Accrual/Deferral Posting
Questions:
Q:
1) How do you handle accruals?
Explanation: Function "create accrual/deferral document" in the task level menu

A:
At present, provisions are made at the month end for preparing Balance Sheet.
CI template:
1.
XYZL is required to make provision at the end of every month which are reversed on the
first day of the subsequent month. They would like to have a functionality whereby these
entries are passed every month and reversed subsequently and no entry is missed to be
passed or reversed.
2.
The standard SAP feature of Recurring Entry / sample documents will be used for making
such provisions. The detailed process for the same has already been discussed above.
3.
Such a system will ensure that all the provisions are made every month and are reversed
subsequently and no document is missed out to be entered or reversed.
1.2.1.7.
Clearing
CI template:
1.
The clearing function is required for all accounts of vendors and customers so that
transactions can be tracked by their status as "open" or "cleared. This enables amongst
other things analysis of outstanding from or to parties and linking payments /credit debit
57
FI Module
memos form or to parties with the relevant invoicing and billing transactions.
For other GL accounts like bank receipt clearing and bank payments clearing accounts
which would receive offsetting entries at the time the bank statement is being uploaded.
2.
The basic prerequisite for clearing is that the accounts must be kept on an open item
basis. Customer and vendor accounts are always managed in this way. This allows to
monitor outstanding receivables and payables at any time. The open item management
option, however, must be defined for general ledger accounts.
This option must be set for example, for clearing accounts and bank sub accounts in order
to be able to track whether the business transactions posted to these accounts are closed
yet.
With the manual clearing option clearing is possible against any GL Accounts that are
maintained as Open Item Managed. These are relevant specifically for balance Sheet
items e.g. Payables ( as in the case of TDS payables, Taxes Payable etc. )
3.

Open item management :
Determines that open items are managed for this account.
Use
Items posted to accounts managed on an open item basis are marked as open or cleared.
The balance of these accounts is always equal to the balance of the open items.
Procedure
Set up accounts with open item management if offsetting entries are to be assigned to the
postings made to these accounts. Postings to these accounts represent incomplete
transactions.
Example:
A goods receipt/invoice receipt (GR/IR) clearing account should be managed on an open
item basis so that you can check at any time whether invoices have been received for the
goods received for an order.
Set up accounts without open item management if no offsetting entry is to be made
against a posting to this account.
Examples
Accounts that are managed on an open item basis include

Clearing accounts:
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FI Module
Bank clearing account

Payroll clearing account
Cash discount clearing account
GR/IR clearing account
Accounts that are not managed on an open item basis:
Bank accounts
Tax accounts
Raw material accounts
Reconciliation accounts
These are managed implicitly using the sub ledger open item function.
4.
Profit and loss accounts

Materials Management (MM) accounts posted with a posting key that has
account type 'M'
Triggers / Inputs
All the clearing accounts, bank sub-accounts, customer / vendor accounts etc will be
maintained on open item basis to facilitate open item management and clearing.
Reconciliation accounts will not be maintained on open item basis since these are only
control accounts and open item management can be controlled from respective subledger accounts.
5.
Presently, there is no system of open item management and clearing of accounts. Manual
exercise is done in order to obtain the open items in a particular account. With this
functionality in SAP, all the open items can be taken out automatically for example
customer invoices which have not been paid.
1.2.2.
General Ledger Account Analysis
CI template:
1.
The following tools are available in SAP for GL Account Analysis.
1. Line item Display.
2. Balance Display.
3. Various reports based on GL Accounts.
All available GL Account Analysis as provided in standard SAP R/3 Solution will be
available. Various standard reports based upon periodic comparison, structured list of GL
Accounts can be used for GL Analysis.
2.
Analysis of any account is an integral part of an accounting function. Accordingly scope is
available for the same. However analysis of line item is possible only if the account is
selected for line item management as otherwise only the totals are updated for the
transactions effected. No currency key is contained in the master records for customer
and vendor accounts. The account balance and the transaction figures are managed in
local currency only. The system translates the posted foreign currency amounts into local
currency. Line items in the account can be displayed in foreign or local currency. If you call
up the totals function, you can look at the totals in Document currency, Local currency with
59
FI Module
the posted amounts and Local currency per foreign currency valuation.
You set the currency for posting to customer and vendor accounts in the master records of
the reconciliation accounts. Generally, you enter your local currency in the master record.
You can then post to the customer and vendor accounts, to which the reconciliation
account is assigned in any currency. You can, however, also enter a foreign currency key
in the master record of the reconciliation account. In this case, you can post to the
customer and vendor accounts in the named foreign currency only. To create financial
statements, you must first valuate your foreign currency balance sheet accounts and the
open items posted in foreign currency. Also, SAP has the functionality to maintain
accounts on open item management basis. This enables segregation of transactions
based on their status as to open or cleared.
1.2.2.1.
General Ledger Line item Analysis
Questions:
Q:
1) Is there certain information that you wish to be able to display when you view items
online?
Explanation: The function "Create accrual/deferral document" in task level menu
A:
Yes detailed information for other attributes of the entry should be available like
Business area, cost center etc.
CI template:
1.
GL Line Item display is provided to all GL Accounts except reconciliation GL Accounts.
Since posting entries are only coming from FI and there is no integration with any other
SAP modules the only source of analysis of value posts to GL's will be through line item
display. In case of AP and AR since party-wise accounts are available Line Item Display
will not be maintained in GL Account level.
XYZL also requires to keep a track of employee-wise telephone expenses, telephone
expenses of connections in XYZL's name , depot rent etc. on monthly basis and would like
the system to give an error in case of re-payment.
2.
Line items are document items that were posted to a specific account. Line items can be
displayed as follows :
1 Open items
2 Cleared items
3 Noted items
4 Parked items
5 Items with special G/L transactions (in Accounts Receivable and Accounts Payable)
6 Items with customer or vendor items (in Accounts Receivable and Accounts Payable
You use line item display to display the document line items from the account. For line
item display, the system lists all the line items for an account.
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FI Module
You can display the line items for the following account types:
1
2
3
Customer accounts
Vendor accounts
G/L accounts
In order to display the line items for an account, the account must be managed with line
item display. This means that you have set the indicator Line item display in the master
data of the account.
3.
This setting is mandatory for customer and vendor accounts.
For G/L accounts, you have to make this setting in the account master data.
Triggers / Inputs
GL Account balances can be viewed by using T.Code - FBL3N. Various selection criteria
are available for viewing line items for example whether we want to see all the line items,
open items only, cleared items only, normal items, noted items, parked items etc.
4.
With line item display we can view each entry passed in an account with document
numbers and large number of other additional fields like cost centers, business areas etc
are also available for analysis.
5.
Description of Functional Deficits

XYZL would like the system to give an error in case the telephone expense of the
employee, depot rent for a particular month is being paid twice.
6.
Approaches to covering Functional Deficits

Employee-wise telephone expenses and telephone expenses of the connections in
XYZL's names, depot rent etc. can be controlled using the standard texts and assignment
fields. reports can be extracted and sorted based on these criteria. However, the system
will not give any error and these need to be monitored manually.
1.2.2.2.
Balance Analysis
Questions:
Q:
1) Which online analysis options do you use?
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FI Module
A:
Normally analysis is done through GL scrutiny and other MIS reports related to
Dispatch, Raw Material, Sales, PPC, outstandings are prepared Monthly, Quarterly and Yearly
basis.
CI template:
1.
SAP Standard GL Balance Analysis will be available for all GLs. The summary of Postings
made during a posting period can be analysed using this functionality. Yearly Closing
procedure and balance transfer activity will have to be run for transferring closing
balances from one accounting period to the next.
XYZL would like to analyse the details of various types of rates and taxes paid during the
year.
2.
The account balance displays the following:
1.
The opening balance (the balance carried forward from the previous year)
2.
The total of all transactions for each posting period, broken down into
debit and credit postings (transaction figures
3.
From these figures the system also calculates the following for the
account balance display:
4.
(a)
(b)
3.
Balance per posting period

The accumulated account balance
Triggers / Inputs
GL Account balances can be viewed by using T.Code - FS10N. Business area wise
balances can also be viewed.
4.

In case separate details are required for each type of rates and taxes paid during the year,
separate GL accounts should be opened for the major heads and for small expenses text
field can be used to extract the details.
5.
In case the account is maintained with line item display, we can directly go to the line itemwise details for the particular column / row by double clicking on the same.
1.2.2.3.
G/L Evaluations
Questions:
Q:
1) What daily, weekly, periodic, and ad hoc reports do you need for the general
ledger?
A:
On a monthly basis G/L , balances, comparisons, trends and other reports
CI template:
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FI Module
1.
XYZL requires reports to evaluate GL accounts for different periods based on trends,
comparisons etc.
2.
Various standard SAP standard reports are available for GL Evaluations. These are of
following types :
Periodic reports with Actual Comparisons.
Periodic reports with Actual and Plan Comparisons.
Structured List of GL Balances.
FSVs - specifically designed to organisational reporting requirement for P&L and Balance
Sheet items for different purposes.
Financial statement analyses for the following time periods:
1.Year comparisons
2.Half-year comparisons
3.Quarterly comparisons
4.Monthly comparisons
3.

An evaluation is a dataset you select and summarize according to predefined rules.
In a generation run, the system retrieves for each evaluation the necessary information
from the databases and stores it as either a drilldown list or a sorted list in a table. When
you display the evaluation at a later stage, the system only needs to access this table.
1.2.3.
Account Clearing [GL]
1.2.3.1.
Manual Clearing
CI template:
1.
other things analysis of outstandings from or to parties and linking payments /credit debit
2.
The SAP System offers the following procedures for accounts with open item
management
Posting with clearing

Manual account clearing
In one clearing transaction, you can process several accounts, different account types
(G/L account, customer, vendor), and accounts from several company codes. The clearing
program carries out automatic clearing within the System.
63
FI Module
Account clearing is to match an invoice entry with that of the related payment. Though the
transactions appear in the account the cleared items does not form the part of out
standings. Option available either to clear the account either at the time of payment or
subsequently separately.
In case of partial payment there is scope to show only the residual amount of a particular
invoice in which case a new document is generated by the system. Instead of the full
value of the invoice only the residual amount is displayed and carried further
You can use the following functions for clearing open items manually:
Posting transaction
Example Business transaction
1. Incoming payment
Credit memo for a check dep. at bank
2. Outgoing payment
Debit memo for an issued check
3. Post with clearingClearing the GR/IR clearing account
4. Outgoing payment
Debit memo for an issued check
Prerequisites for Clearing
The following prerequisites must be fulfilled in order for open items to be cleared:
The accounts must be managed on an open item basis
The accounts that can be cleared automatically must be defined in

Customizing for Financial Accounting.
The items to be cleared cannot trigger a posting, for example, cash discounts
or
exchange rate differences.

The items cannot be special G/L transactions. You use special functions to
clear these items.
The following example is reflected in the figure below.

(a) A customer pays several receivables amounting to 5,000 INR by check. You enter the
amount in the incoming checks account.
(b) To clear the receivables on the customer account, you choose the open items and
complete the document entry transaction.
(c) The amount you enter and the items you select must balance to zero. The system
automatically posts the incoming payment to the customer account.
In the clearing transaction, the system generates a clearing document that consists of the
items you entered manually, and the offsetting entries it created automatically to balance
the document to zero. The document then balances to zero.
The system then flags these items as cleared. It enters a clearing document number and
the clearing date in the cleared document items. These are the selected items and the
items for the offsetting posting. The clearing date is usually the posting date. If however,
the items you select for clearing have a posting date that comes after the posting date of
the clearing document, the system uses the most recent posting date as the clearing date.
The following illustration shows the item that the system posted automatically in the above
example. The item is cleared, and the corresponding document line item contains the
clearing data.
There are three functions you can choose from for posting with clearing. You can use a
basic function for any type of business transaction in which items need to be posted and
cleared simultaneously. The two other functions are specially designed for incoming and
outgoing payments.
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FI Module
You can:
Clear several accounts and account types
Clear items in any currency
Clear items and post any differences
Clear items and enter any number of line items (for example, bank charges
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FI Module
Manual Account Clearing
In this clearing procedure, you manually select open items that balance to zero from an
account.
3.

Most of the clearing and other accounts managed on open item basis will be cleared
automatically at the time of passing the offsetting entry. However, in few cases where the
clearing has not been done at the time of document entry can be cleared manually.
4.
Presently there is no system of open item management and correspondingly there is no
system of account clearing. This feature will enable XYZL to have a better control over the
outstandings and other clearing accounts as the status can be viewed real time.
1.2.3.2.
Automatic Clearing
Questions:
Q:
1) By what criteria do you clear open items?
A:
At present there is no system of open line item. however we reconcile the customers,
vendors & other G/L on regularly basis
CI template:
1.
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FI Module
2.
Automatic Clearing:
This program clears open items from customer, vendor and G/L accounts (in particular
GR/IR clearing accounts) automatically.
It selects all accounts which are specified in the value sets and have debit and credit
postings.
The following items are not cleared:
Noted items
Statistical postings and special G/L transactions of the type bill of exchange
Items containing withholding tax postings (country-specific).
Down payments can only be cleared if down payment clearing for the same amount
has been posted
The remaining open items are grouped together according to fixed system criteria:
Company code
Account type
Account number
Reconciliation account number
Currency key
Special G/L indicator.
The program also groups items according to a maximum of five user criteria (see below).
The program can clear items only if the balance of the group of line items selected
according to the above criteria equals zero in document currency (customer and vendor
accounts) or in update currency (G/L accounts). The clearing date is the date you specify
as the clearing date in the selection parameters. If the clearing procedure is carried out
successfully in an update run, the program also issues the clearing document numbers.
When running this program, the system blocks all accounts in which items can be cleared.
It releases them once the clearing procedure is over. Accounts blocked by other
transactions or specified in an automatic payment run are not included in the automatic
clearing run.
Special processing of GR/IR clearing accounts :
If the assignment of goods receipts to the corresponding invoice receipts using the
purchase order number and purchase order item is not sufficient (such as with scheduling
agreements), you can set the GR/IR accounts special processing indicator. This indicator
means that documents are assigned to GR/IR accounts using the material document in
addition to the purchase order number and purchase order item, assuming that a goodsreceipt based invoice verification is defined in the purchase order item.
Requirements
1. The user criteria must be defined in Customizing for Financial Accounting.
2. You have to select the account types that you want to include in clearing. You can limit
the accounts the program selects by specifying account numbers.
3. If you want to carry out clearing taking account of tolerances, you must define the
tolerances in Customizing and assign the tolerance groups to the accounts where
necessary.
3.

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FI Module
Alternatively, the accounts can be cleared automatically also based on freely defined
criteria like GR/IR clearing account will be cleared based on reference key, purchasing
document number, Line item and Business Area.
4.
1.2.4.
Account Balance Interest Calculation (G/L)
1.2.4.1.
Account Balance Interest Calculation for General Ledger
Questions:
Q:
1) For which G/L accounts do you calculate interest on balances? Give a brief
description.
A:
All bank accounts & in case of customers the interest is calculated on overdue
balances depending on terms & conditions of each customers.
CI template:
1.
The client requires monthly interest calculation (in a report form) for using it in various
reports for Term Loans, Working Capital Loans etc. from the system
2.
Interest calculation for GL accounts:
SAP offers a standard program that generates an interest scale (account balance interest
calculation) in local currency for G/L accounts, and outputs a list. This takes into account
the following :
1. Including a G/L Account in Interest Calculation
2. Calculation Period : The calculation period is derived from the interest calculation
frequency and the day of settlement. There are two instances that are possible:
(a) The key date of the last interest calculation is not maintained in the master record.
(b) The key date of the last interest calculation is maintained in the master record.
3.General Interest Terms
4.Minimum/Maximum Amount
5.Interest Rate Determination
6.Interest Postings and Account Determination
The system will automatically calculate the interest and post to the respective GL
accounts, if required.
3.

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FI Module
We can calculate interest on the balance of those of your G/L accounts which are
managed with open item display by using the balance interest calculation function in the FI
system. This function can be used, for example, to double-check the interest calculated on
your accounts by the bank.
However, in case of XYZL, the interest calculation on GL accounts will be for
memorandum purposes only i.e. a report will be generated giving the calculation of the
interest but the same will not be posted using the interest calculation program. Interest will
be posted at the time of bank reconciliation and this report will be used to cross-verify the
interest charged by the bank.
4.
Presently, interest is being calculated in excel and vouchers are passed in the system
subsequently. In SAP system interest on GL accounts will be calculated and posted to GL
accounts automatically.
5.

Interest calculation program for GL accounts needs to be configured for as per the
requirement for automatic calculation.
1.2.5.
Closing Operations
Questions:
Q:
1) Which internal and external evaluations belong to month-end closing?
A:
We do evaluations internally & externally of P&L , Balance sheet, provisions & other
reports on month end basis.
Q:
2) Which processes do you use to prepare the month-end closing reports?
A:
There is no automatic process but we have manual system of reconciliations,
valuations ,revaluation, depreciation, provisions & accruals.
Q:
3) Describe your current process and time frame for year-end closing.
A:
One Week for monthly closing. Two weeks for year end closing
MONTH END BALANCE SHEET PROCESSING
Before processing / finalisation of Balance Sheet, we check that following booking of

expenses,
process, reconciliation, working has been completed or not?
General Accounting
1
Booking of Directors' Remuneration
Salary & Wages (Incl. Contractors) provision
A
B
C
Freight outwards
Freight inwards (on HR)
Freight on Stores items
Godown Rent, if any
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FI Module
5
Office Rent provision for Branches
Telephone Expenses for Branches / Sahibabad
A
B
C
Utility & Facilities

Maintenance. Charges to Nehru Place Office
Elect. of I.T.T. Office ( Nehru Place Hotels, BSES ETC )
Electricity / Power Bills of SBBD. Plant ( Prov. upto date)
MCG Charges on electricity
10
A
B
C
D
E
FINANCE
Bills Purchase Account reconciliation & Vouchers
Bank Account Reco & Certificates
FLC Outstanding Liabilities Reconciliation for HR / Zinc
Packing Credit Account Reconciliation
Financial Institution's Reconciliation
11
A
B
C
Interest on Term Loans

--Guarantee Premium Paid to Banks
---Prepaid Interest for Commercial Paper
12
A
B
C
Interest on Deferred Credits

-- FROM ICICI
-- FROM UPSIDC
13
14
Interest on Working Capital Loans, if not paid

A
B
c
D
Interest Receivable From/OnPatti Strips Limited

Security Deposits like UPSEB
Margin Money with Banks
15
Booking of Prepaid insurance /Transit Policy to Exp.

-- For Inland Sales
-- For Export Sales
16
Conversion of Foreign Currency Fluctuation in respect to

--Term Loans
--- Cash Credit ( SBI WCDL, BOI WCDL)
-- Creditors/ FLC Outstanding Liab.
-- Debtors
Imports
17
1
2
3
18
SALES -Sbbd, Steel Div., Branches, including Sales Return

CREDIT NOTES
Credit Notes for Cash Discount to be issued from SBBD/ Branches
Credit Notes for Quality Discount to be issued from SBBD/ Branches
Credit Notes for Sales Returns to be issued From Sahibabad
DEBIT NOTES issued against Sales, supplementary bills, etc if any
PURCHASE :
1
2
3
4
DEBIT NOTES ISSUED TO VENDORS AG PURCHASE

PENDING JOB AUTHORITIES
PENDING MRNS--IMPORTS
PENDING MRNS--INDEGENEOUS
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FI Module
19
PENDING GRS OF STORES
Booking of Credit Note to be recd from

ISPAT
---- SAIL
---- Hindustan Zink
---- IOC
--- GAIL
20
1
2
3
4
21
EXIM EXPENSES
IMPORTED HR COIL
CHA Expenses
Expenses at Port
IMPORTED ZINC
CHA Expenses
Inland Collage
Rent payable to CONCOR
Freight from ICD to Factory
IMPORTED EQUIPMENTS & SPARES
CHA Expenses
Expenses at Port
EXPENSES OF EXPORT
Sea Freight
THC Charges
CHA Expenses
Handling Expenses
Local Freight at Mumbai
Expenses at Port
RAW MATERIAL
1
2
3
4
5
6
7
8
9
10
11
12
13
14
BILLS OF IMPORTED / INDIAN RAW MATERIALS

H. R. Coils
Zinc
Scrap
STOCK IN TRANSIT
Export Material lying at port
Imported H. R. Coil not received in factory
Imported Zinc not received in factory
Indian H. R. Coil & Zinc Invoiced before Balance Sheet Date
OTHERS
EXPENSES OF BRANCHES
OTHER RECONCILATION
Sister Concern Reconciliation
Inter Firm Reconciliation
Unpaid Dividend
Excise Reconciliation
Excise Duty on Stock Transfer to Steel Division
Bonus
Addition to Fixed Assets
Calculation of Depreciation (As per Companies Act)
Calculation of Depreciation (As per I.T. Act)
Quantitative Reconciliation
Stock Valuation
Deferred Revenue Exp. (W/Off)
Commission on Export Sale
Sales Tax Recoverable
Consultancy Charges
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FI Module
22
1
2
3
4
5
6
7
8
9
10
11
12
13
14
23
*
For 31St March Only

Audit Fee
Amount Transfer to Debenture Redemption Reserve
Notes on Accounts
see below
Calculation of Deferred Tax Liabilities
Calculation of Debenture Redemption Reserve
Valuation of DEPB License/ Advance License
Calculation of 80 I
Reconciliation of Advance License Purchase
Conservation of Energy
Leave encashment
Gratuity
Cash Flow Statement
Balance Sheet Abstract and a Company General Profile
ICICI Progress Report
Notes on Accounts
Estimated Amount Of Contracts Remaining To Be
Executed On Capital Account And Not Provided For
(Net Of Advance) As On 31/03
Detail Of Contingent Liability In Respect Of Sales

Tax As On 31.03
Detail Of Contingent Liability Of Excise Duty As On 31/03
Letter Of Credits
Bank Guarantees Given
Corporate Guarantee Given By XYZL In Favour Of Bl
Detail Of Bill Discounted As On 31.03
Unpaid Liabilities On Shares Forfeited
Amount Due To SSI
*
*
*
*
Value of Import on CIF Basis

Raw Material
Capital Goods
Packing Material
Stores/ Spares Parts
*
*
*
*
*
*
Expenditure in Foreign Currency

Travelling
Sales Commission
Technical Consultancy
Subscription
Interest
Bank Commission
Earning in Foreign Exchange ( FOB value of Exports)
Value of Imported/ Indigenous Raw Material / Stores
and Spares Parts Consumed
*
*
*
Remittance in Foreign Currency on A/C of Dividend

Number of Non Resident Shareholders
Number of Equity Shares held by them
Amount of Dividend paid
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FI Module
24
DEBTORS OUTSTANDING FOR MORE

THAN SIX MONTHS AS ON 31.03
Amount of Unsecured Loan Payable within one year from

the date of balance sheet 31.03
DETAIL OF ASSETS PURCHASE ON HIRE PURCHASE BASIS
25
FOR TAX AUDIT PURPOSE

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Expenditure incurred at club

Expenditure by way of penalty or fine
CST Payable
SST Payable
Quantitative Information of Raw Material & Finished Goods
Calculation of 145 A
Accounting Ratios
Calculation of Depreciation (As per I.T. Act)
Detail of Employee's Contribution to P.F. and deposit thereof
Detail of Employee's Contribution to E.S.I.. and deposit thereof
Detail of Employer's Contribution to P.F. and deposit thereof
Detail of Employer's Contribution to E.S.I.. and deposit thereof
Particulars of loans or deposits accepted during the year
Particulars of repayment of loans or deposit during the year
Form 29 B under section 115 JB of I.T. Act, and detail thereof
The detailed Period end / year end process is enclosed herewith

Q:
4) How do you specifically handle reporting for taxes on sales and purchases and
other statutory requirements?
A:
By Systems, Reports & manual records are also maintained
Q:
5) What are your reconciliation procedures?
Explanation: Within Financial Accounting: (Does G/L accounting tally with sub-ledger
accounting? Does Financial Accounting tally with Materials Management, Assets Accounting,
Controlling, and so on?)
A:
Reconciliation is done for banks, branches, inter units within financial accounting.
Reconciliation is done between Excise & FI, FI & Marketing & FI & Purchase & with other
external parties.
CI template:
1.
XYZL wants that the closing operations be carried out in a manner that reduces
manual monitoring and supports MIS generation in time. Closing operations
recur periodically and can be subdivided as follows
1.Month-End Closing.
2.Year-End Closing
The closing operations component supports the preparation and carrying out of
activities required for closing. For this purpose, the system provides various
standard reports that you can use to generate evaluations and analyses
directly from the posted account balance.
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FI Module
2.
1.Day-end closing includes all activities required at the end of the day to check that
business transactions posted have been correctly processed. At day end the document
journal can give a list at various summarization levels of the transactions that have taken
place.
2.Following activities as part of month-end closing
a. Open and close posting periods :XYZL can close one or more posting periods in the
past for posting, and permit posting to be made to one or more current or future posting
periods.
bused different reports like :Compact journal, Balance audit trail, Accounting reconciliation,
Account balances, Open item list
3.At the beginning of the new fiscal year, open the new posting periods and carry forward
the balances from the previous year. Then prepare and create the financial statements,
document the business transactions using the balance audit trail, and archive those
documents you no longer need online. The first posting in the new fiscal year
automatically opens that fiscal year. You must however have opened the relevant posting
period first.
The SAP System offers a range of reports with which you can carry forward balances into
the new fiscal year. During this process the profit and loss accounts are carried forward to
one or more retained earnings accounts. The balances on the balance sheet accounts are
simply carried forward into the new fiscal year. You do not have to create special opening
financial statements.
Any postings you make in the old fiscal year automatically adjust the relevant carryforward balance. You do not have to close the old fiscal year and make the closing
postings before opening the new fiscal year
You can use the closing operations component to support the preparation and carrying out of
activities required for closing. For this purpose, the system provides various standard reports that
you can use to generate evaluations and analyses directly from the posted account balance.
3.
Triggers / Inputs
The following Closing Operation Activities are typical to XYZL and will be addresses
through standard SAP functionality in this regard.
1.
Valuating Open Items in Foreign Currency: Post Exchange Rate Differences
In case on Export Sales any open invoices should be analysed at period end and
invariably at the Fiscal Year end for any revaluation on account of Foreign Exchange rate
fluctuations.
In this procedure, we valuate items in foreign currency at the end of a period in order to
post expenses or revenues from currency fluctuations.
If the program for all open items in foreign currency is run, then all items posted to
accounts that have open item management would be valuated. The individual valuation
principle determines the way valuation is carried out: only individual items that are still
open on the key date are considered for valuation.
The system will post any Gain / Loss on account of Foreign exchange rate fluctuation in a
specified GL P&L Account. For expense from currency valuation, the posting is:
Debit: Gain / Loss on A/c of Currency Valuation ( in case of Loss )
Credit: Foreign Customer / Vendor Account
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FI Module
2. Grossing up of Vendor Balances and regrouping for Financial Statement
Reporting
SAP provides following functionalities for reclassification of Debit Balances in vendors into
Receivables and Credit Balances in Customers to Payables. This is primarily done
through postings made in specific adjustment accounts and grouping of GLs in Financial
Statement Versions.
3. Allocation of Customer Receivables based on Remaining Life:
Under Schedule VI requirements the Receivables need to be categorised for more than 6
months and less than 6 months. Standard SAP functionality to allocate receivables and
payables according to remaining life to special reconciliation accounts, will meet the
requirement to this effect.
4.

The detailed procedure for process and treatment for Stock-in-transit has been mentioned
in the annexure.
1.2.5.1.
Foreign Currency Valuation for Open Items
Questions:
Q:
1) Describe your foreign currency revaluation process and which valuation
methods/exchange rate types you use.
A:
The receivable & payables (balances) in foreign currency are revaluated as on the
reporting date. The gain or loss arising out of foreign exchange translation is booked.
Q:
2) In which cases do you post foreign currency revaluations manually?
Explanation: F-05
A:
All the foreign currency revaluation are posted manually.
CI template:
1.
Since XYZL is having substantial volume of exports and imports and correspondingly
large number of foreign currency transactions , they require a program to automatically
revaluate the receivable & payables (balances) in foreign currency at the reporting date
and automatically post the gain or loss arising out of foreign exchange translation.
2.
Foreign Currency Revaluation for Open Items :
The open items of Customers / Vendors accounts are valuated. The result of the
valuations can be stored per valuated document and posted to adjustment accounts and
P&L accounts.
Valuation process
The customer and vendor open items on the key date are read and balanced by account
or group and currency.
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FI Module
Account determination
The postings for accounts managed on an open item basis in the sub-ledger are posted to
an adjustment account and a P&L account.
The postings to G/L accounts not managed on an open item basis are posted to
adjustment accounts if, as above, entries exist for this account. Otherwise, the exchange
rate difference key from the G/L account master record is used for the account
determination.
Example
An invoice for 100 USD is posted using the local currency 4600 INR.
On the key date, the item is valuated using an exchange rate of 45.00. A valuation
expense of ( 4600 - 4500 ) 100 INR arises. This is posted as follows:
Loss from Foreign currency revaluations Dr
100
To FS Adjustment A/c
100
Foreign currency revaluations can be of two types :
Valuation that affects the financial statements
For a valuation that affects the financial statements, the valuation difference is noted in the
item. The valuation difference is cleared when the invoice is cleared.
A valuation that does not affect the financial statements
For a valuation that does not affect the financial statements, all postings are reversed at
the reverse date. You can enter a special period as the reversal period.
3.

Foreign Currency transactions with Foreign Vendors and Customers that are open as on
closing date can be revalued for any foreign exchange fluctuations that have taken place
after the transaction has been posted. Exchange rate differences resulting from the
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FI Module
valuation of open items are automatically posted to specific accounts that will be
configured in the system. When valuating open items, the system posts to a balance sheet
adjustment account and an account for currency exchange differences resulting from the
valuation. This could be either a gain or a loss.
4.
Foreign currency revaluations will be carried out and posted automatically at every period
end as compared to existing practice of calculating the differences in excel and passing
manual entries.
1.2.5.2.
Foreign Currency Valuation for Balances
Questions:
Q:
1) Describe your foreign currency revaluation process and which valuation
methods/exchange rate types you use.
A:
The receivable & payables (balances) in foreign currency are revaluated as on the
reporting date. The gain or loss arising out of foreign exchange translation is booked.
Q:
2) In which cases do you post foreign currency revaluations manually?
Explanation: F-05
A:
All the foreign currency revaluation are posted manually.
CI template:
1.
Similar to requirement to calculate Foreign currency revaluations for open items there is
need to carry out revaluations of foreign currency GL account balances for example
foreign currency loans etc.
2.
Foreign Currency Revaluation for Balances :
The Foreign currency balance sheet accounts i.e. G/L accounts that are managed in a
foreign currency are valuated. The result of the valuations can be stored per valuated
document and posted to adjustment accounts and P&L accounts.
Valuation process:
The G/L account balances on the key date are read and balanced by account or group
and currency.
Account determination:
The postings for foreign currency accounts in general ledger are posted to an adjustment
account and a P&L account.
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FI Module
The postings to G/L accounts not managed on an open item basis are posted to
adjustment accounts if, as above, entries exist for this account. Otherwise, the exchange
rate difference key from the G/L account master record is used for the account
determination.
Foreign currency revaluations can be of two types :
Valuation that affects the financial statements
For a valuation that affects the financial statements, the valuation difference is noted in the
item. The valuation difference is cleared when the invoice is cleared.
A valuation that does not affect the financial statements
For a valuation that does not affect the financial statements, all postings are reversed at
the reverse date. You can enter a special period as the reversal period.
3.

Foreign Currency GL account balances as on Closing Date can be revalued for any
foreign exchange fluctuations that have taken place after the transaction has been posted.
Exchange rate differences resulting from foreign currency balance sheet accounts are
automatically posted to specific accounts that will be configured in the system. For the
valuation of foreign currency balances therefore, to post the exchange rate differences
arising on valuation, a revenue and expense accounts under a key will be defined.
4.
Foreign currency revaluations will be carried out and posted automatically at every period
end as compared to existing practice of calculating the differences in excel and passing
manual entries.
1.2.5.3.
Regroup Receivables/Payables
Questions:
Q:
1) Do you classify open vendor/customer items in the financial statements according
to short, medium, or long term receivables/payables? Describe your procedure.
A:
We classify open customers only according to the age i.e. more than or less than 180
days .
CI template:
1.
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FI Module
XYZL needs to regroup the customers based on their outstanding of less than and greater
than 180 days as per the requirement of Schedule -VI of the Companies Act,1956
2.
SAP offers standard reports which provide the desired data to meet the above
requirement. This report can be used to sort the receivables according to their age i.e.
less than 180 days and more than 180 days.
1.2.5.4.
GR/IR Clearing Account Maintenance
Questions:
Q:
1) Do you show goods receipts without an invoice and invoices without goods
receipts separately in your balance sheet reporting?
A:
Invoices without goods receipts are shown separately as stock in transit & grouped
under inventory in the balance sheet, in some cases the goods are also received without the
invoices, Liability is booked at the month end.
CI template:
1.
XYZL has cases wherein at the period end Invoices have been received from the vendors
without goods receipts which are shown as Stock in transit and also cases wherein goods
are received without the invoices for which the liability is booked at the month end which is
reversed subsequently. They require a program to sort out these cases and make
postings automatically.
2.
GR/IR Clearing Accounts Maintenance:
SAP offers a program that analyzes goods receipt/invoice receipt (GR/IR) clearing
accounts at a specified key date, and generates adjustment postings if necessary. These
are needed in order to display the following business transactions correctly in the balance
sheet:
Goods delivered, but not invoiced
Goods invoiced, but not delivered
The program selects all items in GR/IR clearing accounts that are open at the specified
key date. If the open items per purchase order number and item in local currency do not
balance out to zero, adjustment postings are created in a batch input session for these
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FI Module
items. With a credit balance, the transaction is seen as "delivered, but not invoiced". With
a debit balance, the transaction is seen as "invoiced, but not delivered".
Adjustment postings are created per company code, GR/IR clearing account,
reconciliation account, and business area. All postings are reversed at the specified
reverse posting date. If no date is entered, the program reverses the postings on the day
after the key date.
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FI Module
Example:
Goods receipt 1000 INR posted to GR/IR account. The following postings are possible:
In case of Goods delivered, but not invoiced :
GR/IR clearing account Dr
1000
To Liability for Goods Delivered but not Invoiced a/c
1000
This balances the GR/IR account and the adjustment account to 0.
The case where Invoices have been received but goods have not been delivered will
generally not be applicable in XYZL's case since it has been decided to follow GR based
Invoice verification in all the cases i.e. no Invoice will be booked prior to booking of GR.
However, this may be required in case of imports where Invoice verification needs to be
done prior to GR for making payment of customs duty.
3.
Automatic clearing of GR/IR account and automatic transfer postings for month end
adjustment entries will be made in contrast to the existing practice where this exercise is
carried out manually.
1.2.5.5.
Flat-Rate Individual Value Adjustment due to Default or

Credit Risk
Questions:
Q:
1) What procedure to you use to determine and post a flat-rate individual value
adjustment?
A:
No such procedure is being followed.
CI template:
1.
XYZL is not making a Flat Rate Individual value adjustment for Accounts Receivable.
Instead they are making provisions after review of the debtors on case to case basis.
2.
We can carry out flat-rate value adjustments using a straightforward G/L account posting.
To do this, post the amount to an appropriate expense account and to a balance sheet
account. You display the balance sheet account under the same balance sheet item as
your normal accounts receivable. However, such a scenario is not applicable in XYZL's
case. It has been decided that manual provisions will be made at the year end as per the
existing practice.
1.2.5.6.
Financial Statement Creation
Questions:
Q:
1) Do you create financial statements on a monthly, quarterly or yearly basis?
A:
Monthly basis
CI template:
1.
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FI Module
XYZL has primarily two types of Financial reporting requirements. One for statutory
purpose and as per the requirements of Schedule - VI of The Companies Act,1956
The other requirement is for internal MIS. The MIS requirement is monthly. XYZL has
prescribed formats for reporting for MIS. Most of the information required for internal
monthly Financial statements thru standard reports delivered by SAP and the same
Financial statement version used for statutory reporting can also be used for this purpose.
While the FSV will be reported through FI-GL module the various reports for MIS will be
largely reported from Controlling module based on Profit Centre Accounting and Cost
Centre Accounting.
XYZL is required to include the Trial Balance of 28/4 plant ( outside the scope of SAP) for
monthly consolidation.
2.
Financial Statement Versions:
It basically defines versions ( format and groupings ) you need to create a balance
sheet and profit and loss statement.
You can define versions for a specific chart of accounts, for a group chart of accounts, or
without any specific assignment.
You then determine the financial statement items for your version.
You assign groups of accounts to the items at the lowest levels of the hierarchy. You can
select the criteria that determine which items the accounts are displayed in. For example,
accounts or groups of accounts can be assigned to particular items based on their
balance.
Alternatively, you can also assign functional area intervals at the lowest level of the
structure, instead of account intervals. Either account intervals or functional area intervals
can be assigned to a financial statement item. You must explicitly define financial
statement versions to which functional areas are assigned as such. You do this by setting
the "Functional area allowed" indicator. This financial statement version can then also be
used by the notes to financial statement in the G/L account information system.
Before preparing the financial statements in Financial Accounting, you must first perform
some preparatory work and period end / year end activates in other applications as well
such as Asset Accounting and Materials Management, Sales & Distribution, Production
planning etc.
3.

To include the Trial balance of 28/4 plant which is outside the scope of SAP, following two
options have been proposed to XYZL,
Option -1 :
To pass monthly Journal entries in SAP. Separate GL accounts will be opened to facilitate
such entries. In this case Financial statements can be generated from SAP system
directly.
Option-2 :
To keep 28/4 plant totally out of SAP and consolidation to be done separately outside SAP
in excel.
XYZL is willing to follow Option no.1 whereby monthly Trial Balance of 28/4 tube
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FI Module
plant will be uploaded in the system thru BDC and separate GL accounts will be
opened for incorporating the same.
Detailed strategy for dealing the transactions related to 28/4 plant has been discussed in
the annexure.
4.
Different Financial Statement Versions can be created as per the requirement. This will
enable in viewing the Financial Statements from different perspectives automatically.
1.2.5.7.
Periodic Reports
Questions:
Q:
1) Which periodic reports do you carry out in general ledger accounting?
Explanation: see subsidiary ledgers too.

A:
Reports related to expenses, provisions , Balance Sheet, P/L Account, Cost centre
analysis, Business Area, Profit Centers, Costing, Receivable & Payables, monthly reports for
Depreciation, Acquisition, Retirement & Transfers etc.
Q:
2) What type of information flow do you have for the results of periodic asset
reporting?
A:
Depreciation is posted on annual basis and acquisition, retirement & transfer are
posted at the time of occurrence of the event. Information is required in respect of
acquisitions, sale, transfer, profit/loss on sale, depreciation posted etc.
Q:
3) What are the critical monthly, quarterly and annual reports that you need for Asset
Accounting?
A:
Depreciation, acquisition, retirement, transfer.
Q:
4) Which kind of reports do you use to reconcile asset accounting with the general
ledger?
A:
Manually
Q:
5) Are there any particular reports you would like for low value assets?
A:
Yes we would like to have a report for low value assets, less than 5000/-
Q:
6) Are there any particular reports you run for leased assets?
A:
Yes we would like to have a report for Leased Assets as per AS-19.
Q:
7) How do you create your inventory lists? Do you use barcodes?
A:
No, we dont have barcodes, we manually feed the item purchased in the system as
per the assigned codes by the stores.
Q:
8) By which organizational units (or combinations of units) are asset reporting
functions structured (for example, company, cost center etc)?
A:
Plant-wise, Cost Center-wise & Business-area wise
CI template:
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FI Module
1.
2.
The reporting requirements are attached in the annexure along-with formats. One of the
major requirement of XYZL is to have separate columns for Debit and Credit transactions
for GL , Customer and Vendor accounts.
Large number of standard SAP reports are available in the system and majority of
required information can be extracted from them. However, specific reporting
requirements and its applicability and scope etc has been dealt with separately in the
annexure.
3.

XYZL requires to have separate columns for Debit and Credit transactions for GL,
Customer and Vendor accounts when displaying the reports for these accounts. In
standard SAP, there is only one column and both debit and credit transactions appear in
the same column and the credit entries are identified by the (-) ve indicator. Also, debit and
credit transactions can be segregated. But XYZL requires to have the separate columns
as per the existing system.
4.

Development needs to be carried out for the reports related to GL , Customer and vendor
accounts.
1.2.5.8.
Carry Forward G/L Balances
Questions:
Q:
1) How many retained earnings accounts do you have?
A:
One
CI template:
1.
The carry forward of G/L Balances will be done annually at the end of Fiscal year. XYZL
will follow Apr-March Financial year with 12 periods corresponding to each calendar
months and also 4 special periods for any cut over entries to be made as a year end
exercise.
2.
When the fiscal year changes, you can carry forward balances from the previous fiscal
year(s) to the new fiscal year using the Balance carry forward function.
You use the Balance carry forward function to carry forward the balances of accounts from
the previous fiscal year to the beginning balance of the new fiscal year. You can carry
forward (a) Balance sheet account balances (b) Profit and Loss account balances to a
retained earnings account
At the end of the fiscal year, you can carry forward the balances of your balance sheet
accounts to the beginning balance of the new fiscal year. All account assignments are
transferred for balance sheet accounts when the balance is carried forward.
You can also carry forward the balance of your profit and loss accounts to a retained
earnings account for the new fiscal year. No account assignments are transferred for profit
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FI Module
and loss accounts. You can also define your system so that additional dimension
information (such as the Business Area) is carried forward for the profit and loss accounts.
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FI Module
3.

Balance carry forward activity will take place on annual basis. Balances of Balance sheet
accounts will be carried forward to the next year and balances of P&L accounts will be
carried forward to Retained Earnings Account. In case of XYZL only ONE Retained
Earnings account will be used.
4.
After carry forwarding the balances to the next Fiscal year maximum of Four special
periods remain open for doing entries for last fiscal year, any entries done during these
special periods automatically updates opening balances for the current Fiscal year.
1.2.6.
Integration
Questions:
Q:
1) How should the areas asset accounting, overhead cost controlling, materials
management, payroll, and sales and distribution be integrated with general ledger accounting?
Explanation: You should also give consideration to special account assignments and
document summarizations.
A:
Interfaces / Account determination with asset accounting, overhead cost controlling,
materials management, payroll, and sales and distribution is required for online postings. The
relevant areas are covered in detail under respective heads.
Q:
2) Do you wish to allow postings to decentralized general ledgers?
A:
No
CI template:
1.
Presently the Integration requirement for FICO modules can be categorised into 2 broad
areas :
1. Integration with SAP sub modules
2. Integration with Non-SAP systems.
All the modules/sub-modules of SAP and other external systems like IVL etc.
required should be integrated with each other.
2.
Triggers / Inputs
As explained in other parts in this document the Integration between FI-GL and other
modules and systems can be summarised as follows :
The present scope will cover Asset Accounting and Controlling. Postings in Fixed Assets
Module will be integrated with FICO through standard SAP integration methodology.
Postings with regard to Asset Acquisition, Depreciation, Retirement, Gain/Loss on Sale will
be posted to GL through Account Assignments configured for XYZL.
Value flow in CO will be primarily through FI Documents posted either manually or through
BDC. Relevant Controlling Account Assignment objects e.g. Profit Centre, Cost Centers
and Internal Orders will be captured at the document posting stage.
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FI Module
1. Integration within Accounting and Controlling Module:
1.
2.
3.
4.
Integration with Assets Sub-Module.

Integration with AP/AR Sub-Modules.
Integration with Bank Accounting Sub-Module.
Integration with CO -Cost Element Accounting, Cost Centre
Accounting, CO - Product Costing
5.
Integration with EC - Profit Centre Accounting and CO - Profitability
Analysis.
2. Integration within SAP Systems :
1. Materials Management Module
(a)
(b)
(c)
(d)
(e)
(f)
(g)
GR against PO
Gods Issue against Production order/ Process Order
Finished Goods Receipt
Valuation of Material from time to time
Material valuation w.r.t. PCA
Vendor Billings & Invoice verifications
Vendor Debit / Credit Notes
2. Sales & Distribution Module

(a).
(b)
(c)
(d)
(e)
(f)
Billing Document
Material Issue
Product Cost pricing wart. PCA
Customer payments
Profitability reports wart. CO-PA
Customer Debit / Credit Notes
3.Production Planning Module

(a)
(b)
(c)
Material issue against Production order / Process Order

Production or Process costing
Order settlement
4. Quality management module

5. Plant Maintenance module.
3. Integration with Non-SAP Systems :
1. IVL.
2. Salary Upload from the existing package.
3.

Since SD/MM/ CO modules will be integrated with FI, no accounting entries will be passed
at the sending and receiving locations as per the existing practice. In SAP only Inventory
accounts of both the locations will be affected. The detailed procedure has been
discussed in annexure.
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FI Module
1.3.
Accounts Payable
CI template:
1.
The general requirement of XYZL wart. Accounts payable is to keep a control over vendor
Billings, payments, Debit/ credit notes, outstandings and generating various reports in this
regard.
2.
The Accounts Payable application component records and administers accounting data for
all vendors. It is integrated with FI - GL module. The system automatically makes postings
in response to the operative transactions. In the same way, the system supplies the Cash
Management application component with figures from invoices in order to optimize
liquidity planning.
Payables are paid with the payment program. Outstanding payables are settled by the
payment program, which supports all standard payment methods (such as checks and
transfers) in printed form. Country-specific payment methods are also covered by this
program.
Postings made in Accounts Payable are simultaneously recorded in the General Ledger
where different G/L accounts are updated based on the transaction involved (payables
and down payments, for example). The system contains due date forecasts and other
standard reports that you can use to help you monitor open items.
Balance confirmations, account statements, and other forms of reports will be configured
to suit the various requirements in business correspondence with vendors. There are
balance lists, journals, balance audit trails and other internal evaluations available for
documenting transactions in Accounts Payable.
3.

The Accounts Payable module of FI is fully integrated with MM module. The relevant data
is automatically transferred to FI real time. For e.g. when a vendor Invoice verification is
posted in MM, the vendor account is credited automatically in FI and the liability for the
same is created. The payments can be released to Vendors with reference to the such
Invoices.
4.

The SAP system keeps online real time tracking of the status of P.O. , history of P.O. etc.
The system always keeps a track of the outstanding liabilities for which material has been
received but invoice has not been received through GR/IR Account. The inventory is
automatically updated in the system when the goods are received in the stores through
online integration feature of SAP system.
5.
There is no need to create outstanding liabilities manually for the material for which
invoices have not been received, in the system. The system online take care of that
automatically. In SAP there will be control accounts in all vendor masters i.e. B/Sheet can
be generated any time and there will be no need to make adjustment postings for the
same. There will be Sub-Ledger accounting for Vendors.
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FI Module
1.3.1.
Vendor Down Payments
Questions:
Q:
1) In which cases do your vendors require you to make a payment prior to the
processing of an order or shipment?
Explanation: Comment for PS: Note that it is possible to schedule a down payment in the
invoicing plan for an externally processed or general costs activity, or for an externally
procured material component within the project.
A:
Down Payments are made along with the purchase orders.
Q:
2) Please describe the complete process currently in place for down payments,
including the postings that are generated.
Explanation: Comment for PS: Note that it is possible to schedule a down payment in the
invoicing plan for an externally processed or general costs activity, or for an externally
procured material component within the project.
A:
In projects we make advance payment once the orders are finalised, further the
advances are paid against the running bills of the parties, which are adjusted when the final
bills are processed.
Advance payment to vendors ( consumable stores & spares) in foreign currency
Advance payments are made to foreign vendors in foreign currency on the request of
purchase department
The request is received with complete set of papers( purchase
order, etc)
Vendor A/C
Bank Charges
To Bank Cc A/C
Q:
3) Do you plan on paying down payments with the automatic payment program?
Explanation: Comment for PS: The transfer posting of cash items is a process that takes
place at the end of the period. It must be carried out before you can see the current cash
items in the project.
A:
No
CI template:
1.
Vendor Down Payments are made as advances against Purchase Orders. The client
requires to keep a track of all the down payments made and also ensure that TDS can be
deducted at the time of down payment. This down payment must be cleared with the
vendor Invoice posted subsequently. The vendor balances should be available
considering down payments and also without considering the same.
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FI Module
2.
Vendor down payments refer to the advances to the vendors. Down payments are
maintained separately from the regular a/c as a Special General Ledger Transaction. At
the time of making down payment, the system will prompt for PO number against which
the down payment is being made and after making the payment the status of PO wart.
down payments made is updated automatically. The down payments can be cleared
against the Invoice at the time of payment against the Invoice or separately by using
T.Code F-54.
Down payments must not be balanced with other receivables or payables and must be
displayed separately on the balance sheet. A receivable or payable results from the
delivery of a tangible asset or the performance of a service.
On the balance sheet, down payments made are displayed on the assets side and down
payments received on the liabilities side. Down payments made are further divided,
depending on whether they are:
Down payments on tangible fixed assets

Down payments on intangible fixed assets
Down payments on inventory stocks
General down payments.
Once you have received the goods or services for which you made a down payment, you
need to clear this payment for the final settlement either manually or using the payment
program. The down payment must no longer be displayed as such.
3.

The system will show separately through special G/L concept down payment to vendor
account comparing to present practice where down payment is directly debited to vendor
account. Also there will be full control over the down payments made and the same can be
easily tracked in contrast to the existing system where it becomes really difficult to track
and reconcile down payments.
4.
i.
The down payment will be treated separately as compared to normal

transaction so that user can analyse down payments from customers.
ii.
The system always keeps a track of the currency and rate at the time of
transaction. Also document currency and local currency are available at the time
of analysis.
5.

Special GL transaction would have to be configured for this purpose.
1.3.2.
Invoices and Credit Memos
Questions:
Q:
1) What are your internal procedures and controls from the point of invoice receipt to
payment?
Explanation: Course of action for invoice verification without MM
A:
The invoices are received by stores along with the material where the material is
inspected & tested and then are feuded in the system item-wise. These invoices are then
received by purchase department for rate verification, then the invoices are audited & the data
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FI Module
received by purchase from store is flagged & transferred to accounts for posting. Payments
are made after reconciliation of accounts & purchase considering the advances & TDS aspect.
Flow Chart for Purchase Accounting
1
2
3
4
5
6
Physical MRN / Bills are recd. from the purchase department after all verifications from
Audit.
Flagged data is also recd from purchase department for the above MRN /Bills.
The data from Purchase department is converted to Accounts data.
Bills are checked, including other checks like Partys name, code, bill no, bill date, passed
amount etc.
whether these have been correctly posted by the Purchase department.
Passed amount of bills are tallied with the MRN value physically .
Along with the bills the debit notes are also recd from purchase department for which the
entries are passed in accounts.
A
Party A/c
Dr
Respective Exp Cr
Debit notes for cash discount are recd separately from purchase department & entries are
passed
separately in account.
A
Party A/c
Dr
Respective Exp Cr
All the Vouchers for debit notes are generated, by entries in a program.
9
Purchase vouchers are prepared in three units- Unit II, Steel Division & Power
Division.
10
Purchase vouchers & purchase register are then extracted in each unit from the
program
A sample of purchase vouchers for all the divisions are attached
11
Job Authorities are also recd from purchase department, entries for
which are passed in accounts after taking into consideration the TDS,
Debit notes, Value of job with JA Slips.
When the payment is made to the parties

1
Payments to the Suppliers are made in advance as well as after the processing of the bills
In case of advance:( A ) The advances can be paid in cash as well as through Cheques.
( B ) The purchase department Sends the request for the advances to the accounts with
the authorisation of their heads, mentioning the PO, or Bills in process against which the
advances are being made.
( C ) The accounts department verifies the same & authorises the same for the payment.
In case of Payments after the bills are credited:( A ) A list of outstandings is generated by purchase from their data.
( B ) This list is then reconciled with the Creditors trail in Accounts & a fresh list for the
payments are
made after the reconciliation,
( C ) This final list is the signed by the authorised person in Account as well as Purchase
which is further authorised by the management for payments.
( D ) Payments are through cheques,
Flow chart for Imported purchases of Raw Material.(HR, ZINC & SCRAP)
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FI Module
1
2
Purchase order is recd by finance signed by both the parties.

The LC is opened considering the limits available in the Bank in favour of the exporter
The bank charges are debited & the LC is established

The Accounting entry is passed at this stage
A
Bank Commission (RM)

Bank
Cr
Dr
After shipment by the exporter, negotiable copies of Import document are received in our
banks.
5 The copies of Invoices, packing list & interest invoices are received from the bank. The
bank also notifies the due date.
6 The details of the Material imported is being fed in the excel sheet in the following format
to keep
the track of Stock in transit.
7 A separate excel sheet is maintained for keeping the track of LC outstanding in the
following format.
8 The position of LC outstanding at the end of the month is generated from the above excel
sheet.
9
When the bill of entry is filed a copy of the same is recd by accounts
10
The details such as Rates, Duty paid, Duty foregone under license are fed in the excel
sheet corresponding to the invoices.
11 At the end of the month a report is generated from the Raw Material program with the
details of raw material recd.( Qty & Value)
12 The material recd is fed in the SIT excel sheet & the same process is followed till the
material is completely recd. The vouchers at the end of the month in case the material is
not fully recd are:
A
Raw mat ( imp) Dr

SIT
Dr
Party
Cr
Party
Dr
FLC outstanding
Cr
for completed material @ B/E's date Ex Rate

for Incomplete material @ Closing Rate
with both completed material & SIT
The party account is always NIL as the balances are transferred to the FLC outstanding A/c.
B
FLC outstanding
Dr / Cr With the exchange diff for the month end
Exchange fluctuation
Cr / Dr With the exchange diff for the month end
C
Raw mat ( imp) Dr

SIT
Dr
Collector of customs
Raw mat ( imp) Dr
SIT
Dr
Export incentive
Cr
for the Duty on completed material

for the Duty on Incomplete material
With the duty amount
Cr
for the Duty forgone on completed material

for the Duty forgone on Incomplete material
With the duty forgone amount
The expenses of the CHA are reconciled with the material cleared & the following entries are
passed
A
Raw mat ( imp)

completely in plant
SIT
Party
13
Dr
Dr
Cr
for Material cleared from port & recd
for Material cleared from port but in transit.

With total material cleared
For the transportation of Raw material:( Rail or Road)

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FI Module
---The tenders are called for every month & The rates & other terms & conditions are
finalised.
---The bills are raised by the contracted party, for the material transported.
---Each GR raised by the party is supported with two weightment slip ( Kanta A &
Kanta B)
---These are then recd by accounts with the Daily material register for authorisation from
the raw mat department.
---These GR's are passed after checking the quantity.
---A summary of these GR are prepared by the party is recd by Accounts which are
further checked for the rates as per the contract.
---The vouchers are prepared after taking care of TDS & Advise for payment is
created.
When mat. Received completely at plant
1
3
4
5
A print out of MRN check list is taken out from the RM program & checked with the
physical MRN &
tallied with the Excise department
The No of Coils Invoiced are tallied with the coils receipt from the RM Program by taking
the cut off dates as period.
The receipt of material is also tallied with the bills of transporters already paid from time to
time.
The Physical MRN as well as Invoices are Audited by Audit department.
6
The expense of CHA are recd from the Import Department & checked with the
material receipt.
7
The invoices as well as the CHA bills are authorised by the management
8
The vouchers are prepared as under, taking into consideration , utilisation of License
& Duty
A
Raw mat ( imp)

Party
Cr
Party
Dr
FLC outstanding
The party account is always
outstanding A/c.
B
Raw mat ( imp)
Dr
Collector of customs
Export incentive
Dr
for completed material
with both completed material
Cr
NIL as the balances are transferred to the FLC
for the Duty on completed material as well as
duty forgone under license.
Cr
With the duty amount
Cr
With the duty forgone amount
The expenses of the CHA are reconciled with the material cleared & the following entries are
passed
A
completely
Raw mat ( imp)
Dr
Party ( CHA)
Cr
for Material cleared from port & recd

in plant
With total material cleared
When the payment is made

The bank debits on the due date with the Invoice value
CI template:
1.
XYZL requires a strict control over prices, deliveries, payment terms etc before passing
the Vendor Invoices.
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FI Module
2.
For supply of material a vendor is given credit only when his invoice is posted. Initially on
actual receipt of the material credit is given to GR/IR account and not the vendor. Only
when the actual invoice is received and posted the credit is given to the vendor. Similarly
for any recoveries/deductions the posting is affected through the vendor credit memo.
These two are the basic accounting documents for effecting posting in the vendor's
account.
3.

Invoice verification is part of MM module. Invoice verification will be carried out by MM
personnel and the data will flow automatically to FI. In SAP two financial entries are
involved for processing vendor Invoices as under :
1. At the time of passing goods receipt:
Inventory -Raw Material
Dr
To GR / IR Clearing a/c
2. At the time of Invoice verification :
GR / IR Clearing A/c Dr.
To Vendor A/c
GR /IR clearing account is an intermediary account which helps in accounting and keeping
track of Goods receipt and ensures that the credit is not passed on the vendor with actual
Invoice processing. Invoice verification will be carried out with reference to GR which will
ensure that the vendor account is credited only after receipt of goods.
4.

Presently, there is no system of passing financial entry at time of GR. In SAP, financial
entry will be passed at the time of goods receipt resulting in having control over goods
receipt and also ascertains the liability to vendors at any given point of time. The SAP
system keep tracks online real time the status of P.O. history of P.O. The system keeps
always track online real time the outstanding liabilities for which material has been
received but invoice has not been received through GR/IR Account. The inventory
automatically updates in the system when the goods is received in stores through online
integration feature of SAP system.
5.
The two fold entry enables strict control over vendor Invoices before crediting the vendor
account. Also the rates , terms etc are clearly defined in the PO based on which GR and
Invoice verification is carried out. The process has been discussed in detail in MM module.
There is no need to create manually outstanding liabilities for the material for which
invoices have not been received, in the system. The system online take care of that
automatically.
1.3.2.1.
Vendor Document Parking
Questions:
Q:
1) What is your procedure for parking and releasing invoices and or/credit memos?
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FI Module
A:
Invoices are to be parked by the purchased department after verification of PO, GR
and Invoice. The Invoices should then be finally posted by the accounts department after
cross verification.
CI template:
1.
XYZL requires that the authorisation for posting the vendor invoice should be given to the
accounts department only. Purchase department should be able to only park the Invoices
after checking and the Invoice will be posted finally by the accounts department after
cross -verification.
2.
Parking of a document refers to the stage of stalling a document without posting it. It has
the following advantages:
User can update the entries and keep it for any clarifications before posting it. If opted for
the documents would be released for posting only by a higher authority for which the initial
user may not have authorization. You can park a document in Accounts Payable,
Accounts Receivable or General Ledger.
At the time of saving the parked document, You receive a message with the document
number. These numbers are assigned in the same way as in the standard document entry
function. When you save a parked document, transaction figures, asset values and control
totals are NOT updated, and the system does not generate any automatic postings. No
balance checks are made, but the balance is displayed in the parked documents
document overview. You can use the tax amounts determined on the basis of the data in
parked documents. A parked document can be changed and gradually completed. A large
number of header and item fields can be changed during this process, including the
amounts. Certain of the values you cannot change are the currency and the company
code.
3.

The standard SAP functionality of parking and posting the parked documents will be used
to meet XYZL's requirements.
4.
Notes on further Improvements

Parking and posting functionality will give more authenticity to data and ensure better
control over vendor invoice processing.
5.

Authorisation to the purchase department will be given for parking the vendor Invoices
( T.code - MIR7) and authorisation will be given to Accounts department for posting the
Invoices ( T-Code - MIRO).
1.3.2.2.
Invoice Receipt
Questions:
Q:
1) Which invoices, that are not related to a purchase order, do you typically post?
A:
In case of urgent procurement, in case of sub contracts and in case of purchase of
petty consumables.
Q:
2) Can you use templates for some of these invoices?

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FI Module
Explanation: Reference documents, for example
A:
Yes
Q:
3) How do you handle transactions in foreign currencies?
Explanation: Handling of exchange rates - for example, manual entry of exchange rate in the
document?
A:
We make manual entry of exchange rate in the document manually.
Q:
4) Describe any taxes that must be calculated on vendor transactions.
A:
TDS must be deducted at the applicable rates at the time of payment or credit
whichever is earlier.
Q:
5) How do you handle cash discounts?
Explanation: Gross or net procedure?

A:
Gross procedure i.e. Cash discount is recognised at the time of payment.
Q:
6) Is your cash discount base net or gross?
Explanation: Taxes on sales/purchases Taxes on sales/purchases

A:
Gross procedure i.e. Cash Discount is calculated on the vendor Invoice amount
including taxes.
CI template:
1.
XYZL requires to process few Vendor Invoices directly in FI for example for petty
purchases for which no PO is raised. Down payments can be made against the same also
TDS needs to be deducted on payments / Invoices.
2.
Normally, all the vendor Invoices are transferred to FI thru MM module only. The detailed
process for the same has been covered in MM module. However, if a Vendor Invoice is
required to be posted directly in FI, SAP offers standard transaction to process such
Invoices directly in FI. These entries are not related to inventory and MM module and are
dealt directly in FI. Transaction Code FB60 can be used for the purpose.
3.

Only those invoices related to very petty expenses should be processed directly in FI
where no PO, GR and Inventory accounting is involved.
4.
There will be full integration between MM and FI module. The information from MM like
GR, Invoice verification etc will flow to FI and information from FI like down payments,
Invoice payments etc will flow to MM. The status of PO will always be updated and can be
viewed online realtime.
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FI Module
Also proper discipline will be brought in the company like GR will be done only after
issuance of PO and Invoice verification will be done only after receipt of material and GR
entry in the system.
1.3.2.3.
Vendor Credit Memo
Questions:
Q:
1) How do you process vendor credit memos?
Explanation: Clearing or disbursement?

A:
Credit memos are separately accounted if any and adjusted with invoices for
payments
CI template:
1.
XYZL needs to raise Debit / Credit notes on Vendors on account of price differences,
shortages or any other reason. The system should be able to process such transactions.
2.
SAP offers the standard functionality of Vendor - Credit memos to facilitate issuance to
Debit notes to the vendors. Debit notes can be issued with reference to a Invoice or
without reference to a Invoice.
3.

Debit Notes / Credit notes should be issued to Vendors in the module from where the
Invoice was processed. For example in case he vendor Involve was processed in MM
module, Debit / Credit note should be issued using MM Transactions only and should be
issued using FI transactions codes so that the information is linked to the original
document in MM.
1.3.2.4.
Document Reversal
Questions:
Q:

A:
Negative posting
Q:
A:
Yes.
CI template:
1.
no need to pass the reversal entry for mistakes at the time of document entry or some
other reason thereby eliminating the need for passing the reversal entry manually. Also
negative posting is required for document reversal with a separate document type.
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FI Module
2.
1
2
3


Negative posting :
The document can be reversed in the application / module from where the original
document was generated. For example a If a customer invoice is generated in SD, it can
be reversed in SD module only.
3.

document type and negative posting will be allowed for reversals. Document must be
reversed in the application where the document has been generated. for example a
Vendor Invoice document created in MM module should be reversed in MM module only.
4.

better control.
5.
1.3.2.5.
Recurring Entry
Questions:
Q:
example)?
A:
Yes, e.g. rent on monthly basis
CI template:
1.
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FI Module
XYZL needs to pass few repetitive entries on month to month basis for example Rent etc.
These entries should be posted automatically every month.
2.
insurance. The following data never changes in recurring entries: Posting key , Account,
Amounts.
creating accounting documents. A periodically recurring posting made by the recurring
entry program on the basis of recurring entry of original documents
Prerequisites
To create accounting documents from recurring source documents, you have to either run
the recurring entry program or schedule it to be run. The run dates you enter in the original
recurring documents are not sufficient to create accounting documents. You must run the
recurring entry program at the appropriate intervals and specify, by entering a settlement
period, which original recurring documents are to be included in the run. The recurring
entry program generates a batch-input session. This contains the accounting documents
that are to be created. After running the recurring entry program, process this batch input
session to carry out the postings.
3.

Periodically recurring entries are posted by the recurring entries program based on
recurring entry documents. This process is comparable to the standing order you give to
your bank to deduct your rent, premium payments, or loan repayments. Similar
requirements at XYZL can be handled using this option.
4.
Triggers / Inputs
In the recurring entry document, we can define when a posting is to be created with this
document. We have two options for scheduling. Postings can be made periodically or on a
specific date:
5.
For periodic postings, we need to specify the first and last day of execution,
as well as the interval in months.
If we want to specify certain dates, we can enter a run schedule in the

recurring entry original document
It will help in not missing the entries, which happen periodically and it also avoids
duplication.
1.3.3.
Vendor Account Analysis
CI template:
1.
XYZL requires the Analysis of Vendors on the following Lines :
1.
Individual Account Display of each Customer including any special GL

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FI Module
Transaction.
2. Age Wise Analysis of vendors
3. Analysis of special GL transactions like down payments , LCs etc.
The above requirements will be met through AP Information system as well as from Profit
Centre Reporting Modules.
2.
An account balance shows the:
1 Opening balance (carry forward balance from the previous year)
2 Total of all transactions per posting period, broken down into debits and credits
(transaction figures)
Using these figures the system also calculates the:
1
2
Balance per posting period

Accumulated balance of the account
In addition to the above balances, the system displays the gross turnover per period for
each account. Account balances are also comprised of the balances resulting from special
G/L transactions such as bills of exchange and down payments.. While displaying account
balances, you can view document amounts posted in foreign currency in the respective
local currency. You can also choose between:
i.
Account balances of both the items that are part of sales or purchases and
the items that are not part of sales or purchases
ii.
Account balances of only items that are part of sales or purchases
iii.
Account balances of special G/L transactions
3.
Data relevant for vendor transactions will always be available in the system online real
time basis. There are various standards reports under FI & MM information system from
which a user can make analysis from various angles and combinations.
1.3.3.1.
Vendor Line Item Analysis
Questions:
Q:
1) Is there certain information that you wish to be able to display when you view
vendor postings online?
Explanation: ABAP List Viewer/Line layout variants
A:
etc.
Yes, open items, down payments, payment terms, overdue payments, cost centers
CI template:
1.
displays would like to see the line items of each vendor with assignment of cost centers,
business areas, profit centers, document number, PO number etc.
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FI Module
2.
1 Open items
2 Cleared items
3 Noted items
4 Parked items
5 Items with special G/L transactions (in Accounts Receivable and Accounts Payable)
6 Items with customer or vendor items (in Accounts Receivable and Accounts Payable
1
2
3
Customer accounts
Vendor accounts
G/L accounts
1
2
3.

In other words, with line item display we can view each entry passed in an account with
document numbers and other additional fields like cost centers, business areas ,
document number, PO number etc are also available for analysis. In case of AP and AR
since party-wise accounts are available Line Item Display will not be maintained in GL
Account level. However, line item display for each vendor can be obtained from the vendor
account information system.
4.
Triggers / Inputs
AP Account balances can be viewed by using T.Code - FBL1N. Various selection criteria
are available for viewing line items for example whether we want to see all the line items,
open items only, cleared items only, normal items, noted items, parked items etc.
5.
With line item display we can view each entry passed in an account with document
numbers and large number of other additional fields like cost centers, business areas etc
are also available for analysis.
1.3.3.2.
Vendor Account Evaluations
Questions:
Q:
1) Which evaluations do you need for vendors?
A:
Quality, Service, Credit Period, Delivery Schedule etc
CI template:
1.
XYZL requires reports to evaluate AP accounts for different periods based on trends ,
comparisons etc.
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FI Module
2.
You can use different levels for each evaluation. Possible levels are:
Group level
Credit control area level
Company code level
Business area level
The combination of grouping criteria and evaluation level enables you to carry out a
large number of different evaluations.
Various standard SAP standard reports are available for AP Evaluations. These are of
following types for example:
1. Vendor due date analysis.
2. Open item analysis.
3. Due date forecast.
4. Payment history.
5.Down payments
6. Cleared items.
7. Vendor Business
8. Transaction Figures etc.
9. Special GL Transactions like LCs, Loans and advances to employees etc
3.

1.3.4.
Vendor Payments
Questions:
Q:
1) Which payment methods do you use (check, bank transfers, bills of exchange,
direct debit, etc.)?
A:
All types viz through cheques, bank transfers, bills of exchange, Letter of Credit etc
Q:
2) How do you pay your domestic vendors (by check, bank transfer etc.)?
A:
By Bank transfer , cheques, cash, LC & Bills of Exchange.
Q:
3) How do you pay your foreign vendors (by check, bank transfer, etc.)
A:
By Bank transfers, Foreign DD's, LC & Bills of Exchange.
Q:
4) How do you pay your employees (e.g. travel expenses)?
Explanation: Are you using the HR module? Are accounts managed for each employee?
A:
Salary thru bank transfer, as well as in cash. Travel exp are reimbursed in cash or
cheques
Employee Imprest , Loans & Advances.
In case of Imprest to employees:102
FI Module
1
2
3
4
5
6
7
The imprest forms are recd from the employees after sanction of the concerned
department head on the impress form.
These imprest form are then checked for balances & authorisation for the payment is
given on the same.
After authorisation the payments are made from the cash department.
After the payments the imprest form comes back from cash department to accounts along
with the other payment vouchers.
We have maintained a Main code in four digit & further sub-codes in four digit alpha
numeric, according to the names of the employees for imprest as well as the advances, &
the entries are posted to their
respective codes through control vouchers as mentioned in the process for cash.
The posting is made in Imprest ledger manually.
At the end of the month a deduction list is prepared for the Imprest & Advances, taking the
balances from the trail manually, the format is attached for the deduction lists
In case of Advances to employees:-
1
2
3
4
1
2
3
4
The advance form is recd by accounts after proper authorisation & sanctions of the
concerned department.
These forms are then checked for balances and advances against month / days, previous
advances etc &
then are authorised for payment.
After authorisation the procedure is same as for the imprest.
The posting for the same is made in the employees ledger manually
In case of loans to employees:The loans are sanctioned by the management only, it could be in cash or through
cheques.
The monthly deductions for the loans are also decided by the management, & the
deduction for the
same is done at the month end.
Procedure for the rest is same as advances.
Posting for the same is done manually in the employees ledger.
Formats for imprest & advances are attached.
Q:
5) How do you handle partial payments to vendors?
A:
In some case advances are paid after taking care of Tax, against bills which are
debited to the party account & are adjusted on final settlement of bills. Payments are also
made against the credit balances of the vendors.
Q:
6) Do you always issue a single payment for multiple invoices to the same vendor? If
not please specify the exceptions.
A:
No
Q:
7) How do you handle payables to vendors that are also customers?
Explanation: Separate payment? Clearing?

A:
We knock off the balances of the vendors with their consent.
Q:
8) How do you process credit memos from vendors?
Explanation: Clearing or payment?

A:
Debit / Credit memos are adjusted in bills.
Q:
9) How do you handle cash discounts?

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FI Module
Explanation: Gross or net procedure?
A:
Gross procedure i.e. Cash Discount is calculated on the vendor Invoice amount
including taxes.
Q:
10) How do you handle exchange rate differences in foreign currency payments?
Explanation: Time of update of exchange rate differences/account determination

A:
We are making payments in foreign currency, taking the exchange difference in our
account.
Q:
11) How do you create the payment media (payment forms, remittance advices or
electronic files) for these payment methods?
A:
Manual payment advise.
Q:
12) Do you use pre-numbered checks?
A:
Yes
Q:
13) How do you reconcile your check register (cleared checks)?
A:
After reconciliation with the respective bank manually.
Q:
14) How do you transfer your electronic payment file to the bank?
A:
Thru floppies.
CI template:
1.
XYZL requires to make the payment to the vendors thru Cheques, LCs, Bills of exchange,
down payments, payment to employees against travel entitlements, salary, loans,
advances, imprest etc. They would also like to account for cash discounts, exchange rate
fluctuations, partial payments, payment differences etc. The system should record all the
payments and separate data should be available for analysis.
2.
Payment methods :
The payment method determines how payments are to be made, e.g. by cheque, bank
transfer or bill of exchange, LC, or other means of payment. Payment methods are
entered in the master records of customers and vendors in order to specify how payments
are made. If an open item is to be paid using a specific payment method, enter it in the
open item. The terms which have been defined for the payment method must be satisfied
for the payment.
Following payment methods will be defined for XYZL :
1. Cheque
2. LC
3. Bills of Exchange
4. Bank Transfers
5. Cash
Terms of Payment:
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FI Module
In this step, you can define rules with which the system can determine the required terms
of payment automatically. The rules are stored under a four-character key. You assign the
terms of payment specified to the customers in the master record via the key. The key and
the terms determined with it are proposed when entering a document to the customer
account.
Terms of payment key
Key for defining payment terms composed of cash discount percentages and payment
periods. It is used in sales orders, purchase orders, and invoices. Terms of payment
provide information for:
Cash management
Dunning procedures
Payment transactions
Master records have separate areas for Financial Accounting, Sales, and Purchasing. You
can specify different terms of payment keys in each of these areas. When you then enter
a business transaction, the application in question will use the key specified in its area of
the master record.
Different terms of payment will be defied as per XYZL's requirement.
Gross or Net Document type
If Net document type indicator is selected, the system automatically deducts cash
discounts from vendor invoices that are posted with this document type. If this indicator is
not selected, the cash discount will not be allowed on the Invoice, but will be allowed at
the time of payment.
In case of XYZL, Gross Invoice document type will be used i.e. Cash Discount will be
allowed at the time of payment and not at the time of Invoice.
Discount base amount: Gross / Net Value
If this Indicator is selected, the sales tax is not contained in the base amount for discount
calculation. In case of XYZL, Gross base amount for Cash Discount calculation will be
used i.e. Cash discount will be calculated an the Invoice amount inclusive of sales tax.
Employee Loans , Advances etc.
In case of payment of Loans, Advances, Imprest etc to employees, SPL. GL transactions
will be used and separate GL indicators for the same will be defined to keep a control over
such payments.
Exchange rate fluctuations:
Exchange rate fluctuations will be accounted at every period end. Automatic calculation
and postings will be done.
Payment Differences :
Payment differences can be handled along-with reason codes for handling payment
differences in the form of
Residual items
Partial payments
Postings on account
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FI Module
Reason codes come about, for example, if the cash discount period was exceeded, if cash
discount was taken when net payment was due or simply if there is a computer error at
the customers. Tolerances will be defined, if required to handle payment differences.
Vendor Tolerances:
You specify the tolerances for vendors. These tolerances are used for dealing with
differences in payment and residual items which can occur during payment settlement.
Specify the tolerances under one or more tolerance groups. Allocate a tolerance group to
each vendor via the master record. For each tolerance group, specify the following:
Tolerances up to which differences in payment are posted automatically to

expense or revenue accounts when clearing open items
The handling of the terms of payment for residual items, if they are to be
posted during clearing
3.

In the case of Bill of Exchange the customer will be debited immediately after issuance of
Bills of exchange and acceptance by the vendor as compared to the existing system
where vendor account is debited only at the time of bank advice after the same has been
realized by the bank.
4.
Standard payment methods, payment terms, use of special GL indicators to handle
employee loans , advances, imprest etc, tolerances for handling payment differences will
bring in much better control and transparency in the system. This will also enable for
flexible and standardised reporting.
1.3.4.1.
Vendor Payment Request
Questions:
Q:
1) In which cases do your vendors require you to make payment before the date of
required payment on the invoice?
Explanation: Observe account determination for this special G/L transaction.
A:
Urgent requirement
CI template:
1.
In exceptional cases, XYZL may be required to release the payment to vendors before
due date. They require a functionality to accommodate such cases and keep a track of
such payments.
2.
Payment requests refer to the cases where letter is sent to the debtor, or a letter is
received from a vendor requesting to settle the listed items. You must define a separate
payment method for the payment request.
The items to be paid are selected in the same way as items for bill of exchange payment
requests or bills of exchange generated before the item due date.
3.

Such cases can be handled using Special GL Transactions.
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FI Module
4.
Presently, there is no system to keep a control over the payments before due date. This
will enable XYZL to keep a control over releasing the payments before due date and a
separate report can be generated for analysis.
1.3.4.2.
Release for Payment
Questions:
Q:
1) How do you release invoices that have been blocked for payment?
Explanation: Observe possible blocking reasons / workflow

A:
After the blocked matter is sorted out.
CI template:
1.
XYZL requires to use the functionality of blocking of Invoices for payment and then
releasing the payment after approval.
2.
In case of any dispute or for any other reason, if the payment is not to be released to a
vendor, the Invoice can be blocked for payment wilt a blocking reason code and the
payment can be released after the block has been released by the appropriate authority.
Using payment blocking reasons, you can differentiate why invoices are to be blocked for
payment.
If items are missing or errors are found in a delivery during the goods receipt control and
the invoices should not be paid because of the missing items or errors, you can define a
separate payment blocking reason for this situation.
3.

As per the existing practice, the payments to vendors are released by various personnel in
the MM department since the cheque books are issued to them. It becomes very difficult
to track the payments and there is no control with the accounts department leading to lot
of confusions. It has been decide that after SAP implementation, the payments will be
released by the accounts department only after due verification and MM personnel will not
have any authorisation for making the payments and no cheque books will be issued to
them.
4.
By using the functionality of Invoice blocking, reasons for blocking and releasing the
payment after block removal will give XYZL a strict control over vendor payments
especially in case of any discrepancy or dispute.
1.3.4.3.
Manual Outgoing Payments
Questions:
Q:
1) In what cases do you use manual payments to vendors?
A:
Always
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FI Module
Q:
2) Do you print or hand-write the payment media (for example, debit memo forms)?
A:
We provide hand written payment media.
CI template:
1.
XYZL makes payment to Vendors manually on case to case basis as per the requirement.
There is no fixed period for releasing the payments. System should be able to enable
them process such transactions.
XYZL would also like to have full control over the payment to vendors towards freight
inwards and freight outwards. Also it must be ensured that a particular vendor's
(transporter) Invoice / particular LR is not paid twice.
2.
Necessary settings will be made to allow for the manual processing of outgoing payments.
3.
Triggers / Inputs
Manual payments can be made to vendors using T-Code F-53
4.

Since XYZL would also like to have full control over the payment to vendors towards
freight inwards and freight outwards and they would also like to ensure that a particular
vendor's (transporter) Invoice / particular LR is not paid twice. In case of freight inwards,
the same can be controlled thru MM module by making Invoice verification of the
transporter / service entry sheet. The duplicate Invoice check will also be activated in MM.
The detailed procedure has been discussed in MM module.
However, in case of Freight outward, it is necessary to keep a track of each delivery /
billing and the concerned transporter. It will also not be possible for XYZL to prepare
service entry sheet for each case. It will be very difficult to control the same.
5.

The entries for freight will be accrued in SD by using partner function and the transactions
will be routed thru Freight clearing account. Credit will be given to the transporter at the
time of passing vendors invoice in FI and the line item of Freight clearing account will be
cleared. The process has been described in detail in the annexure.
1.3.4.4.
Automatic Outgoing Payments
Questions:
Q:
1) How do you post payments? Which G/L accounts are used? Which additional
account assignments (for example, cost centers) do you need for bank postings, bank charges
ac counts, cash discount accounts, and exchange rate differences?
A:
We post payments manually, & the bank account as well as vendors account are
used. We need cost centers based account assignment.
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FI Module
Q:
2) Do you wish to clear vendor invoices at the time of payment or at the time the bank
statement is posted?
Explanation: Payment method indicator: Selecting payment order and not payment posting
means that the payment program: does not post a payment document does not clear the paid
items. does not clear the paid items.
Instead, a payment order is created and saved. The
information
contained therein can be used to clear the item at a later date.
contained
therein can be used to clear the item at a later date. The posting of the payment occurs with
the account statement of the
bank and selection of the associated open items via entry of
the
payment order.
payment order.
The paid items are locked until the payment is
posted. This means
that they cannot be used in other clearing transactions or further
payment runs.
A:
At the time of payment.
Q:
3) Do you enter payments automatically based on an electronic bank statement?
Describe in detail how these payments are processed.
Explanation: Observe collection procedure, for example
A:
No , we make the posting after physically issue of cheque to vendors. First purchase
department is making a request for making the payment . after verifying the request ,
accounts is giving the cheque advice to finance section & they issue the cheque and posted in
vendors account.
Q:
4) USA: Do you use the lockbox procedure?
A:
No
Q:
5) Switzerland: Do you use the POR procedure?
A:
No
Q:
6) How often do you make automatic payments?
A:
Not being done presently, however will be done on monthly basis.
Q:
7) Which bank account(s) are used for payments? List the bank accounts by payment
method, by foreign currency, or any other criteria relevant for bank selection.
A:
PNB, Bank Of Baroda, ICICI, State Bank Of India , State Bank Of Bikaner And Jaipur ,
Syndicate Bank, Federal Bank, Bank Of India, Canara Bank, Allahabad Bank - Foreign
currency payments are made from all current accounts.
Q:
8) How does your actual cash position influence the way you assign funds to the
different banks in the payment program?
Explanation: Maintenance of available amounts
A:
No. The cash position does not effect the fund position in the banks . While issuing the
cheques to the vendors the bank balances are not accounted for. the fund is provided after the
issue of the cheques.
Q:
9) How do you handle bank charges?
Explanation: Perhaps define account determination

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FI Module
A:
In case the bank charges are on our account the bank charges a/c is debited. where
vendor bears the charges , the same is debited to his account .
CI template:
1.
XYZL is not following the system of Automatic Outgoing payments. All the payments are
being made manually on case to case basis as per requirement. However, they would like
to have an option of processing Automatic Outgoing payments.
2.
Automatic Payment Program
Payables are paid with the payment program. The payment program supports all
standard payment methods, such as checks and transfers.
The program processes open items in three steps:
a) The payment program determines the open items to be paid and creates a
proposal list.
b)
The proposal list can be processed on-line. The payments can be blocked and the
payment blocks can also be cancelled.
c) The payment program carries out payment using the proposal list.
d) The payment run includes only the open items contained in the proposal list.
e) The payment program posts documents and provides the data for the Cheque
printout.
f) It uses the print program to print the forms and create the data carriers.
Before you can use the payment program, you need to define:
Your house banks and the accounts at your banks

The required payment methods
The necessary payment forms
Payment program configuration involves determining:

What is to be paid. To do this, you specify rules according to which the open items
are selected and grouped for payment.
When payment is 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.
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.
The above rules and conditions must be defined if the payment program is to determine
the above-mentioned information automatically. However, you can also specify this
information manually.
3.

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FI Module
Automatic payment program is basically a functionality which can be used to make the
payment to the vendor automatically based on certain criteria say due date, amount etc.
The system will give the proposed list which can be edited and processed further for
payments. Automatic accounting entries will be generated. Vendor line items will be
cleared at time of time of making payment.
4.
Automatic payment program will help in processing the vendor payments automatically
based on certain criteria and will reduce manual work and will also eliminate chances of
errors.
1.3.4.5.
Vendor Payment Medium Creation
Questions:
Q:
1) For which incoming payments do you create payment medium forms (incoming
bills of exchange, for example)?
A:
In case of Inland L/C discounting i.e. Sail, ISPAT, TISCO only bank charges are
accounted.
Q:
3) Do you use your own number management for checks (check management)?
A:
No
CI template:
1.
XYZL would like to extract the information of a particular payment based on cheque
numbers. The relevant transactions should be displayed just by mentioning cheque
numbers. Also, XYZL would like to print all the Cheques issued to the vendors etc. from
the system. The cheques are required to be printed on the pre-printed stationery provided
by the banks.
2.
The payment program supports all standard payment methods, such as cheque and
transfers. This program also covers country-specific payment methods. SAP offers the
functionality of cheque management
The cheque management functions help you to manage both pre-numbered cheques and
those cheques are assigned numbers from your own number ranges.
The cheque management functionality enables you to link the payment documents with
the cheque giving other relevant details through a cheque register. It records all cheques
issued, destroyed, voided, or reissued etc. and serves as a complete log of all cheque
transactions.
3.

Since cheque printing is required from the system, cheque numbers should be captured in
the system at the time of document entry so that relevant information can be extracted
from the system.
4.
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FI Module
Presently, the cheques are being issued manually and also cheque issuance is delegated
to many employees in the purchase department as well. With implementation of SAP, the
control will be centralised and the cheques will be issued automatically from the system.
Also, Cheque numbers will serve as a single source for extracting the relevant information
from the system.
5.

Necessary print output forms will have to be developed to meet the XYZLs requirement of
printing the cheques from the system.
1.3.5.
Bill of Exchange Payable
1.3.5.1.
Bill of Exchange Payable
CI template:
1.
XYZL uses Bills of exchange as a payment method to it's vendors. The vendors are
issued Bills of Exchange and this can also be used for refinancing. XYZL requires to
handle these transactions separately and keep a proper control over them in respect of
due dates, outstandings charges etc, They would also require the system to calculate the
charges automatically.
2.
Special G/L transactions are special transactions in accounts receivable and accounts
payable that are displayed separately in the general ledger and the sub-ledger. This is
achieved by posting to alternative reconciliation accounts, instead of posting to the
reconciliation accounts for receivables and payables.
The following special G/L transactions are available:
1
2
3
4
5
6
Down payments and down payment requests

Bills of exchange receivable, bills of exchange payable and checks/bills of exchange
Payment requests
Guarantees
Reserves for bad debt
Security deposit.
These special procedures are displayed separately from other receivables and payables
on the balance sheet either for legal reasons, such as with down payments, or for control
reasons, such as with guarantees received. A separate special G/L account is created for
each special G/L transaction. As a result, it is possible to display each transaction in the
balance sheet without having to carry out any transfer postings and to receive an overview
via the account limited to this procedure only.
You will normally use the payment program to post bills of exchange payable. All the
subsequent postings, such as the payment of a bill of exchange by the bank and the
cancellation of the bill of exchange payable and the bill of exchange liability, have to be
made manually.
When posting a bill of exchange payable, the payment program clears the open items and
posts a bill of exchange payable to the vendor account and to the special G/L account for
the bill of exchange payable.
If you so wish, the program can also post to a bank sub account that displays the bill
liability for each bank. This enables you to monitor when bills of exchange are due at
which bank. This posting is particularly useful for cash management and forecast.
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FI Module
The bill of exchange payable remains on the accounts until the bill of exchange is paid.
Your vendor calculates the costs arising from the bill of exchange charges and sends you
an invoice. It is posted and processed in the same way as any other invoice. You only
need special G/L accounts for the bill of exchange charges.
Posting Procedure for Bills of Exchange Payable
The following events are documented in FI for bills of exchange payable:
1.
Payment by Bill of Exchange
You pay an invoice with a bill of exchange. As a result, the payable is cleared; A bill of
exchange payable is created.
2.
Bill of Exchange Charges Statement
Your vendor sends you a bill of exchange charges statement. You post the invoice in the
same way as for other invoices.
3. Payment of a Bill of Exchange
Your bank pays the bill of exchange by debiting the amount from your account. You post
the bank debit entry and cancel the bill of exchange payable and the bill of exchange
liability. We can also post bills of exchange discounting in SAP system.
3.

Bills of exchange are handled as special G/L transactions in the SAP System. These
transactions are thus maintained independently of other transactions in the subsidiary
ledger and are posted to a special G/L account in the general ledger. This affords you an
overview of bills of exchange receivable and bills of exchange payable at any stage.
Transfer postings are not usually necessary to display these items on the balance sheet.
4.
Presently, the Bills of exchange are managed in excel manually and the complete data is
not available from the system. SAP will provide comprehensive data for managing Bills of
exchange.
5.

Special GL transactions to be configured for handling Bills of Exchange and its
discounting.
1.3.6.
Account Clearing [AP]
Questions:
Q:
1) In which cases are open items cleared other than through payment receipts?
Explanation:
afterwards.
A:
Note: With advance payments and offsetting, clearing has to be done
Down payments are adjusted against invoices.

1.3.6.1.
Manual Clearing
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FI Module
CI template:
1.
2.
The System offers the following procedures for accounts with open item management
1. Posting with clearing
2. Account clearing
The clearing program carries out automatic clearing within the System.
Account clearing is to match an invoice entry with that of the related payment. Though the
transactions appear in the account the cleared items does not form the part of out
standings. Option available either to clear the account either at the time of payment or
subsequently separately.
In case of partial payment there is scope to show only the residual amount of a particular
invoice in which case a new document is generated by the system. Instead of the full
value of the invoice only the residual amount is displayed and carried further
You can use the following functions for clearing open items manually:
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FI Module
Clearing Functions in Accounts Payable
Posting transaction
Outgoing payment
Out. pay. with printed form
Internal transfer posting
Incoming payment
discount
Example Business transaction

Debit memo
Immediate payment by check
Inv. cleared due to a product defect
Refund from your vendor, for example, annual quantity
Prerequisites for Clearing
The following prerequisites must be fulfilled in order for open items to be

cleared:
The accounts must be managed on an open item basis
The accounts that can be cleared automatically must be defined in
Customizing for Financial Accounting.
The items to be cleared cannot trigger a posting, for example, cash discounts
or exchange rate differences.
The items cannot be special G/L transactions. You use special functions to
clear these items.
The following example is reflected in the figure below.

(a) A customer pays several receivables amounting to 5,000 USD by check. You enter the
amount in the incoming checks account.
(b) To clear the receivables on the customer account, you choose the open items and
complete the document entry transaction.
(c) The amount you enter and the items you select must balance to zero. The system
automatically posts the incoming payment to the customer account.
In the clearing transaction, the system generates a clearing document that consists of the
items you entered manually, and the offsetting entries it created automatically to balance
the document to zero. The document then balances to zero.
The system then flags these items as cleared. It enters a clearing document number and
the clearing date in the cleared document items. These are the selected items and the
items for the offsetting posting. The clearing date is usually the posting date. If however,
the items you select for clearing have a posting date that comes after the posting date of
the clearing document, the system uses the most recent posting date as the clearing date.
The following illustration shows the item that the system posted automatically in the above
example. The item is cleared, and the corresponding document line item contains the
clearing data.
There are three functions you can choose from for posting with clearing. You can use a
basic function for any type of business transaction in which items need to be posted and
cleared simultaneously. The two other functions are specially designed for incoming and
outgoing payments.
You can:
Clear several accounts and account types
Clear items in any currency
Clear items and post any differences
Clear items and enter any number of line items (for example, bank charges)
Manual Account Clearing
In this clearing procedure, you manually select open items that balance to zero from an
account.
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3.

4.
1.3.6.2.
Automatic Clearing
Questions:
Q:
A:
CI template:
1.
2.
Automatic Clearing:
This program clears open items from customer, vendor and G/L accounts (in particular
GR/IR clearing accounts) automatically. It selects all accounts which are specified in the
value sets and have debit and credit postings.
The following items are not cleared:
Noted items
Statistical postings and special G/L transactions of the type bill of exchange
Items containing withholding tax postings (country-specific).
Down payments can only be cleared if down payment clearing for the same
amount has been posted
The remaining open items are grouped together according to fixed system criteria:
Company code
Account type
Account number
Reconciliation account number
Currency key
Special G/L indicator.
The program also groups items according to a maximum of five user criteria (see below).
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The program can clear items only if the balance of the group of line items selected
according to the above criteria equals zero in document currency (customer and vendor
accounts) or in update currency (G/L accounts). The clearing date is the date you specify
as the clearing date in the selection parameters. If the clearing procedure is carried out
successfully in an update run, the program also issues the clearing document numbers.
When running this program, the system blocks all accounts in which items can be cleared.
It releases them once the clearing procedure is over. Accounts blocked by other
transactions or specified in an automatic payment run are not included in the automatic
clearing run.
Special processing of GR/IR clearing accounts :
If the assignment of goods receipts to the corresponding invoice receipts using the
purchase order number and purchase order item is not sufficient (such as with scheduling
agreements), you can set the GR/IR accounts special processing indicator. This indicator
means that documents are assigned to GR/IR accounts using the material document in
addition to the purchase order number and purchase order item, assuming that a goodsreceipt based invoice verification is defined in the purchase order item.
Requirements
1. The user criteria must be defined in Customizing for Financial Accounting.
2. You have to select the account types that you want to include in clearing. You can limit
the accounts the program selects by specifying account numbers.
3. If you want to carry out clearing taking account of tolerances, you must define the
tolerances in Customizing and assign the tolerance groups to the accounts where
necessary.
3.

Alternatively, the accounts can be cleared automatically also based on freely defined
criteria like GR/IR clearing account will be cleared based on reference key, purchasing
document number, Line item and Business Area.
4.
1.3.7.
Interest Calculation [A/P]
Questions:
Q:
1) For which vendors do you calculate interest?
A:
At present no such system is followed.
CI template:
1.
XYZL does not follow any policy to pay Interest to the Vendors. As such, this functionality
will not be applicable for XYZL.
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1.3.7.1.
Vendor Account Balance Interest Calculation
Questions:
Q:
2) How do you post interest charges?
A:
At present no such system is followed.
1.3.8.
Correspondence with Vendors
1.3.8.1.
Correspondence with Vendors
Questions:
Q:
1) What correspondence (such as balance confirmation) and internal evaluations
(such as internal documents) do you create for your vendors?
Explanation: Correspondence is the written communication that is sent by the company to
vendors. Internal evaluations serve as the internal documentation of business transactions
with vendors.
A:
Balance confirmation
CI template:
1.
XYZL is required to send statement of account and Balance confirmations to vendors
yearly as well as any time, monthly/quarterly/half-yearly, category wise or based on
amount or periodically, showing balances (printing of balance confirmation, can be in a
series or on users choice). XYZL also requires format to be sent to parties asking them to
send their balances/outstanding with details as on a particular date.
2.
All evaluations and reports you send to your business partners are considered
correspondence.
Correspondence includes:
Account statements and open items lists.
Balance confirmations
Correspondence Types :
Correspondence types differ with respect to the contents and structure of the letters you
can send to your business partners.
An account statement and open item list are two types of correspondence. They differ with
respect to the information they contain and the way it is displayed. Unlike an open item
list, an account statement displays all items in a specified period along with the balance
carried forward. The open item list merely displays the open items for a certain key date.
This topic describes the different correspondence types that are delivered with the
standard system.
Account Statement and Open Items List
The account statement can be created for your customers or vendors is an extract from
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the customer account which enables him to check the items there or is merely for
information purposes. The account statement displays the balance carried forward, all
items in the chosen period and the closing balance of the account.
The open items list is a special form of account statement. It is also sent to the customer
for verification or information purposes. Occasionally, the list is also used as a reminder
letter. The open items up to the chosen key date are displayed in this list.
Both letters contain the document number or reference document number, the document
date, the document type, the currency and the amount for every item as well as the
balance of the open items at the key date. The account statement may also contain the
clearing document number. If branches were included in the letter of a head office, their
addresses are listed at the end of the letter.
The layout of the letter is determined via a form. Depending on the form used, the letter
may also contain, for example, the days in arrears per item at the key date or other
information. The form must be defined and stored in the system.
3.

Correspondence is a standard SAP functionality which is used to send statement of
account and balance confirmations to the customers / vendors periodically as per
specified formats.
4.
The process for sending Balance confirmation and statement of accounts will be
automated as compared to the existing manual procedure. The system will extract the
relevant data automatically based on the criteria selected by the user and print the
required output.
1.4.
Accounts Receivable
CI template:
1.
The expectations of XYZL with regard to Accounts Receivable are as under:
1) Accurate & Timely accounting of receivables.
2) Complete integration between the Sales and Financial Accounting, thereby elimination
the need of reconciliation between the GL and Accounts Receivable Ledger.
3) Monitoring of Advance payments and Credit Analysis.
4) Separate Accounts maintenance for the same Dealer for separate Product lines e.g.
Scooters and Motorcycles and parts.
Comprehensive reports taking care of Users' and MIS requirement in accounts receivable.
2.
The Accounts Receivable application component records and manages accounting data of
all customers. It is also an integral part of sales management.
All postings in Accounts Receivable are also recorded directly in the General Ledger.
Different G/L accounts are updated depending on the transaction involved (for example,
receivables, down payments, and bills of exchange). The system contains a range of tools
that you can use to monitor open items.
There are a range of tools available for documenting the transactions that occur in
Accounts Receivable, including balance lists, journals, and other standard reports.
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Accounts Receivable is not merely one of the branches of accounting that forms the basis
of adequate and orderly accounting. It also provides the data required for effective credit
management.
3.

All the transactions related to customer Invoices , credit memos will be processed in SD
module and all the transactions related to payments etc will be processed in FI module. A
high level of integration exist between FI and SD. The data entered in any module is
updated in the other module online realtime. Since the individual applications (general
ledger and sub-ledgers) all exchange data, individual business transactions only have to
be entered once.
4.
Triggers / Inputs
Based upon the Customer groupings the following Account Groupings will be created :
1.
2.
3.
4.
5.
Sundry Debtors - Trade

Sundry Debtors - OEM
Sundry Debtors - Exports
Sundry Debtors - Others ( for Scrap Sales etc.)
One Time Customer - for any future and special requirements.
Special GLs to be opened for the following types of Business Transactions :

1.
2.
3.
4.
1.4.1.
Advances Received.
Deposits & Securities Received.
Bills of Exchange Transactions
LC Transactions
Customer Down Payments
Questions:
Q:
1) In which cases do you require your customers to make a payment prior to the
processing an invoice or delivery?
Explanation: Comment for PS: It is possible to schedule customer down payments in the
project billing plan in WBS elements that have the indicator "Billing element".
A:
In case of some specific customers
customers.
we take
advances . Like in case of new
Q:
2) What is the complete process for down payments, including the postings that are
generated?
Explanation: Comment for PS: Note that it is possible to configure the use of milestones such
that a down payment request is automatically triggered. When the milestone is completed, the
request is generated by the settlement run.
A:
The advances are posted to the customers account directly without any adjustment in
their invoices.
Q:
3) Do you plan on paying down payments with the automatic payment program?
(direct debit)
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FI Module
Explanation: Comment for PS: The transfer posting of cash items is a process that takes
place at the end of the period. It must be carried out before you can see the current cash
items in the project.
A:
No
Q:
4) Do you plan on dunning down payments request?
A:
No
CI template:
1.
Customer Down Payments are made as advances against sales orders. The client
requires to keep a track of all the down payments. This down payment must be cleared
with the customer Invoice posted subsequently. The customer balances should be
available considering down payments and also without considering the same.
2.
Customer down payments refer to the advances to received from the customers. Down
payments are maintained separately from the regular a/c as a Special General Ledger
Transaction. At the time of receiving down payment, the system will prompt for sales
order number against which the down payment is being received and after receiving the
payment the status of sales order wart. down payments made is updated automatically.
The down payments can be cleared against the Invoice at the time of payment against the
Invoice or separately by using T.Code F-39
Customer down payment refers to the advance payment from the customers. Advance
payments are to be separately maintained till they are matched with the bill on the party
and cleared.
Down payments must not be balanced with other receivables or payables and must be
displayed separately on the balance sheet. A receivable or payable results from the
delivery of a tangible asset or the performance of a service.
On the balance sheet, down payments made are displayed on the assets side and down
payments received on the liabilities side. Down payments made are further divided,
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FI Module
depending on whether they are:
Down payments on tangible fixed assets

Down payments on intangible fixed assets
Down payments on inventory stocks
General down payments.
Once you have received the goods or services for which you made a down payment, you
need to clear this payment for the final settlement either manually or using the payment
program. The down payment must no longer be displayed as such.
3.

The system will show separately through special G/L concept down payment from
customer account comparing to present practice where down payment is directly credited
to customer account. Also there will be full control over the down payments received and
the same can be easily tracked in contrast to the existing system where it becomes really
difficult to track and reconcile down payments.
4.
a)
The down payment will be treated separately as compare to normal

transaction so that user can analysis of down payments from customers.
b)
The system always track the currency and rate at the time of transaction and
at the time of analysis document currency and local currency always available
within the system.
12.

Special GL transaction would have to be configured for this purpose.
1.4.1.1.
Customer Down Payment
Questions:
Q:
1) How do you process customer down payments?
Explanation: Identification for separate reconciliation accounts

A:
The advances are posted to the customers account directly without any adjustment in
their invoices.
Q:
2) How are these down payments cleared with the customer account?
A:
Advance payments are adjusted / set off against the debit invoices.
Q:
3) Are some customer down payments related to projects?
A:
No
1.4.1.2.
Customer Down Payment Clearing
CI template:
1.
XYZL requires to clear the down payments against the Invoices so that the status of
outstanding against the particular Invoice can be ascertained and the entry is reflected in
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the Customer account directly.
2.
You can clear a down payment manually or have the payment program clear it. You can
clear manually at any time: No special measures are necessary.
When you enter an invoice, the system issues a warning message that there is an
outstanding down payment. In doing so, the system indicates that a down payment
commitment exists. You can then decide immediately whether or not to clear the down
payment. However, this message depends on the configuration of your system. You can
specify whether or not down payments are indicated. You can make this specification for
each special G/L indicator. This option is provided for all down payment types in the
standard system.
If you want the payment program to clear down payments, you must specify the special
G/L indicators when you define your company code specifications for the payment
program. If you do this, the system automatically sets a payment block when you enter a
down payment. This block indicator prevents the down payments from being cleared
straight away. By canceling the block indicator with the document change function, you
release the down payment for clearing. You can also enter a due date for the down
payment. This specifies from which date the payment program can then clear the down
payment.
1.4.2.
Invoices and Credit Memos
CI template:
1.
XYZL requires a strict control over prices, deliveries, payment terms etc before raising the
Customer Invoices.
2.
The Invoice and the credit memo are the basic documents through which posting in a
customer account is effected. The detailed procedure has been discussed in SD module.
Integration with Accounting consists of forwarding billing data to Financial Accounting (FI Accounts Receivable).
When you create a billing document, the system automatically creates all relevant
accounting documents for:
General Ledger
Profit center
Profitability Analysis
Cost Accounting
Accounting
Financial Accounting - Sales & distribution integration consists of forwarding billing data in
invoices, credit and debit memos to Financial Accounting. The system
posts offsetting entries to the appropriate accounts (with the help of "account
assignment")
and makes sure that FI can recognize all billing documents belonging to one business
transaction (for example, a credit memo to an invoice)
Forwarding Data to Financial Accounting
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FI Module
The system can forward billing data in invoices, credit and debit memos to Financial
Accounting and post them to the appropriate accounts.
Accounts
Costs and revenue can be posted to the following accounts:
Customer accounts receivable
General ledger (for example, a cash clearing account)
Revenue
Sales deductions
Accruals (for rebate agreements)
Accrual account
Accrual clearing account
The system automatically posts the amounts to the appropriate accounts by means of
Account determination
Business Area
The system posts these costs and revenue according to the business area. The business
area can be equivalent to the:
Sales area (if the accounts are to be posted according to sales)
Plant/division (if the accounts are to be posted according to products)
3.

Customer Invoicing is part of SD module. The customer invoicing activity will be carried
out by SD personnel and the data will flow automatically to FI.
1.4.2.1.
Customer Document Parking
Questions:
Q:
1) Do customer invoices require any type of approval before they are posted?
A:
No
Q:
2) What is your procedure for parking and releasing invoices and or/credit memos?
A:
Invoices are released directly for posting, In case of credit memo, they are parked &
are released after authorised approval.
CI template:
1.
No approval is required for final posting of the customer Invoice. However, approval is
required for posting of customer credit memos. Credit memos should be posted only after
approval from the appropriate authority.
2.
In SAP, (SD module) there is functionality of releasing the documents to accounting. This
means that the customer Invoice may be prepared in SD module but the accounting
entries will be generated only after the Invoice has been released to accounting. In case of
XYZL, all the Invoicing & Credit notes of the customers will be entered in SD module.
However, the practice of releasing the customer Invoices to accounting will not be
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FI Module
applicable and the data will be transferred and accounting entries will be generated
automatically at the time of posting the Invoice.
In case of credit memos, the functionality of releasing credit memos to accounting will be
applicable and the same will be released only after necessary approval has been
obtained.
3.

XYZL to decide on the authorisation matrix in this regard.
1.4.2.2.
Outgoing Invoice
Questions:
Q:
1) Which document types and document number ranges do you use?
A:
Invoices cum challan are the document type , and the number range is numeric from
1st April to 31st March.
Q:
2) Can you use templates for some of these invoices?
Explanation: Reference documents, for example

A:
No
Q:
3) How do you handle transactions in foreign currencies?
Explanation: How are exchange rates handled? For example, manual entry of the exchange
rate in the document?
A:
Yes
CI template:
1.
The requirement of XYZL is to have a complete control over the customer billings viz
rates, discounts, payment terms, credit limit etc. The system should allow billings only at
approved rates and terms. In case the credit limit is exceeded, the no further delivery/
billings should be done to the customers and the system should give the error message.
Such billings should be processed further only after special approvals and authorisations.
The authorisation for increasing the credit limit / releasing such blocked documents will
rest with HODs only.
2.
All the billings to the customers will be done thru SD module and all aforesaid controls will
be exercised in SD. All the Invoices posted in SD will automatically be transferred to FI
and there will be no control available to SD to block the invoices for release to accounting.
In case the credit limit of a customer is exceeded, the Invoice will be blocked for delivery
and can be processed further by releasing the block or increasing the credit limit only by
HODs.
3.

All the prices, payments terms etc will be controlled thru relevant master and procedures
in SD module. The relevant prices, terms and procedures will be determined automatically
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FI Module
ands posted to FI on the basis of automatic account determination procedures.
4.
A high level of integration exist between FI and SD. The data entered in any module is
updated in the other module online realtime. Since the individual applications (general
ledger and sub-ledgers) all exchange data, individual business transactions only have to
be entered once.
5.

XYZL needs to decide on the Authorisation matrix in this regard.
1.4.2.3.
Customer Credit Memo
Questions:
Q:
1) How do you process customer credit memos?
Explanation: Clearing or disbursement?

A:
Clearing against invoices.
We issued every month credit notes to the customers on account of material return,
cash discounts, quality claims, shortages, rate differences, price support & others
The cash discounts are given on receipt of payment on the basis of specified
days & specific %. The credit note for cash discount & quantity discount
should be generated thru systems
CI template:
1.
XYZL needs to raise Debit / Credit notes to customers on account of price differences,
shortages, discounts, incentives etc. The system should be able to process such
transactions automatically and should be posted only after necessary approvals.
All the credit notes related to customers viz CN for Cash discounts, Quantity discount,
price support, quality rebate etc are issued on monthly basis after taking necessary
approvals.
2.
SAP offers the standard functionality of Customer - Credit memos to facilitate issuance to
Credit notes to the customers. Credit notes can be issued with reference to a Invoice or
without reference to a Invoice. The detailed procedure has been dealt with in SD module.
The credit notes will be processed in SD module but will be posted to FI only after
obtaining the necessary approvals. SAP standard functionality of releasing documents to
accounting will be used for this purpose and necessary authorisations will be given for the
same.
3.

In case of Credit notes for Cash Discounts, as per standard SAP practice, CD is allowed
at the time of making the entry of payment. However, as per the practice followed by
XYZL, Credit notes for cash discount needs to be issued on monthly basis after taking
necessary approvals. As such, standard SDAP procedure will not be applicable.
4.

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FI Module
A report will have to be developed giving the details of the cash discount payable to the
customers. Based on this report, necessary approvals will be obtained and Credit notes
will have to be issued manually. Detailed procedure has been mentioned in the annexure.
5.

XYZL needs to decide on the Authorisation matrix in this regard.
1.4.2.4.
Document Reversal
Questions:
Q:

A:
Negative posting
Q:
A:
Yes
CI template:
1.
no need to pass the reverse entry for mistakes at the time of document entry thereby
eliminating the need for passing the reversal entry manually. Also negative posting is
required for document reversal with a separate document type.
2.
1
2
3


Negative posting :
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FI Module
The document can be reversed in the application / module from where the original
document was generated. For example a If a customer invoice is generated in SD, it can
be reversed in SD module only.
3.

document type and negative posting will be allowed for reversals. Document must be
reversed in the application where the document has been generated. For example a
Billing document created in SD module should be reversed in SD module only.
4.

better control.
5.
1.4.2.5.
Recurring Entry
Questions:
Q:
example)?
A:
yes
CI template:
2.
There are no recurring entries in case of customers where same entry needs to be passed
periodically as in applicable in case of vendors for example Rent etc.
1.4.3.
Account Analysis [A/R]
CI template:
1.
XYZL requires the Analysis of Customer on the following Lines :
1.
Individual Account Display of each Customer including any special GL

Transaction.
2.
Age Wise Analysis of Customers.
3.
Group Level Analysis of Customer Balances based on Customer Grouping on
Region ID ( State ), Country, Profit Centre ( product ), freely assigned Grouping
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FI Module
key.
4.
Analysis of special GL transactions like down payments , LCs etc.
The above requirements will be met through AR Information system as well as from Profit
Centre and CO-PA reporting Modules.
2.
An account balance shows the:
1 Opening balance (carry forward balance from the previous year)
2 Total of all transactions per posting period, broken down into debits and credits
(transaction figures)
Using these figures the system also calculates the:
(a) Balance per posting period
(b) Accumulated balance of the account
In addition to the above balances, the system displays the gross turnover per period for
each account. Account balances are also comprised of the balances resulting from special
G/L transactions such as bills of exchange and down payments. While displaying account
balances, you can view document amounts posted in foreign currency in the respective
local currency. You can also choose between:
Account balances of both the items that are part of sales or purchases and
the items that are not part of sales or purchases
ii.
Account balances of only items that are part of sales or purchases
iii.
Account balances of special G/L transactions
i.
3.
Data relevant for customer transactions will always be available in the system online real
time basis. There are various standards reports under FI & SD information system from
which a user can make analysis from various angles and combinations.
1.4.3.1.
Customer Line Item Analysis
Questions:
Q:
1) Is there any particular information that you wish to represent when representing
customer postings online?
Explanation: Note on ALV/line layout variants
A:
Yes
CI template:
1.
displays would like to see the line items of each vendor with assignment of cost centers,
business areas, profit centers, document number, sales order number etc.
In case a customer is billed from more than one location, XYZL requires to generate the
statement of account of the customer branch-wise and also cumulative as a whole.
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FI Module
2.
1
2
3
4
5
6
Open items
Cleared items
Noted items
Parked items
Items with special G/L transactions (in Accounts Receivable and Accounts Payable)
Items with customer or vendor items (in Accounts Receivable and Accounts Payable
1
2
3
Customer accounts
Vendor accounts
G/L accounts
1
2
3.
4.


In other words, with line item display we can view each entry passed in an account with
document numbers and other additional fields like cost centers, business areas ,
document number, PO number etc are also available for analysis. In case of AP and AR
since party-wise accounts are available Line Item Display will not be maintained in GL
Account level. However, line item display for each vendor can be obtained from the vendor
account information system.
XYZL requires to generate the statement of account of the customer branch-wise and also
cumulative as a whole, in case a customer is billed from more than one location. Since
there will be only one customer code for a customer i.e. separate customer codes will not
be defined based on billing location, it is possible to do branch-wise sales and other
analysis but in standard SAP it will not be possible to generate branch-wise statement of
account which includes all the information relating to payments, special GL transactions,
credit/debit notes etc. Such statement of account can be generated at the company code
level i.e. SOA only one statement of account will be available for the customer.
5.

"Z" Development needs to be carried out for meeting the XYZL's requirement. Additional
field to be used to capture the data at the time of all the transactions affecting customer
account like sales, credit notes, payments, down payments, special GL transactions etc.
This field needs to be populated at the time of generating branch-wise SOA so that data
can be filtered accordingly.
1.4.3.2.
Balance Analysis
Questions:
Q:
1) Which online analysis options do you use?

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FI Module
A:
Normally analysis is done through GL scrutiny and other MIS reports related to
Dispatch, Raw Material, Sales, PPC, outstandings are prepared Monthly, Quarterly and Yearly
basis.
CI template:
1.
SAP Standard AP Balance Analysis will be available for all AR accounts. The summary of
Postings made during a posting period can be analysed using this functionality. Yearly
Closing procedure and balance transfer activity will have to be run for transferring closing
balances from one accounting period to the next.
2.
The account balance displays the following:
1.
2.
The opening balance (the balance carried forward from the previous year)
The total of all transactions for each posting period, broken down into debit
and credit postings (transaction figures
3.
From these figures the system also calculates the following for the account
balance display:
(a)
(b)
The balance per posting period

The accumulated account balance
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FI Module
1.4.3.3.
Credit Management Analysis
Questions:
Q:
1) Which procedures do you have in place to control your customers' credit limits?
Explanation: Time of credit limit check; Relevant documents for the credit limit check;
Consequences of credit limit check (Notification of person responsible, locking of documents
and so on)
A:
Invoices / dispatch orders are not generated automatically beyond credit limits.
CI template:
1.
XYZL would like to have a strict control over the customer billings and payments and
would like to assign credit limit to each customer. They would also like to have a control in
case the customer exceeds the credit limit by way of non acceptance of sales order or
restriction in delivery & billings. The process has been discussed in detail in SD module.
2.
Information in Credit Management
Credit Management contains a range of functions to assist you in processing sales and
distribution documents, and to help investigate critical cases.
The following section describes the different ways in which you can access information in
Credit Management.
Customer master record
The customer master record contains the data (address, telephone and fax number,
dunning procedure, sales data and so on) that you require to be able to conduct business
with the customer. To learn how to display a customer master record
Account analysis
The account analysis function enables you to call up information on a customer account.
You can then view the customer's payment history (for example, do they usually qualify for
cash discount? How many days early do they pay their items on average?). This
information assists you in assessing a customer's liquidity and likely payment record in the
future.
Line items, line item longest overdue, most recent payment

Credit master sheet
The credit master sheet displays such credit data as the current and maximum credit limit,
and the total of deliveries, orders, and invoices outstanding.
Credit overview
The credit overview shows certain additional data including dunning data, open items and
texts on the customer.
Financial Information System (FIS)

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You can use the FIS to carry out customer evaluations online, structured according to your
own requirements. Due date analyses, payment history evaluations, and DSO figure
calculations are just some of the functions you can perform.
You can summarize or breakdown the data produced in these reports - from open item
display to the customer credit management data - to whatever degree you require. You
can also edit and present the data from the reports graphically.
Sales Information System (SIS)
The SIS enables you to collect, summarize, and evaluate data from sales and distribution
processing.
3.

With the integration of SD and FI-AR, Credit Management provides the following facilities:
You can define automatic credit limit checks according to a range of criteria and in line
with your company's requirements You can also define at what point the system carries
out these checks (order, delivery, goods issue, and so on).
The credit representative is automatically alerted to a customer's critical credit
situation as soon as order processing starts.
4.
Credit Management System will enable XYZL to have a strict control over the customer
outstandings and credit exposure thereby resulting into better risk management.
1.4.3.4.
Customer Evaluations
Questions:
Q:
1) Which evaluations do you need for customers?
A:
Credit worthiness.
CI template:
1.
XYZL requires reports to evaluate AR accounts for different periods based on trends,
comparisons etc.
2.
You can use different levels for each evaluation. Possible levels are:
Group level
Credit control area level
Company code level
Business area level
The combination of grouping criteria and evaluation level enables you to carry out a large
number of different evaluations.
Various standard SAP standard reports are available for AR Evaluations. These are of
following types for example:
1. Customer due date analysis.
2. Open item analysis.
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3. Due date forecast.
4. Payment history.
5 .Down payments
6. Cleared items.
7. Customer Business
8. Transaction Figures etc.
9. Special GL Transactions like LCs etc
3.

1.4.4.
Customer Payments
Questions:
Q:
1) Which payment procedure do your customers use? (Check, bank transfer, bill of
exchange, debit memo procedure)
A:
Cheque, Bills of exchange, LC , Debit memos & Bank transfers.
Q:
2) How do you handle payment differences?
Explanation: For example, charging off, creating residual items, partial payment
A:
The differences are adjusted through credit memos.
Q:
3) Are payment differences posted automatically?
A:
No these are posted manually.
Q:
4) Do your customers provide reason codes for discrepancies in payments?
A:
Yes but the codes are not defined.
CI template:
1.
XYZL receives payment from the customers thru Cheques, LCs, Bills of exchange etc.
They would also like to account for cash discounts, exchange rate fluctuations, partial
payments, payment differences etc. The system should record all the payments and
separate data should be available for analysis.
It is also required that a periodical report from the system should be generated giving
information about payment received from the party with mentioning cheque no./DD no.
and amount along with summary.
2.
Payment methods :
The payment method determines how payments are received e.g. by cheque, bank
transfer or bill of exchange, LC, or other means of payment. Payment methods are
entered in the master records of customers and vendors in order to specify how payments
are made. If an open item is to be paid using a specific payment method, enter it in the
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open item. The terms which have been defined for the payment method must be satisfied
for the payment.
Following payment methods will be defined for XYZL :
1. Cheque
2. LC
3. Bills of Exchange
4. Bank Transfers
5. Cash
Terms of Payment:
In this step, you can define rules with which the system can determine the required terms
of payment automatically. The rules are stored under a four-character key. You assign the
terms of payment specified to the customers in the master record via the key. The key and
the terms determined with it are proposed when entering a document to the customer
account.
Terms of payment key
Key for defining payment terms composed of cash discount percentages and payment
periods.
It is used in sales orders, purchase orders, and invoices. Terms of payment provide
information for:
Cash management
Dunning procedures
Payment transactions
Master records have separate areas for Financial Accounting, Sales, and Purchasing. You
can specify different terms of payment keys in each of these areas. When you then enter
a business transaction, the application in question will use the key specified in its area of
the master record.
Different terms of payment will be defied as per XYZL's requirement.
Gross or Net Document type
If Net document type indicator is selected, the system automatically deducts cash
discounts from customer Invoices that are posted with this document type. If this indicator
is not selected, the cash discount will not be allowed on the Invoice, but will be allowed at
the time of receipt of payment.
In case of XYZL, Gross Invoice document type will be used i.e. Cash Discount will be
allowed at the time of payment and not at the time of Invoice.
Discount base amount: Gross / Net Value
If this Indicator is selected, the sales tax is not contained in the base amount for discount
calculation.
In case of XYZL, Gross base amount for Cash Discount calculation will be used i.e. Cash
discount will be calculated an the Invoice amount inclusive of sales tax.
Exchange rate fluctuations:
Exchange rate fluctuations will be accounted at every period end. Automatic calculation
and postings will be done.
Payment Differences :
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Payment differences can be handled along-with reason codes for handling payment
differences in the form of
Residual items
Partial payments
Postings on account
Reason codes come about, for example, if the cash discount period was exceeded, if cash
discount was taken when net payment was due or simply if there is a computer error at
the customers. Tolerances will be defined, if required to handle payment differences.
Customer Tolerances:
You specify the tolerances for customers. These tolerances are used for dealing with
differences in payment and residual items which can occur during payment settlement.
Specify the tolerances under one or more tolerance groups. Allocate a tolerance group to
each customer via the master record. For each tolerance group, specify the following:
Tolerances up to which differences in payment are posted automatically to expense or
revenue accounts when clearing open items
The handling of the terms of payment for residual items, if they are to be posted
during clearing
The following illustration explains about the procedure for handling payment differences:
3.

In the case of Bill of Exchange the customer will be given credit immediately after
acceptance by the customer and at the time of discounting the same will be treated as
special G/L transaction will be treated in case of customer account and as contingent
liability as compare to present system where customer account is given credit only at the
time of bank advice after the same has been realized by the bank.
4.
Standard payment methods, payment terms, use of special GL indicators to handle LC,
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bills of exchange transactions, tolerances for handling payment differences will bring in
much better control and transparency in the system. This will also enable for flexible and
standardised reporting.
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1.4.4.1.
Payment Advice Note Processing
Questions:
Q:
1) Do you receive payment advices from your customers?
A:
Yes
Q:
2) Do you enter payment advices manually prior to applying the payments?
A:
No
CI template:
1.
XYZL would like to print the payment advices to be sent to the customers automatically
from the system giving details of the customer, Invoice number, payment details,
differences etc.
2.
Payment Advice Notes:
This topic describes the functions provided by the system for the processing of payment
advice notes. A payment advice note contains the incoming payment details required for
assigning and clearing the relevant open item. Payment advice note headers contain the
payment amount, payment date, and other information about the payment. The advice
items contain information on the paid items; the amount, difference reason codes. They
also contain information used for identification purposes such as document number,
reference number, billing document number, customer reference number, and so on.
A payment advice note can be created in several ways in the SAP System.
You can enter handwritten advice notes manually.
When processing bank statements, check deposit lists, or lockbox data, you
can have the system create a payment advice note with the detail information
automatically. This may be necessary if the program cannot clear open items
immediately due to differences.
When manually processing open items for incoming payments, you can
create an advice note to record the current processing status of the items.
Payment advice notes can be imported into the system using EDI.
Payment advice notes are used during payment clearing to search for and assign open
items automatically. Instead of having to enter selection criteria and then process the open
items, all you have to do is specify the payment advice note number. The system uses the
payment advice note to propose items for clearing, including any necessary difference
postings and payments on account.
3.
This functionality will enable XYZL to automatically generate payment advice from the
system giving the necessary details thereby reducing the manual work.
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1.4.4.2.
Release for Payment
Questions:
Q:
1) How do you release invoices that have been blocked for payment?
Explanation: Observe possible blocking reasons / workflow

A:
Manual processing, after the blocked matter is sorted out.

1.4.4.3.
Manual Incoming Payments
Questions:
Q:
1) Which procedure do you use to enter customer payments?
Explanation: Time of customer payment, time of customer payment notice/account statement

A:
as per payment receipt from customer.
Q:
2) Which payment procedure do your customers use? (Check, bank transfer, bill of
exchange, debit memo procedure)
A:
Cheque, Bills of exchange, Debit memos, Bank transfers & LC.
Q:
3) Do you print or hand-write the payment media (for example, debit memo forms)?
A:
NA
CI template:
1.
XYZL receives payments from the customers mostly on the due dates. However,
sometimes there is delay in receiving the payments. There is no fixed period for receiving
the payments. System should be able to enable them process such transactions.
2.
Payment differences arise during clearing if a customer has made an underpayment, or
has made an unauthorized deduction for cash discount and the difference is within, or
exceeds defined tolerance limits. Depending on the amount of the receivables, you define
how payment differences should be treated.
If the difference is immaterial, you usually clear the receivable and post the difference. You
can define how payment differences should be posted. You have the following options:
(a) If the payment differences are within the tolerance limits, the system automatically
adjusts the cash discount or posts the difference to a separate gain or loss account. You
have defined the amount to which differences should be posted in this way. Specify
tolerance amounts and percentage limits.
(b) If the payment difference exceeds the tolerance limits, you can process the payment
as a partial payment or enter a residual item for the difference. When you enter a partial
payment, the system does not clear the original receivable, but posts the payment with an
invoice reference. When you create a residual item, the system clears the original
receivable and posts the outstanding difference as residual item to the customer account.
When you process open items, you can have the following options for dealing with
differences that exceed the tolerance limits:
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FI Module
You can treat the payment as a partial payment. The system does not clear the
original receivable. It posts the payment with an invoice reference, and enters the invoice
number in the Invoice reference field in the payment items.
You can use the payment to clear the original receivables and post the remaining
amount to the customer account as a residual item. The payment amount is noted in the
line item for the original receivable.
You can clear the original receivables and post the difference to an expense account.
3.
Payment methods, payments terms, tolerance limits can be defined for the customers and
payment differences can be handled accordingly based on the criteria specified. This will
ensure better control over the customer outstandings.
1.4.4.4.
Automatic Incoming Payments
Questions:
Q:
1) How do you post payments? Which G/L accounts are used? Which additional
account assignments (for example, cost centers) do you need for bank postings, bank charges
ac counts, cash discount accounts, and exchange rate differences?
A:
We post payments manually, & the Bank Account as well as Customer accounts are
used, we need cost centers based assignment account.
Q:
2) Do you process automatic payments for your customers, such as direct debits and
bills of exchange? Please describe in detail how these payments are processed.
A:
No automatic posting is made. The Inland bill discounting procedure is attached
Q:
3) Do you enter payments automatically based on an electronic bank statement?
Describe in detail how these payments are processed.
Explanation: Observe collection procedure, for example
A:
No automatic payment system exist at present
Q:
4) USA: Do you use the lockbox procedure?
A:
No
Q:
5) Switzerland: Do you use the POR procedure?
A:
No
Q:
6) How often do you make automatic payments?
A:
No such system exist at present
Q:
7) Which bank account(s) are used for payments? List the bank accounts by payment
method, by foreign currency, or any other criteria relevant for bank selection.
A:
Corporation bank , ICICI cash management system is availed for domestic collection.
In case of export advance receipts PNB/ Canara bank PC/CC account is accounted for.
Q:
8) How does your actual cash position influence the way you assign funds to the
different banks in the payment program?
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Explanation: Maintenance of available amounts
A:
No
Q:
9) How do you handle bank charges?
Explanation: Perhaps define account determination

A:
In case of export payments receipts, generally bank charges are on our account. In
domestic sales , we bear the DD charges where the CMS centers are not available.
1.4.4.5.
Customer Payment Medium Creation
Questions:
Q:
1) For which incoming payments do you create payment medium forms (incoming
bills of exchange, for example)?
A:
In case of Inland L/C discounting i.e. Sail, ISPAT, TISCO only bank charges are
accounted.
1.4.4.6.
Questions:
Payment Card Settlement
Q:
1) Do your customers pay by credit card? Describe in detail how these payments are
processed.
Explanation: Consultation required with SD
A:
No
1.4.5.
Bill of Exchange Receivable
Questions:
Q:
1) Do your customers use bills of exchange to pay? Describe this procedure in detail.
A:
The export & domestic customer open L/c.
Accounting For Inland LC / FLC Opened & Discounted & Advance Payments To Foreign
Vendors:
We open foreign LC for import of Raw material, Spares, capital goods against purchase
orders. Bank charges the commission on opening the FLC and blocks the LC limits .The FLC
are for sight / usance payments. On receipt of original documents we make the payment for
sight LC's and undertake to make payment of Usance FLC on due date. The bank charges
that day exchange rate on which payment is made and other remittance charges are also
debited by bank. On payment we reverse FLC outstanding and also account for exchange
fluctuation.
We open inland LC for Zinc , Hr coils against purchase order. The bank charges commission
and block limits upto the extent of LC value.
The LC is discounted by us with different banks and the charges are on our account. On due
date we make payment or the LC opening bank.
The foreign currency is paid to foreign vendors as advance
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ACCOUNTING FOR INLAND BILLS DISCOUNTING ( CUSTOMERS)
We receive the set of complete documents from marketing coordination. The documents are
discounted with the consortium bank and
the bank credits the hundi value and charge interest upto usance period , bank commission
etc. The accounting is made in Bills Purchase
a/c in our records. The bills payment is received on due date or after due date or in case of
sight bills before 25 days. The bank either charges
or refunds the interest on bills discounting. The bills purchase is reversed in our books at this
point.
EXPORTS ACCOUNTING
Packing credit is taken from bank on Orders/LC's in INR & USD. The export bills are
negotiated in the bank and the PC/PCFC is adjusted .
The bills purchase entry is made for each transaction and the account is maintained bank
wise. Different banks charge different interest rates.
charges on discounting . The bank refunds/ charge interest on actual realisation of bills and
further debit foreign bank charges/short realisations. The bills purchase is reversed on
realisation of the bills.
In some cases we receive advance payments against export orders, which is adjusted on
invoicing the material.
The agency commission, quality claims are paid by us on request of export department.
The documents are also send on collection and amount is credited by bank on realisation.
Interest on Pc/PCFC are calculated monthly
EXPORT
Packing credit/ packing credit in foreign currency is availed for
Max 180 days. The PC / PCFC is given against order/letter of credit
The original Lucys are received from export department after tax no. Noting
1 ) Availing packing credit in INR- PC
PNB cc a/c Dr
To PNB Packing Credit
Bank charges Dr
to PNB cc a/c
( Bank Charges for availing Packing Credit)
2 ) Availing packing credit in foreign currency- PCFC
PNB cc a/c Dr
To PNB PC a/c
PCFC x exch rate)

PCFC x exch rate)
Bank charges A/c Dr

to PNB cc a/c
(Upfront charges + processing charges)
The PC/ PCFC details are recorded in the register
3 A) Negotiation- packing credit in INR is adjusted
PNB Packing Credit Dr
Bank charges
Interest on export b/d
(foreign currency with exch rate)
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To PNB-Bill purchase ( FC )
The export documents are received from export dept and checked by
same
finance dept after final checking & correction the documents are presented
in the bank the packing credit register is checked to see the over due pc &
Is adjusted in the bank & in our register
The register gives the details The entry of negotiation is done in the negotiation register
packing credit register- bank wise
S.No Order No.
Adjusted Inv No.
( on computer )
LC No Pc No. Pc Taken
Neg
Date
PCFC Taken
Date
Inr
Neg No.
Neg
The negotiation register is maintained bank wise

( on computer )
S.No
Tex No Inv No Party
Usd
Ex/ Rate
Dt
3
B) Realisation of export bills

PNB-Bill Purchase ( FC )
Foreign Bank Charges
( Foreign Curr With Exch Rate)
Bank Charges/Commission
To Party
Dr/Cr PNB Cc A/C
Dr/Cr Interest On Export B/D
Dr/ Cr Foreign Exchange Fluctuation A/C
4 A) Negotiation- packing credit in FC is adjusted
( PCFC is adjusted)
PNB PC A/C
Bank Charges
To PNB-Bill Purchase ( Fc )
Interest On Export B/D
PNB Cc A/C
Dr/Cr Foreign Exchange Fluctuation A/C
The packing credit register is checked to see the over due PCFC and
same is adjusted in the bank & our register
4 B) Realisation of export bills
PNB-Bill Purchase ( FC )
Bank Charges
To Party
Dr/Cr PNB Cc A/C
Dr/Cr Interest On Export B/D
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5 A ) Direct negotiation- the proceeds of export bills are directly
credited in cc a/c.
PNB Cc A/C
Bank Charges
Interest On Export B/D
To PNB-Bill Purchase ( FC )
5 B) Realisation of export bills
Same As 4 B
6 A) Export bills send on collection
Bank Charges
To PNB Cc A/C
( Charge Are Debited In Our A/C At The Time Of Sending The Documents,
While Some Charges At The Time Of Realisation Of The Payment)
6 B ) Realisation of export bills
PNB -PC/Cc
Bank Charges
To Party
Dr/Cr PNB Cc A/C
7 A ) Advance payment is received from exporters
PNB -PC/Fc/Cc
Bank Charges
To Party
( IMT - Details are given. The controlling should be imt based, party wise)
7 B) Negotiation
Same As 3a Or 4a Or 5a
The IMT amount are also linked with the realisation amount & foreign
bank charges are booked
7 C ) Realisation of export bills ( advance payments received)
Same As 4 B
9 ) Interest on packing credit
( monthly)
Interest Packing Credit In INR

To PNB Cc
10 ) interest on packing credit in FC
( monthly)
Interest Packing Credit In FC

To PNB Cc
Note: System should be able to generate the interest calculation
11 ) Agency Commission
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PNB Cc A/C Dr
Bank Charges Dr
To Party
G.NOTE
System Should Be Able To Sort/Search On Reference No.,Inv No, Party Name,
Negotiation Date, Realisation Date, Usd, Exchange Rate
Interest on export b/d is dr/ cr with the refund / overdue interest
Export register is maintained
1
Tex No, Export Invoice - Invoice No, Party Name, Usd Rates are
entered
2
After negotiation - Exchange Rate, Inr , Negotiation Date ,
Reference No is entered
3
On Realisation- Realisation Date, Realisation Amount, Foreign
Bank Commission
4
BRC- BRC Received, No, Date
Checks
1
2
3
4
5
6
The export sale are tallied with the invoice value negotiated
Interest on negotiation are checked.( interest rates are different
of each bank)
On realisation foreign bank charges are checked. In case the part
payment has been received as advance, the balance payment is
adjusted in the party account
BRC control is kept
Bill purchase statement is prepared monthly
Total export outstanding is maintained bank & party wise
Inland Bills Discounting

The l/c is opened on order basis. Marketing coordination make s the
documents as per the l/c . The documents are prepared by marketing
co-ordination as per l/c terms . The documents are then handed over
to finance department checks the documents as per l/c and competes
the documents for negotiation in bank
1 A ) Negotiation
PNB Cc A/C
Bank Charges
Interest On Inland Bill Discounting
To PNB - Bill Purchase
1 B ) Realisation
The realisation entry is made on receipt of bank advice
CI template:
1.
XYZL uses Bills of exchange as a payment method to collect payment from customers.
The Bills of Exchange is received from the customer and this can also be used
discounting from the banks. XYZL requires to handle these transactions separately and
keep a proper control over them in respect of due dates, outstandings, bank charges etc,
They would also require the system to calculate the charges automatically.
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2.
Bills of exchange are a form of short-term finance. If your customer pays by bill of
exchange, he does not make payment immediately, but only once the period specified on
the bill has elapsed (three months, for example). Bills of exchange can be passed on to
third parties for refinancing
Posting Procedure for Bills of Exchange:
For bills of exchange receivable, there are three events which are posted in Financial
Accounting:
Payment by Bill of Exchange
Firstly, the payment by bill of exchange is posted and used to clear the receivable against
the customer. There is a now a bill of exchange receivable which is recorded on the
customer account and the special G/L account.
Bill of Exchange Usage
If the bill of exchange is used for refinancing and is passed on to a bank, then the bill of
exchange usage must be posted. The bill of exchange liability (liability to recourse) that
you now have is recorded on special accounts in the system until it has expired.
Cancel the Bill of Exchange Liability
Once the due date of the bill of exchange has elapsed, including any country-specific
period for the bill of exchange protest, you can cancel the bill of exchange receivable for
your customer and the bill of exchange liability.
3.

Bills of exchange are handled as special G/L transactions in the SAP System. These
transactions are thus maintained independently of other transactions in the subsidiary
ledger and are posted to a special G/L account in the general ledger. This affords you an
overview of bills of exchange receivable and bills of exchange payable at any stage.
Transfer postings are not usually necessary to display these items on the balance sheet.
4.
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Presently, the Bills of exchange are managed in excel manually and the complete data is
not available from the system. SAP will provide comprehensive data for managing Bills of
exchange.
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5.
Description of functional deficits

XYZL requires to have full control over LC transactions, automatic calculation of bank
charges and interest, due dates, funds management etc. he entire process and reporting
needs to be automatic and the system should give the desired reports.
In SAP system, the LC transactions are not fully automatic. Calculation of charges ,
interest automatically and monitoring of limits will not be possible using standard SAP R/3
functionality. ( also refer annexure for more details).
6.
Approaches to covering functional deficits

Refer annexure for the approach to be followed to meet the functional deficits. Integration
with IVL and data capturing in IVL will have to be studied to see the possibility of meeting
the requirement to a certain extent.
7.

Special GL transactions to be configured for handling Bills of Exchange and its
discounting.
1.4.5.1.
Manual Payment by Bill of Exchange
Questions:
Q:
1) If you process manual payments, do you want the option of directly entering a
check or a bill of exchange?
A:
Yes
CI template:
1.
Posting a Bill of Exchange Receivable :
You have a receivable amounting to Rs. 10,000/- from your customer. This receivable is
displayed on the customer account and on the reconciliation account for receivables from
goods and services.
The customer settles the receivable with a bill of exchange. When clearing the receivable,
the following postings are made:
You post the bill of exchange to the customer account. In the general ledger, the
receivable is posted automatically to the special G/L account for bill of exchange
receivables. A bill of exchange receivable now exists which is recorded on the customer
account. Since it is a special G/L transaction, the bill of exchange receivable is managed
separately from the other receivables.
From the customer account you choose the receivable to be cleared by the bill payment.
The system posts the clearing amount to the customer account and to the reconciliation
account for receivables from goods and services. It also indicates the original receivable
as cleared.
The bill charges are also entered when entering the bill of exchange receivable. They are
then passed on to the customer.
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In the above example, the bill charges give rise to the following postings:
Five percent of the bill of exchange amount is calculated as the discount charge Rs.500/It is automatically calculated on the discount charges Rs. 300/-. These amounts are
posted to the corresponding revenue accounts. The system automatically posts the bill
charges Rs. 800/- to the customer account.
1.4.5.2.
Bill of Exchange Usage
Questions:
Q:
1) Do you intend to issue bills of exchange to customers?
A:
yes . the bill of exchange is issued by us and presented to customer through bank
channel
CI template:
1.
There are two types of Bills of exchange usage applicable for XYZL i.e. either it can be
presented to bank for payment on the due date or the same can be discounted from the
bank to generate the funds. Both the scenarios should be taken care of by the system. In
case of discounting, bank charges and interest are not recovered from the customers and
are on XYZL's account.
Also XYZL requires automatic calculation of bank charges & interest at the time of Bills
discounting. In addition to this, the system should automatically calculate charges &
interest for overdue / under due days.
2.
When you deposit a bill of exchange at a bank, you must post bill of exchange usage.
The possible types of usage are as follows:
Discounting
Collecting
You can post manually once the bill amount has been credited to your bank account and
is evidenced by a bank statement.
You post bill of exchange usage once the bank credits the bill of exchange to your bank
account. You post the cash receipt to your bank account and post the bill of exchange
charges to the corresponding expense accounts. The system creates the offsetting entry
automatically. It is posted to the bill of exchange liability account (bank sub account).
You do not reverse the bill liability until after the due date and the protest period have
elapsed and there is no longer any liability to recourse.
3.

In SAP system, the system calculates bank charges and interest at the time of acceptance
of bill of exchange based on the criteria specified in the customization and the same are
debited to the customer account. In case of XYZL, the same is not recovered from the
customers and the charges etc are on XYZL's account. So, automatic calculation of
charges at the time of acceptance cannot be used here.
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At the time of posting Bills of exchange usage, the system does not calculate the charges
etc automatically and the same have to be entered manually. Also, calculation of overdue /
under-due days and interest thereon will have to be calculated manually.
1.4.5.3.
Bill of Exchange Reversal
CI template:
1.
XYZL may require to reverse a Bills of Exchange Transaction which has already been
posted into the system. Necessary entries should be passed in the system automatically.
2.
Reversing Bills of Exchange
You can reverse bill of exchange postings at different stages, depending on the
circumstances requiring reversal.
When reversing a bill of exchange, the following cases must be distinguished:
Case 1: Clearing Open Items Without a Deposit
You have cleared open items with the bill of exchange payment. The bill of exchange has
not yet been deposited.
Case 2: Clearing Open Items with a Deposit
You have cleared open items with the bill of exchange payment. The bill of exchange was
used for discounting.
Case 3: Payment on Account Without a Deposit
You have posted a bill of exchange payment without clearing any open items. The bill of
exchange has been posted as a payment on account and has not yet been deposited at a
bank for discounting.
Case 4: Payment on Account After Deposit
You have posted the payment, have not cleared any open items, and have already
deposited the bill of exchange at a bank.
1.4.5.4.
Failed Bill of Exchange
CI template:
1.
There may be cases where the Bill of Exchange has been presented to bank for payment
and the presenting bank informs that a bill of exchange was presented unsuccessfully to
the drawee for collection, or where there are insufficient funds to cover a check or if a
bank collection could not be carried out. The system should be able to handle such cases.
2.
Failed Bills of exchange payment transactions refers to cases where you have presented
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a bill of exchange at your house bank to be discounted or for collection. Your customer or
your house bank then inform you that this bill of exchange cannot be paid. Before further
processing can take place (posting a new receivable with the same amount as the failed
bill , the bill of exchange must first be cleared.
Such posting is necessary where, for example, the presenting bank informs you that a bill
of exchange was presented unsuccessfully to the drawee for collection, or where there are
insufficient funds to cover a check or if a bank collection could not be carried out.
Under these circumstances, the bank's debit memo must be posted and the original
receivable reproduced.
1.4.6.
Account Clearing [AR]
Questions:
Q:
1) In which cases are open items cleared other than through payment receipts?
Explanation:
afterwards.
A:
Note: With advance payments and offsetting, clearing has to be done
Credit memos , Sales Returns, Clearing of down payments etc.
CI template:
1.
XYZL requires to clear the open items of the customers by all possible means like a
Customer Invoice may be cleared on account of payment, credit notes, sales returns,
down payments etc. All such clearing should be possible and the system should given the
details of all such clearings related to a particular Invoice so that the status of Invoice can
be tracked.
2.
clearing has not been done at the time of document entry can be cleared manually. The
report can be extracted to track the status of a particular Invoice that how the same has
been cleared. Assignment field will be used to capture the Invoice number at the time of all
the credit transactions in the customer account like payments, credit notes, sales returns
etc.
3.

After clearing function using the customer account always shows outstanding account with
relevant document only which represent outstanding amount of customer. The user will
not have to manually tally the bill wise tally with every transaction.
1.4.6.1.
Manual Clearing
CI template:
1.
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2.
The process has been discussed in detail in Accounts Payable. So, the same is not being
discussed here again.
3.
1.4.6.2.
Automatic Clearing
Questions:
Q:
A:
CI template:
1.
The requirement for Account clearing for Accounts receivable is same as that of Accounts
payable.
2.
The process has been discussed in detail in Accounts Payable. So, the same is not being
discussed here again.
1.4.7.
Dunning Notice
1.4.7.1.
Automatic Dunning
Questions:
Q:
1) After how many days do you intend to issue a dunning notice?
A:
One week after the expiry of credit periods
Q:
2) What is the dunning frequency?
A:
Every 10 days
Q:
3) Do you dun various customer groups at different intervals?
A:
Yes in case of all customers.
Q:
4) Which types of dunning do you use?

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A:
By sending formal reminders.
Q:
5) How many dunning levels do you have?
A:
HOD.
Three levels 1st - Reminder by Executive, 2nd By Marketing Executive, 3rd by the
Q:
6) Which organizational units are responsible for dunning (for example, company
code, division)?
A:
By concern business segments people ( i.e. trade, OEM , export )
Q:
7) Do you calculate dunning interest or charge a dunning fee?
A:
Interest is charged at the time of dunning & debited to customers account at the time
of realisation / adjustments of Interest amount.
Q:
8) In which cases do you dun a vendor?
A:
In case where customer/ vendor are same
CI template:
1.
Though the functionality of dunning is available in SAP, it is not recommended to use the
same due to system related constraints. Also, this may not be very useful in the Indian
scenarios. Separate letters can be prepared and statement of account can be generated
from SAP to send reminders to the customers.
1.4.8.
Interest Calculation [A/R]
CI template:
1.
XYZL requires to calculate interest on the overdue payments from the customers but the
same is debited to the customer's account after realisation or adjustment from the credit
notes on case to case basis. They require a report giving the details of interest to be
charged and the debit notes will be raised in the system manually.
2.
Interest can be calculated on customer and vendor accounts in two ways:
1. Account balance interest calculation
2. Calculation of interest on arrears
Interest calculation is controlled by settings made in the interest indicator. You assign an
interest indicator to the master records of the customer and vendor accounts you want to
calculate interest for. Interest is calculated using the debit interest rate defined for the
interest indicator.
There are different ways to calculate interest:
To calculate interest on cleared items only and post this interest: The system will calculate
interest as of the net payment due date.
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To calculate interest on open and cleared items and post the interest: The system will
calculate interest as of the upper limit date of the last interest run.
To calculate interest on open and/or cleared items without posting the interest: The system
will calculate interest as of the net payment due date.
3.
Triggers / Inputs
In case of XYZL, calculation of Interest on arrears will be applicable since the Interest will
be calculated on the overdue items. The system will generate the report showing the
interest to be charged and the postings will be made manually on case to case basis as
per the requirement / approvals.
4.
Presently, interest is being calculated in excel and vouchers are passed in the system
subsequently. In SAP system interest on overdue payments from customers will be
calculated automatically and posted as per the requirement.
5.

Interest calculation program for customer accounts needs to be configured for as per the
requirement for automatic calculation.
1.4.8.1.
Customer Account Balance Interest Calculation
Questions:
Q:
1) For which customers do you calculate interest on balances?
A:
As per payment terms, for every customer who is not making the payment on time.
Q:
2) Which interest rates do you use?
A:
Prevailing rate of interest .
Q:
A:
Manually through debit notes at the time of realisation / adjustment of interest amount.
Q:
4) What types of notices do you send to your customers and how often?
A:
HOD.
1.4.8.2.
Calculation of Interest on Arrears - Customers
Questions:
Q:
1) After how many days do you calculate interest on overdue amounts?
A:
After credit period, however grace periods are not fixed.
Q:
2) Which interest rates do you apply to your different groups of customers?
A:
Prevailing market rate
Q:
3) How do you handle credit memos?

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A:
Credit Memos are adjusted from the overdue amount for calculation of interest on
case to case basis.
Q:
A:
Manually through debit notes at the time of realisation / adjustment of interest amount
on case to case basis.
Q:
5) What types of notices do you send to your customers and how often?
A:
HOD.
1.4.9.
Correspondence with Customers
CI template:
1.4.9.1.
Correspondence with Customers
Questions:
Q:
1) What sort of correspondence (account statements, balance confirmations, for
example) and internal evaluations (internal documents, account balances, open item lists, for
example) do you create for your customers?
Explanation: Correspondence is the written communication that is sent by the company to
customers. Internal evaluations serve as the internal documentation of business transactions
with customers.
A:
Account balances conformation, Account statement, overdue reminders, credit notes
for cash discount etc are created for the customers.
We evaluate the customers on creditworthiness & business dealings.
CI template:
1.
XYZL requires to send statement of account and Balance confirmations to customers
yearly as well as any time, monthly/quarterly/half-yearly, category wise or based on
amount or periodically, showing balances (printing of balance confirmation, can be in a
series or on users choice). XYZL also requires format to be sent to parties asking them to
send their balances/outstanding with details as on a particular date.
2.
All evaluations and reports you send to your business partners are considered
correspondence.
Correspondence includes:
Account statements and open items lists.
Balance confirmations
Correspondence Types :
Correspondence types differ with respect to the contents and structure of the letters you
can send to your business partners.
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An account statement and open item list are two types of correspondence. They differ with
respect to the information they contain and the way it is displayed. Unlike an open item
list, an account statement displays all items in a specified period along with the balance
carried forward. The open item list merely displays the open items for a certain key date.
XYZL is required to send statement of account and balance confirmation letters to the
customers on quarterly basis. The same will be incorporated in the system.
3.

Correspondence is a standard SAP functionality which is used to send Statement of
account and balance confirmations to the customers / vendors periodically as per
specified formats.
1.5.
Bank Accounting
CI template:
1.
Daybook for various bank accounts to be prepared and in GL account the monthly totals
of the bank transactions (Debit / Credit) to be posted in the control accounts. Automatic
interest calculation and month wise bank wise break-up in a report form. Automatic bank
reconciliation statement is required.
The detailed bank and finance related requirements are attached herewith.
2.

For details bank and finance related requirements and gaps in the SAP system are
attached herewith.
3.

For details on gaps related to bank and finance requirements and approaches to covering
the functional deficits refer annexure.
1.5.1.
Incomings
1.5.1.1.
Cash Journal
Questions:
Q:
1) How do you manage incoming cash?
A:
We are making the payments to our employee for imprest, salary advance
reimbursement of expenses, freight payment to vendors, advance payment to
vendors. We are also receiving the payment from customers, employees,
withdrawal & deposit of cash into Bank. These transactions are managed by issuing receipts,
& making petty cash payments & balance as in hand.
Flow of cash Accounting
1
Cash Vouchers are prepared in visual basic program from passed bills, supports etc.
A
Expense
Cash Cr
Dr
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FI Module
2
3
4
5
6
7
8
Vouchers are checked by authorised person & are passed by the signing authority for
payment.
The payments are made from the cash department & a summary of the days payment
along with the vouchers are sent back to accounts.
The data for cash vouchers are then transferred from Visual basic to fox pro, assigning the
numbers to all the cash vouchers manually.
A cash summary is generate & is tallied with the summary recd from the cash department
for the payments.
Control vouchers for various exp are prepared:Imprest control
Revenue control
Employees control
These control vouchers are the passed by the authorised person.
Then the posting is done in the cash book.
Q:
2) For which business transactions are incoming cash journal postings made?
A:
Withdrawals from bank, customer & employees.
Q:
3) How are these business transactions posted?
A:
Manually
CI template:
1.
XYZL requires the functionality of Cash Journal to manage Incoming and Outgoing cash
transactions. Incoming cash transactions include cash receipt from customers,
employees, cash withdrawal from bank etc and outgoing cash transactions include
payment to employees, imprest, loans, advances, payment to vendors, cash deposited
into bank etc.
For handling cash maintenance at depots, XYZL issues imprest in favour of concerned
depot employee and he submits fortnightly statement of expenses and his imprest account
is adjusted accordingly.
2.
Cash Journal
The cash journal is a sub-ledger of Bank Accounting. It is used to manage a company's
cash transactions. The system automatically calculates and displays the opening and
closing balances, and the receipts and payments totals. You can run several cash journals
for each company code. You can also carry out postings to G/L accounts, as well as
vendor and customer accounts.
You can use the cash journal independently of other posting transactions. You can enter
amounts in different currencies. In a two-step procedure, you save the entries in the cash
journal before they are transferred to Financial Accounting. After this transfer, the cash
journal postings correspond to the FI documents.
Features
The cash journal is a single-screen transaction. This means that you can enter, display,
and change cash journal documents on one screen. You have the following options:
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FI Module
Entering, saving, and posting cash journal entries
You can save cash journal entries locally in the cash journal. The system also calculates
the balances. The cash journal entries saved are then posted to the general ledger.
For a cash journal document, you can carry out CO account assignments, and have taxes,
including withholding taxes, calculated by the system with reference to business
transactions, taking account of tax jurisdiction codes.
Displaying follow-on documents
You can also display the follow-on documents arising for the cash journal entries posted.
Defining cash journal business transactions
As well as defining cash journal business transactions in Customizing, you can also, if
necessary, define a new business transaction while you are making entries in the cash
journal.
Printing the cash journal
You can print all of the cash journal entries posted in the time period displayed. You select
the print form in Customizing.
Printing receipts
You can print the cash journal entries saved. You select the print form in Customizing.
Deleting cash journal entries saved
If you have the appropriate authorization, you can delete cash journal entries that have
been saved.
Displaying all cash journal documents that have been deleted
You can display all the cash journal documents that have been deleted within a specific
time period.
Changing the cash journal
You can change the cash journal and the company code while you are processing entries.
3.

Cash Journal is a functionality to manage cash transactions for the company. The
permitted business transactions can be defined and the users can enter the data for these
transactions only. Data is posted to financial accounting transaction wise or on day to day
basis. Cash Journal is a very simple and flexible system for handling Cash Transactions.
In case of XYZL only one cash Journal will be required which will be maintained in the
local currency of the company code i.e. INR.
4.
Naming convention
In case of XYZL - Sahibabad , the Cash Journal will be named as "SBCJ".
5.
With the use of Cash Journal, handling of cash transactions will become more easy and
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will give XYZL a better control over the same. Only the authorised person will be allowed
to post the entries. This will also eliminate duplication of work as is prevalent in the
existing system. Automatic postings to GL will be done. This will also eliminate errors in
posting to wrong GL account.
6.

As per the practice followed by XYZL, a voucher is prepared and printed in some other
package and authorised by the concerned person which is sent to cashier for making the
payment. Based on the same the cashier ( who sits at some other place) makes the
payment and these entries are subsequently posted into the system on the basis of
statement submitted by the cashier on daily basis. There are however cases where the
payment is not made on the same day on which the voucher was authorised but is paid
subsequently on some other day. XYZL would like to continue such practice in SAP as
well.
SAP offers the functionality of saving the Cash Journal entries and then posting the same
after verification and making cash payments. Receipts can also be printed for saved
entries. The entries saved can be deleted also and list of deleted entries can also be
viewed. The option of using the receipts as vouchers for authorizing can be used to meet
the XYZL's requirement but in case the receipt has been printed, the entry can neither be
deleted nor the posting date can be changed. In such instances, it will be very difficult to
control the cash transactions.
As such the requirement cannot be met using standard SAP functionalities.
7.

Since it is not possible to meet the XYZL's requirement using standard SAP functionalities
available in Cash Journal, the preparation of entries and printing of vouchers for
authorisation purposes should be kept out of SAP and the entries should be passed in
SAP only after cash has been paid by the cashier and on his submission of daily
statement to accounts department.
8.

The cashier will be authorised to only save the documents and the appropriate person will
be authorised to post the entries after verification.
1.5.1.2.
Electronic Bank Statement
Questions:
Q:
1) For which house banks would it make sense to use electronic bank statements?
Do these banks have the required technical capability?
A:
ICICI bank.
Q:
2) In which format is the electronic bank statement available?
A:
ICICI bank statement- CBS format & ICICI bank transaction report - PDF & RPT files.
Q:
3) What specific information do the bank statements contain (e.g. invoice numbers)?
If you wish to use the information for the payee to allocate items, you need to select a suitable
interpretation algorithm.
Explanation: Suitable interpretation algorithm (this may require additional company-specific
programming via a user exit - see note 24281).
A:
Bank statement contains date, particulars, cheque details, amount.

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Q:
4) Does you house bank transfer business transaction codes with the bank
statements to help you classify the postings?
A:
No
Q:
5) Outline the posting steps for typical bank statement postings.
A:
No bank statement is posted in the system
Q:
6) Which payment methods do you process using the FI payment program?
A:
We make manual reconciliation entries in the system on receipt of bank statement.
Q:
7) Do you process these payment methods via separate clearing accounts?
A:
No
Q:
8) Do you want to distinguish between posting documents for manual and electronic
bank statements for accounting and reporting purposes?
A:
No.
CI template:
1.
XYZL is maintaining accounts with 10 ( Ten) House banks. Bank statements are received
from all the banks in the from of Hard Copy except for ICICI bank from which the
statement is received in the form of PDF files. XYZL would like to reconcile the banks and
carry out necessary postings automatically.
2.
In SAP, the entries are not posted to main bank account directly. Instead they are posted
to clearing accounts depending upon the nature of transaction. Entries in the clearing
accounts would be cleared at the time of updating the bank statement and executing bank
reconciliation in SAP and corresponding entries would be posted in the main bank account
based on posting keys, posting rules, account symbols and account determination defined
in customizing that would ideally reflect the balance as per bank statement.
Statement entry is usually a two-step process:
First, you enter the account line items in the system. Various tools are available to
help you with this. You can vary the row format for entering individual transactions. In
addition, the system supports individual account determination and checks data
consistency. ( T. Code - FF67)
The second step is to post the line items you have entered.( T.Code - FEBP)
In case the system is unable to find the relevant data to execute the automatic postings for
example direct credit into bank by the customer, the same transaction can be completed
by performing reprocess function of bank statements.( T. Code - FEBAN)
3.

XYZL would like to execute bank reconciliation automatically based on the following fields:
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1. Transaction type
2. Value date
3. Amount
4. Cheque Number ( bank reference)
5. Document number.
Since entering document number manually for each transaction will be difficult, it has been
decided to match the transactions based on cheque number. Document number will be a
optional entry.
Bank statement entry variant will be configured based on the above requirement.
It has also been decided that bank statement will be entered manually in the system or the
data can be copied from excel and posted onto SAP screen for all the banks since the
bank statements are being received in physical form only except for ICICI bank. If required
data for ICICI bank can be uploaded thru BDC.
4.
Naming convention
In SAP system, Bank statement entry variant is identified by a four digit alphanumeric key.
For XYZL, the same will be named as "XBSV"
5.

Efforts must be made to execute bank reconciliations on weekly basis so that the system
is always updated.
6.

In SAP system, postings will be made to respective clearing accounts and main bank
account will be posted at the time of executing bank reconciliation as compared to the
existing practice of posting to main bank account directly.
7.
Automatic bank reconciliation will give better control over the bank transactions and bank
reconciliation can be carried out automatically faster and accurately.
1.5.1.3.
Manual Account Statement
Questions:
Q:
1) What specific information do your bank statements contain (for example, invoice
numbers)?
A:
Date, Ch No, Amount & short description.
Q:
2) Does you house bank transfer business transaction codes with the bank
statements to help you classify the postings?
A:
No
Q:
3) Outline the posting steps for typical bank statement postings.
A:
The bank entries are made on the basis of bank slips/ advices. No bank We prepare
manual bank reconciliation on receipt of bank statement.
Q:
4) Which payment methods do you process using the FI payment program?

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A:
Incoming payments are posted manually on receipt of cheque/ bank advice ( export
customers)
Q:
5) Do you process these payment methods via separate clearing accounts?
A:
No separate clearing accounts are maintained. Incoming payments are directly
debited to bank account.
Q:
6) Do you want to distinguish between posting documents for manual and electronic
bank statements for accounting and reporting purposes?
A:
No.
CI template:
2.
The existing process and the process to be followed in SAP system in respect of bank
postings and bank reconciliation has already been discussed in detail in the node of
electronic bank statement. Therefore, the same is not being discussed here again.
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1.5.1.4.
Check Deposit Transaction
Questions:
Q:
1) How many checks do you present to your house banks per day?
A:
Anything between 50 to 80
Q:
2) Do you enter checks from customers manually or electronically?
A:
Manually
Q:
3) What information given by the check issuer can be used to allocate items (check
number, invoice number)?
A:
Party code, Invoice No. & Cheque No.
Q:
4) Sketch the posting steps for check deposits (are checks posted directly to
customer accounts or via clearing accounts)?
A:
Directly to the customer account.
Q:
5) Do you want to separate check postings for general ledger accounting and subledger accounting?
A:
We want posting in the sub ledger which is automatically posted in the G/L
1.5.2.
Outgoings
1.5.2.1.
Payment with Payment Requests
Questions:
Q:
1) In addition to payments to or from customers and vendors, should payments
between G/L accounts also be dealt with using the payment program?
Explanation: Documentation: Payment requests form the basis for payment here, not open
items (FI documents).
A:
Yes
1.5.2.2.
Cash Journal
Questions:
Q:
1) How do you manage incoming cash?
A:
Managed by issuing receipts, & making petty cash payments & balance as in hand.
Q:
2) For which business transactions are incoming cash journal postings made?
A:
Withdrawals from bank, customer & employees.
Q:
3) How are these business transactions posted?
A:
Manually
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1.5.3.
Check Management
1.5.3.1.
Manage Check Balance
Questions:
Q:
1) Do you use pre-numbered checks, or do you assign your checks numbers from
self-defined number ranges?
A:
Yes
CI template:
1.
XYZL is using pre-numbered cheques from the cheque books issued by the banks. They
would like to keep a track of the cheques issued and would also like to print the cheques
from the system. Also the information on the payment document and other relevant
information can be obtained based on cheque numbers.
2.
The pre-numbered checks are usually split into lots so that they can be printed or filled out
at different locations. A check number interval in the SAP System represents a lot of prenumbered checks.
Cheque lots are defined which contains the cheque numbers for example one cheque lot
can be created for a cheque book number which will contain the cheque numbers in the
cheque book. The relevant information can be obtained based on the cheque number.
3.

Cheque lots and cheque numbers can be maintained in the system for printing of cheques
and also getting the required information.
4.
Cheque Management will give XYZL automatic cheque printing thru system. Also the
system will record all the relevant information such as payment document number, name
of the party, Invoice etc in contrast with the existing system where there is no such control
and cheque printing is manual.
1.5.4.
Account Balance Interest Calculation
1.5.4.1.
Account Balance Interest Calculation
Questions:
Q:
1) For which G/L accounts do you calculate interest on balances? Give a brief
description.
A:
Customers, Vendors , Banks etc.
Q:
2) Which interest rates do you use?
A:
Prevailing market rate
Q:
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FI Module
A:
Manually, by debit note in case of customers & monthly postings in G/L accounts in
case of Banks.
Q:
4) Do you combine the debit and credit balances of different accounts for interest
calculation?
Explanation: Cash pooling involves the fictitious combination of debit and credit balances on
accounts. Interest is calculated on the pooled overall balance.
A:
No.
CI template:
1.
XYZL is required to calculate and post interest on the bank accounts at the end of every
period. The requirement is automatic calculation and posting of interest based on the
specified rates of interest.
2.
The detailed procedure for Interest calculation has already been described in Business
processes of GL accounts. So, the same is not being discussed here again.
3.

Account balance Interest calculation is the functionality which can be used to calculate
and post the interest on GL accounts automatically based on pre-defined interest rates.
This will meet XYZL's requirement of calculating interest on bank account balances at the
end of every period.
4.
Presently there is no fixed system to calculate the interest. The entries are passed based
on the interest debited by bank and is cross verified in few cases only. SAP will calculate
the interest on balances automatically and execute postings accordingly. Thus, the
interest debited by bank can be cross -checked automatically.
2.
Asset Accounting
Questions:
Q:
1) Are any of your asset values managed in a foreign currency? If so, specify the
relevant countries and currencies.
A:
No. The activities involved in Asset Accounting include acquiring the assets in the
normal course of business . We are procuring assets like Plant & Machinery, Land & Building,
Furniture , Vehicles, Computers, spares etcfirst of all we place the order along-with advance
payment to the vendor. Vendor supply the goods and we receipt the same, after verification
invoices we make the FI entries and capitalized the assets. We calculate/ charge the
depreciation accordingly when we want to install a big plant & machinery, we place the orders
to different vendors for different machines spares, parts , erection work, cabling and other
work, than we first book the asset into capital work in progress and on completion/ trial run we
capitalized the assets.
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Q:
2) Does the fiscal year for asset accounting correspond to the calendar year? If not,
specify the start and end dates of your fiscal year.
A:
No, Fiscal year for asset accounting does not correspond to the calendar year. Fiscal
year followed by us is 1st April to 31st March
Q:
3) Is your enterprise currently using a shortened fiscal year, or you have used a
shortened fiscal year in the past, for which you want the R/3 System to recalculate
depreciation as part of the asset data transfer?
A:
No
Q:
4) Is your enterprise required to calculate mid-month or mid-year depreciation?
A:
No
2.1.
Handling Fixed Assets
2.1.1.
Asset Maintenance
2.1.1.1.
Creation of Master Record for Tangible Assets
Questions:
Q:
1) Do you need to manage and depreciate certain parts of your asset portfolio in the
form of group assets?
A:
Yes for Income Tax purposes.
Q:
2) Who is responsible for creating asset maser records? Who provides which
information?
A:
HOD- Balance Sheet
Q:
3) Which organizational units and/or which functional areas have authorization for
creating or displaying asset master records?
A:
HOD balance sheet
Q:
4) The asset master record can be divided up into tab pages. How should the asset
master record field groups be ordered for your organization?
Explanation: Customizing layout of screen layout and assignment to asset class.
A:
As per SAP standards.
CI template:
1.
Presently, the maintenance of information related to assets is done in spreadsheets.
Multiple spreadsheets managing asset values under the Indian Companies Act, the
Income Tax Act are maintained. Periodically, the business user performs depreciation
calculation in these spreadsheets. Also, these spreadsheets manage other information like
the description , quantity , location , etc. XYZL expects that all the assets should be
identified in SAP by a separate asset master with the details of assignment like cost
center, business area, plant etc.
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2.
The "Asset Master Data Maintenance" component is used for recording the master data of
your fixed assets on an individual asset basis. A fixed asset is defined as an individual
economic good that it is recognized in the balance sheet at the time of closing, and is in
the long-term service of the enterprise.
In order to make it easier for the user to create, maintain and evaluate master data, the
varied individual information is structured according to its area of use and the relevant
functions in the system. The asset master record consists of two main parts:
General Master Data
This part of the master record contains concrete information about the fixed asset. The
following field groups exist:
General information (description, quantity, etc.)

Account assignment
Posting information (for example, capitalization date)
Time-dependent assignments (for example, cost center)
Information for plant maintenance
Entries for net worth tax
Information on real estate
Leasing conditions
Investment support measures
Information on the origins of the asset
Physical inventory data
Insurance data
User fields/evaluation groups
Data for Calculating Asset Values

You can specify depreciation terms in the asset master record for each depreciation area
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in the chart of depreciation. In order for you to make these specifications, the master
record contains an overview of the depreciation areas. In addition, there is a detailed
display available for each depreciation area.
Some of the important depreciation terms in a depreciation area are:
1. Depreciation Key.
2. Useful life
3.Ordinary depreciation start date etc.
3.

Asset master records will be created through 2 sub-processes. These are :
1
2
Create Asset Main Number

Create Asset Sub-number.
The projects/ user department submits a request for asset creation when the asset in
question is installed/ put to use. The request is reviewed by Finance and the requestor is
notified if the approval is not granted. If the request is approved, Finance determines if an
asset main number or asset sub-number is to be created based on the nature of the
request. The asset main number is used for new assets. The sub-numbers may be used
for fixed assets with complex component parts or to represent addition.
The FA user proceeds to create the asset main number in the SAP system.
4.

The control for creation and maintenance of assets master records would involve correct
maintenance of the required information in the masters so that the transaction details are
proper. It is suggested that responsibility for creation, changing, blocking/unblocking and
deletion of asset masters in the organisation be fixed on a responsible person i.e. master
creation and maintenance should be centralised.
5.

Saps Asset Master feature acts as one umbrella to manage all information related to the
asset. The same asset master record has the feature of storing the description, physical
inventory details, quantity, location, cost center, plant, business area, insurance details,
depreciation etc. This make reporting easier and faster.
So SAP master would have to be prepared carefully as it would contain all important
details.
6.
The legacy application did not have features to manage assets. Hence, the business
users were compelled to manage these assets in multiple spreadsheets. As opposed to
this, the SAP's Asset Master feature acts as one umbrella to manage all information
related to the asset. The same asset master record has the feature of storing the
description, physical inventory details, quantity, location, cost center, plant, business area,
insurance details.
The depreciation information and asset values for different depreciation methods were
managed in multiple spreadsheets. However, in SAP, the depreciation related information
will be stored under the same asset master under different depreciation areas.
Using the asset sub number feature, all related costs to the asset can be captured.
Since, all the data related to the asset are managed under one master record, the
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business user always would have information available for reporting at his fingertips.
13.

Only HOD - Balance sheet will be authorised to open new asset master record.
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2.1.1.2.
Creation of Group Asset
Questions:
Q:
1) Do you need to manage and depreciate certain parts of your asset portfolio in the
form of group assets?
A:
Yes for Income Tax purposes.
CI template:
1.
XYZL is required to calculate depreciation as per the requirements of the Income Tax
Act,1961. To meet these requirements the depreciation is to be calculated for the group of
assets and not for the individual asset. So, creation of group assets is required for the
same.
2.
A group asset is represented in the system by a separate master record. The structure of
this master record corresponds to the structure of the normal asset master record. You
can determine the structure of this master record using screen layout control, just as you
do for normal master records. Just the same as a normal asset, a group asset can have
any number of sub-numbers. In this way it is possible, for example, to collect all the
acquisitions for one year in a single sub-number master record at the level of the group
asset
You can assign an asset to a group asset by specific depreciation areas. For this purpose,
there is a special field in the asset master record (in the detail display of each depreciation
area). You enter the number of the group asset in this field. Once this entry is made, the
system calculates and posts the depreciation for this depreciation area only at the level of
the group asset. In this way, you can also assign one asset to different group assets in
different depreciation areas.
3.

In the FI-AA component, the calculation and posting of depreciation generally takes place
at the level of the individual asset. The system is fundamentally conceived so that
depreciation is calculated for each main number or sub-number. To meet certain tax
reporting requirements such as Income Tax Act, which require depreciation at a higher
level than the individual asset (for example, all assets in a given class in a given
year).Therefore, the R/3 FI-AA component enables you to define group assets for
depreciation, in addition to depreciation at the individual asset level. These group assets
make it possible to group together a number of assets for the calculation and posting of
depreciation.
4.
Naming convention
Following group assets would be opened for XYZL :
1.
2.
3.
4.
5.
6.
7.
Free hold Land

Leasehold Land
Building
Plant & Machinery
Assets not owned by Company
Furniture & Fixtures
Vehicles
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5.
Presently, the calculation of depreciation for Income Tax purposes is done manually in
excel and there is no integration with the data maintained in FI for the purpose meeting
the requirements of the companies act. In SAP system the data will be managed centrally
and automatic valuation will be available for Income Tax purposes.
2.1.1.3.
Asset Master Record Change
Questions:
Q:
1) In your enterprise, who has authorization to change asset master records? For
which areas? Are these authorized individuals different from those who create the master
records?
A:
The authorised person for change in assets master record is the same who is
responsible for creation of asset master record, i.e. HOD Balance Sheet
Q:
2) How often is it necessary to change your asset master records? Which parts of the
asset master record are most often affected?
A:
Very rarely in case of mistakes
Q:
3) Are there certain asset master record fields that need to be protected against
changes? If so, which fields?
Explanation: It is possible to define non-changeable display fields in the asset master record
screen layout.
A:
All fields
CI template:
1.
There are very few cases where the changes have to be made to the asset master record.
XYZL would like to give authorisation for changing the asset master record to HOD Balance sheet only.
2.
Asset master records will be changed through Change Asset sub-processes.
A requestor submits a request for change in asset information by completing a form and
submitting to Finance. The request is reviewed by Finance and the requestor is notified if
the approval is not granted. If the request is approved, Finance proceeds to change the
asset in the SAP system.
The FA user proceeds to update asset information using T-Code AS02 in the respective
sections :
General
Time-dependent
Update cost center change
Update Business Area
Allocations
Origin
Depreciation method
Update the depreciation method
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Update the deprecation start date
Upon completion, the FA user saves the asset.

The FA user is able to view a history of changes made to the asset master record by a
path within the asset master record.
The history of the asset can be also obtained by running the standard report 'Asset
History'.
The FA user may display the asset master record and check the details using T-Code
AS03.However no changes or updates are permitted.
The assets, which are not to be posted, should be blocked permanently to prevent
accidental postings .The assigned asset number is unblocked to allow for posting.
Blocking/Unblocking is done using T-Code AS05.
Similarly, using T-Code AS06 asset can be deleted also. After deletion, it will not appear
for reporting.
3.

A change in Asset master record will have impact on other processes. For e.g. if
depreciation key is changed, it will have impact on depreciation. Similarly if cost center is
changed .it will impact cost allocation. Hence Asset master record should be changed with
due consideration.
4.
The legacy application did not have features to manage assets. Hence, the business
users were compelled to manage these assets in multiple spreadsheets. As opposed to
this, the SAP's Asset Master feature acts as one umbrella to manage all information
related to the asset. The same asset master record has the feature of storing the
description, physical inventory details, quantity, location, cost center, plant, business area,
insurance details.
The depreciation information and asset values for different depreciation methods were
managed in multiple spreadsheets. However, in SAP, the depreciation related information
will be stored under the same asset master under different depreciation areas.
Using the asset sub number feature, all related costs to the asset can be captured.
The screen layout rules defined in the Asset management configuration will bring about
uniformity in maintaining the asset master. This would bring about standardization in the
management of assets.
Since, all the data related to the asset are managed under one master record, the
business user always would have information available for reporting at his fingertips.
5.

Authorisation for changing the Asset Master record is to be given to HOD - Balance Sheet
only.
2.1.1.4.
Mass Change
Questions:
Q:
1) In your enterprise, who has authorization to change a large number of assets
simultaneously?
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A:
Top Management
Q:
2) Do you need to make changes to a large number of assets simultaneously?
A:
No
Q:
3) If so, under what circumstances? Please describe.
A:
Not applicable.
2.1.2.
Receipts
Questions:
Q:
1) Does your organization have a specific amount, above which purchases are to be
capitalized as fixed assets? If so, what is this amount?
Explanation: Amount limit for low-value assets
A:
Not dependent on amount
CI template:
1.
The "transactions" component enables you to carry out all accounting transactions that
occur during the life of a fixed asset in your organization. Asset Accounting is a subsidiary
ledger of Financial Accounting, along with Accounts Receivable and Accounts Payable.
The Asset Accounting component makes it possible to perform all business transactions
that affect fixed assets, in integration with Financial Accounting and other R/3 SAP System
components, while at the same time guaranteeing parallel updating to the general ledger
and the subsidiary ledger.
The primary business process in asset accounting is the purchase of assets , the
capitalization of in-house produced goods or services, and/or retirement.
An external asset acquisition is a business transaction resulting from the acquisition of an
asset from a business partner (in contrast to an acquisition from in-house production).
An asset that you produce yourself has two stages in its life that are relevant for
accounting from the point of view of your company:
*Under construction phase
*Useful life
Generally, an asset has to be shown in different balance sheet items, depending on the
phase that it is in. Therefore, it is necessary to manage the asset as a separate object or
asset master record during the construction phase. Assets under construction are
acquisitions to fixed assets that are not permitted to be capitalized and depreciated
immediately.
2.1.2.1.
Down Payment on Asset under Construction
CI template:
1.
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FI Module
XYZL pays Down Payment for Assets Under Construction based on the terms of the PO
and instruction from concerned person in Plant where the Asset to be used. In excel this
entry is manually entered to respective general ledger account of Asset Under
Construction.
2.
In SAP, down payments are handled through Accounts Payable Module. Down Payment
can be made by passing an entry using T-Code F-48 .
3.

Configuration of Special G/L Indicators for Down Payments in case of assets
2.1.2.2.
Direct Acquisition of Internal Activity
Questions:
Q:
1) Are some services (or internal activities) capitalized (such as legal costs or
consultancy charges)?
A:
Yes, such as foreign consultancy charges
Q:
2) Do you activate costs for internal activity using: - Production order - Investment
measure - Asset under construction - Direct capitalization - Other?
A:
We dont do this presently
Q:
3) For reporting, would you like separate capitalized internal activities using different
transaction types?
A:
No
CI template:
1.
XYZL may require to capitalise few expenses resulting from Internal activity such as
maintenance order etc. The system should be configured so as to able them to perform
this function.
2.
An acquisition from internal activity is the capitalization of goods or activities that are partly
or completely created within your own company.
You can capitalize your own costs for such internal activity (for example, production orders
or maintenance orders). There are two different approaches that you can use:
Capitalization of costs collected in a production order (when you manufacture an
asset that requires capitalization within the framework of an internal production order)
Capitalization of costs collected in a maintenance order (for plant maintenance that
requires capitalization, such as general improvements)
You capitalize the maintenance order or production order by settling it to an asset. As a
prerequisite for this settlement, the settlement profile of the order must allow for receiver
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type "A" (for asset).
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2.1.2.3.
Processing of Asset Acquisition
Questions:
Q:
1) Describe the information flow for asset acquisitions in your enterprise.
A:
The concerned department/ cost centers provides the requirement for assets, in
consultation with the technical staff and prepare a detailed requirement for the same. The
requirement goes to VP- projects / VP- Operations & after their approval the requirement goes
to the top management. After the approval of the top management the detailed requirement is
sent purchase department for placing the order. PO is prepared taking into consideration the
Price & other terms & conditions. The asset is recd in the plant and are duly checked / verified
by the technical staff. The bills for the same are audited & are posted. Once the asset
becomes operational the same is capitalised.
Q:
2) Describe your capital procurement requirements.
A:
As answered in Ques 1
Q:
3) What types of acquisition occur in your enterprise?
Explanation: Acquisition integrated via invoice receipt/goods receipt (Logistics - Materials

Management) Acquisition via goods receipt - accounts payable accounting Acquisition with
automatic clearing account offsetting entry
A:
[X] Integrated with Materials Management (SAP MM)

[X] Integrated with Accounts Payable (SAP FI)
[ ] Directly to Asset Accounting (SAP FI-AA)
Q:
4) Are asset acquisitions posted on a net basis (deducting any discounts) or as a
gross amount (discounts are deducted only on payment)?
Explanation: Document type settings: Net document type indicator
A:
Gross basis
Q:
5) Do you want to show acquisitions to certain depreciation areas differently than you
do in the book depreciation area (for example, to fulfill certain cost-accounting, tax or group
requirements)?
A:
No.
Q:
6) Do you post goods receipt to assets valuated or non-valuated?
A:
Assets valuated
Q:
7) Do you want down payments for assets to be shown separately?
A:
Yes
Q:
8) If using asset sub-numbering, do you want to permit asset acquisitions only to the
main number in the year of capitalization, and post all later acquisitions to sub-numbers?
A:
Yes
Q:
9) Do you keep a record of costs using acquisitions to the asset under construction?
A:
Yes
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Q:
10) Do you plan and budget for capital investments in your enterprise? Should assets
that are capitalized directly also be included in the planning and budgeting processes?
A:
Yes
Q:
11) Which is the procedure from invoice receipt to posting of capitalization? Outline
the different steps.
A:
As answered in Ques 1
CI template:
1.
Normally the assets are acquired in XYZL in the following two ways:
1. Capitalisation of assets under construction.
2. Purchase of assets from external vendor.
The system should be able to meet both the above requirements and in case of purchase
of assets from external vendor, full integration should be made with MM module for
making PO, GR and Invoice verification resulting into capitalisation of assets and
necessary information be passed to FI automatically.
2.
The Asset Acquisition can take place in the following ways :
1. Capitalisation Assets under Construction
Assets under construction are acquisitions to fixed assets that are not permitted to be
capitalized and depreciated immediately. The options below apply to direct capitalization:
Collect the costs using an investment measure (an order or a work breakdown
structure element with an asset under construction linked to it).
Collect the costs on an independent asset under construction in the Asset Accounting
(FI-AA) component.
2. Direct Capitalization
Direct capitalization refers to asset acquisitions that do not have an asset under
construction phase. Instead, they are capitalized and begin depreciation immediately. The
options below apply to direct capitalization:
(a) External Asset Acquisitions
An external asset acquisition is a business transaction resulting from the acquisition of an
asset from a business partner. You can post the acquisition of a purchased asset in
several different ways, using different components of the R/3 System.
(b)
Processing Asset Acquisitions in Purchasing (FI-AA/MM)
When you are using the FI-AA component in conjunction with the Materials Management
(MM) component, you can post an asset acquisition within the framework of the ordering
process in purchasing. Unlike most other business transactions, external acquisition using
a purchase order requires a sequence of steps to be performed at separate times:
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FI Module
Creating the purchase requisition

Creating the purchase order
Posting the goods receipt
Posting the invoice receipt
(c) Goods Receipt and Invoice Receipt with Reference to Asset

You can post the goods receipt and the invoice receipt for an ordered asset with reference
to the purchase order
3.

The projects/ user department submits a request for asset creation when the approval of
purchasing the asset has been received. If the request is approved, Finance determines if
an asset main number or asset sub-number is to be created based on the nature of the
request. The asset main number is used for new assets. The sub-numbers may be used
for fixed assets with complex component parts or to represent addition.
The FA user proceeds to create the asset main number within Asset class and Company
Code using T-Code AS01 in the SAP system .Upon completion, the FA user saves the
asset and notes down the asset number created on the request form, which is filed. The
FA user maintains a running list of all asset numbers assigned to Procurement.
The purchasing Department creates the purchase order for the procurement and also
initiates necessary action to release the purchase order. Since in XYZL this is done
outside SAP , hence direct AP Invoice postings is made for the above created Asset using
T-Code FV60.
The stores department receives the asset and records the same in the system. Also,
postings made using AP invoice for any incidental charges on assets will also be recorded
(T-Code FV60).
4.
This process enables XYZL to derive full benefits of having an integrated system.
This process helps in:
(a) Monitoring Cape spending.
(b)
Exercising Budgetary control both for project related as well as non project related
capital spending.
(c) Integrated procurement.
2.1.2.4.
Subsequent Acquisition
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FI Module
Questions:
Q:
1) Under what circumstances do you intend to post subsequent acquisitions to
previously capitalized fixed assets?
A:
As present we dont but could be depending on the circumstances.
CI template:
1.
Presently, XYZL is not following the practice of subsequent acquisition. However, this
functionality may be required in future.
2.
A subsequent acquisition in this context is an addition or enhancement to a capitalized
asset in the current fiscal year. The depreciation start date for the enhancement should be
in the current fiscal year.
Assets can be represented differently in the FI-AA component according to their
complexity. You can post a subsequent acquisition to an already existing asset either to
the existing asset master record or to a new sub-number. When you post to an already
existing asset master record, the system creates separate line items for each acquisition.
However, the system cannot display the depreciation from the subsequent acquisition
after the end of the current fiscal year separately from the historical original acquisition.
This type of separate display is only possible when you use a separate sub-number for the
subsequent acquisition.
In case of XYZL, if any subsequent acquisition is required in future the procedure
enunciated above for acquisition of assets shall be followed and asset sub numbers would
be used to have a better control.
2.1.3.
Depreciation
CI template:
1.
XYZL wants automatic calculation of depreciation for the assets based on the depreciation
rates applicable for the purpose of Book Depreciation, Depreciation under the Income Tax
Act and Depreciation for cost accounting purposes. Also, they require posting of book
depreciation to be done on quarterly basis instead of monthly basis.
2.
Every asset transaction in the R/3 Asset Accounting (FI-AA) component immediately
causes a change of the forecasted depreciation. However, it does not immediately cause
an update of the depreciation and value adjustment accounts for the balance sheet and
profit and loss statements. The planned depreciation is posted to the general ledger when
you run the periodic depreciation posting run. This posting run posts the planned
depreciation for each posting level for each individual asset as a lump sum amount.
Quarterly posting runs on monthly basis would be relevant for XYZL.
3.

Chart of Depreciation with three depreciation areas would have to be enabled to provide
depreciation for the three aforesaid purposes. Out of these three, one depreciation area
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i.e. for book depreciation would be a real depreciation area and others would be derived
depreciation areas based on the book depreciation area
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2.1.3.1.
Creation of Reserves from Gain from Asset Retirement
Questions:
Q:
1) Under what circumstances do you intend to create reserves from profits realized
on the sale of fixed assets?
A:
We do not intend to create reserve separately.

2.1.3.2.
Reserves Carry forward
Questions:
Q:
1) Do you create reserves for fixed assets?
A:
No
Q:
2) If so, provide examples. How do you post? What are the reasons?
A:
Not applicable
2.1.3.3.
Depreciation Processing
Questions:
Q:
1) What are the methods of depreciation that you are currently using?
A:
Both methods as per company law as well as Income Tax, WDV & SLM
Q:
2) Do you calculate depreciation values to the day?
A:
In case the asset is purchased upto 15th of the month, the depreciation is calculated
at full rate for that month and in case the acquisition is done after 15th, 50% depreciation is
calculated for that month.
Q:
3) In certain cases do you change over from a declining-balance depreciation to
straight-line depreciation? If so, when?
A:
During the year we dont change our method of depreciation. In some exceptional
cases.
Q:
4) Do you want to allow negative depreciation for certain assets or categories of
assets? If so, please specify.
A:
No.
Q:
5) Do you distinguish between a fixed and a variable depreciation portion?
A:
No
Q:
6) How do you handle the period control for depreciation values?
A:
As per the company's Act. Depreciation is being posted Annually.
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CI template:
1.
Depreciation documents should be generated in mass and the entire depreciation
processing and update of information should be quick without long processing time. It is
required to process depreciation on a quarterly basis.
2.

Before the depreciation run, ensure that assets are correctly capitalized, transferred or
retired under their respective processes. Reconcile capitalized items with FA sub-ledger.
Verify parameters in the asset master record such as account determination, depreciation
key ,depreciation start date. The depreciation run will be carried out on a quarterly basis.
In order for the system to calculate depreciation automatically, the FA user will run T-Code
AFAB. This run will be carried out on a quarterly basis under the option 'Planned Posting
Run. The Business user will first run the program in the test mode , selecting the 'List
assets' indicator and execute. The Business user prints the depreciation report generated,
verifies the depreciation figures and updates the depreciation terms if necessary. Note that
when the system posts depreciation, it creates collective documents. It does not create
separate documents for each asset.
3.
Triggers / Inputs
Depreciation posting run would be carried out quarterly
The Business user will first run the program for depreciation posting in the test mode first
and generate report to verify the results and then thereafter post depreciation.
4.
The business user has the advantage of getting accurate depreciation. The user is also
relieved of the efforts involved in managing multiple spreadsheets.
SAP will offer depreciation values under:
(a)
(b)
(c)
5.
Indian Companies Act,1956

Income Tax Act,1961
For Cost Accounting purpose.

Posting run to be configured as a Quarterly run.
2.1.3.4.
Manual Depreciation Planning
Questions:
Q:
1) In which cases do you need to start depreciation manually?
A:
Manual depreciation may be calculated in case of rectification of any error in
exceptional cases.
Q:
2) How often do you use the manual depreciation function?
A:
As & when required in exceptional cases.
Q:
3) When do you use unplanned depreciation?

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A:
As & when required in exceptional cases.
CI template:
1.
Normally, XYZL is not required to post manual depreciation since the depreciation is
calculated as per the rates prescribed by the Companies Act. However, in exceptional
cases manual depreciation may be used.
2.
As a rule, the system automatically determines the planned depreciation for the current
fiscal year by means of the depreciation keys entered in the master record. If you need to
specifically set the amount of depreciation, the system offers a manual depreciation
forecasting option. This means you can manually increase the planned values managed
for the asset. You can generate manual depreciation amounts for all depreciation types,
but it is more common to manually generate unplanned depreciation and the transfer of
reserves.
3.

In order to forecast manual depreciation, you can use the standard posting transaction in
Asset Accounting. The system provides special transaction types that enable you to
forecast depreciation in relation to specific areas, or for all areas that use the
corresponding depreciation type, in one stroke.
2.1.3.5.
Depreciation Posting
Questions:
Q:
1) Is it necessary, from a business point of view, to post depreciation directly to cost
accounting? If so, which receivers are to be debited (for example, cost centers, internal
orders)?
A:
Presently we are not doing , but yes the depreciation is to be posted to cost
accounting, debiting the related cost centers in case separate depreciation area for cost
accounting is opted.
Q:
2) How often do you intend to post depreciation to the general ledger and to cost
accounting?
A:
Quarterly.
Q:
3) Do you post depreciation to assets under construction?
A:
No
Q:
4) To which account(s) is depreciation posted?
A:
Depreciation Account & Accumulated depreciation account
Q:
5) Do you want to show interest only in reports, or do you want to post interest
directly to cost accounting?
A:
Not required.
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CI template:
1.
XYZL wants that the system should be able to post depreciation automatically on quarterly
basis and give results in the form of depreciation calculation separately for each of the
following three purposes:
1.Book Depreciation
2.Depreciation as per Income Tax
3.Depreciation for Cost Accounting purposes.
2.
Depreciation Run
The depreciation in background in production (actual) mode after the depreciation in the
test run has been verified as correct by deselecting the test run indicator. It will create
Batch Input Session for processing. Depreciation has not been posted to the GL at this
point.
The FA user will execute Batch Input Session at the batch input screen. In the event that
the session is lost or accidentally deleted at the batch-input screen, it can be recreated .
The FA user can proceed to execute the batch session at the Batch Input screen to post
depreciation.
Depreciation run can be repeated for period in case of change in depreciation terms of
any of the assets or under other circumstances under which the system takes into account
the changes between the original run and present status and does a differential posting.
Depreciation will be posted to depreciation account and accumulated depreciation
accounts in GL for each asset class separately.
3.

Run the depreciation in background using T-Code AFAB in production (actual) mode
when the depreciation in the test run is verified as correct by deselecting the test run
indicator. It will create Batch Input Session for processing. Depreciation has not been
posted to the GL at this point.
The FA user will execute Batch Input Session at the batch input screen. using T-Code
SM35 .In the event that the session is lost or accidentally deleted at the batch-input
screen, it can be recreated using T-Code AFBD. The FA user can proceed to execute the
batch session at the Batch Input screen. Depreciation is posted when the batch input is
processed successfully
The posted depreciation can be viewed using T-Code FBL3N by displaying the balances
and line items in GL or viewing the values in Fixed Asset.
Print other depreciation reports in addition to the standard report generated by this
Transaction using Report Tree
2.1.3.6.
Unit-of-Production Depreciation
Questions:
Q:
1) Do you use the unit of production method for certain assets? If so, please specify.
A:
No we do not use the unit of production methods for depreciation

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2.1.4.
Business Transactions
2.1.4.1.
Settlement of Asset under Construction
Questions:
Q:
1) Do you wish to manage "Assets under construction" in Asset Accounting? If yes,
describe the capitalization process.
Explanation: 1. Classic asset under construction or investment measure
A:
Yes we would like to manage Assets under construction. The capitalisation is done
after the completion of Assets i.e. when the Asset starts functioning.
Q:
2) What is the timing for the capitalization process?
A:
At the closing of periods.
Q:
3) With respect to capitalization, are you bound by specific laws?
A:
Yes
Q:
4) Is it possible that an asset under construction is capitalized as a low value asset?
A:
No
Q:
5) Do you intend to use summary settlement or line item settlement for assets under
construction?
A:
We intend to use line item settlement for Assets under construction.
Q:
6) To which receiver(s) do you settle assets under construction?
A:
Cost centers
Q:
7) Do you use partial capitalization?
A:
No
Q:
8) What kind of information flow do you have for when an investment measure is
completed and the asset under construction is ready for settlement to the final asset?
A:
The concerned department/ cost centers provides the requirement for assets, in
consultation with the technical staff and prepare a detailed requirement for the same. The
requirement goes to VP- projects / VP- Operations & after their approval the requirement goes
to the top management. After the approval of the top management the detailed requirement is
sent purchase department for placing the order. PO is prepared taking into consideration the
Price & other terms & conditions. The asset is recd in the plant and are duly checked / verified
by the technical staff. The bills for the same are audited & are posted. Once the asset
becomes operational the same is capitalised.
Q:
9) Do you display down payments to assets under construction separately?
A:
Yes
Q:
10) What kind of information flow do you have for the settlement of down payments?
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FI Module
A:
The advances are paid against the running bills as per the terms & conditions agreed
upon. The advances standing at the closing is transferred to the CWIP. These advances are
settled with the final bill, after the asset is operational & are capitalised.
CI template:
1.
Presently, the maintenance of information related to assets is done in spreadsheets. All
the Asset Acquired under AUC are manually entered to general ledger (AUC) by FA user.
After completion of Asset, FA user identifies or create new asset master in order to settle
the AUC and makes manual entry in respective general ledger .XYZL wants to use the AM
functionality for this to automate the process and meet its reporting requirements.
2.
An asset that you produce yourself has two stages in its life that are relevant for
accounting from the point of view of your company:
Under construction phase

Useful life
Generally, an asset has to be shown in different balance sheet items, depending on the
phase that it is in. Therefore, it is necessary to manage the asset as a separate object or
asset master record during the construction phase. The transition between these two
phases is called "capitalization of the asset under construction" in the following.
You can manage the asset under construction in the system in two different ways,
depending on the types of functions that you need. The asset under construction can be
either a normal asset record, or a master record with line item management. As a result,
the transfer from the asset under construction to completed fixed assets can be handled in
one of two ways:
Summary transfer from a normal asset master record to the receiver assets
(transaction type 348/349)
Line item settlement of an asset under construction that has line item management
All expenditure incurred for the CWIP in question would first be debited in the CWIP code.
Thereafter settlement rules would be defined for settlement of line items that form the
CWIP. The settlement is possible at stated percentages, or in specified ratios or specified
amounts. The capitalization date can be defined for the settlement rules. The AUC line
items can be settled against the assets or any expenditure code in case expenditure is not
to be capitalized.
3.

Asset class for CWIP would have to be opened and a suitable settlement profile would
have to be attached.
2.1.4.2.
Post-capitalization
Questions:
Q:
1) What circumstances make post-capitalization necessary in your enterprise?
One amount on the asset should have a different depreciation start date than the original
asset -
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FI Module
Explanation: For example: - Someone neglected to capitalize an asset (if so, for what
reason?) - One amount on the asset should have a different depreciation start date than the
original asset - Other
A:
In exceptional cases
Q:
2) How do you intend to post post-capitalization: - Gross, that is, with historical values
(APC and depreciation)- Net, that is, depreciation begins on the posting date using the net
book value.
A:
Gross
Q:
3) Do you want to post to a separate sub-number for post-capitalization?
A:
Yes
CI template:
1.
XYZL may require to use Post Capitalization functionality in exceptional cases. In case
this feature is to be used, they would like to use gross value of the assets to a asset subnumber instead of the main asset.
2.
Post-capitalization, in this context, represents subsequent corrections to the acquisition
and production costs of a fixed asset. An example of when you need this type of correction
is if you neglected to add expenditures and costs linked with the acquisition or assembly
of an asset to its APC in a fiscal year that is now closed.
The system posts gross post-capitalizations, meaning with historical depreciation
amounts. The system newly calculates depreciation from closed fiscal years on the basis
of the capitalization date entered in the asset master record.
The system then posts the historical APC as an acquisition to the asset balance sheet
account, and the accumulated depreciation from past fiscal years to the accumulated
depreciation account. The system also posts extraordinary revenue in the amount of the
difference between the APC and the accumulated depreciation.
If you want to post net (enter the value adjustment manually), that is, you have already
reduced the posting amount by the historical depreciation, you can use transaction ABNA
to post without entering historical depreciation values. The system then posts the
acquisition only in the amount of the net book value to the asset balance sheet account,
and extraordinary revenue of the same amount.
2.1.4.3.
Write-up
Questions:
Q:
1) Do the value of your assets appreciate, and if so, do your ledgers need to be
adjusted?
A:
No
Q:
2) Describe the reasons for a fixed asset revaluation, the process used, and give
examples of the assets which are to be revaluated.
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FI Module
A:
Not Applicable
2.1.4.4.
Reposting
Questions:
Q:
1) Is it necessary to transfer assets from one company code to another?
Explanation: Settings for company code transfer

A:
No because there is only one co. code
Q:
2) Do you sometimes split an asset into one or more new assets? If so, please
specify.
A:
No
Q:
3) Do you transfer between different asset classes? Give examples.
A:
No
Q:
4) Is the changing of an assigned cost center or a business area, for example, a
reason for a transfer posting?
A:
Yes it can be.
Q:
5) How do you find out about necessary transfer postings in asset accounting?
A:
The transfer posting is required when a asset is physically transferred across cost
centre, plant, or business centre
CI template:
1.
In case of XYZL, reposting of asset may be required only in cases where the Asset is
physically transferred from one physical location to another across cost center, plant,
business area or profit center. In such a case, the historical values of the assets needs to
be transferred to the new location.
2.
Using intra-company asset transfer, you transfer a fixed asset, or an asset component, to
a different asset master record. The target asset has to be in the same company code as
the sending asset. Intra-company transfer may be necessary for one of the following
reasons:
An asset was created in the wrong asset class. Since you cannot change the
asset class in the asset master data, you have to transfer the asset to a new
master record.
You split up an asset or move part of an asset (transfer from asset to asset).
You settle an asset under construction and transfer it to a finished asset.
You configure the transfer of capitalization and depreciation dates, as well as the transfer
of field contents from the sending to the receiver asset, in Customizing for Asset
Accounting. Intra-company transfers (within a company code) use transfer variants and
field transfer rules, as do inter-company transfers. You find the Customizing steps for
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FI Module
making these settings (for both types of transfer) by choosing Inter-company Asset
Transfers.
You can create a new asset within the transfer posting transaction, or you can transfer to
an existing asset. The system enters the number of the sending asset in the target asset.
However, it is suggested to create a new asset master and transfer the asset to the same.
2.1.5.
Retirements
2.1.5.1.
Retirement
Questions:
Q:
1) How and when is asset accounting informed of the retirement of an asset?
A:
The concern dept gives information for retirement ( by sale or scrap ) of assets & the
asset is retired after approval of top management.
Q:
2) Do you sell or transfer assets to affiliated/associated companies?
A:
No
Q:
3) How do you process retirement of a low value asset (e.g. retirement with zero
value; retirement with revenue; account assignment for retirement with revenue)?
A:
Retirement with zero value
Q:
4) Who issues invoices for asset sales?
A:
Management Authorised persons
CI template:
1.
Presently, the maintenance of information related to assets is done in spreadsheets.
Hence whenever an Asset is retired or scraped or sold is adjusted to asset account and
any gain/loss is posted to respective G/L account. XYZL wants to automate the process
and use the asset management functionality.
2.
Asset retirement is the removal of an asset or part of an asset from the asset portfolio.
This removal of an asset (or part of an asset) is posted from a bookkeeping perspective as
an asset retirement.
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FI Module
Depending on organizational considerations, or the business transaction which leads to
the retirement, you can distinguish the following types of retirement:
3.
An asset is sold, resulting in revenue being earned. The sale is posted with a
customer.
An asset is sold, resulting in revenue being earned. The sale is posted against
a clearing account.
An asset has to be scrapped, with no revenue earned.

Assets can be retired in SAP and the resulting profit and loss can be calculated
automatically based on the book value and depreciation till date. Partial retirement is also
possible in SAP based on the amount, percentage or quantity of the asset to be retired.
4.
Even though the asset is scrapped, historical information of the asset will continue to be
available in the system. The loss or gain on sale would be automatically calculated by the
system.
2.1.5.2.
Mass Retirement
Questions:
Q:
1) When retiring assets, is there ever a need to retire a large number of assets at the
same time?
A:
No
Q:
2) If yes, how many assets are normally concerned? Please provide an example with
documents.
A:
not applicable
2.1.6.
Closing Operations [Asset Accounting]
Questions:
Q:
1) What activities are included in the month-end process for asset accounting?
A:
Depreciation, Valuation, Profit or Loss on sale of assets, Transfers, acquisition etc.
Q:
2) Which internal and external asset valuations belong to month-end closing
process? Please provide a sample of all required valuations.
A:
Only internal Valuation, Profit or Loss on sale of assets, Transfers, acquisition etc.
Q:
3) What activities are included in the year-end closing process for asset accounting?
A:
Depreciation, Valuation, Profit or Loss on sale of assets, Transfers, acquisition etc.
Q:
4) Which internal and external asset valuations belong to year-end closing process?
Please provide a sample of all required valuations.
A:
Same as above
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FI Module
CI template:
1.
In addition to the requirements mentioned above, XYZL further requires that in case of
additions to fixed assets, group-wise and block-wise details of additions as required by
The Companies Act and The Income Tax Act.
Asset wise date wise sale value cost of assets book value of asset and the profit or loss
on sale of asset is also required as the same forms part of Tax audit report
In case of transfer of assets from one unit to another unit, XYZL requires the unit wise
gross value of asset. Gross depreciation charged to the asset up to the date of transfer
and the net value of the asset to be transferred to other unit.
2.
The year-end closing is an annual balance sheet, an annual profit and loss statement, and
an appendix with additional information, which has to be created to meet the particular
legal obligations in each country. Before you can close a fiscal year in Financial
Accounting from a bookkeeping perspective, you have to carry out preparatory measures
in Asset Accounting.
From the point of view of the system, a fiscal year change is the opening of a new fiscal
year for a company code. At the fiscal year change, the asset values from the previous
fiscal year are carried forward cumulatively into the new fiscal year
There are a number of standard reports available for the analysis of asset transactions
Physical inventory is the recording of the quantities relating to the asset portfolio
3.
The Asset Ledger will automatically update general ledger online real time
2.1.6.1.
Multiple Valuations
Questions:
Q:
1) Do you have parallel valuation for your asset, e.g. for group valuation, for cost
accounting purposes or for legal reasons?
A:
Yes, parallel valuations are there for Companies Act and Income Tax Act.
Q:
2) Do you have to valuate your assets in different currencies?
A:
No
Q:
3) Is there a distinction necessary between book depreciation (for balance sheet) and
tax values (for a tax balance sheet)?
A:
Yes
2.1.6.2.
Physical Asset Inventory
CI template:
1.
XYZL wants that the assets should be traceable by their physical location and further
reporting be enabled using this parameter.
2.
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FI Module
The asset master for each asset contains fields for location, inventory number and serial
number which help in identification of an asset and its physical location. Reports can be
drawn on these parameters for the purposes of physical verification
3.

To utilise the above functionality, XYZL must ensure that the opening balances which are
uploaded in SAP system should match with the physical asset-wise Inventory and
complete data required for asset master record is provided and the system is always
updated.
2.1.6.3.
Fiscal Year Change
CI template:
1.
From the point of view of the system, a fiscal year change is the opening of a new fiscal
year for a company code. At the fiscal year change, the asset values from the previous
fiscal year are carried forward cumulatively into the new fiscal year. Once the fiscal year
change takes place, you can post to assets using value dates in the new fiscal year. At the
same time, you can continue to post in the previous fiscal year. You find the fiscal year
change program under Periodic processing.
The fiscal year change can only be carried out (even in test mode) for the new fiscal year.
The earliest that you can carry out a fiscal year change is in the last month of the old fiscal
year. You can choose any point in the new fiscal year for carrying out the fiscal year
change. Before you can change to fiscal year for example 2003, you must have already
closed fiscal year 2002. You can have a maximum of two fiscal years open for posting at
one time.
No business transactions can be posted in a new fiscal year before the fiscal year change.
You can continue to post in the old fiscal year, even after the fiscal year change. The
system automatically corrects any values that are affected by postings in the past.
2.1.6.4.
Preparations for Year-End Closing in Asset Management
Questions:
Q:
1) When do you close your fiscal year?
A:
31st March
Q:
2) Do you run the year-end closing process in asset accounting separate from
general ledger?
A:
Yes the Assets accounting is processed at the end of the year at present.
Q:
3) Are leased assets treated like any other fixed assets in year-end closing?
A:
Yes.
CI template:
1.
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FI Module
The year-end closing is an annual balance sheet, an annual profit and loss statement, and
an appendix with additional information (annual report), which has to be created to meet
the particular legal obligations in each country. Before you can close a fiscal year in
Financial Accounting from a bookkeeping perspective, you have to carry out preparatory
measures in Asset Accounting.
You use the year-end closing program to close the fiscal year for one or more company
codes from an accounting perspective. Once the fiscal year is closed, you can no longer
post or change values within Asset Accounting (for example, by recalculating
depreciation). The fiscal year that is closed is always the year following the last closed
fiscal year. You cannot close the current fiscal year.
The system only closes a fiscal year in a company code if:
2.1.6.5.
The system found no errors during the calculation of depreciation (such as,
incorrectly defined depreciation keys).
Planned depreciation from the automatic posting area has been completely
posted to the general ledger.
Balances from depreciation areas that are posted periodically have been
completely posted to the general ledger.
All assets acquired in the fiscal year have already been capitalized.
Since this check does not make sense for assets under construction, you can
prevent this check from being made for assets under construction by means of the
asset class.
All incomplete assets (master records) have been completed
Mass Change
Questions:
Q:
1) In your enterprise, who has authorization to change a large number of assets
simultaneously?
A:
Top Management
Q:
2) Do you need to make changes to a large number of assets simultaneously?
A:
No
Q:
3) If so, under what circumstances? Please describe.
A:
Not applicable.
CI template:
1.
Normally, XYZL does not require to make changes to large number of assets at a time.
However, this may be required in exceptional cases. In such an event, only HOD Balance sheet will be authorised to perform mass changes to assets.
2.
The Asset Accounting component provides a function for mass processing of freely
definable changes to asset master data. The system carries out these changes
automatically to a large extent. This type of mass asset change might be necessary in the
following cases:
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FI Module
When there is a change to the cost center plan, you have to change the cost
center assignment of all assets affected.
As part of year-end closing, you have to change depreciation terms.
Following the legacy data transfer, you have to make entries in certain asset
master data fields that could not be copied from your legacy system.
You made a change at the asset class level. Changes at this level affect only
those assets that are created after the change was made. Therefore, you have to
make this change in the already existing assets.
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FI Module
2.1.6.6.
Recalculation of Depreciation
Questions:
Q:
1) Does it sometimes occur that you need to change depreciation methods or
calculation rules during the course of a fiscal year? If so, please provide an example and
reason why a change was necessary).
A:
No, we generally do not change depreciation method during the year.
Q:
2) Does it sometimes occur that you introduce a new depreciation valuation area
during the course of a fiscal year? If so, please provide an example and reason why a new
valuation area was necessary).
A:
No
CI template:
1.
XYZL may require to recalculate depreciation, in case of change in rate of depreciation for
a asset resulting into change in the depreciation key. Normally, this type of situation does
not arise in between the fiscal year, however, it may changed from the subsequent year.
However, there should be option available to XYZL to make such adjustments.
2.
It might be necessary to recalculate planned annual depreciation in certain company
codes or for individual assets. This might be necessary if you have changed depreciation
keys due to some requirement.
In such an event, you can use the program for the recalculation of depreciation. This
program enables you to recalculate planned annual depreciation using the depreciation
terms that are valid at the time that you start the report. You can also run the report in test
mode. However, you can only recalculate planned depreciation for fiscal years that are still
open.
The depreciation posting program corrects the periodic depreciation for the fiscal year. It
does so by correcting the depreciation in periods that are still to be posted in the fiscal
year. To determine this depreciation, the system uses the newly calculated annual
depreciation and the periodic depreciation that has already been posted.
3.

In case the depreciation rate or method is changed in between a fiscal year, recalculate
depreciation program can be used. The system recalculates the depreciation and posts
the differential in the current period. However, it is recommended that this functionality
should be used in very exceptional cases only.
2.1.6.7.
Depreciation posting
Questions:
Q:
1) Is it necessary, from a business point of view, to post depreciation directly to cost
accounting? If so, which receivers are to be debited (for example, cost centers, internal
orders)?
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FI Module
A:
Presently we are not doing , but yes the depreciation is to be posted to cost
accounting, debiting the related cost centers in case separate depreciation area for cost
accounting is opted.
Q:
2) How often do you intend to post depreciation to the general ledger and to cost
accounting?
A:
Quarterly.
Q:
3) Do you post depreciation to assets under construction?
A:
No.
Q:
4) To which account(s) is depreciation posted?
A:
Depreciation account & accumulated depreciation account
Q:
5) Do you want to show interest only in reports, or do you want to post interest
directly to cost accounting?
A:
Not required
CI template:
1.
XYZL wants that the system should be able to post depreciation automatically on quarterly
basis and give results in the form of depreciation calculation separately for each of the
following three purposes:
1.Book Depreciation
2.Depreciation as per Income Tax
3.Depreciation for Cost Accounting purposes.
2.
Depreciation Run
The depreciation in background in production (actual) mode after the depreciation in the
test run has been verified as correct by deselecting the test run indicator. It will create
Batch Input Session for processing. Depreciation has not been posted to the GL at this
point.
The FA user will execute Batch Input Session at the batch input screen. In the event that
the session is lost or accidentally deleted at the batch-input screen, it can be recreated .
The FA user can proceed to execute the batch session at the Batch Input screen to post
depreciation.
Depreciation run can be repeated for period in case of change in depreciation terms of
any of the assets or under other circumstances under which the system takes into account
the changes between the original run and present status and does a differential posting.
Depreciation will be posted to depreciation account and accumulated depreciation
accounts in GL for each asset class separately.
3.

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FI Module
Run the depreciation in background using T-Code AFAB in production (actual) mode
when the depreciation in the test run is verified as correct by deselecting the test run
indicator. It will create Batch Input Session for processing. Depreciation has not been
posted to the GL at this point.
The FA user will execute Batch Input Session at the batch input screen. using T-Code
SM35 .In the event that the session is lost or accidentally deleted at the batch-input
screen, it can be recreated using T-Code AFBD. The FA user can proceed to execute the
batch session at the Batch Input screen. Depreciation is posted when the batch input is
processed successfully
The posted depreciation can be viewed using T-Code FBL3N by displaying the balances
and line items in GL or viewing the values in Fixed Asset.
2.1.6.8.
Carry Out Year-End Closing in Asset Management
Questions:
Q:
1) How do you conduct the physical inventory for fixed assets (e.g. manually, using
barcode scanner)?
A:
Manually.
Q:
2) Who is responsible for the physical inventory of the fixed assets?
A:
HODs
Q:
3) What is the relation between the inventory number of an asset and the number of
the asset master record?
A:
At present we do not have any numbering.
Q:
4) Do you create inventory lists using the SAP R/3 System, or using a non-SAP
system?
A:
Non SAP system at present.
CI template:
1.
XYZL wants that the assets should be traceable by their physical location and further
reporting be enabled using this parameter.
2.
A physical inventory is the recording of the quantities and amounts relating to the asset
portfolio. The FI-AA component provides the following functions to support the physical
inventory:
The system provides an inventory list to assist with physical inventory. You find this list in
the standard Information System for Asset Accounting. You adapt the structure and
sorting of the list to meet your specific needs. The list displays only those assets in which
the inventory indicator is set in the asset master record.
3.

The asset master for each asset contains fields for location, inventory number and serial
197
FI Module
number which help in identification of an asset and its physical location. Reports can be
drawn on these parameters for the purposes of physical verification.
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FI Module
4.

To utilise the above functionality, XYZL must ensure that the opening balances which are
uploaded in SAP system should match with the physical asset-wise Inventory and
complete data required for asset master record is provided and the system is always
updated.
2.1.6.9.
Integrated Planning in CO
Questions:
Q:
1) What is the relationship between investment measures and fixed assets in the
planning process?
A:
Planning for capital investments is being done & if the plan is approved by the top
management necessary action is taken for procurement of assets & capitalised after the asset
is operational.
Q:
2) Is your plan activity-dependent or not activity-dependent?
A:
Activity dependent.
2.1.6.10.
Periodic Reports
Questions:
Q:
1) Which periodic reports do you carry out in general ledger accounting?
Explanation: see subsidiary ledgers too.

A:
Reports related to expenses, provisions , Balance Sheet, P/L Account, Cost centre
analysis, Business Area, Profit Centers, Costing, Receivable & Payables, monthly reports for
Depreciation, Acquisition, Retirement & Transfers etc.
Q:
2) What type of information flow do you have for the results of periodic asset
reporting?
A:
Depreciation, Acquisition, Retirement & Transfers.
Q:
3) What are the critical monthly, quarterly and annual reports that you need for Asset
Accounting?
A:
Depreciation, Acquisition, Retirement & Transfers.
Q:
4) Which kind of reports do you use to reconcile asset accounting with the general
ledger?
A:
No reconciliation is being done at present.
Q:
5) Are there any particular reports you would like for low value assets?
A:
Yes we would like to have a report for low value assets, less than 5000/-
Q:
6) How do you create your inventory lists? Do you use barcodes?
A:
No we dont use barcodes, The inventory list is created by the system.

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FI Module
Q:
7) By which organizational units (or combinations of units) are asset reporting
functions structured (for example, company, cost center etc)?
A:
Business area wise, cost center & plant wise.
CI template:
1.
XYZL would like to have various reports related to depreciation postings in the company
code and would like to have Cost centre wise analysis, Business Area wise analysis, Profit
Centre wise analysis and monthly reports for Acquisition, Retirement & Transfers etc.
2.
There are a number of standard reports available for the analysis of asset transactions.
These reports will provide the required information related to asset management.
However, the detailed reporting requirement has been dealt separately in the annexure.
200

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FI Module

SAP R/3 IMPLEMENTATION

BUSNIESS BLUEPRINT DOCUMENT

ABC Information System Limited

Sign Off Date

We have only one legal entity i.e. XYZ CO. LTD.

2) Do you have foreign companies?

3) Which companies are going to work with which chart of account?

4) In which currencies are the transactions posted in the companies?

5) Are all companies managed in FI company codes, and is FI integration used?

Definition of Organizational Units

Assignment of Organizational Units

1.3. Company Code

We require only one Chart of Account.

4) Do all companies use the same operating chart of accounts?

5) Will a different chart of accounts be used for consolidation purposes?

6) Identify legal entities holding minority interest.

7) Are goods/services exchanged between your different legal entities?

8) Specify the different levels of consolidation (for example, by country, by region).

12) Which functions will be performed on a cross-company level?

Definition of Organizational Units

Assignment of Organizational Units

1.4. Business Area

6) Note for business area:

Definition of Organizational Units

Assignment of Organizational Units

2.1. Chart of Accounts

1) Which companies use the same chart of accounts?

Approx 850 other than vendors & customers

3) What is the document numbering logic?

Explanation: Possible reconciliation with SD/MM

5) Will the chart of accounts need to be approved? If so, by whom?

Yes, by the steering committee

6) Which maintenance language should be used for each chart of accounts?

8) Please provide your current Chart of Accounts.

Definition of Organizational Units

Assignment of Organizational Units

1) For which of your legal entities will you be implementing FI-AA?

Asset Accounting (FI-AA)

Definition of Organizational Units

Assignment of Organizational Units

4) Is there a distinction between taxation values and valuation of net assets?

No. Independent valuations required for all depreciation areas.

Separate depreciation area is required for costing purpose.

Definition of Organizational Units

Assignment of Organizational Units

3.2. Chart of depreciation

1) In which countries do you manage fixed assets?

Definition of Organizational Units

Assignment of Organizational Units

3.3. Asset class

3) Will you manage financial assets in the asset accounting system?

As mentioned in point no.1

Definition of Organizational Units

Assignment of Organizational Units

1.1. G/L Account

Yes, as per the attachment enclosed.

3) How many retained earnings accounts do you have?

All except control accounts

Account receivable / payable, all banks & clearing account.

8) What criteria do you use to search for G/L accounts?

Explanation: Match code

9) Which of your General Ledger accounts are not relevant to tax?