Table of Contents

1.

SAP Financial Accounting

1.1

Brief

1.1.1

The General Ledger

1.1.2

The Accounts Payable

1.1.3

The Accounts Receivable

1.1.4

Bank Accounting

1.1.5

Asset Accounting

1.1.6

Withholding Tax

1.1.7

Country India version

1.2

Implementation Scope

1.2.1

Client

1.2.2

Company

1.2.3

Company Code

1.2.4

Business Area

1.2.5

Company Code Segment

1.2.6

Chart Of Accounts

1.3

Master Data

1.3.1

General Ledger Master

1.3.2

Asset Master

1.3.3

General Master Data

1.3.4

Vendor Master Data

1.3.5

House Bank

1.3.6

Cash Journal

2.

SAP Controlling

2.1

Brief

2.2

Cost Center Details

3.

SAP Asset Accounting

3.1

Brief

3.1.1

Asset Class Details

3.2

Depreciation

3.2.1

Purpose

3.2.2

Features

3.2.3

Asset Depreciation

3.2.4

Asset Retirement & Transfer

3.2.5

Closing operation

4.

SAP Business Process

4.1

Basic Setting

4.1.1

Parameter of settings

4.1.2

Currency

4.1.3

Fiscal Year

4.1.4

Fiscal Year Variant

4.1.5

Posting Period Varian

4.1.6

Number Range.

4.1.7

Document Type

4.1.8

Posting key

4.1.9

Account Group

4.1.10

Field Status Variant

4.2

Extended Withholding tax

4.3

General Ledger Account

4.3.1

Purpose

4.3.2

Features

4.4

Manual payment

4.4.1

Prepaid Expenses

4.4.2

Parked Documents

4.4.3

Document Reversal

4.4.4

Closing Procedures

4.4.5

Accruals & Reversal of provisions

4.4.6

Closing of Period

4.4.7

Balance Carried Forward

4.5

Accounts Payable

4.5.1

Traveling Expenses

4.5.2

Vendor Payment

4.5.3

Vendor Down Payment

4.5.4

Down Payment Request & Advance Payment

4.5.5

Invoice Booking & Settlement of Advances

4.5.6

TDS Processing

4.5.7

TDS Calculation Requirement

4.5.8

TDS Certificate

4.6

Advances/Loans to employees & Travel expenses

4.7.1

Purpose

4.7.2

Clearing of Accounts

Annexure 1

SAP FINANCIAL ACCOUNTING:

1.1 Brief:
The Financial Accounting (FI) module components address the requirements of the financial
accounting department of an organization. It provides the following features:
Management and representation of all accounting data: All business transactions are recorded
with an unbroken audit trail from the financial statements to the individual documents.
Open and integrated data flow: Data is available in real time within Financial. Accounting.
Postings made in the sub ledgers always generate a corresponding posting in the General Ledger.
Thereby the necessity of reconciling the sub-ledger with the general ledger is undone with.
All accounting-relevant transactions made in Logistics (LO) are posted real-time to Financial
Accounting by means of automatic account determination. This data can 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. The financial impact
of the goods movement, inwards and outwards, are accounted online real time.

The Financial Accounting (FI) application component fulfills all the external reporting
requirements that must be met by the organization whether national or international. The SAP FI
application provides the following features

1.1.1 The General ledger:

The central task of G/L accounting is to provide a comprehensive picture for 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 ensures
that the accounting data is always complete and accurate.

1.1.2 The Accounts Payable:

The Accounts Payable application component records and manages accounting data for all vendors
as a whole. It is also an integral part of the purchasing system: Deliveries and invoices are managed
according to vendors. The system automatically triggers postings in response to the operative
transactions in MM. The concept of sub-ledger is used to ensure that the vendor related financial
entries are updated in the vendors accounts and also to the general ledger accounts. This is done by
the assignment of the general ledger account in the vendor master.
1.1.3 The Accounts Receivable:
The Accounts Receivable application component records and manages accounting data of all customers.
All postings in Accounts Receivable are also recorded directly in the General Ledger. Different G/L
accounts are updated depending on the transactions involved (for example, receivables & down
payments).

1.1.4 Bank Accounting:

This component is used to handle accounting transactions to be processed with the banks. It
includes the management of bank master data; cash balance management and the creation and
processing of incoming and outgoing payments.

1.1.5 Asset Accounting:

The Asset Accounting component is used for managing and supervising fixed assets with the SAP
R/3System. 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.

1.1.6 Withholding Tax: (Tax deducted at sources)

Country Version India uses the standard functions for calculating and collecting withholding
taxes. However, Withholding Tax comes with additional functions for tax remittance, journal
vouchers, creating withholding tax certificates, and preparing quarterly returns.

1.1.7 Country India Version:

Most of the country-specific functions for India relate to Financial and Logistics.
Company is subject to deductible as well as non deductible input tax and will also have relevant output
tax for processing of sales process.
Tax will be calculated through tax codes maintained with rates as per requirement. The relevant input
tax codes are listed below:-

1.2 Implementation Scope:

For SAP FI module the following are implemented:

General ledger

Accounts payable

Accounts receivable

Bank accounting and Cash journal

Fixed assets

FI organization structure:
CLIENT

Chart Of Account

Compa
ny Code

1.2.1 Client:
Client is the highest level in the SAP hierarchy.
Specifications or data which will be valid for all organizational units in all SAP applications
are entered at the client level, eliminating the need to enter this information more than once
(e.g. exchange rates).
Each client is a self-contained unit which has separate master records and a complete set of tables
and data.
Users must enter a client key and have a user master record in the client in order to log on to the
system.
The Enterprise Structure in SAP Finance module consists of the following entities under
Client: Company
Company Code
Chart of Accounts

1.2.2. Company
A Company represents a group of entities (one or more Company codes) in SAP.This entity is used for
consolidation of accounts of multiple entities (Company Codes). All company codes within a company
must use the same transaction Chart of accounts and the same Fiscal Year breakdown. However, the
company code currencies can be different.

1.2.3. Company Code

A Company Code represents an independent legal accounting entity in SAP. Balance Sheets
and Profit/Loss statements required by law will be created at the Company Code level. In
other words, the organizational unit for which a complete self-contained set of accounts can be
drawn up for external reporting purpose. The process of external reporting involves recording

all relevant transactions and generating all supporting documents required for financial
statements.

1.2.4 Business Area:

Business area in sap is defined as an organisational area within the financial accounting module. Business
area in SAP is used for internal and external reporting.Financial statement can be created for business area
and this financial statement can be used for internal purpose.

1.2.5 Company Code Segment:

The information, which is specific to a particular Company, is maintained in the Company code
segment of the General Ledger Master record. This data controls how one enters and processes
business transaction data in the appropriate account as well as how the account is managed within a
company code. The following are some of the specifications which will be made for each G/L
account:

1.2.6 Chart of Accounts:

Definition consists mainly of the account number, account name and the type of GL account, i.e.
whether the account is a Profit & Loss account type and Balance Sheet type of account. Chart of
accounts relation between company code.
1:1 or 1 :n

1.3 Master Data:

1.3.1 General ledger Master:
All the transactions in SAP FI Module will be processed only by using General Ledger
Accounts contained in the Chart of Accounts.
G/L accounts will also be used for posting transactions from other modules of SAP
there are 2 Segments to a GL master data:
(a) Chart of Accounts Segment and
b)Company Code

1.3.2 Asset Master:

In order to make it easier for the user to create, maintain and evaluate master data, 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
Data for calculating asset values

1.3.3 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.)

Posting information (for example, capitalization date)

Time-dependent assignments (for example, cost center)

Information on the origins of the asset

Data for Calculation Asset Values:

You can specify depreciation terms 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 the
depreciation areas that are not needed for a specific asset, it is possible to deactivate these
depreciation areas at the asset level.

Financial Statement Version:

Financial Statement Version

1.3.4 Vendor Master Data:The vendor master database contains information about the vendors that supply an enterprise. This
information is stored in individual vendor master records. A vendor master record contains the vendors
name and address, as well as data such as:

The currency used for ordering from the vendor

Terms of payment

Names of important contact persons (sales staff)

Since, to the accounts department, vendors are generally creditors (accounts payable), the vendor master
record also contains accounting information, such as the relevant control account (reconciliation account)
in the general ledger.Therefore, the vendor master record is maintained by both Accounting and
Purchasing .

1.3.5 House Bank

House Banks are Banks through which the company deals with payment transactions. House Banks and
Banks are pretty much the same but the structure of a house bank is different to a bank in their G/L
account composition.
A House Bank can contain multiple G/L accounts allowing you to define one for each operation. You can
define one for payments, one for deposits, one for clearing cheqs, one for cash..etc. And the sum of all
these accounts will make the balance of the House Bank.
Each House Bank is represented by a Bank ID in SAP and every account at a House Bank by a
Account ID

1.3.6 Cash Journal

The cash journal is a subledger 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.
The cash journal is a single-screen transaction. This means that you can enter, display, and change
cash journal documents on one screen.cash payment not more than Rs.20000. but we can receive
more than 20000 amount .

2.SAP CONTROLLING:
2.1 Brief:
The controlling area is the highest organizational unit in Controlling.

2.2 Cost Center Details:

Cost center allocation of departmental cost ,here also using for department wise cost .Cost center and cost
center hierarchy is in place, however budgeting is being done by expenditure / income / cost center wise
for the company

3. SAP ASSET ACCOUNTING:

3.1 Brief:
The Fixed Asset module is an integrated asset management solution for additions, updating, tracking,
depreciation and administrative purposes. Assets are depreciated periodically to arrive at their
current net value. Once an asset is capitalized, it can be transferred between locations, cost centers.
Assets can be removed from the Assets Ledger by disposing them.
Asset is a subsidiary ledger accounting module in Financial Accounting.
Company code

Chart Of Depreciation

3.1.1 Asset Class details:

It is being decided that depreciation rate for all new company codes will be used as per Companys
Act 1956 with WDV method.
The Fixed Assets Module will provide following functions:

New Asset addition

Add to an existing asset

Modify Asset details

Asset Transfer Asset

Disposal

3.2 Depreciation:
3.2.1 Purpose:
The Asset Accounting (FI-AA) 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. Various types
of reports are available for both internal and external reporting with regard to the assets maintained
in an organization. The system maintains the asset master data, manages the transactions and updates
the depreciation run.

3.2.2 Features:
Drill down for a particular asset to view the transaction history for that asset.Depreciation is run only
once for each period. The system will record the last period for which depreciation was run. The user can
only run the depreciation program for the next period. Asset that is depreciated, the system automatically
generates a journal and posts it to the Fixed
Asset sub ledger for the depreciation amount.
When posting the depreciation expense for an asset the cost center of the asset at the time of
depreciation run is considered.

3.2.3 Asset Depreciation:

Different depreciation rates are configured using different depreciation keys and they will be
attached with the asset masters at the time of creating an asset master.
Depreciation as per the Companies Act will be handled by creating Book Depreciation ,
depreciation area where as depreciation as per the income tax act will be handled by Country India
Version settings. Country India version allows calculating depreciation on each asset block and also
facilitates calculation of capital gains and losses as per the Indian income tax act, 1961.

3.2.4 Asset Retirement & transfer:

The asset retirement consists of any of the following:
1. Sale of asset with customer,
2. without customer scrapping of an asset
3. Transferring of an asset

The asset transfer consists of any of the following:

1. Transfer due to wrong posting to asset class using
2. Intra Company Transfer.
3. For transfer of asset between the business areas (asset to asset transfer)

3.2.5 Closing Operation:

The year-end closing program is used to close the Fiscal Year for the asset accounting. Once the
fiscal year is closed, one can no longer post or change values within asset accounting (say,
recalculate depreciation). The fiscal year that is closed is always the year following the last closed
fiscal year.
At the time of closing the period system performs certain checks like proper depreciation calculation,
proper update to general ledgers etc.

4. SAP BUSINESS PROCESS:

4.1 Basic setting:
The purpose of this setting is to document the global configuration settings in Financial Accounting for
the Company Code. These settings control the transaction entry and the dependent controls in SAP across
all the modules.

4.1.1 Parameter of setting:

Posting of transactions in SAP require the following settings:
Currency
Fiscal Year in which the transaction is to be posted Fiscal year variant for determining the posting periods
Document Types
Document Numbering
Document Posting Keys (debit/credit)
Posting Period Variant to determine the open and close periods
Tax Deducted at Source (Extended Withholding Tax)

4.1.2 Currency:
For each company code a currency must be specified. Accounts are managed in the company code
currency. All other currencies are indicated as foreign currency. The system converts the amounts
posted in a foreign currency into the company code currency. The currency defined in the company
code is known as the local currency within SAP.

4.1.3 Fiscal Year:

The fiscal year is defined as a variant which is assigned to the company code. Standard fiscal year
variants are already defined in the system and can be used as templates. The fiscal year variant
contains the definition of posting periods and special periods.
Special periods are used for postings which are not assigned to time periods, but to the process of
year-end closing.
A fiscal year will consist of maximum of 12 posting periods and maximum 4 special periods.
4.1.4 Fiscal Year Variant:
Maintain Fiscal Year Variant- (Consider Fiscal Year April to March)

4.1.5 Posting Period Variant:

Posting Period Variant
4.1.6 Number Range :
Number range can be maintain external or internal

4.1.7 Document Type:

The document type controls the document header and is used to differentiate the business
transactions to be posted, e.g. customer invoice, vendor payments, etc.

4.1.8 Posting Key:

Posting Key controls Debit or Credit account indicator for each line item.The posting key also describes
the type of transaction that is entered in a line item and allowable account type, which will be entered for
the respective line item.

Standard Account Types in SAP are as follows:

S- General Ledger
A- Assets
K- Vendors
D- Customers
M- Materials
4.1.9 Account Group:
The account group is a summary of accounts based on criteria that effects how master records are
created. The account group determines: The number interval from which the account number is selected
when a G/L account is created

4.1.10 Field Status Variant

Field status group is assigned to GL account. Through field status group one can make a feild as optinal,
suppresse or mandatory. According to the field status groups, respective fields will be displayed ar
mandatory or suppresse when the postings are made to that GL account.All these field status groups are
clubbed to a field status variant and Field status variant is assigned to a company code. With this, fields
tatus groups from fields status variant can only be assigned, when a gl account is created for a company
code.

4.2 Extended Withholding Tax (TDS):

Standard system allow defining two different tax types in withholding tax namely one for invoice
posting and one for payment posting, the customer requirement can be achieved with SAP standard
functionality. The tax collected will be deposited in a separate GL accounts and can be made automatic
assignment, so at the time of posting automatically tax account will be updated.
Section

Description

194C

Payment to contractors

194J

Prof/Technical services

194H

Brokerage & commission

4.3 General ledger Account:

General ledger is a comprehensive financial management solution that dramatically enhances
financials controls, data collection, information access and financial reporting throughout the
organization. General ledger is the central repository of all the accounting information of the
organization. Most of the transactions will be handled in respective sub-ledgers and subsequently
consolidated and posted to General Ledger. However the module shall provide specific functions

of passing journal entries (Manual, Provisional, Recurring and Reversal Journals) and
posting them, which will be purely rectification and provisional in nature .
4.3.1 Purpose:
The central task of G/L accounting is to provide a comprehensive picture for 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 (other
modules) of a company and ensures that the accounting data is always complete and accurate.

4.3.2 Features:
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,in the form of account displays, financial statements (with

financial statement versions and additional analyses).

Posting to GL:
The following are some of the processes that will be operated through General Ledger Posting submodule in SAP:
Cash Accounting Receipts of Cash (withdrawals from Bank or refund of advances from
employees etc), payments to employees for Expenses like travel expenses, reimbursement of
conveyance expenses, advances etc.
Booking of provisional entries using acct assignment models, sample documents & recurring
entries Adjustment and rectification entries
Clearing of G/L open item managed accounts for. E.g. TDS Accounts, outstanding
liabilities.

4.4 Manual payment:

Manual Payments are those payments, where the user selects vendor and invoices to be paid. This
selection can be used for cheque printing or other methods of payment (like Instruction to bank).
Usually this procedure is preferred where the number of selection/payments is less or in the case
where the user wants to manually select and process payments for selective vendors.

4.4.1 Prepaid expenses.

The values posted to the G/L accounts appear in the Trial Balance which will provide
financial statements like Balance Sheet, Profit and Loss Statement.

4.4.2 Parked Documents:

An incomplete document may be parked and then posted at a later date; this may be done by the
same or a different user.
Generally the documents are parked when the user is waiting for an approval from his superior.
Subsequently the user can book the same as a G/L document.

4.4.3 Document Reversal:

It is possible for a user to make an input error. As a result, the document created will contain
incorrect information. In order to provide an audit of the correction, the user must first reverse the
document in error, and then capture the document correctly.The system provides a function to
reverse G/L, A/R and A/P documents both individually or in mass. The reason code also controls if
the reversal date is allowed to be different from the original posting date. When reversing a
document, a reversal reason code must be entered to explain the reversal.

4.4.4 Closing Procedures:

The closing operations are to be performed on a monthly or quarterly or yearly basis which will be
discussed in detail in the Operational Manual. Some of the Closing Procedures are explained below:
Foreign Currency Valuation for Open Items
Accruals and Reversal of provisions
Closing & opening of posting periods
Balance carried forward

4.4.5 Accruals & Reversal of Provisions:

A provision document will be created for entering provision entries. At the time of entry of a
provision, document date for reversal will be entered. Entry of reverse document date facilitates
reversal program to pick up such transactions to be reversed.The provision will be made for the
combination of G/L accounts, cost centers and Internal Order. Reversal of the provision will be
performed on the stipulated date.

4.4.6 Closing of Periods (Month / Year):

Open Periods can be defined for FI and Logistics separately. Usually the logistics posting period is
opened only for two periods, the current period and the immediately preceding period only. Whereas in FI
the periods can be kept open for the whole of the fiscal year. Option is available to close the FI posting
period also. Generally for FI the 12 periods of a year will be kept open. By keeping the FI periods open,
only the stand alone FI entries can be entered in earlier periods. The logistics related entries will flow
only based on the periods allowed for posting for the logistics.
Closing Fiscal Year for Asset Accounting: The program blocks the current fiscal year to further posting to
assets.
4.4.7 Balance Carried Forward
Account balances are carried forwarded from one fiscal year to the next fiscal year by using the standard
SAP carry forward program after the accounts are finalized.

ANNEXURE 1