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We use SAP FICO modules within a company to manage financial tasks within an international framework of languages and currencies. SAP FI (Financial Accounting) deals mainly with fixed assets, accrual, cash journal, tax accounting, general ledger, and other such financial tasks. SAP CO (Controlling) on the other hand deals with buying orders, stock sheet, cost sheet, cost assignment and other tasks in this category.
You find four hierarchical components in SAP FI:
a. Company Code
b. Business Area
c. Functional Area
d. Chart of Account
You use financial statements to manage the financial assets of your company. By creating and handling such financial records, you also create data that you can use in developing further plans and investments for your company.
You use the company code before generating the profit and loss statements of your company. While not all employees do not have access to the same code, you can configure up to 3 different currencies. One of these remains local, while the other two are considered a parallel.
You can create Business Areas in order to differentiate among the different lines of businesses in the company. Another way can be to create different company codes for each business line.
You use FI COA in order to meet the daily needs of your company as well as the legal requirements of the country.
The COA has two types:
a. Operating COA: this record is assigned to the company code and contains all the general ledger accounts.
b. Country COA: this is the list of general ledger accounts required in order to meet the legal requirements of the country.
You use credit control in order to safeguard your business from overstretching its financial assets. Generally, you can set a credit limit for the customers using SAP, when the payment is made after the sale of the product. In this way, you can restrict the amount that the customer needs to clear in his/her account before further purchases can be made.
The fiscal year variants that you create contain the number of posting periods in that fiscal year as well as the number of special periods. Up to 16 posting periods can be defined.
Each company code needs a specific fiscal year variant. Thus, while creating a controlling area, you should also specify that code’s fiscal year variant.
FI is also integrated into the following modules:
a. Production Planning
b. Human Resource
c. Material Management
d. Sales and Distribution
The country of origin of your company will have tax procedures defined, having tax codes within them. You can make the choice to either expend the tax amount or you can choose to capitalize the tax amount into stocks.
FSV ( Financial Statement Version) is a reporting tool. It can be used to extract final accounts from SAP like Profit and Loss Account and Balance Sheet. The multiple FSV’s can be used for generating the output of various external agencies like Banks and other statutory authorities.
a) Manual payment without the use of any output medium like cheques etc.
b) Automatic payments like DME (Data Medium Exchange), cheques, Wire transfer
The customizing pre-requisite for document clearing is to check the items cleared and uncleared, and this is done by open item management. Open item management manages your outstanding account, i.e account payable and account receivable. For instance, an invoice item that has not yet been paid is recorded as open account until it is paid.
GR/IR ( Good Received/ Invoice Received) is an interim account. In the legacy system, if the goods are received and the invoice is not received, the provision is made, in SAP at the goods receipt. It passes the Accounting entry debiting the Inventory and crediting the GR/IR account. Similarly, when an invoice is received the vendor account is credited, and the GR/IR account is debited, the GR/IR will show as an un-cleared items till the time the invoice is not received.
Each company code can have two additional currencies, in addition to the company code, currency entered to the company code data. The currency entered in the company code creation is called local currency and the other two additional currencies are called parallel currencies. Parallel Currencies can be used in foreign business transactions. In order to do international transaction, parallel currency can be used. The two parallel currencies would be GROUP CURRENCY and HARD CURRENCY.
A short-end fiscal year results when you change from a normal fiscal year to a non-calendar fiscal year, or other way around. This type of change happens when an enterprise becomes part of a new co-corporate group.
To control the data that needs to be entered at the time of the creation of a master record an account group is used. Account group exist for the definition of GL account, Customer Master and Vendor.
The purpose of ” Document type” in SAP is
a) Number range for documents are defined by it
b) Types of accounts that can be posted are controlled by it, e.g Assets, Vendor, Customer, Normal GL account
c) It is used for the reversal of entries
No. Business area is at client level which means other company codes can also be posted to the same business area.
The Vendor and Customer codes are stored at the client level. It means that by extending the company code view any company code can use the customer and vendor code.
Payment terms are created in the configuration and determine the payment due date for vendor/customer invoice.
They are stored on the customer or vendor master record and are pulled through onto the customer/vendor invoice postings. The due date can be changed on each individual invoice if required.
In certain companies, especially the one dealing with high cash transactions, it is not practical to create new master records for every vendor trading partner. One time vendors allows a dummy vendor code to be used on invoice entry and also the information which is usually stored in the vendor master.
‘Residual payment’ and ‘Part payment’ are the two methods for allocating partial methods from customers. For example, an invoice for $200 is generated, customer has paid $170. Now this $170 will be off-set and leaving the remaining balance $30. With residual payment, the invoice is cleared for the full value of $200 and a new invoice is generated for the remaining balances $30.
‘Dunning’ is the process by which payment chasing letters are issued to customers. SAP can determine which customers should receive the letters and for which overdue items. Different letters can be printed in SAP depending on the overdue payment date, with a simple reminder. With the help of dunning level on the customer master, we can know which letter has been issued to the customer.
At the end of the year, profit and loss accounts are cleared down to the retained earnings balance sheets account. The field contains an indicator which is linked to a specific GL (General Ledger) accounts to use in this clear down.