B.Madhusudhan Rao SAP FICO TRAINING -GL Accounting
BASIC ACCOUNTING PRINCIPLES
Accounting
Accounting means they way it’s used to store the transactional data in a systematic way based upon Accounting Principles.
There are 2 types of Accounting methods are there.
1)Finance – Financial Accounting for External Reporting purpose
2)Controlling – Managerial Accounting or Costing for Internal Reporting purpose.
Basic Accounting Principles
Basicaccounting principles which are useful to draw the financial statements like Profit & Loss Account and Balance Sheet Statements
Classification of Accounts and Rules of Debit and Credit
The transactions are recorded on the basis of classification of accounts and rules pertain to Debit and Credit.
There are 3 Types of Accounting Principles are there to post the day to day transactions.
1)Personal Accounts
2)Real Accounts
3)Nominal Accounts
Personal Accounts
Transactions relating to persons or firms are come under Personal Accounts
Accounting Rule: Debit is the Receiver and Credit is the Giver
Ex: Ramu Paid cash to Suresh.
Accounting entry:
Suresh A/cDr10, 000/-
To Ramu A/c Cr10, 000/-
In this example Suresh’s Account will be “Debited” (Receiver)
Similarly Ramu Account will be “Credited”(Giver).
Real Accounts
Transactions relating to Properties or assets come under Real Accounts.
Accounting Rule: Debit what comes in and Credit what goes out.
Ex: Building Purchased for cash
Accounting entry:
Building A/cDr5, 00, 000/-
To Cash A/c Cr5, 00, 000/-
Building Account will “Debited”, since it is coming into the business
Cash account will be “Credited”, since it is going out of business.
Nominal Accounts
Transactions relating to Expenses or losses and Incomes or gain come under Nominal Accounts.
Accounting Rule: Debit all expenses and losses and Credit all revenues and gains.
Ex: Salaries Paid – Pertains to Expenses
Accounting entry:
Salaries A/cDr2, 00, 000/-
To Cash A/c Cr2, 00, 000/-
Salaries Account will “Debited”, since it is nominal account
Cash account will be “Credited”, since cash is going out of business.
Ex: Interest Received on Investments – Pertains to Income
Accounting entry:
Cash A/cDr5 000/-
ToInterest A/c Cr5, 000/-
Cash Account will “Debited”, since Cash is coming into business.
Interest account will be “Credited”, since it is a nominal account.
Concept of Debit and Credit
The words “Debit” and “Credit” no specific meaning. They are used only as Accounting Symbols.
In accounting Left Hand Side is called Debit and the Right Side is Called Credit.
Debit is used to denote a receiver or receiving account and Credit is used to denote a giver or giving account.
As such the rules of the Debit and Credit can be expressed as Followers.
Every transaction has a dual effect with one element receiving the benefit and the other element giving the benefit.
Some of the examples:
S.no / Transaction / Received Benefit - DR / Giving Benefit -CR1 / Purchased Raw Materials / Raw Materials / Cash
2 / Sales / Cash / Goods
3 / Paid Salaries / Salaries / Cash
4 / Discount Received / Cash / Discount
5 / Commission Paid / Commission / Cash
Below the Examples to understand the concept clearly.
1)Govind Commenced business with Cash Rs. 10,000/-
Entry: Cash A/c Dr10,000/-(Real Account) – Debit what comes in
Capital A/cCr10,000/-(Personal Account) – Credit the giver
2)Opened a Bank Account Rs. 5,000/-
Entry: Bank A/c Dr5,000/-(Real Account) – Debit the receiver
Cash A/cCr5,000/-(Real Account) – Credit what goes out
3)Bought Goods from Raghav Rs.1000/-
Entry: Purchases A/c Dr1,000/-(Real Account) – Debit what comes in
Raghav A/cCr1,000/-(Personal Account) – Credit the giver
4)Sold Printer to Praveen on Credit Rs. 1,000/-
Entry: Praveen A/c Dr1,000/-(Personal Account) – Debit the receiver
Printer A/cCr1,000/-(Real Account) – Credit what goes out
5)Sold goods for Cash Rs. 400/-
Entry: Cash A/cDr400/-(Real Account) – Debit what comes in
Sales A/cCr400/-(Real Account) – Credit what goes out
6)Purchases Goods for cash from Vinay Rs.200/-
Entry: Purchase A/cDr200/-(Real Account) – Debit what comes in
Cash A/cCr200/-(Real Account) – Credit what goes out
7)Drew Cash from Bank Rs.500/-
Entry: Drawings A/cDr500/-(Personal Account) – Debit receiver
Cash A/cCr500/-(Real Account) – Credit what goes out
8)Paid rent to Land Lord Rs.250/-
Entry: Rent A/cDr250/-(Nominal Account) – Debit the Expenses
Cash A/cCr250/-(Real Account)– Credit what goes out
9)Received cash from Praveen Rs.1,000/-
Entry: Cash A/cDr1,000/-(Real Account) – Debit what comes in
Praveen A/cCr1,000/-(Personal Account)– Credit the giver
10)Took a loan from Shubha Rs.2,000/-
Entry: Cash A/cDr2,000/-(Real Account) – Debit what comes in
Shubha A/cCr2,000/-(Personal Account)– Credit the giver
11)Office equipment stolen Rs.500/-
Entry: Loss by theft A/c Dr500/-(Nominal Account) – Debit the expenses
Equipment A/c Cr500/-(Real Account)– Credit what goes out
GENERAL LEDGER ACCOUNTING
INTRODUCTION
The FI (Financial Accounting) Module is geared for external reporting. Itproduces a Balance sheet (B/S) and Profit and Loss account (P&L), cash flow report. The B/S & P/L is required by management for monitoring its monthlyand yearly performance. It is also required for statutory accounts, GAAPreporting and various other legal and tax requirements.
Within the FI module there are various sub modules and the important oneare as follows:
General Ledger
Bank Accounting
Accounts Payable
Accounts Receivable
Asset Accounting
The CO (Controlling) module is geared for Management reporting. It isrequired more for internal performance analysis. It gives information about theorigin of the cost. It helps in controlling the costs of the organization. This module gives another dimension to the way profits are seen, by Productlines, Business segment by customer by region.
It also helps in controlling and monitoring the Costs of the product which aremanufactured inhouse.
The important sub modules in CO are as follows:-
Cost Center Accounting
Profit Center Accounting
Profitability Analysis
Product costing
Internal order
The FICO module in SAP is very tightly integrated with all the modules inSAP. Data is posted real-time to FICO module. The important modules fromwhich data is updated into FICO module are as follows:-
Materials Management (MM)
Sales and Distribution (SD)
Production Planning (PP)
Human Resource (HR)
ENTERPRISE STRUCTURE
1. Define Company T.code: OX15
IMG Enterprise Structure Definition Financial accounting Define Company
In the SAP system, consolidation functions in financial accounting are basedon companies. A company can comprise one or more company company codes.
Click New entries and update the Following
Save
2. Define Company CodeT.code: OX02
IMG Enterprise Structure Definition Financial accounting Edit Copy, Delete, Check Company Code
The Highest organizational unit in the FI module is the company code. It is anorganizational unit for which Balance sheet and Profit and loss account ispossible.The various organizational units which are assigned to the company code are as follows
Purchasing organization is assigned to the Company code. (MM module)
Sales Organization is assigned to the Company code (SD module)
Plants are assigned to the Company code (Logistics module)
Click New entries and update the Following
Press Enter, it will take us to next screen and update the following.
3.Assign Company Code to Company T.code: OX16
SPRO Enterprise structure Assignment Financial Accounting Assign Company code to company.
4.Define Chart of Accounts T.code: OB13
SPRO Financial Accounting General Ledger Accounting G/L Accounts Master Records Preparation Edit chart of Accounts list
For each company code in SAP, you have to specify one chart of accounts forthe general ledger. This chart of accounts is assigned to the company code. Achart of accounts can be used by multiple company codes. This means thatthe general ledgers of these company codes have identical GL structure.
Charts of accounts can have three different functions in the system:
1) OPERATING CHART OF ACCOUNTS
The operating chart of accounts contains the G/L accounts that you use for posting in your company code during daily activities. Financial Accounting and Controlling both use this chart of accounts.
You have to assign an operating chart of accounts to a company code
2) GROUP CHART OF ACCOUNTS
Group chart of accounts are used for reporting (Consolidation) purposes mostly.
Take the example of Multinational Company like Coca-Cola
They have companies across the world but at the end of the year if they want to do reporting for the company coca cola as a whole, then they need to consolidate all the accounting stuff across the world. To remove that manual effort, group chart of accounts concept was indicted. Here, we will have one chart of accounts for the whole company, along with operating chart of accounts. Whatever is posted to operating chart of accounts is also posted to Group Chart of accounts. Hence, the whole process of consolidation is automated :)
3) COUNTRY SPECIFIC CHART OF ACCOUNTS
The country-specific chart of accounts contains the G/L accounts needed to meet the country's legal requirements. This allows you to provide statements for the country's legal requirements.
The assigning of a country-specific chart of accounts to a company code is optional
Click New Entries and update the following
5.Assign Company code to Chart of Accounts T.code: OB62
SPRO Financial Accounting General Ledger AccountG/L Accounts Master Records Preparations Assign company code to chart of Accounts.
Country specific charts of Accountswill be assigned here to draw up the financial statements to meet Legal requirement.
6.Define Account Groups T.code: OBD4
SPRO SAP Ref IMG Financial Accounting General Ledger Accounting G/L Accounts Master Records Preparations Define Account Group
An Account group controls the data that needs to be entered at the time of creation of a master record. Account groups exist for the definition of a GL account, Vendor and Customer master.
It basically controls the fields which pop up during master data creation in SAP.
1. Liabilities -1.series
2. Assets -2.series
3. Income-3.series
4. Expenditure-4.series
7.Define Retained Earnings T.code: OB53
SPRO SAP Ref IMG Financial Accounting General Ledger Accounting G/L Accounts Master Records Preparations Define Retained Earning Accounts
At the end of Fiscal year the balance in the profit & loss a/cmust be transferred to Retained Earning account. To automatically carry forward the balance by the system to the retained earnings a/c , We have to define one or more profit & loss statement A/c types per chart of accounts and assign them to retained earnings account
Each Profit & Loss a/c is assigned to a Retained Earnings Accounts via key. We have to entered this key in the P & L statement a/c type field found in the chart of a/c are of each P & L a/c. Normally, Companies use one Retained Earnings a/c. For this reason, X can be denoted as the key
8.Define Fiscal Year T.code: OB29
SPRO IMG Financial Accounting Financial Accounting Global SettingsFiscal Years Maintain Fiscal Year
Fiscal year is nothing but the way financial data is stored in the system.SAP provides you with the combination of 12 normal periods and alsofour special periods. These periods are stored in what is called the fiscalyear variant.
9.Assign Company Code to Fiscal Year T.code: OB37
SPRO IMG Financial Accounting Financial Accounting Global SettingsFiscal Years Assign Company code to Company
10.Define Posting Period Variant T.code: OBBO
SPRO IMG Financial Accounting Financial Accounting Global SettingsDocumentPosting Periods Define Variants for Posting Periods
In this activity, we can define variants for open posting periods. In the standard setting, a separate variant for posting periods is defined for every company code. The name of this variant is identical to the company code name. Every company code is allocated to this variant with the same name.
Thus in our example we will have posting period variant which is identical tothe company code i.e. 1000
11.Assign Posting Variant to Company Code T.code: OBBP
SPRO IMG Financial Accounting Financial Accounting Global SettingsDocumentPosting Periods Assign Variants to Company Code
12.Define Open and Close Posting Periods T.code: OB52
SPRO IMG Financial Accounting Financial Accounting Global SettingsDocumentPosting Periods Open and Close Posting Periods
In this activity we specify for each variant which posting periods are open forposting in SAP
13.Maintain Field Status Variant T.code: OBC4
SPRO Financial Accounting Financial Accounting Global SettingsDocument Line Item Controls Maintain Field Status Variant
Field status groups control the fields which come up when the user doesthe transactions. There are three options for field selection. They are:
Display only
Suppressed
Mandatory
So basically you can have any field either for display only or you cantotally suppress it or make it mandatory.
The field status group is stored in the FI GL Master Record.
Select Field Status Variant - 1000
Double click on Field Status GroupsFolder
Select G001 – General and Double click on General Data.
Text make it required entry field.
Save.
14.Assign Company Code to Field Status Variant T.code: OBC5
SPRO Financial Accounting Financial Accounting Global SettingsDocument Line Item Assign Company Code to Field Status Variant
15.Define Tolerance Group for G/L Accounts T.code: OBA0
SPRO Financial Accounting General Ledger Accounting Business transactions Open item clearing clearing differences Define Tolerance group for G/L Accounts.
Debit columns are applicable when posting a loss due to a Payment difference.
Credit Columns are applicable when posting a gain due to a payment difference.
It is mandatory to assign a Tolerance Group to Every G/L, if no Tolerance Group is assigned to a G/L Account, by default system assign the “blank” Tolerance group defined above.
16.Define Tolerance Group for Employees T.code: OBA4
SPRO Financial Accounting General Ledger Accounting Business transactions Open item clearing clearing differences Define Tolerance group for Employees.
The tolerance groups for Employees are used as follows:
1)We will define the maximum document amount the employee is authorized to post
2)The maximum cash discount percentage the employee is authorized to post
3)The maximum accepted tolerance limit for payment differences
Payment differences are posted automatically with in certain tolerance groups. This way the system can post the difference by correcting the cash discount or by posting to a separate expense or revenue account.
If no tolerance group is assigned to a G/L Accounts, by default system assigns the “blank” Tolerance group defined above.
17.Define Document Number Ranges T.code: OBA7/FBN1
SPRO Financial Accounting Financial Accounting Global SettingDocumentDocument HeaderDefine Document Types.
We create the number ranges for documents. For each number range we specify:
· A number interval from which document numbers are selected
· The type of number assignment (Internal or External)
Step 1
Double Click Change Intervals Tab, it will take us to next screen
Step 2
Double Click Insert Interval and enter the number ranges
Step 3
Update the following
Number / Year / From Number / To Number / Doc Type1 / 2009 / 1 / 100000 / SA
19 / 2009 / 100001 / 200000 / KR
15 / 2009 / 200001 / 300000 / KZ
17 / 2009 / 300001 / 400000 / KA
18 / 2009 / 400001 / 500000 / DR
14 / 2009 / 500001 / 600000 / DZ
16 / 2009 / 600001 / 700000 / DA
Dark Red Colour Indicates – Posting Pertains to General Ledger Accounting
Blue Colour Indicates – Posting Pertains to Accounts Payables
Green Colour Indicates – Posting Pertains to Accounts Receivables
General Ledger Accounting
We can create GL Accounts at 3 Stages based up on business requirements.
1)Chart of Accounts Level – FSP0
2)Company Code Level – FSS0
3)Centrally – FS00
Mostly we will create the GL accounts centrally i.e. FS00.
Chart of Account Ares / Company Code Area / CentrallyFSP0 / FSS0 / FS00
The below mentioned GL Accounts are required to create to post the transactions.
G/L account / CoCd / Account group / P& L statement acct / Balance sheet account / GL Long text / Account currency / Line item display / Sort key / Field status group / Relevant to Cash Flow100100 / 1000 / Liabilities / X / Reserves & Surplus / INR / X / 001 / G001
100110 / 1000 / Liabilities / X / Reserves & Surplus -1 / INR / X / 001 / G001
100000 / 1100 / Liabilities / X / Share Capital / INR / X / 001 / G001
200100 / 1000 / Assets / X / Cash Account / INR / X / 001 / G005 / X
400100 / 1000 / Expenses / X / Salaries Account / INR / 001 / G004
400300 / 1000 / Expenses / X / Rent Account / INR / 001 / G004
- A) GL Accounts atChart of Accounts- FSP0:
When we create a GL Accounts at chart of Accounts level, we can able to create the required parameters under“Type and Description” which includes Account Group, P8 L Statement Account, P& L Account Type, Balance sheet, Description, Consolidation Data in Chart of Accounts.
- B) GL Accounts at Company Code level- FSS0:
When we create a GL Accounts at Company Code level, we can able to create the required parameters under“Type and Description” and “Create/Bank/Interest”.
Step 1
Step 2
- C) Create GL Accounts Centrally T.code: FS00
Accounting Financial Accounting General Ledger Master records Individual processing centrally
This is the T.code: FS00 we frequently used to create the GL Accounts.
It will cover all the views like “Type/Description”, “Control Data”, and “Create/Bank/Interest”.
Step 1
ClickCreateButton
Step 2
Step 3
Save
Note: In the similar way we have to create the GL Accounts are100110, 100000, 200100, 400100, and 400300.
2. Posting of TransactionsT.code:F-02
Accounting Financial Accounting General Ledger Document entry General posting
Posting Keys
40 – G/L Account Debit
50-G/L Account Credit
Now we will post the Share Capital Account entry; this posting is used to bring capital into business.
Accounting entry:
Cash A/cDr1, 00,000/-
ToShare Capital A/c Cr1, 00,000/-
1st step
Enter then it goes to next screen
2ndstep
Enter then it goes to next screen
3rdstep
Save.
We will post one more document
We will post the Salaries Account entry
Accounting entry:
Salaries A/cDr5, 000/--40
ToCash A/cCr5,000/- - 50
1st step