BBP New Sap Fico

Business Blueprint
Submitted
To
X GROUP
By
KPIT CUMMINS INFOSYSTEMS
Financial Accounting
December, 2013
Version 0.0
Project xxxxxx
Print Document Financial Accounting
Blue
DOCUMENT RELEASE NOTICE

Customer:
X CompanyGroup
Project
XXXXX
Document details:
Name
Financial Accounting
Version No.
1.0
Description
This
document
outlines
the
Financialaccountingbusiness processes of X COMPANY
and how these will be implemented in SAP.
Document details:
Revision
Number
Action taken
(add/del/chg)
0.0
Initial draft
1.0
Final draft
2.0
Final Document
Preceding New
Revision
Page No. Page No. Description
These are confidential documents. Unauthorized access or copying is prohibited.
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PREFACE
Purpose of this Document
The purpose of this document is to record the business process requirements of X
CompanyGroupand outline the requirement mapping in SAP.
Intended Audience
The intended audience for the Financials Blueprint is the employees of X
CompanyGroup and other persons authorized by X Company who are in any way
related to Business Processes involving Financial Accounting.
Related Documents/ References

Documents referred to prepare Financial Accounting Business Blueprint Document are
as follows:
Sl.
No.
Title
Confidential
Versio
n
Author
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Sign Of
Role
Name
Functional Consultant
Mr.
GajananMankeshwark
ar
Project Manager- KPIT

Cummins Infosystems
Ltd.
Mr.Ravichandra
Business Process
Owner
Mr. Jayaprakash
Project Manager- X
Company Group
Mr. Padma Kumar
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Signature
Date
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ORGANIZATION OF THIS DOCUMENT
The FinancialsBlueprint consists of 10 chapters in the order as mentioned below:
1.
Organization Structure: That describes the organization

structure to be configured in SAP.
2.
Master Data: It describes the master data in Financials. It

includes creation and maintenance of master record.
3.
GL Accounting: This process

Accounting tasks done by accounting department.
4.
Accounts Payable Accounting: This part described various

activities, business transactions in connection with customer postings
5.
Accounts Receivable Accounting: This part described various

activities, business transactions in connection with customer postings.
6.
Assetaccounting: This section talks about asset life cycle

management per legal entity. It describes the accounting treatment for
acquisition of assets, capitalization, depreciation and sale of assets is detail.
7.
Cash and bank accounting: Cash and Bank Accounting

details describe procedures across all locations to manage Cash and Bank
transactions
8.
Profit center accounting: This section describes the

processes of profit center accounting. The profit center accounting helps an
enterprise to analyze the profitability or draw financial statement based on
the internal area of responsibility.
9.
Process mapping: This section summarizes the AS IS

business process and corresponding TO BE business processes.
10.
Reports: This section covers the reporting requirements. It

includes how all reporting requirements would be fulfilled with the TO BE
process.
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Table of Contents
ACRONYMS....................................................................................................................... 9
GENERAL EXPLANATION.................................................................10
1.
SAP ORGANIZATION STRUCTURE WITH REFERENCE TO FI MODULE

11
1.1. COMPANY...............................................................................11
1.2. COMPANY CODE......................................................................11
1.3. CHART OF ACCOUNTS..............................................................13
1.4. CREDIT CONTROL AREA............................................................14
1.5. SEGMENTS.............................................................................. 15
1.6. PROFIT CENTERS.....................................................................17
1.7. FINANCIAL ACCOUNTING GLOBAL SETTINGS:.............................18
2.
MASTER DATA FOR FI...............................................................28
2.1. GENERAL LEDGER....................................................................28

2.2. ASSET..................................................................................... 33
2.3. BANK MASTER.........................................................................36
2.4. MATERIAL MASTER..................................................................37
2.5. VENDOR MASTER.....................................................................38
2.6. CUSTOMER MASTER.................................................................41
3.
BUSINESS PROCESSES- GL ACCOUNTING...................................45
3.1. GENERAL EXPLANATION (AS IS):.............................................45

3.2. SOLUTION IN SAP ( TO BE):.....................................................46
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3.3. CHANGES TO EXISTING ORGANIZATION PROCESS.......................57

3.4. SPECIAL ORGANISATION CONSIDERATIONS:...............................57
3.5. GAP ANALYSIS:........................................................................57
3.6. INTEGRATION CONSIDERATIONS...............................................58
4.
ACCOUNTS PAYABLE................................................................59
4.1. GENERAL EXPLANATIONS (AS-IS)..............................................59

4.2. SOLUTION IN SAP (TO BE):.....................................................61
4.3. CHANGES TO EXISTING ORGANIZATION PROCESS:......................76
4.5. GAP ANALYSIS:........................................................................76
4.6. INTEGRATION CONSIDERATION:................................................76
5.
BUSINESS PROCESSES - ACCOUNTS RECEIVABLES......................77
5.1. GENERAL EXPLANATIONS (AS IS):.............................................77

5.2. SOLUTION IN SAP (TO BE):.....................................................79
5.5. GAP ANALYSIS:........................................................................88
6.
ASSET ACCOUNTING................................................................89
6.1. GENERAL EXPLANATIONS (AS-IS)..............................................89

6.2. FUNCTIONS AND EVENTS (TO BE):............................................89
6.5. GAP ANALYSIS:........................................................................98
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CASH AND BANK ACCOUNTING.................................................99
7.1. GENERAL EXPLANATIONS- (AS IS):............................................99

7.2. SOLUTION IN SAP....................................................................99
7.3. CHANGES TO EXISTING ORGANIZATION PROCESS:....................103
7.4. SPECIAL ORGANISATION CONSIDERATIONS:.............................103
7.5. GAP ANALYSIS:......................................................................103
7.6. INTEGRATION CONSIDERATION:..............................................103
8.
PROFIT CENTER ACCOUNTING.................................................104
8.1. GENERAL EXPLANATIONS- (AS IS):..........................................104

8.2. SOLUTION IN SAP (TO BE):...................................................104
8.3. CHANGES TO EXISTING ORGANIZATION PROCESS:....................105
8.4. SPECIAL ORGANISATION CONSIDERATIONS:.............................106
8.5. GAP ANALYSIS:......................................................................106
8.6. INTEGRATION CONSIDERATION:..............................................106
9.
PROCESS MAPPING................................................................107
10. REPORTS............................................................................... 113
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ACRONYMS
Code
Description
X
COMPA
NY
X CompanyGroup
MM
Material Management
QM
Quality Management
PP
Production Planning
PM
Plant maintenance
VM
Vendor master
PO
Purchase Order
PR
Purchase Requisition
SD
Sales and Distribution
LE
Logistics Execution
MM
Material Master
HR
Human Resource
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GENERAL EXPLANATION
Company Profile -X Company Group is one of the leading paint manufacturers in
India based at Chennai, Tamil Nadu. This 350cr organization is in the industry for more
than 5 decades. The product range includes paints for Architecture, Automotives and
wood finishes. The brand X Company is quite famous in India. The organization split
into multiple legal entities which manufactures and markets Paints/wood finishes
across India. This organization has around 450 employees in its group. They have
operations in Sri Lanka also.
Business Blue Print - This is the document where we define the business processes
and operating procedures for your company to support the corporate growth initiatives
and also to adapt to the new SAP system that will be implemented.
SAP Blueprint is the architectural foundation for the success of our project. This is
where we define your business requirements, set expectations from the new system
and gain alignment of the key business stakeholders with the capabilities and
expected output from the new SAP system.
In a Business Blueprint, we create a project structure in which relevant business
scenarios, business processes and process steps are organized in a hierarchical &
tabular structure to specify how your business processes should run in your SAP
systems.
The project documentation and the project structure that you create during the
Business Blueprint will be integral part in the configuration and test organization
phases.
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1. SAP
ORGANIZATION
REFERENCE TO FI MODULE
STRUCTURE
WITH
1.1. COMPANY
1.1.1.
Definition
A company is an organizational unit in Accounting which represents a

business organization according to the requirements of commercial law in a
particular country.
In the SAP system, consolidation functions in financial accounting are
based on companies. A company can comprise one or more company codes.
1.1.2.
Application
If an organization uses several clients, the companies which only

appear as group-internal business partners, and are not operational in
each system, must be maintained in each client. This is a precondition
for the account assignment of a group-internal trading partner.
Companies must be cataloged in a list of company IDs which is

consistent across the group. The parent company usually provides this
list of company IDs.
It is also acceptable to designate legally dependent branches

'companies' and join them together as a legal unit by consolidation .
In case of X Company group, the consolidation is required for all 9

legal entities. And this is required only at group level. Therefore 1
company would be set up in the system.
1.1.3.
Naming Convention
COMPANY
DESCRIPTION
1000
X Company Group
1.2. COMPANY CODE

1.2.1.
Definition
The company code is an organizational unit used in accounting. It is used to

structure the business organization from a financial accounting perspective.
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A company Code represents an independent accounting unit, for example, a

Company within a Corporate Group (Client).
1.2.2.
Application
The 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.
Balance sheets and Profit and Loss statements, required by law, are created
at company code level.
We can set up several company codes in one client in order to manage
various separate legal entities simultaneously, each with their own balanced
set of financial books.
Different Currency requirement will need additional company code.
In case of X Company group, it consists of 9 legal entities. It individual entity
prepares and files the financial statements and income tax returns.
Therefore 9 company codes would be set up in the system.
1.2.3.
Naming Convention
Sr. No.
Company
Code
Description
1000
X Company Paints Corporation Ltd.
1100
X Company Financial services
1200
Sphinax Organic & research P. Ltd.
1300
Sphinax Info Systems
1400
TechServices
1500
X Company Auto Solutions
7
8
1600
1700
Sheenworld Services LLP
5000
X Company Lanka Paint P. Ltd
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1.3. CHART OF ACCOUNTS

1.3.1.
Definition
This is the classification scheme consisting of a group of general ledger (G/L)

accounts.
A chart of accounts provides a framework for the recording of values to
ensure an orderly rendering of accounting data. The G/L accounts it contains
are used by one or more company codes.
1.3.2.
Application
For each G/L account, the chart of accounts contains the account number,
account name, and the information that controls how an account functions
and how a G/L account is created in a company code.
We have to assign a chart of accounts to each company code. This chart of
accounts is the operating chart of accounts and is used for the daily
postings in this company code.
In case of X Company group, all the 9 legal entities use same chart of
accounts for day to day operation. Therefore 1 chart of accounts would be
would be set up and assigned to all 9 legal entities. The same chart of
accounts would be used for the purpose of consolidation at the company
level.
Naming Convention
Chart of Accounts
YAIN
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X Company Chart of
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1.4. CREDIT CONTROL AREA

1.1.1.
Definition
The credit control area is an organizational unit that specifies and checks a credit limit
for customers. A credit limit is set per business partner record. Within a credit control
area, the credit limits must be specified in the same currency
1.4.1.
Application
This organizational unit is either a single company code or, if credit control is
performed across several company codes.
As required in X Company the credit monitoring should be done per separate legal
entity. Therefore separate credit control area would be set up per legal entity. It would
be done only for the below mentioned company codes since the credit checks are not
required for the remaining company codes.
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1.4.2.
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Naming Convention
Sr. No.
Credit Control
Area
1000
1500
1600
1700
5000
Description
X Company Paints Credit Control
area
X Company Auto Credit Control
area
Sheenworld Services Credit
Control area
Sphinax Chemicals Credit Control
area
X Company Lanka Credit Control
area
1.5. SEGMENTS
1.1.2.
Definition
Profitability Segment corresponds to market segment. The market segments can be

defined as products, product groups, customers, customer groups, geographic areas.
For example, a company may wish to analyze profitability for a particular geographical
area.
1.5.1.
Application
This organization unit would be set up based on the geographical bifurcation present
in X Company. The X Company group has East, West, South and North regions and
distribution chains. Based on that,Segments would be set up as East, West, South
and North regions. Among all the legal entities, only X Company Paints Corporation
Ltd., Sphinax Chemicals Pvt. Ltd., Sheenworld Services LLP,X Company Auto Solutions
has the regional segments.
1.5.2.
Naming Convention
Sheenlac
Segments.xlsx
1.6. PROFIT CENTERS

1.6.1.
Definition
Profit centre represents a part of firm as independently operating enterprise within the
company.
Profit centres collect revenues and also collect costs via cost centres.
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A profit centre is a management oriented organizational unit used for internal controlling
purposes.
Dividing your company into profit centres allows you to analyze areas of responsibility and
to delegateresponsibility to decentralized units, thus treating them as companies within the
company.
Profit centres are statistical objects.
1.6.2.
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Application
X COMPANY will have profit centre accounting taking into consideration of location wise
trial balance requirement
1.6.3.
Naming Convention
Sheenlac Profit
Centers.xlsx
1.7. FINANCIAL ACCOUNTING GLOBAL SETTINGS:

Posting of Transactions in SAP requires the following settings:
Currency Settings
Fiscal year and Fiscal year variant
Posting period variant
Document Types
Document Numbering
Posting Keys
Currency:
X Company group will use Indian Rupees (INR) as the local and base currency. The
local and base currency for all Indian Legal Entities would be Indian Rupees (INR). In
case of legal entity in Sri Lanka the base currency would be Sri Lankan Rupees (LKR).
Other currencies would be defined in relation to INR. The factors for currency
translations will be based on the direct quotation method that is i.e. 1: n, where one
unit of foreign currency will be equal to n units of INR.
Fiscal year and fiscal year variant:
A Fiscal year variant is defined in the SAP system to identify financial transactions
related to a particular financial year. X Company will define 1000 as the fiscal year
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variant. Since all the legal entities are using the same financial year (April to March),
the same fiscal year variant would be used for all legal entities. The fiscal year will be
defined as the last accounting year; for example, if the financial year is April 2011March 2012, then the fiscal year will be 2012. A fiscal year will consist of twelve
normal posting periods and four special posting periods.
Fiscal Year Variant V3 will be used
Sixteen periods will be defined in the system. The first period will be April and the
twelfth period will be March. The four extra periods will be used for posting year-end
/closing adjustment entries. Special restrictions will be made on the accounts that can
be posted to in the 4 special periods.
A Posting Period Variant is defined & assigned to one or more company codes. This
variant controls opening and closing of one or more posting periods in Financial
Accounting.
It is further desired by X Company, that the controlling the posting period should be
possible at the individual location level. I.e. a posting period can be opened only for
Hyderabad branch. To cater this need, authorization groups would be created per
various locations. Users from the locations would be assigned to the respective
authorization group.
Sr. No.
Posting period
variant
1000
1100
3
4
5
1200
1300
1400
1500
1600
1700
9
Posting Periods:
5000
Description
X Company Paints Posting period
variant
X Company Financial Posting period
variant
Sphinax Organic Posting period
variant
Sphinax Info Posting period variant
TechServices Posting period variant
X Company Auto Posting period
variant
Sheenworld Services Posting period
variant
Sphinax Chemicals Posting period
variant
X Company Lanka Posting period
variant
One posting period should generally be kept open for the current month
At the month end next posting period should be opened
The previous month should be closed after the month end closing procedures
are carried out
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One or more posting periods may be kept open for certain accounts on selective
basis, if required. However the authorization for this will be maintained at a very
high level.
A document is uniquely identified by the combination of fiscal year, company

code and document number
Old Posting Periods have to be closed after carry forwarding all ledger balances
to next year and New posting periods will be opened for new year
It will be possible to post to the current and the previous fiscal years until the
previous fiscal year is not closed
All document numbers will be reset to the minimum number of the range for the
new fiscal year
Document Principle:
SAP uses the document principle as its reference for entering and posting business
transactions. Each business transaction is stored as a document form and remains a
complete unit within the system till it is archived. In SAP, a document consists of a
document header and a line item, both of which are controlled by document types and
posting keys.
Document types:
Document types are required in the SAP system to create and post financial
documents, such as (e.g. Bank Payment Voucher, Bank Receipt Voucher and, Journal
Etc.) Document types are also used to distinguish between the various FI documents.
In addition, Document types also controls, Document Numbering (external or internal),
Account Types (Debtors, Materials, Assets, G/L accounts and Creditors) that can be
entered in the document.
Apart from the key controls mentioned above, few other definitions are made at the
Document type level for the purpose of processing transactions, which are driven by
the business process needs.
X Companywould use the standard SAP document types for the various types of
transactions across all legal entities.
Document numbering:
Each of the document types defined will have an identification number. The SAP
system uses predefined number ranges for this purpose. The number ranges are
assigned to the document types. The number ranges may be defined as internal, that
is i.e. automatically generated by the system in chronological order or as external, i.e.
that is enterable at the time of the transaction.
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X Company has decided to have internal numbering for all the documents. The
number range would be year dependent.The following Document Types are identified
for use from SAP Standard.
Docu.
Type
AA
AB
AF
Description
Asset posting
Accounting
document
No.
Ran
ge
01
01
DG
Dep. Postings
03
Customer
credit
memo
16
DR
Customer invoice
18
DZ
Customer payment
14
KG
Vendor credit memo
17
KR
Vendor invoice
19
KZ
Vendor payment
15
PR
Price change
48
RE
Invoice gross
51
WA
Goods issue
49
WE
Goods receipt
50
ZP
Payment posting
20
From
Number
1000000
00
1000000
00
3000000
00
1600000
000
1800000
000
1400000
000
1700000
000
1900000
000
1500000
000
4800000
000
5100000
000
4900000
000
5000000
000
2000000
000
To
Number
1999999
99
1999999
99
3999999
99
1699999
999
1899999
999
1499999
999
1799999
999
1999999
999
1599999
999
4899999
999
5199999
999
4999999
999
5999999
999
2999999
999
Exter
nal
Reverse
Doc.
Type
AA
AB
AF
DA
DR
DA
KA
KA
KA
PR
RE
WA
WE
ZP
Account type:
Account type is a key that specifies the accounting area to which an account
belongs.Examples of account types are:
Asset accounts - A
Customer accounts - D
Vendor accounts - K
G/L accounts - S
Materials accounts - M
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Posting Key:
The posting key is a two digit numeric key that controls the entry of document
line items. It specifies whether the line item is a debit or a credit entry, the
account type that can be posted (Vendors, Customers, and General Ledger etc.)
and the screen layout.
For posting special G/L transactions special posting keys, are used which are
supplemented by a special G/L indicator. The system uses the specifications
(posting key and special G/L indicator) to determine the alternative reconciliation
account.
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2. MASTER DATA FOR FI

2.1. GENERAL LEDGER
2.1.1.
Definition
General Ledger Accounting allows you to perform parallel accounting by

managing several parallel ledgers. It is just the extend version of classic
general ledger. Also Segment wise reports are also possible.
Following are the features of New GL
Real time integration between FI and CO
Integrated PCA
Document Splitting
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.
Business transactions are posted to accounts and managed by GL accounts.
You must create a master record for each account that you need. This
contains information that controls the entry of business transactions in an
account and the processing of data.
2.1.2.
Application
In X Company Group, new GL will be used to support the internal

management reporting and to have financial statements for segments and
profit centers.
In New General Ledger Accounting, you can perform internal management
reporting in parallel with legal reporting. For this purpose, the Segment and
Profit Center Accounting functions are integrated with General Ledger
Accounting. Furthermore, you can generate financial statements for any
dimension (such as profit center).
New GL helps in giving cost centre at each line item while posting
transaction. Also it helps in Document Splitting i.e. splitting one Balance
sheet item in two cost centre
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Example:
Repairs A/c... Dr (Cost Centre 100001) - Rs.2000
Repairs A/c... Dr (Cost Centre 200001) - Rs 1000
To Bank A/c (Cost Centre 100001) - Rs.2000
To Bank A/c (Cost Centre 100001) - Rs.1000
New General Ledger Accounting comprises the following functions for
entering and evaluating posting data:
Automatic and simultaneous posting of all sub ledger items in the

appropriate general ledger accounts (reconciliation accounts)
Simultaneous updating of the parallel general ledgers and of the

cost accounting areas
Real-time evaluation of and reporting on current posting data, in

the form of account displays, financial statements with different
balance sheet versions, and additional analyses.
Closing:
The new general ledger has significantly simplified and accelerated period-end
closings. For document splitting, the data in the new GL already meets the
reporting requirements from the time of posting. You can make a zero balance
setting for the corresponding characteristics (segment, profit center, and
customer fields) in each document. In this manner, you can create a
(nonconsolidated) balance sheet at the level of these characteristics at any
time. You no longer need additional program runs to split the characteristics.
Reconciliation between controlling functions and the new general ledger also
do not require additional program runs. In the case of cross-entity controlling
postings (such as transfer postings for costs from one cost center or profit
center to another, either manually or with allocations), the values are updated
to the general ledger in real time. In this manner, the controlling area and
general ledger are synchronized for the transactions. You no longer need
additional reconciliation activities or use of the reconciliation ledger. The
system provides data on the origin of such documents. If you have to
distribute values for specific general-ledger characteristics (such as a
customer field) using a specific scheme, you can perform allocations in the
general ledger.
2.1.3.
Data Maintenance
G/L account master records are divided into two areas so that company
codes with the same chart of accounts can use the same G/L accounts.
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Company code specific area

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.
G/L account master records are divided into two areas so that company
codes with the same chart of accounts can use the same G/L accounts. In
order to organize and manage a large number of G/L Accounts better, they
are arranged in account group. So when creating a G/L account, you must
specify an account group.
The accounts of an account group normally have similar business functions.
You could, for example have an account group for cash accounts, one for
Expenses accounts, one for revenue accounts, and one for other balance
sheet accounts etc.
The account group determines:

The interval in which the account number must be
Which fields are required and optional entries when creating and
changing master records
Which fields are suppressed when creating and changing master
data?
It enables you to control the layout of screens.
You use account groups to combine accounts according to the above criteria
(for example, a P&L account group, asset account group and material
account group).
Account groups for G/L accounts are based on the chart of accounts.
Chart of accounts area
The chart of accounts area contains the data that is valid for all company
codes, such as the account number. The following is the data in Chart of
account
Specifies the account number and account name (short and long
text) for each G/L account master record.
Specifies whether the account is a balance sheet account or an

income statement account. At the start of a new fiscal year, the
balance of a balance sheet account is carried forward to the same
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account. With income statement accounts, you must specify the

account to which the profit or loss is carried forward at fiscal year
change.
Controls how a master record is created or changed. In particular it

specifies which fields must or can be filled or suppressed when
creating or changing a master record. You use the account group to
do this.
Can group G/L account master records in the chart of accounts

when you specify number intervals. You enter the number of the
master record in the company code in the chart of accounts and
use the account group to control and check the number
assignment. To do this, you define corresponding number intervals
using the account group.
CREATION OF GL ACCOUNT MASTER RECORD
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You must define your account groups outside of the chart of accounts.
First specify the key under which you have stored these definitions in the
chart of accounts. Then create a G/L account master record: specify the
account number of the sample account in the required master record in
the chart of accounts.
Following account groups would be created for X Company:
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COA
A/C
Group
YAIN
LIAB
YAIN
PABL
YAIN
DEPN
YAIN
FXAS
YAIN
MATL
YAIN
RCBL
YAIN
CASH
YAIN
ASET
YAIN
REVN
YAIN
CONS
YAIN
EXPN
Description
Blue
From
100000
Balance Sheet A/C - Liabilities
00
Reconciliations
Account
- 160000
Vendor
00
201000
Accumulated Depreciation
00
210000
Fixed Assets
00
Material
Management
- 220000
Inventories
00
Reconciliations
Account
- 230000
Customer
00
240000
Cash and bank Accounts
00
Balance sheet Accounts - 250000
Assets
00
310000
P&L A/Cs - Revenues
00
Material
Management
- 401000
Consumption
00
400000
P&L A/Cs - Expenses
00
To
159999
99
169999
99
209999
99
219999
99
229999
99
239999
99
249999
99
259999
99
399999
99
401999
99
499999
99
2.2. ASSET
2.2.1.
Definition
The "master data maintenance" component is used for recording the

master data of organization 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.
2.2.2.
Application
Traditional 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, interest, insurance and other purposes between these two
points in time, and places this information at your disposal in varied
forms using the Information System. There is a report for depreciation
forecasting and simulation of the development of asset values.
2.2.3.
Data Maintenance
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Time-independent management of organizational units If you set this

indicator, the system manages the organizational unit and cost center
(and thereby profit center) as not time dependent in the asset master
records in this company code.
2.2.4.
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)
User fields/evaluation groups etc.
In addition, you can create long texts for the individual field groups
belonging to the general data part of the asset master record. You can
simplify the creation of long texts by using freely-definable long text
templates.
2.2.5.
Data for Calculating Asset Values
You can specify depreciation terms in the asset master record for each
depreciation area 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. Group asset will be created to group the asset as
per IT act. But depreciation value for IT department will be calculated out
of system.
Internal Number Range will be used for the Asset Class.
2.2.6.
Asset Classes & Account Determination
Asset Classes are used to classify the Assets under various heads for
Legal and reporting purposes. Asset Classes facilitate creation of
individual Asset Masters with certain default values and characteristics
that may, if required, be changed at individual asset master level.
Account Determination forms the link between Asset Classes in Asset
Accounting Module and FI module for integration with GL. Various GL
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Accounts for APC, Depreciation, and Asset Disposal etc. are assigned in
various depreciation areas through account determination.
Each asset class is maintained with different depreciation areas as
required by X COMPANY. Once the asset classes are defined different
asset master records will be created under the asset classes. Each class
will be assigned a different number range to give different numbers to
assets.
Following asset classes would be set up in the system:
Details
Land and buildings
Plant and Machinery
Fixtures and fittings
Office Equipments
Vehicles
Computer equipments
Low-value assets
Assets under construction
Asset
Class
1000
2000
3000
4000
5000
6000
7000
9000
2.3. BANK MASTER

2.3.1.
Definition
Bank is used to handle accounting transactions that process with

bankers.
Bank accounting includes the management of bank master data; cash
balance management (check), and the creation and processing of
incoming and outgoing payments.
Bank Master Data is required for bank transaction like Bank
Reconciliation and payments; this master record is also known as youre
House Bank.
2.3.2.
Application
A house bank refers to the bank a company uses for receivables and/or
payments. It is any bank with which your company code does business.
Each house bank contains a companys bank accounts. It also contains a
bank key that defines address and control data for the bank. The house
bank establishes a link with G/L accounts.
2.3.3.
Data Maintenance
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The bank key contains the addresses and valid control data of all banks
used in the SAP System. The bank key has to be created in the system, if
a bank is set up in the bank key, this information could then, for example,
be accessed when entering the bank information in a customer or vendor
master record. You would only need to enter the country of the bank and
the country key; the system would determine the name and address in
the background.
A G/L account master record must be created for each bank account.
The house bank and account ID must be entered in the GL account
master record to ensure the accounting transactions involving the bank
account will be reflected in the general ledger.
The following bank accounts would be set up in the system per legal
entity:
X Company Paints Pvt. Ltd.
Bank name
The South Indian bank
HDFC Bank Ltd
Axis bank Ltd
Axis bank Ltd
ICICI bank Ltd
Account No.
01380830000016
20
00040330012166
90903003321056
3
91102005601252
8
000905019304
A/C Type
Cash Credit
Current A/c
Cash Credit
Current A/c
Current A/c
Sphinax Chemicals Pvt. Ltd.

Bank name
HDFC Bank
The South Indian Bank
ICICI Bank Ltd
Axis Bank Ltd
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Account No
0004033000296
2
0138073000001
792
0138073000001
793
0127073000001
413
0138073000001
791
0111073000003
324
0374073000000
278
0414073000000
117
000905024635
9110200559576
57
A/c Type
Current A/c
Current A/c
Current A/c
Current A/c
Current A/c
Current A/c
Current A/c
Current A/c
Current A/c
Current A/c
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30861566143
Current A/c
2.4. MATERIAL MASTER

2.4.1.
Definition
The material master contains information on all the materials that a

company procures orproduces, stores, and sells. It is the company's
central source for retrieving material-specificdata. This information is
stored in individual material master records.
A material master has many views to be maintained , these depend upon
the material type which we choose , some important views are Basic
Data1 , Basic Data 2 , Sales org 1 , Sales Org 2, Sales Org general /
Plant, Purchasing, MRP1, MRP2, MRP3, MRP4, Plant storage, accounting1,
accounting2, costing1, costing2, etc.
For Finance, accounting views are important as they decide the link of
material and accounts it will trigger.
2.4.2.
Application
Accounting1
This view of material has details regarding how the material is
accounted. i.e. unit of measure, currency etc. Below are important fields
Valuation class: Determines the G/L account that is updated if there is
impact on accounting.
Price control: Determines whether material is valuated on standard price
basis or moving average price basis.
Prices: displays the price of material
Accounting2
This view is only to display different prices like tax prices etc. if
maintained.
2.4.3.
Data Maintenance
BDC/LSMW will be created to upload material master.

File format will be provided to upload material master using BDC/LSMW.
Fields to be maintained for Valuation class, Price control
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2.5. VENDOR MASTER

The vendor master record will have three data segments:
General data segment: Information such as name, address, post box,

communication details of vendors will be maintained. In addition to this,
if the vendor is also a customer, the customer number will be entered.
Company code data segment: Information such as reconciliation

account, sort key, terms of payment, bank particulars and other
correspondence details will be maintained.
Purchasing area data segment: Information such as vendor group,

shipping details, billing details will be maintained.
Certain vendors for example auditors, insurance Companies, Banks etc
can be created only in financial accounting, i.e vendor will be have
General data segment & Company code segment only. Restricted user
will be given the right to create such vendors. Materials management
personnel will create the purchasing view of the vendor and financial
accounting personnel will create the accounting views for the same. The
accounting view consists of reconciliation account, method of payment,
tolerance groups etc.
It is necessary that the reconciliation account for the vendor is correctly
identified and defined in the master data.
Vendor master consists of three views:
General view
This is data that applies to every company code and every purchasing
organization in your company. The general area includes, for example,
the vendors name, address, language, and telephone number.
Company code view:
This is data that is specific to an individual company code. Company
code data includes, for example, the reconciliation account number,
payment method and payment terms.
Purchasing view:
This is data relevant to the purchasing organization of your company. For
example, requests for quotations, purchase orders, and invoice
verifications are stored in this section.
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Data in vendor master records controls how transaction data is posted

and processed for a vendor. The vendor master record also contains all
the data you require to do business with your vendors.
Each master record has a unique number. You need this number to
display or change the master record and to post to the vendor account.
Vendors are generally classified as:
General vendor:
General vendor means a regular supplier who will be rendering either
goods or service from within the country or outside country. Since he is
very frequent vendor with whom company is willing to have long time
relationship, in SAP R/3, all the master information such as name,
address, bank details, payment terms etc. should be made available at
the time of vendor master creation.
One time vendor:
One time vendor means a vendor who does adhoc services to the
company and will not hold long term relationship. Since he is not a
frequent vendor, in SAP R/3, it will not expect vendor master details at
the time of master creation. It will only expect the name, address and
bank details at the time of payment transaction.
Account Groups:
The account group is a classifying feature within vendor master records.
It determines the following
Which screens and fields are necessary for entering master data
Fields can be defined as optional or mandatory at creation of master data
How master record numbers are assigned (externally by you or internally

by the system) and the number range from which they are assigned
Which partner functions are valid
Whether the business partner is a one-time vendor

The following vendor account group will be maintained.
Sr. No.
Vendor Account Group
Vendors Domestic RM
Vendors Domestic PM
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00
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Vendors Imports RM
Vendors Imports PM
Vendors Service
Vendors Logistics
One Time Vendors
Vendors Employee
Vendors Others
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00
300000
00
400000
00
500000
00
600000
00
700000
00
750000
00
800000
00
9
3999999
9
4999999
9
5999999
9
6999999
9
7499999
9
7999999
9
8999999
9
2.6. CUSTOMER MASTER

Customer Master
The customer master record contains all the data required to do business
with the customer. Data in customer master records controls how
transaction data is posted and processed for a customer. Individual fields
within the customer master record are also used:
X COMPANY has identified the following specific requirements:
Input master data in central location to be accessed via all other modules
The ability to assign and report on customers by various categories

and/or classifications
Accounts Receivable Master Data Maintenance Functions
SAP provides the following transactions for maintaining Accounts
Receivable master records:
Create a new account
Create a new account with template
Change an account
Display an account
Block/unblock an account
Set the deletion indicator
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The above operations may be undertaken at the general/company code

level, the sales area level, or centrally against both levels.
It is anticipated that the X COMPANY accounts receivable account
maintenance will be centralized, and the creation of any new accounts
will go through an approval process.
Account Groups. The account group is a classifying feature within
customer master records. It determines the following:
Which screens and fields are necessary for entering master data
Fields can be defined as optional or mandatory at creation of

master data
How master record numbers are assigned (externally by you or

internally by the system) and the number range from which they
are assigned
Which partner functions are valid
Whether the business partner is a one-time customer
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Account Groups:
Sr.
No.
Customer Account Group
1
Customer domestic
2
Customer export
3
One time customer
4
Project customers
From
To
1000000
0
2000000
0
3000000
0
4000000
0
1999999
9
2999999
9
3999999
9
4999999
9
Data in the customer master is stored in 3 views:

General Data: Data that applies to all company codes and sales areas
(e.g. customers name, addresses, language and telephone data).
Company Code/Accounting Data: Data that is specific to a company
code (e.g. the reconciliation account number, payment terms and
dunning area).
Sales Area Data: Data specific to the sales area of the company (e.g.
sales office, sales district, pricing information, as well as information
relating to shipping and billing).
Customer Reconciliation Account
Customer Reconciliation account is the G/L account for a group of
customers in FI-AR module. The number of Customer Reconciliation
accounts will depend on the grouping of the customers in FI.
The following reconciliation accounts are to be used by X COMPANY.
GL Account
23000000
23100000
23200000
23300000
Description
Accounts
customers
Accounts
Customer
Accounts
customers
Accounts
customers
receivable-Domestic
receivable-Export
receivable-One
time
receivable-Project
Payment Terms:
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Payment terms enable the system to determine the required terms of

payment automatically. The specified terms of payment are assigned
using a key. This key can be:
Stored in the master record of the customer/vendor account (in the
purchasing or sales view and in the accounting view)
Entered when the FI document is created (or changed)
Entered when the logistics documents (in the purchase order / sales
order and incoming invoice or in the order and the outgoing invoice, for
example) are created (or changed)
Terms of payment include settings for the payment terms, the day limit,
the baseline date for payment, and installment payments. Baseline date
determines the date from which payment terms will be calculated. The
final deadline for payments can be summarized in a formula:
Payment Deadline = Baseline Date + Payment Terms
Payment terms will be defined in system and will maintain in Customer
master. Standard SAP payment terms are: Key
0001
Description
Payable Immediate
NT07
Payable in 7 days
NT15
Payable in 15 days
NT30
Payable in 30 days
NT45
Payable in 45 days
NT60
Payable in 60 days
Customer Credit Master

Customer Credit processing includes risk and credit exposure
management. It provides levels and mechanisms to handle credit limits.
Credit Management enables to minimize the credit risk by specifying a
specific credit limit for customers.
Using Credit Management module credit limit can be granted to
customers by setting up Credit Master Data. The system controls
transactions of each customers on basis of this master data.
The Credit
functions:
Management
function
provides
the
following
Create/Edit/Display Credit Master Data (Risk Category, Total Credit

Limit, Review period etc)
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Overview of Credit Limit usage
Sales and Delivery documents blocked due to Credit Management
Releasing Process of Blocked documents
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3. BUSINESS PROCESSES- GL ACCOUNTING

3.1. GENERAL EXPLANATION(AS IS):
X Company accounting team performs following activities under GL
Accounting
a. Posting Journal Entries: As a part of day to day accounting activities and
month/ year end closing journal entries are posted by the accounting
department.The entries are reviewed by the supervisor periodically and
necessary corrections are made if required. Printout for the journal entry
vouchers are taken and are files time to time. Some entries of recurring
nature are posted during monthly closing. Salary posting is also done by
passing a journal entry. Also journal entries are passed to adjust the CENVAT
credits.
b. GL accounting further functions: To meet business requirements X
Company team does foreign currency valuation or interest calculations
manually. Also as a part of process the GR/IR accounts and other provision
accounts are cleared periodically.
c. GL reporting: The accounting team uses GL A/c balance, item wise reports
for internal analysis.
d. Financial statements:
The accounting team draws financial statements at legal entity level.
Depending upon the legal statuses of the legal entities, the financial
statement reporting format is changed. The Limited and Private limited
companies use new schedule VI format for statutory reporting. And other
proprietary and partnership firms use different formats.
Also some reports
location/division.
are
generated
to analyse
the
profitability per
As on date the consolidated financial statements are prepared for X

Company group manually using excel.
Summarized expectations from the new system:
Ability to manually process Journal entries
System to facilitate the parking of transaction and to be posted on

specific approvals
Integration to other modules with real time
Financial statements as and when required
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Consolidation at group level
Processing of foreign currency transactions
Foreign exchange transaction with gain loss information is required
On-line data entry validation and correction facility
System to facilitate the posting and reversal of provisional entries by the

system
System to facilitate the automatic posting of recurring entries
To facilitate the month closing activities
To facilitate the smooth and proper closure of books at the end of the
accounting year and carry forward of balances to new accounting year
3.2. SOLUTION IN SAP (TO BE):

Overview: General ledger is a comprehensive financial management solution that
dramatically enhances financials controls, data collection, information access and
financial reporting through 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.
The objective is to maintain accurate and complete books of accounts in compliance
with the provisions of Indian GAAP as Leading Ledger and IFRS as non Leading
Ledger .Also ensuring compliance with statutory guidelines with the provisions of the
Companies Act, 1956.
The General Ledger is integrated with all other modules in SAP and thus serves
as a complete record of all business transactions. This means that all postings
that originate in other sub-modules of SAP will be automatically transferred to GL
during day-to-day processing, thus considerably reducing the amount of manual
journals. For example, when a purchasing officer records a receipt of goods that
was purchased in the Purchasing module, the inventory value is updated in the
GL immediately. Each transaction updates the GL at the individual transaction
level and summary level by account, debit or credit total and period total. All
these items can be displayed on-line.
The SAP ECC 6.0 uses the document principle as its reference for entering and posting
business transactions. Each business transaction is stored as a document form and
remains a complete unit within the system till it is archived. The following are the
common documents that will be used within the General Ledger posting area:
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Adjustment entries
Banking and Cash Transactions
Provision Postings
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Other G/L Transactions:
Information, which applies to the entire document, such as the

document date and number, will be specified in the document header. It also
contains controlling information such as the document type. The document number
will be assigned internally which will be specific for document type of X COMPANY.
The line item only contains information, which will be specific to

that line item. It always has an amount and one account number. It may also
contain other specifications, such as the terms of payment, a cost center or an
explanatory text, depending on the transaction being posted.
3.2.1.
DOCUMENT
A document consists of a document header and line items.

Document header is the part of a document that contains information valid for the
whole document, for example, document date and number. It also contains controlling
information such as the document type, user.
Line items are the part of a document that contains information about an item. This
includes an amount, an account number, the credit or debit assignment, and
additional details specific to the transaction being posted. For example you can enter
terms of payment, a cost centre, or an explanatory text in a line item.
You can display the line items for one or more accounts.
Line items are document items that were posted to a specific account. In contrast to a
document item, a line item only contains the information from the document that is
relevant from the account view.
You can display the following line items in GL account balances:
Open items
Cleared items
Noted items
Parked items
Items with special G/L transactions (in Accounts Receivable &Accounts Payable)
Items with customer / vendor items(in Accounts Receivable &Accounts Payable)
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The SAP system adheres to the document principle. This means that each posting is
always stored in the form of a document; each document has a document type, which
is generally used to identify the source and nature of the transaction (e.g. AP Invoice,
AR Debit Memo etc.), and a unique document number. Each document remains in the
system until it is archived.
Only complete documents can be posted in the SAP 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 document 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 of Field Status Groups).
When you enter documents, the system checks whether these conditions have all
been met. It also checks/validates the entries themselves. For example, if you have
entered a key that is not defined in the system, the system issues an error message to
this effect. If this is the case, you can only continue processing after you have
corrected the error. These system checks & validates that all the required data is
entered into the system in complete and in error-free form.
If you are interrupted on entering a document and want to save the information you
have already entered, you can do so by using the Hold function. On the other hand,
you cannot post the document as account assignments are missing, or something is
unclear, you can use the preliminary posting function to park the document until you
are ready to complete it.
3.2.2.
PARK AND POST GENERAL LEDGER DOCUMENT
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 the
superior. Subsequently the user can book the same as a G/L document.
One advantage of parking is that you can evaluate the data in documents online for
reporting purposes from the moment they are parked, rather than having to wait until
they have been completed and posted.
A list of parked documents can be generated in the SAP for the benefit of the
supervisor/manager. The document can then be checked and corrected by the user.
This document can then be posted in the General ledger. Parked documents can be
modified or deleted before posting.
The documents are entered in to the system and depending on the authorizations;
the documents are parked and posted later.
The user will park all the documents in R/3. Then the designated approver will view
the list of all the parked documents and post the parked documents before the end
of the day.
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POST/DISPLAY/CHANGE GENERAL LEDGER DOCUMENT

Document Posting
Header information like company code, posting date, document date

currency is entered.
Items details like general ledger account, amount, tax code, cost
assignment will also be entered for each line item.
New line items can be added.
A line item before posting may be deleted if required.
An automatic internal number will be created for each document posted in

the system.
Document display in accounting document will allow viewing all the

header and line item details.
Document change of the accounting document will allow changes to the

Header text, reference, and line item next and assignment field.
Post general ledger documents
To make general ledger business transaction available, you must post them to
the general ledger account. The system creates the document and makes the
data available in accounts.
When you carry out the postings to G/L accounts, you enter the document header
data and line items data. Upon simulation of the document, the system carries
out the consistency checks before posting the data. If the error exists, the data
will not be posted and proposes error information. Once the data is error free,
then the system updates the document file and G/L accounts amount may be
posted.
The expense GL account is made mandatory to input a cost centre.
Journal creation will be mainly used for adjustments of incorrect postings, ad-hoc
entries, or period-end adjustments. All GL transactions from other modules will
be generated automatically with their own document types and number ranges.
In addition, the standard journal creation program provides for the creation of an
Account Assignment Template. At any time during the creation of a document,
the user may save the document as a template for future use. The template may
contain any number of individual line items (up to the SAP maximum of 999), and
any combination of GL account assignments and individual line item values.
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.
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Flow diagram:Document parking and posting
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3.2.4.
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DOCUMENT REVERSAL
It is possible for a user to make an input error. As a result, the 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.
When reversing a document, a reversal reason code must be entered to explain

the reversal. The reason code also controls if the reversal date is allowed to be
different from the original posting date.
Documents with cleared items cannot be reversed. The document must first be
reset.
However, it needs to be noted that reversal of any document will affect the allocation
cycles in case if these processes are completed. It will be required to re-run all these
cycles once again after reversing the document.
3.2.5.
OPEN ITEM CLEARING
Open items reflect unfinished transactions. For example, a Liability that has not
been settled remains in the Liability account as an open item until it is settled.
The open items of an account can only be cleared once you post an identical
offsetting amount to the account. In other words, the balance of the items
assigned to each other must equal zero.
During clearing, the system enters a clearing document number and the
clearing date in these items.
Open items can only be cleared if they are posted to accounts that are
managed on an open item basis. Open item management is automatically set
for customer and vendor accounts. For GL accounts, however, you have to set
the open item management option in the master record.
Open item management would be set for the following GL accounts:

o
Check clearing accounts (bank clearing accounts).
Goods receipt/invoice receipt.
Other General Ledger Balance Sheet Account
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Open items of an account can be cleared manually using the Account Clearing
function, or they can be cleared automatically by the system. Automatic clearing is
especially useful for clearing accounts in the GL account area.
Users will clear open items from GL accounts by running the clearing program.
This program uses predefined criteria to group together open items per
account. If the balance of the group of open items equals zero in local or foreign
currency, the items are marked as cleared.
The clearing program is used to automatically clear open items based on

predefined criteria. Manual clearing of open items is therefore not usually
necessary.
Automatic clearing (i.e. clearing based

assignment, amount, ref. field).
Manual clearing (i.e. matching of amount performed by users).
Within the general ledger module, account clearing shall be performed using
the following functions:
3.2.6.
on
SAP-defined
fields such
Account clearing (ad hoc).
Automatic clearing (part of closing activities).
Post with clearing (during the course of posting a document).
as
POST RECURRING DOCUMENT
For postings that recur on a regular basis, such as payments for rent or interest,
legal fees, and property taxes, the recurring entry program can be used to have
the necessary documents generated automatically.
The recurring business transactions must be stored in the system as recurring
entry original documents.
Each recurring entry original document contains the date of the first and last
posting, the frequency at which posting should be made, and the date of the
next planned posting.
The recurring entry program must be started at regular intervals within a
specified period. The program selects all recurring entry original documents in
which the date of the next posting falls within the specified period, and then
generates a batch input session.
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When the session is processed, an FI document that corresponds to the original

document is posted, and the date of the next posting is changed accordingly in
the recurring entry original document.
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SAMPLE DOCUMENTS
Sample documents will be used as reference documents entered specifically for a

purpose. Sample documents will have a separate number range. When such
documents are entered and posted as a sample document, the system stores the
document, but does not update any transaction figures.
During document entry, data could be from another document defaulted. The items
from this reference document will be:
Transferred without changes
Used for reverse postings
Changed
In contrast to an accounting document, sample documents do not update transaction

figures. They serve merely as data sources for an accounting document. Their
advantage will be that change or enhancements are possible. Therefore a sample
document will be used rather than an accounting document when a reference
document has to be defined.
Sample documents will be used as a reference document when allocation to more than
one cost center is defined. If allocation is to be made to other cost centers, the values
in the sample document need to be changed.
Sample documents will be entered with a special function to ensure that these
documents cannot be accidentally posted as accounting documents.
3.2.8.
FIXED DEPOSITS WITH BANKS
Making/Breaking/Maturity of Fixed Deposits/Investments

The company operates fixed deposits of various values with several banks. Though the
deposits made for a fixed period with a defined maturity date these will be broken
based on the business needs.
As on the date of maturity, a manual entry will be posted for recording the interest
due on the deposit.
3.2.9.
JOURNAL VOUCHER
Here all adjustment entries related to vendors or customers is to be passed through FI

(JV). It covers following:
1.
2.
3.
Vendor/ customer reconciliation entry.

GL rectification JV.
Accrual JVs
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3.2.10.
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PERIODIC PROCESSING
Closing Procedures:
Apart from the normal day-to-day transaction processing that is undertaken within
SAP, there are many processes that require completion on a periodic basis. These
include the regrouping of customer credits and vendor debits, and unmatched invoice
receipts and material receipts, revaluing of foreign currency items, and month-end
accruals and deferrals.
List of period close operations in SAP:
N
o.
Are
a
Description
Business Process Description
FI
Book all provisions
Enter Accrual / Deferral Document for the period
FI
Depreciation Run
FI
Bank Reconciliation
FI
Clearing of
GL/Customer/Vendor
accounts
FI
Withholding Tax
Provision
FI
Open next FI Posting

Period
FI
Financial Statement
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This process involves execution of monthly

depreciation run and will be centrally executed in
X COMPANY on a pre-defined date. It has to be
ensured that before execution of this process, all
asset capitalization entries must be completed.
This process is for running automatic bank
Reconciliation for X COMPANY
The program (T-code F.13)when executed at the
required periodicity will clear all the matching
open items in the GR/IR account so as to retain
items which will be the open Goods Receipt
Credits for which the Invoice Verification has not
yet been done (or Invoice not yet received). This
Process (T-Code-F-44 Vendor & F-32 Customer)
Involves clearing of Vendor Invoice against
unmatched payments / advance / debit credit
note or JV passed in the Vendor account.
This process discuss about Provision of
withholding Tax against the each Goods Receipt
Note (GRN) for which Invoice not yet posted.
This process has to be centrally controlled in X
COMPANY and hence is relevant to Finance and
Accounts which will control the opening and
closing of the posting periods. SAP permits
selective opening and closing of posting periods
for various types of accounts
This process is for generating the financial
statements such as Profit and Loss Statement and
Balance Sheet for X COMPANY. Financial
Statement Versions will be created for external
reporting.
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N
o.
Are
a
Description
FI
Customer & vendor

Balance Carry
forward.
FI
GL Balance Carry
forward
11
FI
Asset Balance Carry

Forward
12
FI
Foreign Currency
Revaluation
10
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Business Process Description

These transactions carry forwards the Vendor &
Customer balances to next fiscal year. For carry
forwards of Balances the selection of data will be
Company Code & Year. Before running the carry
forward it can be run in Test mode.
These
transactions
carry
forwards
the
GeneralLedger balances to next fiscal year. For
carry forwards of Balances the selection of data
will be Company Code &Year. Before running the
carry forward it can be run in Test mode.
The process will close the asset master entries for
the relevant fiscal year. After this process, SAP
does not permit any postings to Fixed Assets for
the closed fiscal year.This process should be
carried out only when the final Fixed Assets
Schedule is complete
Revaluation is done for all current assets (except
stock) and current liabilities accounts. Foreign
currency revaluation will be manually calculated
and posted or automatically calculated and
posted by SAP. For automatic calculation and
posting, the standard valuation method is used.
3.3. CHANGES TO EXISTING ORGANIZATION PROCESS

N.A.
3.4. SPECIAL ORGANISATION CONSIDERATIONS:

N.A.
3.5. GAP ANALYSIS:

N.A.
3.6. INTEGRATION CONSIDERATIONS

SAP financial accounting module has a close integration with other
modules in SAP. All the postings in other modules having financial impact
would be directly posted to Financial accounting GL A/c in real time. In
case of X Company the integration would be primarily as follows:
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FI-CO Integration(Company code, GL accounts)
FI-SD Integration (General data, Company code, Distribution Chain)
FI-MM Integration (General data, Company code, Purchase area) and FI-AA
FI-HR Integration (Company code)
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4. ACCOUNTS PAYABLE
4.1. GENERAL EXPLANATIONS (AS-IS)
Currently X Company accounting team along with the purchasing team performs
following activities under Accounts payable Accounting
PO based Bills processing (Revenue & Service):

X Company purchases the raw materials, fixed assets, production consumables,
services etc. by placing a purchase order to the vendor. The centralized purchase
department caters to the need of all 9 legal entities. As per the process, the ordered
goods are delivered to the plant-store or desired place. The stores person books the
goods receipt. Usually the invoice is accompanied with the goods delivery. In case the
invoice document arrived at plant, the stores people send the invoice copies to
Purchase department in head office. The purchase department verifies the invoice and
passes it on to accounts department for further processing.The accounting
department posts the vendor liability and processes for payment.
Sometimes, if the expenses incurred at individual branch, the invoice is forwarded to
purchase department in head office. The purchase department verifies the invoice and
passes it on to accounts department for payment. X Company also imports some
materials. In these cases the invoices are booked in INR.
If in case any discrepancy seen between delivered quantity and invoice quantity above
tolerance limit, subsequent debit note is issued to the vendor. The vendor is paid only
for quantity actually received + allowable tolerance quantity.
Unplanned delivery cost if any is identified as separate expenses.
Accounting for Purchase - Other Than PO
In case of Vendor invoices without Purchase Order / Service Order / Contract would
be booked by the Finance vendor invoice. And link with the relevant department at
the time of transaction.
In the FI vendor invoice, GL account is to be entered for the debit posting. Due
date, payment terms is picked up from the vendor master but this can be modified
if required at the transaction level.
Payment to vendors: the vendors are usually paid through checks. Some times
RTGS or DD are used for payments. This file is then shared with bank for check
printing.
Vendors are usually paid through checks. The payment request is raised by respective
branch (if procurement does not happen from HO) along with invoice. In case of check
payments, manual payment entry is posted into the system which owns a check
number. X Company has got check numbers received from the bank. At a particular
time interval, a file (.csv format) is generated which includes the information
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pertaining to the check payments. This file contains the information about the vendor,
invoice details, amount paid and checks number. This file is then shared to bank for
check printing. Then check printing takes place at bank end. The printed checks are
collected by X Company person. The checks are then couriered to respective vendors.
All the legal entities pays to respective vendors form their own bank accounts.
Salary payments:As on date the net salaries for all the legal entities are paid from
Sphinax Chemicals bank account. A consolidated file is uploaded to bank portal. A this
point other legal entities are considered as receivables in the Sphinax chemicals books
of accounts. Later on each legal entity reimburses the amount to Sphinax Chemicals
Pvt. Ltd.
Payment in cash:Some minor expenses are paid in cash.
Communications with vendors:X Company sends payment advices to the

vendors along with the check. This contains the information about the invoices paid.
As on date the other formal correspondence with vendors is not followed particularly.
However, as and when required requests for balance confirmations are sent to
vendors.
Accounts payable reports:X Company team uses reports like vendor open
invoices, due date analysis, vendor balances etc. for analysis purpose.
Taxes and duties:X Company deals with excise, VAT/ CST, service tax, customs
duty, GTA as input taxes. The input taxes, where ever applicable, for eligible expenses
are booked as current asset to avail the CENVAT credit. And the expenses which are
not eligible for credit, the taxes are loaded to the expenses account. Also if applicable
the withholding tax is deducted at the time of invoice posting or payment whichever is
earlier.
4.2. SOLUTION IN SAP(TOBE):

Overview: The Accounts Payable application component records and administers
accounting data for all vendors. It is also an integral part of the purchasing system.
Deliveries and invoices are managed according to vendors. The system automatically
makes postings in response to the operative transactions.
Payables are paid with the payment program. The payment program supports all
standard payment methods.
Postings made in Accounts Payable are simultaneously recorded in the General Ledger
where different GL 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.
You can design balance confirmations, account statements, and other forms of reports
to suit your 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.
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PO BASED BILLS PROCESSING (REVENUE & SERVICE)
In this process Purchase Order is raised with reference to Purchase Requisition where
accounting has no impact, its only a commitment item. When the goods are received
from the vendor based on the PO, we execute MIGO where goods receipt is posted and
both Material document and FI document is generated.
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Material document will be for accounting stock into stores and FI entry will
Inventory / Stock A/c
Dr.
GR/IR Clearing A/c Cr.

Here GR / IR clearing account is a clearing account and gets knocked off at the time
posting the invoice (MIRO execution).
All the Incoming Invoices are verified in terms of their content, prices and arithmetic
and the invoice is posted, the data is saved in the system. The system updates the
data saved in the invoice documents in Materials Management and Financial
Accounting.
After the invoice has been posted, the document appears as an open item in the
vendor account. (Payment proposal list).
Accounting Entries when invoice is posted will be:
GR/IR A/c
Dr.
CENVAT Clearing A/c
Dr
(if applicable)
VAT Clearing A/c
Dr
(if applicable)
Vendor Account
Cr.
In case of Service PO following entry will be triggered:Goods Receipt:

Expense a/c
Dr.
Service GR / IR A/c CR
Invoice Posting:
Service GR/IR A/c
Dr.
Vendor Account
Cr.
Delivery costs can be divided into:
Planned delivery costs

Unplanned delivery costs
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Planned Delivery Cost:

Planned delivery costs are entered at item level in the purchase order.
Planned delivery costs can be divided into:
Freight costs
Customs relevant
Insurance
Planned delivery costs can be invoiced in the following ways:
Fixed amount, independent of scope of supply

Quantity-dependent amount
Percentage of value of goods to be delivered
For planned delivery costs, the System makes postings to a clearing account at goods
receipt.
If the delivery costs in the invoice differ from the planned delivery costs, the System
posts the differences in the same way as it posts normal price and quantity variances.
In case of planned delivery cost such as Freight:
Freight clearing A/c
Dr
Freight Vendor A/c Cr

In case of planned delivery cost for Customs duty (Bill of Entry items),
Customs clearing A/c
Customs Officers A/c
Dr
Cr (Govt. Vendor)
Unplanned Delivery Cost:

Enter the unplanned delivery costs on the Extras tab page. The System distributes
unplanned delivery costs among the items; it treats them in the sameway as price
differences. However, it does not check the price after distributing the delivery costs.
It does not list them separately in the purchase order history. They are only included in
the invoiced value.
Then accounting entries will be,
Vendor A/c
Cr
Stock A/c (or) Price Difference Dr
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Domestic Purchases (material) -- which includes fright,VAT

During GR:
Material Stock
Dr
GR/IR Clearing A/c
Cr
Freight Clearing A/c
Cr
During Invoice Verification:

GR/IR Clearing A/c Dr
Freight Clearing A/c
VAT A/c
Dr
Dr
Vendor A/c
Cr
Freight Vendor A/c Cr
For Domestic Procurements of Capital Goods:

During GR:
Material (Asset) A/c
GR/IR Clearing A/c
Dr
Cr

GR/IR A/c
Dr
Vendor Payable A/c
Cr
Import Purchases (material) -- which includes fright, Duty
During Customs Duty Clearing Invoice:

Custom Clearing A/c
Dr
Custom Officer A/c
Cr
Here Custom Officer is created as a vendor.

During GR:
Material Stock
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GR/IR A/C
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Cr
Custom Clearing A/c
Cr
(The custom duty portion of value is loaded to the inventory and the Customs clearing
a/c will get nullified)
GR/IR
A/c
Dr
Vendor A/c
Cr
4.2.2.
DIRECT BILLS PROCESSING (NON PO BASED)
Accounting Document is generated manually by debiting the expense and crediting

the vendor. WHT is also deducted at this stage which will be called up automatically.
Vendor invoices without MM purchase order would be booked through FI vendor

invoice and has no impact on the stock.
In the FI vendor invoice, GL account is to be entered for the debit posting. Due
date, payment terms is to be mentioned in the invoice.
4.2.3.
VENDOR DOWN PAYMENT & CLEARING
Payment / Receipt process (Advance & Regular):
Advance Payment: Once the APR (Advance Payment Request) received from
Purchase / Intending department, AP user will cross check the request with PO
for compliance.
For all the purchase based advances, PO numbers will be referred/attached to

prepayment voucher. So system will allow to pay the advance always less than
or equal to the advance amount mentioned in the PO. More than one PO can be
referred for a single pre payment against each vendor.
Advance Payment:
A Down Payment request is raised by the authorized person requesting for payment.
Based on the request, a down payment may be released to the particular vendor and
request item is cleared. Down payment request is a noted Item special General Ledger
account which will not be displayed in the Balance Sheet. In SAP, processing of a down
payment involves a number of steps:
Down Payment request, a notational item recorded against the vendor,

Make payment against the payment request,
Post the invoice which required the down payment,
Clear the down payment against the invoice, and
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Make final vendor payment, the balance of the invoice.
The accounting entry for making the down payment will be:
Vendor account (Spl. G/L: Down Payment)
Bank A/c
4.2.4.
Dr
Cr
INVOICE BOOKING & SETTLEMENT OF ADVANCE
The concept of authorizing the document entry can be achieved by the standard SAP
functionality creating and authorizing the payment request. Payment request will be
created by one person and authorized by another person to keep the control.
It is also possible to post invoices from FI without the necessity of purchase order. That
can be used to fulfill the requirement of postings like miscellaneous payments,
employee related payments, travel agent payments, hotel bills and consultancy
payments.
Settlement of down payments to the vendor account and clearing of Invoice
against,Down Payment
Vendor A/c
Dr
Vendor A/c (Spl. G/L: Down Payment)
Cr
Wherever, WHT is applicable, the WHT will be deducted at the time of down-payment
to the vendor and will be adjusted at the time of settlement of advances.
4.2.5.
CREDIT PERIOD FOR VENDOR PAYMENTS:
Terms of Payment will be defined by the Company, which will be updated in the Vendor
Master for each vendor and will be defaulted in the PO and Invoice level. Where the
payment terms have been changed in the invoice level, the due dates will over-ride
the original due date (calculated based on Purchase Order). Terms of payment will
define the credit period, due date and cash discount, if applicable. The due date will
be calculated from a baseline date as per the payment terms, which will be either of
the following dates:
Document Date
Posting Date
No Default
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VENDOR NORMAL PAYMENT
By using the SAP standard functionality all the check payments can be managed. The
typical procedure under SAP with respect to check will be:
a) Defining the check lots for house bank of X COMPANY
b) Entering the vendor invoice
c) Entering the vendor payment by clearing the open item created by invoice
d) Attach check to the payment document number generated in step (C)
e) Check the check register to see the check updated/3
Vendor Payments can be manual or automatic. The general aspects related to vendor
payment are Terms of Payment, Method / Media of Payment, manual payment &
Automatic Payment
X COMPANY has to make payments to vendors during their course of transactions,
vendors invoice due date is checked and if it is due, then the payment process begins.
Prior to making any payment down payments if any are to be checked and cleared
against the invoices. Only then Payment process can be carried out.
The payment can be full payment or part payment or residual payment. In case of full
payment, the system clears the open item. In case of part payment, the open item is
not cleared and has to be cleared manually subsequently, when the entire amount is
paid. In case of residual payment, the original invoice is cleared and the balance
amount is created as fresh open item.
Availability of the funds is checked before making the payment. In case funds are not
available, after making the funds available, the payment has to be carried out.
Payments can be made through automatic payment program or through manual
payment.
Check payment can be made through automatic payment program or through post
plus print option transaction. In case of automatic payment program, the parameters
have to be entered and the system prints the checks for all the vendors who are due
as per specified parameters. In both cases, the check is printed.
In case of post plus print option, the individual vendor has to be selected and
payments are to be made by selecting the required open items and with that
reference of payment document check can be printed.
4.2.7.
AUTOMATIC PAYMENTS:
The payment program is designed so that you can pool and process outgoing
payments. The payment program processes domestic and foreign payments for
vendors and customers. It creates payment documents and supplies data to the
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payment medium programs. These payment medium programs print either a payment
list, payment forms (for example, checks).
The payment program processes the open line items in three steps:
It determines the open items to be paid according to the parameters entered and
creates a proposal list. You then have the ability to edit the proposed payments
before the transactions are posted. Any items that you do not want to pay can be
blocked for payment, however, if you need additional items to be included in the
proposal list, the previous proposal must be deleted, the parameters changed to
pick up the additional transactions and the payment program rerun.
The payment program makes the payments based on the edited proposal list. Only
the open items contained in the proposal list are taken into consideration. The
payment program posts documents, sets up data for the form printout (check), the
remittance advice, and the payment summary as required.
Payment program will automatically update the check register (if used) and the
relevant general ledger accounts and also clear the vendor invoice for which
payment run is executed.
Considering the need of paying multiple vendors at a time and generating .csv file,
automatic payment program would be used for X Company.
The payment parameters that need to be specified include:
Company Code
Vendors to be paid (and customers for refunds)
Posting and document date for open transaction items that must be included in
the proposal list
Defining the bank from which the payments will be made
Payment methods that are permitted (e.g. Check, EFT)
Currency
During the payment run accounting document is generated clearing the vendor open
item.
4.2.8.
MANUAL PAYMENT
With manual payments you can print checks without running automatic payment
program. There are two ways of doing this:
You can print a check for a payment already posted. This may be necessary if a
check is damaged during printing.
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Check is prepared manually i.e outside the SAP system and then check details are
updated to the payment document which updates the check register.
4.2.9.
VENDOR FOREIGN PAYMENT
In case of Import materials, Purchase orders will be processed and sent to the selected
vendor with all terms and conditions. Upon the receipt of the goods in the customs
area, they would be released after the payment of duty. In SAP the customs authority
would be considered as vendor and a liability towards customer duty would be
recognized in the system. This would be called as customs invoice verification. Then
after payment of subsequent duties, goods would be released from the customs area.
Goods receipt would be booked once the goods are received in companys storage
location. Then import vendors commercial invoice would be booked in the system.
If goods received are as per the PO order quantity, Goods receipt will be posted with
reference to purchase order when material is physically received. Invoice verification
will be processed with reference to goods receipt and vendor invoice receipt as per the
payment terms stated in purchase order. Vendor payment will be processed with
reference invoice verification posted in Materials Management by Financial
Accounting. For such an IR, the exchange rate is picked up from the PO in which we
have defined a fixed exchange rate.
All import purchase orders are to be raised in foreign currency but the transactions are
to be recorded in INR. The import vendor invoice would be booked in the system in
foreign currency. System would pick up the exchange rates maintained in the system
for the currency pair for e.g. USD to INR. The exchange rate can be changed in the
document, if required. At the time of payment, the system would automatically
calculate the exchange gain/loss and book it to relevant GL A/c.
4.2.10.
DEBIT NOTE & CREDIT NOTE
All the support/relevant documents will be submitted by purchase to generate the

debit/Credit note on the identified process like discounts on the qtypurchase.
Cross Functional with MM:
Credit Memo:
A credit memo can be entered with reference to a purchase order or a goods receipt.
Purchase Dept/AccountsDept enter a credit memo for a purchase order item when the
goods are returned to the vendor. First MIGO is to be posted for the return quantity
and then credit memo to be posted in MIRO for the return PO.
Accounting Entries will be for Credit Memo (returned goods)
Goods Receipt - MIGO
GR/IR A/c
Dr
Inventory A/c
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Posted for the returned quantity, stock value & quantity is reduced.
Invoice Posting MIRO

Vendor A/c
GR / IR A/c
Dr
Cr
VAT Receivable A/c Cr
4.2.11.
ADJUSTMENT / CLEARING PROCESS
Open items reflect unfinished transactions. For example, a Liability that has not
been settled remains in the Liability account as an open item until it is settled.
The open items of an account can only be cleared once you post an identical
offsetting amount to the account. In other words, the balance of the items
assigned to each other must equal zero.
During clearing, the system enters a clearing document number and the clearing
date in these items.
Open items can only be cleared if they are posted to accounts that are managed
on an open item basis. Open item management is automatically set for customer
and vendor accounts. For GL accounts, however, you have to set the open item
management option in the master record.
Open items of an account can be cleared manually using the Account Clearing
function, or they can be cleared automatically by the system. Automatic clearing is
especially useful for clearing accounts in the GL account area.
Users will clear open items from GL accounts by running the clearing program.
This program uses predefined criteria to group together open items per account.
If the balance of the group of open items equals zero in local or foreign currency,
the items are marked as cleared.
The clearing program is used to automatically clear open items based on

predefined criteria. Manual clearing of open items is therefore not usually
necessary.
Automatic clearing (i.e. clearing based on SAP-defined fields such as assignment,

amount, ref. field).
Manual clearing (i.e. matching of amount performed by users).
4.2.12.
CORRESPONDENCE
All evaluations and reports sent to business partners are considered

correspondence. Correspondence for both customers and vendors includes:
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Account statements and open items lists in letter form
Individual letters and standard letters
Balance confirmations
Document extracts
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Since standard reporting format of above correspondence does not meet X COMPANY
requirement, need to be developed
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Vendor master creation
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Park and post vendor invoice:

X COMPANY requires day to day accounting of the transactions that take place in the
organization. This application component is required for entering vendor invoices that
arise in the accounts payable module of financial accounting.
In case, where materials management is involved, the entering of the invoice is done
in the logistics invoice verification of the materials management.
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Vendor down Payment

X COMPANY has to pay, during their course of transactions, advance payments to the
vendors. Advance payments are known as down payments in SAP. Down payment
request can be created by the materials management department and the same can
be viewed by the accounts payable person. After checking the purchase order terms,
the down payment is made by the accounts payable person.
The system posts the down payment transaction as a special general ledger
transaction in the vendor account. Hence, it will not appear in the regular balance but
only in special general ledger balance. Once, the down payment is cleared against an
invoice, the balance is shifted from the special general ledger balance to the regular
vendor account balance.
At the time of document entry, the appropriate special general ledger indicator needs
to be chosen.
Flow diagram for vendor down payment
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Flow diagram Vendor Payment Process
4.3. CHANGES
TO
EXISTING
ORGANIZATION
PROCESS:
N.A.

N.A.
4.5. GAP ANALYSIS:

N.A.
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4.6. INTEGRATION CONSIDERATION:

FI-MM Integration
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5. BUSINESS PROCESSES - ACCOUNTS RECEIVABLES

5.1. GENERAL EXPLANATIONS (ASIS):
The following table summarizes the sales business lines of the individual legal
entities. As a business practice usually the sales invoice is created by the sales
team. Based on that the accounting team post the accounting entry periodically.
Sr.
No.
Name of the company
Existing Line of business
X Company Paints Corporation Ltd. is the

manufacturer and sellers of paints, thinners,
wood finishes, putties and other materials. As on
Paints date X CompanyPaint sales their products
through Sphinax Chemicals.X CompanyPaints
earn the primary revenue through this sale.
However,soon X Company is going to sale their
products directly into the market.
X
Company
Corporation Ltd.
As on date Sphinax Chemicals Pvt. Ltd. actsas

marketing Company for X Company Paints. The
acts as carrying and forwarding agent for X
Sphinax Chemicals Pvt. Company Paints Ltd.Sphinax Chemicals sales the
Ltd.
finished products ofX Company Paints in the
market.Sphinax raises invoice on X Company
Paintsfor commission. A monthly invoice is raised
by the finance department.
Sheenworld Services LLP
Sheenworld team promotes the sales for

Sheenworld division of X Company Paints Ltd.
Based on the sales revenue recognized for the
division for a particular period (for a month); an
invoice is raised on X Company Paints
Corporation Ltd. This invoice is currently raised
by the Finance team. However, management is
of the view the Sheenworld services would have
their own branch offices (same as Sphinax
Chemicals Pvt. Ltd.) at different locations. And
Sheenworld would have its own sales through
these branches.
X
Company
Solutions
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Auto X Company Auto Solutions is in the trading

business. The imports some auto paints and sale
them into domestic market. They earn their
revenue through the trading activity. However,
management is of the view the X Company Auto
Solutions would have their own branch offices at
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different locations (same as Sphinax Chemicals

Pvt. Ltd.). And X Company Auto solutions would
have its sales through these branches.
TechServices
Tech Services are manufacturers of some

material. They have a contract executed with X
Company Paints, under which they sale the
material to X Company Paints Corporation Ltd.
Tech Services raises invoices for the sale of
material and earns their revenue. As on date
they the sales is made only X Company Paints
Corporation Ltd.
Sphinax Info Systems
Sphinax Info Systems is an IT services

company.They render IT services to other sister
concern companies in the X Company Group. IT
services fees are charged to each sister based
on the number of users. It is likely possible that
Sphinax would sale some computer peripherals
to the sister concerns companies as a part of
service contract.
Sphinax
Organic
research P. Ltd.
X
Company
services
Sphinax Organic and research P. Ltd.is into

agriculture activities. They have procured some
&
farming land and they cultivate crops there. The
food grains thus farmed are sold into local
market. Revenue is earnedthrough crop sale.
Sheelac Financial Services are into business of

Financial lending funds to other sister concern companies
in the group. They charge interest to the loan
provided and the revenue is recognized.
X Company Lanka Paint P.

Ltd
X Company Lanka Paints P. Ltd. is in the trading

business. The imports paint from X Company
Paints Ltd, India and sale them into local markets
of Sri Lanka. They earn their revenue through the
trading activities in the Sri Lankan local market.
Among the entities listed above, almost all the entities post their invoices through
Sales and Distribution module. Only in case of X Company Financial services it is
proposed to book the invoices directly through Financial Accounting.
AR Credit/debitnotes:In case of Sphinax Chemicals Pvt. Ltd., the material is sold
the distributor and primary sale is considered at this point. Depending upon the
market situation the distributor may sale the X Company products at a discounted
price. Or distributor may sale the X Company products at a premium price. In this
situation to adjust the customer (distributor) account balance, Sphinax chemicals
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issues a credit note or a debit note to the distributor. As on date a distributor sales
report is pulled from another system and based on the report credit or debit note
entries are posted into the accounting system.
In case of other legal entities depending upon business requirement the credit notes
are issued to the end customers. The sales team posts the credit notes into the
system. Usually at the month end the accounting team posts the accounting entry
for the same.
AR Sundry Invoices:Other direct sales invoices other sundry Invoiceslike sale of an
asset and scrap, miscellaneous receipts etc.would be posted directly through
financial Accounting. In case of scrap sales, TCS is not collected.
Incoming payment receipts: In case of Sphinax chemicals Pvt. Ltd.the customer
payments are usually collected through check. Sometimes other medium like DD,
RTGS or very rarely cash are accepted. The customer payment is collected by the
local branch team and deposited into Sphinax chemicals Pvt. Ltd. CMS (Cash
Management System) HDFC bank A/c. Each branch has a CMS bank A/c code. The
branch also informs the accounting team in the head office about the details of
payments received. The credits for the payments deposited by the branches are
reflected into HO HDFC Bank A/c. Based on the credits in the bank A/c and the
information received from the branches the accounting department posts the
payment receipt to the customer account.
In case of other legal entities in the group the customer payments are usually
collected through checks. Sometimes other medium like DD, RTGS or very rarely
cash are accepted. Based on the payment receipts, the accounting team posts the
customer payment receipt in the system.
It is also practiced that customer payments are received in advances. And
sometimes in partial amounts.
X Company also holds some security deposits for the distributors. This deposit is not
adjusted against the invoice outstanding.
Correspondence with the customer:X Company accounting team sends
reminders to the customer informing the outstanding invoices. Besides this as a part
of year end closing, balance confirmation requests are also sent to customers.
Interest calculations: Currently the X Company accounting team does not follow
the practice to calculate interest on customer outstanding.
Credit limit:X Company customers enjoy some credit as business partners. The
credit limit may differ from customer to customer. For dealers the credit limit starts
from Rs.50K and goes in multiple of Rs.50K. In case of SKU, X Company holds a
deposit for a particular amount. Credit limit is offered to the extent of 4 times of the
deposit amount. The credit limit is legal entity specific. The customer outstanding for
the purpose of calculating the credit is not cumulative across the across company
codes
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Credit period:X Company uses credit period of 7 days or 30 days. After that the
invoice is considered as overdue.
Reports: for the purpose of AR analysis the accounting team makes use of customer
balance, customer line item reports. The customer ageing report is also used for
analysis purpose.
Taxes and duties: All the legal entities have individual tax/duties registration
depending upon the line of business. All the taxes compliances are followed
meticulously by the legal entities. The tax/duty liabilities are recognized in the
accounting entries posted by the accounting department.
5.2. SOLUTION IN SAP (TOBE):

Overview: The Accounts Receivable module records and administers accounting data
of all customers, and is also an integral part of sales management.
All postings in Accounts Receivable are also updated in the General Ledger. Different
G/L accounts are updated depending on the transaction involved (for example regular
invoice posting, advance payments). The system contains a range of tools that can
use to monitor open items, customer account balance analysis, ageing analysis. The
correspondence linked to these tools can be individually formulated to suit the
requirements. This caters to the requirement of sending payment notices, balance
confirmations, account statements, and interest calculations.
Accounts receivable also provides the data required for effective credit management,
(as a result of its close integration with the Sales and Distribution component).
Accounts receivable sub module of financial accounting also enables to post customer
invoices directly through financial accounting.
This also caters to the requirement of dealing with outgoing taxes on customer
invoices.
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, (as a result of its close integration with the
Sales and Distribution component)
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, such
as account analyses, alarm reports, due date lists. The correspondence linked to
these tools can be individually formulated to suit X COMPANYs requirements.
This is also the case for payment notices, balance confirmations, account
statements, and interest calculations.
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There are ranges of tools available for documenting the transactions that occur
in Accounts Receivable, including balance lists, journals, balance audit trails,
and other standard reports. When drawing up financial statements, the items in
foreign currency are re-valued; customers who are also vendors are listed.
5.2.1.
CUSTOMER MASTER DATA
The Accounts Receivable application component records and manages accounting

data of all customers. All postings in Accounts Receivable are also recorded parallel in
the General Ledger. Different G/L accounts are updated depending on the transaction
involved (for example, receivables, down payments,). The system contains a range of
tools that can be used to monitor open items, such as account balances, reports, and
due date lists.
In X Company Customer will be created through Sales and Distribution Module & FI
Module jointly.Customer Master is created centrally in sales and distribution and
financial accounting with their respective views
Flow diagram for customer master
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5.2.2.
Blue
INVOICE POSTING
X Company requires recording of customer invoice transactions. This application

component is required for entering customer invoices that arise in the accounts
receivable module of financial accounting. Generally, the customer invoice is raised in
sales and distribution module and is released to accounting.
However, in some circumstances, the invoice is raised in accounts receivable module
itself. Accounting executive enters the invoice and parks the invoice. The parked
invoice is checked by Accountant/accounting manager and if he is authorized, he will
complete the document and posts it. In case, he is not authorized, then he will
complete the document and his superior will post the document.
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Park and Post Customer Invoice
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LOCAL SALES PROCESS

1. Release Billing Document to Accounting (VF01/VF02): - If there is a
Posting Block activated to the Document Type then it will not get released to
Accounts automatically. In that case, an authorized person will go to change
Billing Document and release it to Accounting. As a result of which Customer
Account will get debited and Revenue Accounts will get credited in the system.
Customer A/c
Dr
Sales A/c
Cr
VAT Payable
Cr
Other taxes payable
Cr
(The above process is same for Raw Material / Scrap Sales Process)
5.2.3.
DEBIT MEMO & CREDIT MEMO
Price difference can be addressed directly in SD by creating Debit Memo

request/Debit memo by refereeing sales order/invoice
X Company team desires to have a tool to post the debit or credit notes to the
distributor A/c. A flat file would be imported into SAP system which would
automatically post the debit or credit notes into respective customer A/c. This
activity is usually done at the month end. A customized tool would be given for
this process.
Besides the tool option is always available to the finance department to pass
manually entry for the traction.
5.2.4.
DOWN PAYMENT RECEIVED AND CLEARING
Down Payment is a function that uses Special GL indicators. Special GL Transactions

allow the user to post the document to an alternative GL account instead of normal
customers reconciliation account. They are defined in Customizing for Customers
reconciliation accounts. This Process involves receipt of Advances from customers
against orders. The functionality can be triggered either by recording a down payment
request, or by actually receiving a down payment. The sales order reference no. is to
be mentioned here.
The event will always make the system prompt that Down payments from customers
exist whenever invoices are raised. The Down payment Clearing Functionality will be
used to clear existing Down payments.
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Advances are received from the customer:

Bank Account
Dr
Advanced Payments CustomerCr.

These advances are later adjusted against the final invoice raised on the parties and
advance can be adjusted against more than one invoice at the time of clearing of the
invoices against advances.
Adjustment of advances is done as follows:
Advanced Payments Customer
Customer Account
5.2.5.
Dr.
Cr.
COLLECTION PROCESS (POST INCOMING PAYMENT)
This function allows user to record receipts from customers in the system and adjust
them against invoices and debit memos.
In the case of receipts received against invoices, the user can enter the invoices
to be adjusted.
Else, he can record the receipt as an On Account receipt, and link to one or
more invoices later. But this will lead to manual clearing.
Invoices, advances and debit memos can be settled to the extent of the
outstanding amount.
Incoming payment can be cleared partially or residually depending on the

situation.
In case the receipt currency is not the local currency, the same is converted into
local currency for accounting purposes. The exchange rates maintained as on
the value date will be used for conversion. However, the receipt details are
stored in the entered currency but can be view in local and foreign currency as
and when required.
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Customer Incoming Payment Process (Regular/Advance/Adhoc)
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5.2.6.
CUSTOMER INCOMING PAYMENT PROCESS (DIRECT DEPOSIT
INTO BANK)
Collections received from customers in two ways. The first one is check or draft
directly received from customer and deposit into Bank. Second one is Customer
directly deposit into our specified bank account. Further entries are to be updated
based on the Bank statement and the RTGS / E-net receipts.
Customer incoming payment process (Direct deposit into bank)
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5.2.7.
Blue
CUSTOMER ACCOUNT CLEARING
a) Manual Incoming Payment Processing

This process allows selecting an invoice or a group of invoices, further an
invoice may be paid in full or partially. In case, the invoice is paid partially, the
item is held in the customer account as an open item. This transaction will be
used in X COMPANY, in cases where incoming payments are received for a
customer or a few customers.
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b) Automatic Incoming Payment Processing

Automatic incoming payment processing facility can be used to process
incoming payments. Standard incoming payment methods such as Check
Deposits, Bank transfers shall be available. The incoming payment however
needs to match the invoice for a clearance to be effected by the posting rule for
such clearances. In the event of an exact match not being available, an on
account posting can take place through a separate statement & posting rule for
such on account payments.
5.2.8.
CREDIT CONTROL PROCESS
Credit control area is an organizational unit that represents the area where customer
credit is awarded and monitored.Credit control area will be defined at company code
level and would be updated in customers master record.
Credit limits can normally be specified in the individual customer master records at
sales organization level. The credit limits at the control area level are checked during
sales order processing.
Simple Credit check is established during sales order by maintaining Credit master
Data will be captured in SD. The customer can be blocked for the billing by using
delivery/billing block field in sales order.
It is also desired by the X Company team to have customer processing block based on
the days of overdue invoices.
5.2.9.
RESTATEMENT OF FOREX RECEIVABLES
This process performs the revaluation of all foreign currency open items, primarily in
customer and vendor accounts, using the month end exchange rate maintained.
This process carries out foreign currency valuation for accounts managed on an open
item basis. Valuation takes place according to the single valuation principle. This
means that individual open item on the key date only are taken into consideration for
the valuation.
SAP selects open items for customers, vendors, and G/L accounts posted in foreign
currencies. Based on the exchange rate on the key date, exchange rate difference is
calculated automatically and valuation document is posted.
The balance of the foreign currency balance sheet accounts, i.e., the balance of the
G/L account managed in a foreign currency forms the basis of the valuation. The
exchange rate profit or loss from the valuation is posted to a separate expense or
revenue account for exchange rate differences.
5.2.10.
RECONCILIATION & MIS
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Due to tight integration with Sales & Distribution module all entries will be posted
through sub modules Accounts Receivable to FI. Hence Reconciliation processes which
are following in Legacy will be eliminated in SAP.
5.2.11.
DUNNING
SAP enables sending the reminder letters to the customer based for outstanding
invoices. The system would be configured as per the X Company team requirement for
sending the reminder letters.
5.2.12.
CORRESPONDENCE
SAP system would enable X Company to generate customer correspondences like

document extract, balance confirmation etc.
5.3. CHANGES
TO
EXISTING
ORGANIZATION
PROCESS:
N.A.

N.A.
5.5. GAP ANALYSIS:

N.A.

FI-SD Integration
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6. ASSET ACCOUNTING
6.1. GENERAL EXPLANATIONS (AS-IS)
Asset acquisitions/capitalization:All legal entities of X Company groups hold
fixed assets and are managed per legal entity.
The asset procurement process starts with requisition. The requisitions are
approved by concern authority. Based on the requirement, the quotations are
called. After finalizing the best quotation, a purchase order is released. All the
assets are procured through purchase order only.
If the new fixed asset needs installation, erection etc to put to use,the asset is
considered as under construction. The asset would be capitalized once it is put to
use.
An individual asset tag is allotted per asset and is tracked accordingly. Based on
the location of the fixed asset it is identified as office equipment or plant and
machinery. E.g. Air conditioner fitted on the shop floor is identified as plant and
machinery. And an air conditioner fitted in the production office on the shop floor is
identified as office equipment.
Depreciation:The fixed asset register is maintained in Excel and the
Depreciation is calculated in excel. Usually the depreciation calculation and posting
takes place at financial year end closing activity.
Asset scrap:The scenario of asset scrapping of write off is not yet taken place.
Assets are owned and managed per legal entity. There is no cross company or
sharing ownership in the assets.
Assets of one legal entity may be used by other legal entity for which rent or
required charges are paid to the owing company code.
X Company would like to have depreciation calculations as per companys act
and income tax act only. They requirement is post depreciation as per company
act into GL A/c.
6.2. FUNCTIONS AND EVENTS (TOBE):

OVERVIEW: The Fixed Asset module is an integrated asset management solution for
additions, updating, tracking, depreciation and 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/scraping them.
The Asset Accounting module provides most of the processes required for the
management of fixed assets. The module is integrated with all other modules and data
for all asset-related transactions is updated into GL online. Accounting for assets is
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done on the concept of sub ledger - all postings made to any asset are updated in the
GL account and there is never any difference between the values as shown by the
asset reports and the GL balances.
The depreciation calculation process is also automatic, and depreciation is posted to
the books of accounts at pre defined periodical intervals (generally monthly).
Depreciation can be calculated according to different principles for the same asset,
based on business requirements. For example, the depreciation rates for accounting
purposes and for tax purposes can be different.
The asset master contains all the important information required, and the depreciation
calculation, postings to cost centers etc. depends upon the assignments made in the
master data.
6.2.1.
ASSET ACQUISITION
For purchasing new Assets, PO is raised in following ways

a) Account Assigned If PO is Account Assigned, then on the preparation of GRN
the Asset is directly capitalized.
b) No Account Assignment If PO is not Account Assigned then on the
preparation of GRN Inventory Asset A/c is debited. Once the Asset is ready to
use the Inventory Asset A/c is transferred to the Asset A/c.
For the assets, which are not yet installed, an asset master is created as Capital work
in Progress. As and when the asset is installed, the balances under WIP asset will be
transferred to the final asset, for which an asset master record will be prepared under
an appropriate asset class.
6.2.2.
ASSET CAPITALISATION
All Asset purchases would be routed through Materials Management in the form of a
Purchase order. The Accounts section will create the Asset Master record before
Purchase Order is raised through MM Module. All Asset purchases in X COMPANY in the
nature of Office Equipment, Computer Equipment, Furniture and Fixtures and Vehicles
will be routed through Capital Work in Progress (CWIP) to make it capitalized.
During the construction phase, all the assets are initially booked to the assets under
construction account (capital works in progress Account).After the completion of the
construction and when the assets are put to use the assets under construction need
to be transferred to the assets account. This transfer of assets from assets under
construction to the assets is known as settlement in SAP. Before making the
settlement, it is to be clearly known, as to in which proportion the line items under
assets under construction are to be settled to the assets. Basing on this, the
distribution rules are defined and then assets can be settled.
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6.2.3.
Blue
PERIODIC PROCESSING
Depreciation Run:
SAP gives a functionality of Depreciation Forecast Report wherein one can analyze the
Depreciation of the existing Asset over a period of years.
The planned depreciation is posted to the general ledger at the time of the monthly
depreciation posting run. This posting run uses a batch input session to post the
planned depreciation for each posting level for each individual asset.
The depreciation posting cycle is determined by entering the length of time (in posting
periods) between two depreciation-posting runs. This means that a setting of 1
indicates monthly posting, 3 means quarterly posting, 6 means semi-annual, and 12
means annual (for a fiscal year version with 12 posting periods). When a depreciationposting run is started, one has to enter the period for which one wants it to be carried
out.
6.2.4.
ASSET TRANSFER
Asset transfer within a company code is made mainly for 2 reasons

a) Wrong Asset Class: In case, the asset was created under a wrong asset
class then a new asset has to be created in a New Asset Class and an Intra
Company Transfer will to be executed. During the Asset transfer, SAP transfers
Acquisition Value, Accumulated Depreciation as of the day of the Transfer from
the Old Asset to the New Asset. Depreciation will be prospectively calculated
with the new rate.
However we can use the transaction for unplanned depreciation to make an
unplanned posting of previous depreciation.
b) Change in Location (profit centre): In case of a change in location (profit
centre) of the asset, the master record is to be changed.
6.2.5.
ASSET SCRAPPING / RETIREMENT
Management approval is necessary for retirement of assets. Retirement can be

through a customer, either with revenue or without revenue. It may be for net book
value as well. The customer may / may not exist in the accounts receivable module.
In case of retirement with revenue, the profit or loss on sale of assets is recorded
automatically by the system, even if it is partial or full retirement is made. In case of
retirement with net book value, no profit or loss sale of asset is triggered.
Asset retirement can be done in many ways and if the asset is retired with revenue
and with customer, then a customer liability is created while retiring the asset and the
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system will take care of all the background processing like calculating the net book
value, loss/gain on sale of asset etc.,
Asset retirement can happen by way of sale of an asset to a customer, sale without
customer, debiting customer account for loss of asset and also by way of scrapping. In
case of scrapping, the asset scrap will be without customer and this can also be with
and without revenue.
The asset retirement consists of any of the following:
Sale of asset with customer: - An asset is sold, resulting in revenue being

earned. The sale is posted with a customer
Without customer: - An asset is sold, resulting in revenue being earned.
The sale is posted against a clearing account (no customer record needs
to be maintained)
Scrapping of an asset: - An asset has to be scrapped, with no revenue
being earned
Inter-unit transfer from one Profit Center to another Profit Center or from
one location to other location
Posting revenue / loss on asset sale or scrapping of asset
Profit or loss on disposal will be automatically calculated and posted to
the relevant general ledger accounts.
Retirement may involve a single, multiple or partial asset(s).
For partial retirement of an asset, the value, quantity or percentage of an
asset can be entered when posting the retirement.
The profit or loss from retirement will be assigned to separate general
ledger accounts.
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Create Asset Master:
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Settlement of Assets under Construction
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Retirement of Assets
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Depreciation posting process
Start
Review
Planned
Depreciation
Perform Batch
Recalculation?
Yes
Run Batch
Recalculatio
n Program
No
Perform
Depreciation
Run in Test
Mode
Review
Results and
Error Log
Amend
Items?
No
Run
Depreciation
in Actual
Mode
Yes
Correct/Amen
d Entries
Review and
Release
Batch, Postprocess
Errors
Run Reports
and Review
Postings
End
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6.2.6.
Blue
DESCRIPTION OF IMPROVEMENTS
1. Manage the history of Assets from their origin to their disposal/scrapping

2. Proper capitalization of all the incidental expenses till the time of capitalization.
3. Cost centre wise Assets detail will be available
4. Capitalization of asset can be done through AUC (Asset under construction)
wherever relevant.
5. From AUC part capitalization is possible with the balance written off as expense
in a cost centre.
6.2.7.
SYSTEM CONFIGURATION CONSIDERATIONS
Creation of Asset Classes
Account Determinations
Screen Layouts & Rules
Asset Depreciation
Depreciation Keys
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.
In X COMPANY, two depreciation areas will be created as follows:
Dep.
Area
Description
01
Book Depreciation.
15
Depreciation per Income Tax act
For X COMPANY there would be monthly posting for Book Depreciation. A batch input
session will be run called depreciation run for posting of planned depreciation using
periodic execution functionality. The unplanned depreciation will be calculated
manually and posted through System. The required posting documents are created
once this is executed, this will be execute as a background job every period end to
post the depreciation postings to the generalledger.
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Blue
TO
EXISTING
ORGANIZATION
PROCESS:
N.A.

N.A.
6.5. GAP ANALYSIS:

N.A.

FI-MM Integration
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7. CASH AND BANK ACCOUNTING

7.1. GENERAL EXPLANATIONS- (AS IS):
Bank accounting:Each legal entity holds own set of bank accounts. They do the
banking transactions independently.
X Company as a part of bank transactions includes depositions, check/DD payments,
outward remittances, interbank transfers, overdraft facilities etc. All the bank accounts
in India are maintained in INR currency. Only the bank account for Sri Lankan entity is
maintained in LKR.
Sphinax Chemicals and X Company Paints Lt. also enjoy check printing facility from
one of its banking partner HDFC. HDFC Bank issues check numbers to X Company
which are updated into payment voucher at the time of payment.
Sphinax also uses Central Cash Management facility from HDFC bank. Under this
facility a main bank A/c is held in the name of HO. And a CMS code is given to each
individual branch. The checks deposited by the individual branch into the CMS code
A/c. The checks are cleared locally and credit is passed to HO main bank A/c
immediately (next day). Currently the bank reconciliation is done manually for the
CMS code A/c as well as for the main bank A/c.
Cash accounting: Each legal entity and each individual branch has its own petty
cash book. Each individual legal entity does the physical cash balance count every
day. In case of individual branches, the physical cash count is taken per week. And the
same is reported to HO accounting team. The individual branch raises a request to the
HO in case of cash requirement.
Usually sundry expenses on ad hoc basis are made from the potty cash. All the cash
payments are approved by the appropriate authority.

The objective is to ensure compliance and standardization of procedures across all
locations so as to effectively manage Cash and Bank transactions and to build robust
controls and cover risk exposure associated with cash and bank transactions
7.2.1.
CASH ACCOUNTING:
7.2.1.1.
CASH JOURNAL
All the cash transactions will be handled through cash journal. Cash Account will
not be available for direct posting through FI-GL or through any other module.
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All cash disbursing locations will need to be defined as Cash Journal number in SAP.
7.2.1.2.
CASH WITHDRAWAL
The amount and time of cash withdrawal is fixed based on the cash balance in hand
and average requirement for each week. The cash withdrawal statement is prepared
by the Cashier specifying the amount of cash to be withdrawn and dually approved by
the Finance Manager. On receipt of the approval the check for cash withdrawal is
processed.
7.2.1.3.
CASH PAYMENTS:
Cash imprest accounts will be created for each location. Cash reimbursement will be
as per their imprest limit. All other expenses like centralized or local purchases will be
routed through purchase accounting procedure. There will be a field to capture
Employee personnel number for all employee related claims, payments and advances.
Cash transactions in SAP would include sundry expenses like Medical bills, Travel
Advance bills, and Imprest A/C reimbursement.
Accounting treatment will be:
Debit Expense A/C
Credit Cash A/c
7.2.1.4.
CASH RECEIPTS
Cash receipts for scrap sale, return back imprest from employees
Choose from business transactions list available for processing.
Cash journal entries locally in the cash journal. The system also calculates the
balances. The cash journal entries saved is then posted to the general ledger.
Cash receipts and cash withdrawals can be processed
7.2.2.
BANK ACCOUNTING:
7.2.2.1.
CHECK REGISTER
A Check Register will be maintained in the SAP system, which will show status of
issued check, cancelled check and unused check.
7.2.2.2.
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A .csv file would be generated using automatic payment program. The same then
would be sent to bank for check printing.
OR
Multiple check lot will be maintained in the system. For check printing in the system,
the payment document number, check lot number, check date, and check number will
be entered.
Along with the Bank provided check-printing stationery the check payment advice will
be printed (format provided by client).
7.2.2.3.
CHECK CANCELLATION PROCEDURE
X Company will cancel the check physically and will mention check cancellation reason
in the system. The cancelled check will be filed separately for future reference.
The reference of cancelled check will be mentioned in the narration of the reversal
entry. Fresh check will be issued in the same manner as applicable for other payments.
7.2.2.4.
BANK CHARGES AND INTEREST
Bank charges and interest accrued will be on account of DD charges, transfer charges,
LC opening charges, Bank Guarantee charges and interest on working capital, etc.
7.3. CHANGES
TO
EXISTING
ORGANIZATION
PROCESS:
N.A.

N.A.
7.5. GAP ANALYSIS:

N.A.

FI-MM Integration
FI-SD Integration
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8. PROFIT CENTER ACCOUNTING

8.1. GENERAL EXPLANATIONS- (AS IS):
Currently X Company has exclusive set of GL Accounts per location / branch. The
expenses pertaining to the specific location / branch are posted to the GL Account
specifically maintained for that location/branch. Also sales entries are passed by
selecting the location/branch. Based on this an income/expense statement is derived
in the system. Also as and when required a trial balance report is extracted by the
system at the location level.

Profit center accounting will be used for specific reporting purposes. As Profit Center
Accounting will be actively used in X COMPANY, some key aspects of this functionality
will be discussed in detail.
Profit center is a management oriented organizational unit in SAP used for internal
controlling purpose. Enterprise will be divided into profit center units. It enables you to
analyze the profitability of the Responsibility areas and to delegate Responsibility to
such units.
Profit center will be of Products (products or product lines), Geographical areas
(regions, sites, offices) or functional areas (production, sales)
Profit Center Accounting (EC-PCA) helps to analyze the operating results of the internal
organizational units. Profit center reporting is used to control the results of the
individual areas of Responsibility (profit centers) within the organization.
Broad objectives of the profit center accounting are to get Profit and loss account and
balance sheet for the each profit center wise.
Revenue & sales deductions postings will be made using profit center.
Each cost center will be mapped to a profit center.
P&L and Balance sheet will be generated at the profit center level.
Revenue related AOP data will need to be migrated to profit center structure.
Using the module Profit Center Accounting in addition to the other modules in
controlling involves little additional workload on business users. Once set up correctly
we can benefit from reporting in Profit center wise almost automatically.
Main reason is that Profit Center Accounting generates very few transactional postings
itself, relying instead on the data being generated by other sources, such as goods
movements through production and receiving and billing documents through sales.
These external transactions update PCA through object assignments. The profit
centers are central objects reflecting all costs and revenues from all cost objects in the
SAP system.
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It is necessary to assign SD sales orders to profit centers in order to reflect sales

revenues and sales deductions. The profit assignment is passed on from the sales
order -> delivery note -> goods issue -> billing document. By default it takes the profit
center from the material master.
Therefore the dominant link in the SAP system that will be used by X COMPANY is the
one between material and profit center. Through this assignment, the majority of the
PCA postings will occur. With a single assignment on the material master record, for
each material / plant combination, you will have identified for SAP the default profit
center for all sales orders, process orders, goods movements, material transfers and
physical inventory adjustments.
When creating a process order for finished goods, material costs will be posted to the
process order and at the same time to the Profit Center of the material confirmation of
activities will credit a manufacturing cost center and debit the process order and the
Profit center of the material. Goods receipt of this finished product into warehouse will
credit the process order and the Profit center of the material. If a balance exists on the
process order due to more than budgeted usage of raw materials for example, then
this balance will also be visible on the profit center of the material.
REPORTING REQUIREMENTS
Reports predefined by SAP are available for Profit Center Accounting. The predefined
reports are arranged in a Standard report tree. The reports enable you to evaluate the
posted data according to various criteria.
The report shows enable to draw Profit loss account, balance sheet; GL account
balances per profit centers.
8.3. CHANGES
TO
EXISTING
ORGANIZATION
PROCESS:
N.A.

N.A.
8.5. GAP ANALYSIS:

N.A.

N.A.
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9. PROCESS MAPPING
Sr.
Process
Name
GL
Accounting
1.
1
GL
As a part of day
Accounting:Do
to accounting
cument
and monthly
processing
closing X
Company
Accounting
team posts
some journal
voucher
entries, makes
monthly
provisions
entries etc.
1.
2
GL Accounting :
Further
functions
As-IS Process
To-Be Process
WA/GAP
System
N.A.
SAP
N.A.
SAP
To meet
business
requirements X
Company team
does period end
closing, foreign
currency
valuations,
interest
calculations
manually. Also
as a part of
process the
account
balances
clearing done
regularly.
Confidential
GL A/c master data

GL Accounting
Document parking
Document posting
Document editing
Document reversal
Sample Document
Voucher printing
Period end closing
Recurring document
Foreign currency
valuations
Interest calculations
Open item clearing
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1.3
GL Accounting
reports
1.
4
Taxes and
duties
Accounts
payable
2.
1
Vendor
invoice
document
postings
Blue
The accounting
team uses GL
A/c balance,
item wise
reports for
internal
analysis.
GL Account balance
report
Passing JV for
CENVAT credit
set off
Excise JV
Vendor invoice
verification
reference to PO
Vendor master record
Vendor invoice
verification
non-reference
to PO
Vendor invoice
posting
Vendor
Debit/credit
note
N.A.
SAP
N.A.
SAP
N.A.
SAP
GL Account line item

report
GL Account master
data report
Journal voucher entry
PO based invoice
verification
Vendor invoice
parking
Vendor invoice
posting
Handling delivery
costs
Vendor credit/debit
notes
Vendor credit
period
2.
2
Vendor
payment
credit period
Depending
upon
understanding
with business
partner, the
credit limit is
utilized for
releasing the
payments.
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2.
3
Outgoing
payments
Blue
Manual check
payment entry
Manual payment
entry
Check lot
tracking
Regular payment
Generation of
.csv file
Check printing
facility from
bank
Outward
remittances
N.A.
SAP
N.A.
SAP
N.A.
SAP
N.A.
SAP
Payments in foreign
currency
Advance payment
Advance payment
settlement
Automatic payments
Payment block
Generation of .csv
file
Vendor open item
clearing
2.
4
Communicatio
ns with
vendors
Vendor balance
confirmation
letters
Payment
advices
2.
5
2.
6
Accounts
payable
reports
Input
Taxes/duties
Account statements
Balance
confirmations
Payment advices
X Company
team uses
vendor
balances,
vendor open
invoices and
vendor ageing
analysis
reports.
Vendor Account
balance report
Input taxes:
Excise, VAT,
CST, service
tax, customs
duty, GTA
Tax codes for : Input

taxes: Excise, VAT,
CST, service tax,
customs duty, GTA
Input tax credit

No inputs credit
Vendor Account line

item report
Vendor Account
master data report
Automatic posting of
input taxes to current
assets
Automatic loading of
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Withholding
taxes
Blue
input taxes to
expenses
Withholding taxes at
invoice posting or
payment posting
Accounts
receivable
3.
1
Customer
document
posting
Manual periodic
accounting of :
Sales invoices,
Credit notes,
Debit notes
Customer master
record
Customer
credit limits
Credit limit
based on the
security deposit
Credit management
3.
2
N.A.
SAP
N.A.
SAP
Real time automatic

accounting of sales
invoices, credit
notes, debit notes
Processing block
Automatic credit
checks
3.
3
customer
credit period
7 days and
30days credit
period
Payment terms
N.A.
SAP
3.
4
Customer
payment
receipts
Regular
payments
Incoming payments
N.A.
SAP
N.A.
SAP
Partial
payments
Advance
payments
3.
5
Customer
interest
calculations
Not followed
currently
Confidential
Partial incoming
payments
Advance incoming
payment
Customer A/c
clearing
Customer balance
Customer item
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3.
6
Communicatio
ns with
customer
Balance
confirmation
Payment
reminders
Blue
Dunning
N.A.
SAP
N.A.
SAP
N.A.
SAP
N.A.
SAP
N.A.
SAP
Balance confirmation
Account statements
Payment advices
3.
7
3.
8
Accounts
receivable
reports
Output
Taxes/duties
Customer
balances
Customer Account
balance report
Customer open
invoices
Customer Account
line item report
Customer aging
report
Customer Account
master data report
Input taxes:
Excise, VAT,
CST, service tax
Tax codes for : output

taxes: Excise, VAT,
CST, service tax
Withholding
taxes
Automatic posting of
output taxes to
current liabilities
Withholding taxes
credit
Asset
Accounting
4.
1
Asset Master
record
Assets are
managed in
excel. Asset
with individual
tags
Asset class
4.
1
Asset
acquisition
and
retirement
Procurement
through PO
Asset acquisition
Capitalization
from the put to
use
Asset Master record
Asset under
constructions
Asset retirement
Asset scrap
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4.
2
Asset
depreciation
Manual
depreciation
calculation at
the year end
and posting
into system
Blue
Planned depreciation
N.A.
SAP
N.A.
SAP
N.A.
SAP
N.A.
SAP
N.A.
SAP
Scheduled
depreciation run
Depreciation as per
companys act
Depreciation as per
Income Tax act
4.
3
Asset report
Cash and
bank
accounting
5.
1
Petty cash
book
Asset balances
Asset explorer
Depreciation
balance
Asset balances
Petty cash book

for each branch
Cash Journal
Cash payments
Depreciation schedule
Cash receipts
Cash payments
Cash closing
5.
2
Bank
accounting
Individual bank
a/c for each
legal entity
CMS A/c for
Sphinax
Chemicals
Fund transfer
Bank master record

House banks
Check lot
management
Check register
Check cancellation
Balance
tracking for all
CMS branches
Manual bank
reconciliation
5.
3
Manual bank
reconciliation
Profit Center
Accounting
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6.
1
Cost
allocation per
unit of
responsibility
Posting
expenses per
location-branch
Profit center
assignment
N.A.
SAP
6.
2
Profitability
analysis for
branch
locations
Income
expenses
analysis for
various
locations/branc
hes
Profitability analysis
report
N.A.
SAP
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10. REPORTS
Transaction
Code of Report
Name of the Reports
Details
Report
of
SAP
the Standard
/Customize
d
GL Accounting
S_ALR_87012326
Chart of Accounts
S_ALR_87012328
GL Account List
S_ALR_87012308
Display Changes to GL
Accounts
S_ALR_87012279
Structured Account Balances

(Balance Sheet & P&L
Account in FS Version Format)
S_ALR_87012301
GL Account Balances (Totals &

Balances )
S_ALR_87012282
GL Line Items
S_ALR_87012332
Statements for GL Accounts,

Customers & Vendors
S_ALR_87012287
Document Journal
S_ALR_87012289
Compact Document Journal
S_ALR_87012291
Line Item Journal
S_ALR_87012293
S_ALR_87012341
S_ALR_87012344
Display of Changed
Documents
Invoice Numbers assigned
Twice
Posting Totals Document Type
wise
S_ALR_87012346
Recurring Entry Documents
S_PL0_86000030
G/L Account Balances
List of Ledger
accounts in Chart of
accounts
Details of Ledger
accounts
Display Changes to GL
Accounts
Structured Account
Balances (Balance
Sheet & P&L Account
in FS Version Format)
GL Account Balances
(Totals & Balances )Trial balance
GL Line Items
Statements for GL
Accounts, Customers
& Vendors
Document Journal
Compact Document
Journal
Periodic list of Journal
posting
Display of Changed
Documents
Invoice Numbers
assigned Twice
Posting Totals
Document Type wise
Recurring Entry
Documents
G/L Account Balances
SAP Standard
SAP Standard
SAP Standard
SAP Standard
SAP Standard
SAP Standard
SAP Standard
SAP Standard
SAP Standard
SAP Standard
SAP Standard
SAP Standard
SAP Standard
SAP Standard
SAP Standard
Accounts
receivables
S_ALR_87012172
S_ALR_87012197
S_ALR_87012168
Customer Balances in Local

Currency
Customer Line Items
Due Dates Analysis for Open
Items
S_ALR_87012173
List of Customer Open Items
S_ALR_87012176
Customer Evaluation with

Open Item Sorted List
S_ALR_87012177
Customer Payment History
Confidential
Customer Balances in
Local Currency
Customer Line Items
Due Dates Analysis for
Open Items
List of Customer Open
Items
Customer Evaluation
with Open Item Sorted
List
Customer Payment
History
SAP Standard
SAP Standard
SAP Standard
SAP Standard
SAP Standard
SAP Standard
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S_ALR_87012178
S_ALR_87012198
S_ALR_87012199
S_ALR_87012287
S_ALR_87012186
S_ALR_87012169
S_ALR_87012197
Customer Open Item Analysis

(Overdue Items Balance)
List of Customer Cleared Line
Items
List of Down Payments open
at key date
Debit & Credit Notes Register
Monthly
Customer wise Sales
Transaction Figures Account
Balance
List Of Customer Line Items
Blue
Customer Open Item

Analysis (Overdue
Items Balance)
List of Customer
Cleared Line Items
List of Down Payments
open at key date
Debit & Credit Notes
Register Monthly
Customer wise Sales
Transaction Figures
Account Balance
List Of Customer Line
Items
SAP Standard
SAP Standard
SAP Standard
SAP Standard
SAP Standard
SAP Standard
SAP Standard
Accounts
payable
S_ALR_87012086
S_ALR_87012087
Vendor List
Vendor address List
S_ALR_87012103
List of Vendor Line Items
S_ALR_87012287
Vendor Debit/Credit Memo

Register
S_ALR_87012089
Display Changes to Vendors
S_ALR_87012309
S_P99_41000101
Print Cashbook
Check Register
Vendor List
Vendor List
Vendor Information
System
Vendor Balances
Due Date Analysis for
Open Items
List of Vendor Line
Items
Vendor Debit/Credit
Memo Register
Display Changes to
Vendors
Print Cashbook
Check Register
S_ALR_87012077
Vendor Information System
S_ALR_87012082
Vendor Balances
Due Date Analysis for Open
Items
S_P99_41000102
Check Number Ranges
Check Number Ranges
SAP Standard
Asset Explorer
Asset History Sheet
Asset Balance by Asset
Number
Asset Explorer
Asset History Sheet
Asset Balance by
Asset Number
Asset Balance by
Asset Class
Asset Balance by
Business Area
Asset Balance by Cost
Center
Asset Balance by Plant
Location
SAP Standard
SAP Standard
S_ALR_87012078
SAP Standard
SAP Standard
SAP Standard
SAP Standard
SAP Standard
SAP Standard
SAP Standard
SAP Standard
SAP Standard
SAP Standard
Asset
accounting
AW01N
AR02
S_ALR_87011963
S_ALR_87011964
Asset Balance by Asset Class
S_ALR_87011965
Asset Balance by Business

Area
S_ALR_87011966
Asset Balance by Cost Center
S_ALR_87011967
Asset Balance by Plant

Location
S_ALR_87011968
Confidential
SAP Standard
SAP Standard
SAP Standard
SAP Standard
SAP Standard
SAP Standard
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Business Blueprint

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Related Documents/ References

Project Manager- KPIT

Mr. Padma Kumar

ORGANIZATION OF THIS DOCUMENT

The FinancialsBlueprint consists of 10 chapters in the order as mentioned below:

Organization Structure: That describes the organization

Master Data: It describes the master data in Financials. It

GL Accounting: This process

Accounts Payable Accounting: This part described various

Accounts Receivable Accounting: This part described various

Assetaccounting: This section talks about asset life cycle

Cash and bank accounting: Cash and Bank Accounting

Profit center accounting: This section describes the

Process mapping: This section summarizes the AS IS

Reports: This section covers the reporting requirements. It

SAP ORGANIZATION STRUCTURE WITH REFERENCE TO FI MODULE

MASTER DATA FOR FI...............................................................28

2.1. GENERAL LEDGER....................................................................28

BUSINESS PROCESSES- GL ACCOUNTING...................................45

3.1. GENERAL EXPLANATION (AS IS):.............................................45

3.3. CHANGES TO EXISTING ORGANIZATION PROCESS.......................57

4.1. GENERAL EXPLANATIONS (AS-IS)..............................................59

BUSINESS PROCESSES - ACCOUNTS RECEIVABLES......................77

5.1. GENERAL EXPLANATIONS (AS IS):.............................................77

6.1. GENERAL EXPLANATIONS (AS-IS)..............................................89

CASH AND BANK ACCOUNTING.................................................99

7.1. GENERAL EXPLANATIONS- (AS IS):............................................99

PROFIT CENTER ACCOUNTING.................................................104

8.1. GENERAL EXPLANATIONS- (AS IS):..........................................104

10. REPORTS............................................................................... 113

Sales and Distribution

A company is an organizational unit in Accounting which represents a

If an organization uses several clients, the companies which only

Companies must be cataloged in a list of company IDs which is

It is also acceptable to designate legally dependent branches

In case of X Company group, the consolidation is required for all 9

1.2. COMPANY CODE

The company code is an organizational unit used in accounting. It is used to

A company Code represents an independent accounting unit, for example, a

X Company Paints Corporation Ltd.

X Company Financial services

Sphinax Organic & research P. Ltd.

Sphinax Info Systems

X Company Auto Solutions

Sheenworld Services LLP

X Company Lanka Paint P. Ltd

Sphinax Chemicals Pvt. Ltd.

1.3. CHART OF ACCOUNTS

This is the classification scheme consisting of a group of general ledger (G/L)

1.4. CREDIT CONTROL AREA

Profitability Segment corresponds to market segment. The market segments can be

1.6. PROFIT CENTERS

1.7. FINANCIAL ACCOUNTING GLOBAL SETTINGS:

Fiscal year and Fiscal year variant

Posting period variant

At the month end next posting period should be opened

A document is uniquely identified by the combination of fiscal year, company

Vendor credit memo

2. MASTER DATA FOR FI

General Ledger Accounting allows you to perform parallel accounting by