"Our Father in heaven,

hallowed be your name.

Your kingdom come,

your will be done,

on earth as it is in heaven.

Give us this day our daily bread,

and forgive us our debts,

as we also have forgiven our debtors.

And lead us not into temptation,

but deliver us from evil."

Lesson 1 – Organizational Units

·         Client is the highest level in SAP ERP System Hierarchy.

·         Most important organizational unit is company code.

·         At client level, specifications and data valid for all organizations are entered to avoid duplication of data entry.

·         Each client is technically independent unit with separate master records and complete set of tables and data.

·         To log on to system, one must enter USER master record and Client key.

·         A company code (minimum structure in FI) represents an independent balancing/legal accounting entity.

·         Every organization for which a financial statement and profit and loss statement (P&L) is to be created must be stored as a company code in the SAP system.

·         Copying company code (4 digit alpha numeric key) will copy following

o   Definition –

§  4 Character numeric code

§  Company Name

§  City

§  Country (now called Home)

§  Currency (now called local currency)

§  Language

§  Address

o   Global Parameters

§  Chart of Accounts

§  Fiscal Year 

§  Co Code defaults

o   Customizing Tables 

o   GL Accounts (optional)

o   Account Determination

.

1.       Business area four digit alphanumeric key and a short description.

2.       Segments have ten characters

3.       Companies have six characters (either numeric or alphanumeric).         

4.       company code (4 digit alpha numeric key)

Country Template

The country installation program not only creates a country-specific company code template but also a country-specific template for

1.       controlling areas,

2.       plants,

3.       purchasing organizations,

4.       sales organizations,

5.       credit control areas,

6.       financial management areas

In SAP company code 0001 is a template for general company code with international chart of accounts

We should only run country installation program in an initial installation of SAP and not in upgrade installation.

Other important organizational units

1.       Business area:

a.       Business areas represent separate areas of operation

b.      within an organization and can be  used across company codes.

c.       can create their own set of financial  statements for internal or external purposes

2.       Profit center:

a.       Success of independent individual units.

b.      From  an Accounting point of view it must be determined whether only a profit and loss statement at profit center level is to be created (document breakdown not active) or whether a financial statement is also to be created (document breakdown active).

3.       Segment : legal requirement

4.       Company:

a.       Companies are used as a basis for the consolidation functions for financial accounting

b.      A company can contain one or more company codes.

5.       Functional area: according to function

Customer who wishes to draw up financial statements by business areas, profit centers or segments have to activate document breakdown.

Business area defined at client level

Segments are derived from profit centres

Controlling area

A controlling area identifies a self-contained organizational structure for which costs and revenues can be managed and allocated.

It represents a separate unit of cost accounting.

More than one company code can be assigned to one or more controlling areas. This enables a cross-company code cost accounting between the assigned company codes.

However, assigning more than one company code to the same controlling area is possible only if

o   all the assigned company codes use the same operating chart of accounts

o   Have the same fiscal year variant.

Scenarios

It defines which fields are updated in New G/L ledgers during a posting

These scenarios are available in customizing which are assigned to Ledger

It cannot be created.

A ledger can be assigned one or all six scenarios.

Scenarios are

·         Cost centre

·         Consolidation

·         Business area

·         Profit segment

·         Segment

·         Cost of sales

Ledgers

Each client has exactly one leading ledger.

Other leading ledger are used for other requirements

Main ledger reflects accounting principle used to draw up consolidated financial statements.

It’s integrated with all sub ledgers and is updated in all company codes.

Leading ledger OL and totals table FAGLFLEXT

Additional ledgers can be added to company code.

Along with leading ledger, other non- leading ledger are defined, known as leading approach.

When leading approach followed we have option of defining different fiscal year in non- leading ledger.

Only the values from leading ledger are posted to CO in standard system.

Different valuation approaches and valuation methods for different accounts known as account approach

Leading ledger automatically receives settings that apply to company code are

1.       Currency

2.       Fiscal year variant

3.       Posting period variant

Variant Principle

The variant principle is a 3 step method in SAP system to assign particular properties

·         Define Variant (K4 fiscal year)

·         Determine values for the variant (properties)

·         Assign the variant to object (K4 to Co Code)

Variant principle is used for

1.       Fiscal year variant

2.       Posting period variant

3.       Field status variant

4.       Chart of accounts variant

Fiscal Year

FY can be dAefined as

·         Year Independent (No and start/end dates for the period are same for every year)

·         Year Specific (Periods can vary from year to year)

The fiscal year variant contains the definition of posting periods and special periods. Special periods are used for postings that are not assigned to time periods, but to the business process of year-end closing. In total, you can define 16 periods.

System derives posting period from posting date.

If posting date falls with last normal posting period, we can post transaction in one of special periods.

Standard fiscal year variant are already defined in system.

Fiscal year variant doesn’t specify whether a period is open or closed.

Fiscal year variant defines number of periods and their start and finish dates

Fiscal year variant assigned to company code and not company code segment.

Posting period defined in Fiscal year variant and not Fiscal year.

Fiscal year variant defines relationship between fiscal and calendar year

A year-independent fiscal year variant can be defined as:

1.       Calendar year (Jan – dec)

2.       Non-calendar year

Fiscal year which is a calendar year have only 12 posting periods

Fiscal year which is a non-calendar year can have16  posting periods. You have to define posting periods by assigning end dates to each period. It must have an indicator -1 or +1

Fiscal years are normally year independent

A fiscal year variant has to be defined as year-specific if  the following conditions is  fulfilled:

·         The start and the end date of the posting periods of some fiscal years will be different from the dates of other fiscal years.

·         Some fiscal years use a different number of posting periods.

If one year of a fiscal year variant has less posting periods than the others, it is called a shortened fiscal year

Advantages of Fiscal year variant

·         Different Fiscal year variant

·         Manageable number of G/L accounts

·         Separate ledger for every accounting principle

Predefined Fiscal year variant

·         Calendar year             01,k0,k1,k2,k3,k4

·         Year specific               AA,AM,R1,UL,WK

Currencies

Exchange range types

·         Historical rate

·         Bank selling rate

·         Bank buying rate

·         Average rate

·         Rate on certain key dates

A currency key must be assigned to every currency used with a validity date

For every combination of two currencies, we can maintain different exchange rates which are distinguished by an exchange rate type.

This can be used for various purposes such as

1.       valuation,

2.       conversion,

3.       translation, and

4.       planning.

The relationship between currencies must be maintained per exchange rate type and currency pair using translation ratios. This usually has to be performed only once.

 Translation ratios maintained on time period basis.

Exchange rate tools

·         inversions

·         base currency

·         exchange rate spreads

A base currency can be assigned to an exchange rate type. We then only have to maintain exchange rates for all other currencies into this base currency. A translation between two foreign currencies is calculated via the base currency, that is, by combining two exchange rates.

In direct quotation, one unit of foreign currency is quoted for the local currency, whereas in indirect quotation, one unit of local currency is quoted for the foreign currency.

Foreign currency per unit of local currency is indirect quotation.

For each currency pair you can define direct quotation or indirect quotation as standard notation.

the standard setting is valid:

·         “ “ for direct quotation and “/” for indirect quotation

If you work mainly with for direct quotation exchange rates - “ “ (blank, without a prefix)

If you increasingly use direct quotation exchange rates and indirect quotation exchange rates

·         “* “ direct quotation and “/” for indirect quotation

If indirect quotation exchange rates is most widely used

·         “/“  for direct quotation and “  ” for indirect quotation