SAP FICO BBP Sample (Up to Date PDF)

Business Blueprint Submitted To

X GROUP

By KPIT CUMMINS INFOSYSTEMS

Financial Accounting December, 2013

Version 0.0

Project xxxxxx

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DOCUMENT RELEASE NOTICE Customer:

X CompanyGroup

Project :

XXXXX

Document details:

Name

Version No.

Financial Accounting

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 Page No.

New Page No.

Revision 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

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Version

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Sign Off

Role

Name

Functional Consultant

Mr. GajananMankeshwarkar

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 describes various GL 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 ................................................................................................... 13 1.5. SEGMENTS ...................................................................................................................... 14 1.6. PROFIT CENTERS ............................................................................................................. 14 1.7. FINANCIAL ACCOUNTING GLOBAL SETTINGS: .................................................................. 15 2.

MASTER DATA FOR FI...................................................................................................... 19

2.1. GENERAL LEDGER............................................................................................................ 19 2.2. ASSET ............................................................................................................................. 23 2.3. BANK MASTER ................................................................................................................ 25 2.4. MATERIAL MASTER ......................................................................................................... 26 2.5. VENDOR MASTER............................................................................................................ 27 2.6. CUSTOMER MASTER ....................................................................................................... 29 3.

BUSINESS PROCESSES- GL ACCOUNTING.......................................................................... 33

3.1. GENERAL EXPLANATION – (AS IS): ................................................................................... 33 3.2. SOLUTION IN SAP –( TO BE): ............................................................................................ 34 3.3. CHANGES TO EXISTING ORGANIZATION PROCESS ............................................................ 43 3.4. SPECIAL ORGANISATION CONSIDERATIONS: .................................................................... 43

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3.5. GAP ANALYSIS: ............................................................................................................... 43 3.6. INTEGRATION CONSIDERATIONS ..................................................................................... 43 4.

ACCOUNTS PAYABLE ....................................................................................................... 45

4.1. GENERAL EXPLANATIONS (AS-IS) ..................................................................................... 45 4.2. SOLUTION IN SAP – (TO BE): ............................................................................................ 46 4.3. CHANGES TO EXISTING ORGANIZATION PROCESS: ........................................................... 60 4.4. SPECIAL ORGANISATION CONSIDERATIONS: .................................................................... 60 4.5. GAP ANALYSIS: ............................................................................................................... 60 4.6. INTEGRATION CONSIDERATION: ..................................................................................... 60 5.

BUSINESS PROCESSES - ACCOUNTS RECEIVABLES ............................................................ 61

5.1. GENERAL EXPLANATIONS (AS IS): .................................................................................... 61 5.2. SOLUTION IN SAP – (TO BE): ............................................................................................ 64 5.3. CHANGES TO EXISTING ORGANIZATION PROCESS: ........................................................... 73 5.4. SPECIAL ORGANISATION CONSIDERATIONS: .................................................................... 73 5.5. GAP ANALYSIS: ............................................................................................................... 73 5.6. INTEGRATION CONSIDERATION: ..................................................................................... 73 6.

ASSET ACCOUNTING ....................................................................................................... 75

6.1. GENERAL EXPLANATIONS (AS-IS) ..................................................................................... 75 6.2. FUNCTIONS AND EVENTS (TO BE): ................................................................................... 75 6.3. CHANGES TO EXISTING ORGANIZATION PROCESS: ........................................................... 83 6.4. SPECIAL ORGANISATION CONSIDERATIONS: .................................................................... 84 6.5. GAP ANALYSIS: ............................................................................................................... 84 6.6. INTEGRATION CONSIDERATION: ..................................................................................... 84 7.

CASH AND BANK ACCOUNTING ....................................................................................... 85

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7.1. GENERAL EXPLANATIONS- (AS IS): ................................................................................... 85 7.2. SOLUTION IN SAP............................................................................................................ 85 7.3. CHANGES TO EXISTING ORGANIZATION PROCESS: ........................................................... 87 7.4. SPECIAL ORGANISATION CONSIDERATIONS: .................................................................... 87 7.5. GAP ANALYSIS: ............................................................................................................... 87 7.6. INTEGRATION CONSIDERATION: ..................................................................................... 87 8.

PROFIT CENTER ACCOUNTING ......................................................................................... 88

8.1. GENERAL EXPLANATIONS- (AS IS): ................................................................................... 88 8.2. SOLUTION IN SAP – (TO BE): ............................................................................................ 88 8.3. CHANGES TO EXISTING ORGANIZATION PROCESS: ........................................................... 89 8.4. SPECIAL ORGANISATION CONSIDERATIONS: .................................................................... 89 8.5. GAP ANALYSIS: ............................................................................................................... 89 8.6. INTEGRATION CONSIDERATION: ..................................................................................... 89 9.

PROCESS MAPPING ......................................................................................................... 90

10.

REPORTS ......................................................................................................................... 96

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ACRONYMS

Code

Description

X X CompanyGroup COMPANY 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 STRUCTURE WITH REFERENCE TO FI MODULE 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 groupinternal 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. A company Code represents an independent accounting unit, for example, a Company within a Corporate Group (Client).

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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

1

1000

X Company Paints Corporation Ltd.

2

1100

X Company Financial services

3

1200

Sphinax Organic & research P. Ltd.

4

1300

Sphinax Info Systems

5

1400

TechServices

6

1500

X Company Auto Solutions

7

1600

Sheenworld Services LLP

8

1700

Sphinax Chemicals Pvt. Ltd.

9

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

Description X Company Chart of Accounts

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. Naming Convention Sr. No.

Credit Control Area

1 2 3 4 5

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. 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.

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1.6.2. 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 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

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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. 1 2 3 4 5 6 7 8 9 Posting Periods:

Posting period variant 1000 1100 1200 1300 1400 1500 1600 1700 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



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

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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. 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 DG DR DZ KG KR KZ PR RE WA WE ZP

Description Asset posting Accounting document Dep. Postings Customer credit memo Customer invoice Customer payment Vendor credit memo Vendor invoice Vendor payment Price change Invoice – gross Goods issue Goods receipt Payment posting

No. Range 01 01 03 16 18 14 17 19 15 48 51 49 50 20

From Number

To Number

100000000 100000000 300000000 1600000000 1800000000 1400000000 1700000000 1900000000 1500000000 4800000000 5100000000 4900000000 5000000000 2000000000

199999999 199999999 399999999 1699999999 1899999999 1499999999 1799999999 1999999999 1599999999 4899999999 5199999999 4999999999 5999999999 2999999999

External Reverse Doc. Type AA AB AF DA DR DA KA KA KA PR RE WA WE ZP

Account type:

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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

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.  Company code specific area

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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 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.

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

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 Start

STOP

Yes

Account Exists in Company Code?

Yes

General Ledger Master does not exist

S

Check the Chart of Accounts

S

Account Exists in Chart of Accounts?

No

Create at Chart of Accounts Level

STOP

No

S

Account required in Company Code

Yes

Create at Company Code Level

S

Yes

End

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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: COA

A/C Group

Description

From

To

YAIN YAIN YAIN YAIN YAIN YAIN YAIN YAIN YAIN YAIN YAIN

LIAB PABL DEPN FXAS MATL RCBL CASH ASET REVN CONS EXPN

Balance Sheet A/C - Liabilities Reconciliations Account - Vendor Accumulated Depreciation Fixed Assets Material Management - Inventories Reconciliations Account - Customer Cash and bank Accounts Balance sheet Accounts - Assets P&L A/Cs - Revenues Material Management - Consumption P&L A/Cs - Expenses

10000000 16000000 20100000 21000000 22000000 23000000 24000000 25000000 31000000 40100000 40000000

15999999 16999999 20999999 21999999 22999999 23999999 24999999 25999999 39999999 40199999 49999999

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 Accounts for APC, Depreciation, and Asset Disposal etc. are assigned in various depreciation areas through account determination.

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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 you’re 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 company’s 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

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.

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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. 0138083000001620 00040330012166 909030033210563 911020056012528 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 The South Indian Bank The South Indian Bank The South Indian Bank The South Indian Bank The South Indian Bank The South Indian Bank ICICI Bank Ltd Axis Bank Ltd State bank of India

Account No 00040330002962 0138073000001792 0138073000001793 0127073000001413 0138073000001791 0111073000003324 0374073000000278 0414073000000117 000905024635 911020055957657 30861566143

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 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 materialspecificdata. 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

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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

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.

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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 vendor’s 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. 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:

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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

From

To

1

Vendors Domestic RM

10000000

19999999

2

Vendors Domestic PM

20000000

29999999

3

Vendors Imports RM

30000000

39999999

4

Vendors Imports PM

40000000

49999999

5

Vendors Service

50000000

59999999

6

Vendors Logistics

60000000

69999999

7

One Time Vendors

70000000

74999999

8

Vendors Employee

75000000

79999999

9

Vendors Others

80000000

89999999

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

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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

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 onetime customer

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Account Groups: Sr. No.

1 2 3 4

Customer Account Group

Customer domestic Customer export One time customer Project customers

From

10000000 20000000 30000000 40000000

To

19999999 29999999 39999999 49999999

Data in the customer master is stored in 3 views: General Data: Data that applies to all company codes and sales areas (e.g. customer’s 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

Description

23000000

Accounts receivable-Domestic customers

23100000

Accounts receivable-Export Customer

23200000

Accounts receivable-One time customers

23300000

Accounts receivable-Project customers

Payment Terms: 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)

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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 customer’s on basis of this master data. The Credit Management function provides the following functions: 

Create/Edit/Display Credit Master Data (Risk Category, Total Credit Limit, Review period etc)



Overview of Credit Limit usage



Sales and Delivery documents blocked due to Credit Management



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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 are generated to analyse the profitability per location/division.  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



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

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

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:



Adjustment entries



Banking and Cash Transactions



Provision Postings

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.

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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)

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

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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.

3.2.3.

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.

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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 periodend 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 Start

GL document entered

Post the document

Yes

S

S

Authorized to post?

No

Park the document

S

Authorized person accesses the parked document

Correct the document

No

S

S

Accept?

Yes

Post the document

S

Yes

Authorized to Post?

No

Authorized person accesses the parked document

Post the document

S

S

End

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3.2.4.

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).

o

Goods receipt/invoice receipt.

o

Other General Ledger Balance Sheet Account

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.

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

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).



Within the general ledger module, account clearing shall be performed using the following functions:

3.2.6.

o

Account clearing (ad hoc).

o

Automatic clearing (part of closing activities).

o

Post with clearing (during the course of posting a document).

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. 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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Blue Print Document – Financial Accounting

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. Vendor/ customer reconciliation entry. 2. GL rectification JV. 3. Accrual JV’s

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Blue Print Document – Financial Accounting

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: No. Area

Description

Business Process Description

1

Book all provisions

Enter Accrual / Deferral Document for the period

FI

3

FI

Depreciation Run

4

FI

Bank Reconciliation

5

FI

Clearing of GL/Customer/Vendor accounts

6

FI

Withholding Tax Provision

7

FI

Open next FI Posting Period

8

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 predefined 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 (TCode-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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Description

FI

Customer & vendor Balance Carry forward.

FI

GL Balance Carry forward

11

FI

Asset Balance Carry Forward

12

FI

Foreign Currency Revaluation

9

10

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: 

FI-CO Integration(Company code, GL accounts)

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

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 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.

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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.

4.2.1.

PO BASED BILLS PROCESSING (REVENUE & SERVICE)

In this process Purchase Order is raised with reference to Purchase Requisition where accounting has no impact, it’s 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

VAT Clearing A/c Dr

(if applicable)

(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 Officer’s 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

Dr

VAT A/c

Dr

Vendor A/c

Cr

Freight Vendor A/c

Cr

For Domestic Procurements of Capital Goods: During GR: Material (Asset) A/c

Dr

GR/IR Clearing A/c

Cr

During Invoice Verification: 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:

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Material Stock

Dr

GR/IR A/C

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) During Invoice Verification: 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 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:

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

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.



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.

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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 company’s 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

Cr

Posted for the returned quantity, stock value & quantity is reduced.

Invoice Posting – MIRO Vendor A/c

Dr

GR / IR A/c

Cr

VAT Receivable A/c

Cr

4.2.11.

ADJUSTMENT / CLEARING PROCESS

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

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 as correspondence. Correspondence for both customers and vendors includes: 

Account statements and open items lists in letter form



Individual letters and standard letters



Balance confirmations



Document extracts

Since standard reporting format of above correspondence does not meet X COMPANY requirement, need to be developed

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Vendor master creation Start

Create Vendor Centrally ?

No

Decide the account group

M

Create vendor in that account group

S

Yes

Materials management process

S

No

Purchasing view created?

Yes Yes

Create accounting views

Create Accounting View

S No

Vendor is created

Stop

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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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Start

Vendor invoice entered

Post the invoice

S

Yes

S

Authorized to post?

No

Park the invoice

S

Authorized person accesses the parked invoice

S

No

Accept?

Correct the invoice

S

Yes Authorized person accesses the invoice

S

No

Authorized to post?

Yes

Post the invoice

S

End

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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

Start

Down payment request from Purchase Department

Read the purchase order

Stop

No

S

M

Down payment to be made?

Yes

Make down payment through check/ transfer

S

Vendor Account updated

End

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Flow diagram Vendor Payment Process Start

Check the vendor due list

Stop

No

S

Payment due?

Yes

Wait for funds

M

No

Funds exist?

Yes

Clear the down payment

S

Yes

Down payment exists?

No

Part payment

S

No

Full Payment?

Yes

Vendor Paid Document generated

End

4.3. CHANGES TO EXISTING ORGANIZATION PROCESS: N.A.

4.4. SPECIAL ORGANISATION CONSIDERATIONS: N.A.

4.5. GAP ANALYSIS: N.A.

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

1

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

2

Sphinax Chemicals Pvt. Ltd.

As on date Sphinax Chemicals Pvt. Ltd. actsas marketing Company for X Company Paints. The acts as carrying and forwarding agent for X Company Paints Ltd.Sphinax Chemicals sales the 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 Auto Solutions

‘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 different locations (same as Sphinax Chemicals Pvt. Ltd.). And X Company Auto solutions would have its sales through these

3

4

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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.’

6

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.

7

‘Sphinax Organic and research P. Ltd.’is into agriculture Sphinax Organic & research P. activities. They have procured some farming land and they cultivate crops there. The food grains thus farmed are sold Ltd. into local market. Revenue is earnedthrough crop sale.

8

X Company Financial services

‘Sheelac Financial Services’ are into business of 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.

5

9

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 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.

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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 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.

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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 COMPANY’s requirements. This is also the case for payment notices, balance confirmations, account statements, and interest calculations.



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.

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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

Start

Create customer centrally?

Decide the account group

M

Sales Organization views Created?

Create customer in that account group

S

Yes

Create Accounting view?

No

Yes

Sales and distribution process

No S

Yes

Create accounting views

S

No Customer is created

Stop

5.2.2.

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.

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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.

Park and Post Customer Invoice Start

Customer invoice entered

Post the invoice

S

Yes

S

Authorized to post?

No

Park the invoice

S

Authorized person accesses the parked invoice

S

No

Accept?

Correct the invoice

S

Yes Authorized person access the invoice

S

No

Authorized to post?

Y

Post the invoice

S

End

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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” customer’s 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 Dr. Customer Account

5.2.5.

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) Start

Payment received from customer

No

M

Down Payment exists?

Yes

Clear the down payment

Part Payment?

No

No

Y

Enter payment

Full Payment?

Yes

S Enter payment

Enter residual payment

S

S

S

Payment Document Posted

End

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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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Start

Payment received by bank

M

Yes

CMS from Bank

No

M

Down Payment exists?

Yes

Clear the down payment

Part Payment?

No

No

Y

Enter payment

Full Payment?

Yes

S Enter payment

Enter residual payment

S

S

S

Payment Document Posted

End

5.2.7.

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. b) Automatic Incoming Payment Processing

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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 customer’s 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

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

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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.

5.4. SPECIAL ORGANISATION CONSIDERATIONS: N.A.

5.5. GAP ANALYSIS: N.A.

5.6. INTEGRATION CONSIDERATION: 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 company’s 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 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.

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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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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 depreciation-posting 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.

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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 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:

Start

Check the Asset Master List

Stop

Yes

S

Asset Master Exist?

No

Decide Asset Class

Create Asset Master in Asset Class

M

S

End

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Settlement of Assets under Construction

Start

Form C2 to be approved

M

No

End

Yes

Create Assets

S

No

Relevant Assets created?

Yes

Define distribution rules

S

No

Distribution rules defined?

Yes

Execute Settlement

S

Assets Settled

End

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Retirement of Assets

Start

Asset is to be retired

S

Yes

Form C2 to be approved

M

No

End

Yes Create customer in AR

S

Customer exist?

No

Y

Yes

Retirement with customer?

No

Retirement with revenue?

No

Partial Retirement? No Post book value

Yes

Post partial entries

S

Yes

Partial Retirement?

No

Post full entries

S

S

Yes

Profit/Loss Posted

Asset Retired

End

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Depreciation posting process

Start

Review Planned Depreciation

Perform Batch Recalculation?

Run Batch Recalculation Program

Yes

No

Perform Depreciation Run in Test Mode

Review Results and Error Log

Amend Items?

No

Run Depreciation in Actual Mode

Yes

Correct/Amend Entries

Review and Release Batch, Post-process Errors

Run Reports and Review Postings

End

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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.

6.3. CHANGES TO EXISTING ORGANIZATION PROCESS: N.A.

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6.4. SPECIAL ORGANISATION CONSIDERATIONS: N.A.

6.5. GAP ANALYSIS: N.A.

6.6. INTEGRATION CONSIDERATION: 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.

7.2. SOLUTION IN SAP – (TO BE): 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.

All cash disbursing locations will need to be defined as ‘Cash Journal number’ in SAP.

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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.

CHECK PRINTING

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.

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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.

7.4. SPECIAL ORGANISATION CONSIDERATIONS: N.A.

7.5. GAP ANALYSIS: N.A.

7.6. INTEGRATION CONSIDERATION: 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.

8.2. SOLUTION IN SAP – (TO BE): 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.

8.4. SPECIAL ORGANISATION CONSIDERATIONS: N.A.

8.5. GAP ANALYSIS: N.A.

8.6. INTEGRATION CONSIDERATION: N.A.

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9. PROCESS MAPPING Sr.

Process Name 

1

GL - Accounting 

1.1

GL – Accounting:Docu ment processing

As-IS Process

 As a part of day to accounting and monthly closing X Company Accounting team posts some journal voucher entries, makes monthly provisions entries etc.

To-Be Process

 GL A/c master data

WA/GAP

System

N.A.

SAP

N.A.

SAP

N.A.

SAP

 GL Accounting  Document parking  Document posting  Document editing  Document reversal  Sample Document  Voucher printing

1.2

GL - Accounting : Further functions

1.3

GL Accounting reports

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 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.

 Period end closing

 The accounting team uses GL A/c balance, item wise reports for internal analysis.

 GL Account balance report

 Recurring document  Foreign currency valuations  Interest calculations  Open item clearing

 GL Account line item report  GL Account master data report

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Taxes and duties

2

Accounts payable 

2.1

Vendor invoice document postings

 Passing JV for CENVAT credit set off

 Excise JV

 Vendor invoice verification reference to PO

 Vendor master record

 Journal voucher entry

SAP

 PO based invoice verification

 Vendor invoice verification nonreference to PO

 Vendor invoice parking

 Vendor invoice posting

 Handling delivery costs

 Vendor Debit/credit note

N.A.

 Vendor invoice posting

 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.

 Payment terms

N.A.

SAP

2.3

Outgoing payments

 Manual check payment entry

 Manual payment entry

N.A.

SAP

 Check lot tracking  Generation of ‘.csv’ file  Check printing facility from bank  Outward remittances

 Regular payment  Payments in foreign currency  Advance payment  Advance payment settlement  Automatic payments  Payment block  Generation of ‘.csv’ file

Confidential

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 Vendor open item clearing

2.4

2.5

2.6

Communications with vendors

Accounts payable reports

Input Taxes/duties

 Vendor balance confirmation letters

 Account statements

 Payment advices

 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  Withholding taxes

N.A.

SAP

N.A.

SAP

N.A.

SAP

N.A.

SAP

 Balance confirmations

 Vendor Account line item report  Vendor Account master data report

 Automatic posting of input taxes to current assets  Automatic loading of input taxes to expenses  Withholding taxes at invoice posting or payment posting

3

Accounts receivable

3.1

Customer document posting

Confidential

 Manual periodic accounting of : Sales invoices, Credit notes, Debit notes

 Customer master record  Real time automatic accounting of sales invoices, credit notes, debit notes

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3.2

Blue Print Document – Financial Accounting

Customer credit limits

 Credit limit based on the security deposit

 Credit management

N.A.

SAP

 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

 Partial payments

 Partial incoming payments

 Advance payments

 Advance incoming payment

N.A.

SAP

N.A.

SAP

N.A.

SAP

N.A.

SAP

 Customer A/c clearing

3.5

Customer interest  Not followed calculations currently

 Customer balance Interest calculations  Customer item Interest calculations

3.6

Communications with customer

 Balance confirmation  Payment reminders

 Dunning  Balance confirmation  Account statements  Payment advices

3.7

Accounts receivable reports

 Customer balances  Customer open invoices  Customer aging report

3.8

Output Taxes/duties

Confidential

 Customer Account balance report  Customer Account line item 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

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output taxes to current liabilities  Withholding taxes credit 4

Asset Accounting

4.1

Asset Master record

 Assets are managed in excel. Asset with individual tags

Asset class

Asset acquisition and retirement

 Procurement through PO

Asset acquisition

4.1

 Capitalization from the put to use

N.A.

SAP

N.A.

SAP

N.A.

SAP

N.A.

SAP

N.A.

SAP

Asset Master record

Asset under constructions Asset retirement Asset scrap

4.2

Asset depreciation

 Manual depreciation calculation at the year end and posting into system

Planned depreciation Scheduled depreciation run Depreciation as per company’s act Depreciation as per Income Tax act

4.3

Asset report

5

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

Confidential

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5.2

Blue Print Document – Financial Accounting

Bank accounting

 Individual bank a/c for each legal entity  CMS A/c for Sphinax Chemicals

5.3

Bank master record

N.A.

SAP

House banks Check lot management

 Fund transfer

Check register

 Balance tracking for all CMS branches

Check cancellation

 Manual bank reconciliation

Manual bank reconciliation

N.A.

SAP

6

Profit Center Accounting

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/branches

Profitability analysis report

N.A.

SAP

Confidential

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10. REPORTS

Transaction Code of Name of the Reports Report

Details of the Report

SAP Standard /Customized

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 S_ALR_87012282

GL Account Balances (Totals & Balances ) 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

Display of Changed Documents

S_ALR_87012341

Invoice Numbers assigned Twice

S_ALR_87012344

Posting Totals Document Type wise

S_ALR_87012346 S_PL0_86000030

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

SAP Standard SAP Standard SAP Standard

SAP Standard

SAP Standard SAP Standard SAP Standard SAP Standard SAP Standard

Recurring Entry Documents

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

G/L Account Balances

SAP Standard

SAP Standard SAP Standard SAP Standard SAP Standard SAP Standard

Accounts receivables S_ALR_87012172

Customer Balances in Local Currency

S_ALR_87012197

Customer Line Items

S_ALR_87012168

Due Dates Analysis for Open Items

S_ALR_87012173

List of Customer Open Items

S_ALR_87012176 S_ALR_87012177

Customer Evaluation with Open Item Sorted List Customer Payment History

S_ALR_87012178

Customer Open Item Analysis (Overdue Items Balance)

S_ALR_87012198

List of Customer Cleared Line Items

S_ALR_87012199

List of Down Payments open at key

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 Customer Open Item Analysis (Overdue Items Balance) List of Customer Cleared Line Items List of Down Payments

SAP Standard SAP Standard SAP Standard SAP Standard SAP Standard SAP Standard SAP Standard SAP Standard SAP Standard

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date

open at key date

S_ALR_87012186

Debit & Credit Notes Register – Monthly Customer wise Sales

S_ALR_87012169

Transaction Figures Account Balance

S_ALR_87012197

List Of Customer Line Items

Debit & Credit Notes Register – Monthly Customer wise Sales Transaction Figures Account Balance List Of Customer Line Items

S_ALR_87012086

Vendor List

Vendor List

SAP Standard

S_ALR_87012087

Vendor address List

Vendor List

SAP Standard

S_ALR_87012077

Vendor Information System

Vendor Information System

SAP Standard

S_ALR_87012082

Vendor Balances

SAP Standard

S_ALR_87012078

Due Date Analysis for Open Items

S_ALR_87012103

List of Vendor Line Items

S_ALR_87012287

Vendor Debit/Credit Memo Register

S_ALR_87012089

Display Changes to Vendors

Vendor Balances Due Date Analysis for Open Items List of Vendor Line Items Vendor Debit/Credit Memo Register Display Changes to Vendors

S_ALR_87012309

Print Cashbook

Print Cashbook

SAP Standard

S_P99_41000101

Check Register

Check Register

SAP Standard

S_P99_41000102

Check Number Ranges

Check Number Ranges

SAP Standard

AW01N

Asset Explorer

Asset Explorer

SAP Standard

AR02

Asset History Sheet

SAP Standard

S_ALR_87011963

Asset Balance by Asset Number

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

S_ALR_87011968

Asset Balance by Cost Location

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 Asset Balance by Cost Location

S_ALR_87012287

SAP Standard SAP Standard SAP Standard SAP Standard

Accounts payable

SAP Standard SAP Standard SAP Standard SAP Standard

Asset accounting

Confidential

SAP Standard SAP Standard SAP Standard SAP Standard SAP Standard SAP Standard

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