Goal of Financial Accounting (FI)
Financial Accounting is designed to collect the transactional data that provides a foundation for preparing the standard portfolio of reports.
In general, these reports are primarily, but not exclusively, directed at external parties.
Standard reports include:
Balance Sheet
Income Statement
Statement of Cash Flows Enroll EnrollNow Now: : https://goo.gl/H4HFKP https://goo.gl/H4HFKP
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Target Audience
Internal Executives Senior Management Administrative Staff Employees
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External - Legal Authorities - Banks - Auditors - Shareholders - Insurance - Taxing Authorities - Media - Financial Analysts
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FI Organizational Structure
Represents the legal and/or organizational views of an enterprise Forms a framework that supports the activities of a business in the manner desired by management Permits the accurate and organized collection of business information Supports the development and presentation of relevant information in order to enable and support business decisions Enroll EnrollNow Now: : https://goo.gl/H4HFKP https://goo.gl/H4HFKP
FI Organizational Structure
Client
An independent environment in the system
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Company Code
Represents an independent legal accounting unit
Balanced set of books, as required by law, are prepared at this level.
A client may have more than one company code
United States
Germany
United Kingdom
Australia
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Assets
Liabilities & Owners Equity
FI Organizational Structure
Chart of Accounts
Credit Control Area
A classification scheme consisting of a group of general ledger (G/L) 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. An organizational entity which grants and monitors a credit limit for customers. It can include one or more company codes Enroll Now :
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Business Area
An organizational unit that represents a separate area of operations or responsibilities within an organization and to which value changes recorded in Financial Accounting can be allocated Financial statements can be created for business areas, and these statements can be used for various internal reporting purposes. USA : +1 940 440 8084, IND : +91 953 383 7156 Email Id : info@maxonlinetraining.com
GBI 2.0 Structure for Financial Accounting Global Bike
Global Bike Inc.
Global Bike Germany GmbH Global Bike Chart of Accounts
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Client
Company Code Chart of Accounts
Bikes
Business Area
Global Credit Control
Credit Control Area
Chart of Accounts
A listing of the accounts (assets, liabilities, equity, revenues, and expenses) that are contained in the General Ledger A chart of accounts must be assigned to every company code in order to create the General Ledger for that company Several company codes can use the same chart of accounts Enroll EnrollNow Now: : https://goo.gl/H4HFKP https://goo.gl/H4HFKP
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Chart of Accounts
The foundation for the General Ledger is the Chart of Accounts A Chart of Accounts contains a complete list of all of the accounts utilized in the General Ledger for a given company Financial accounting reports are prepared from the balances contained in the General Ledger’s Chart of Accounts
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Chart of Accounts (continued)
There are five types of accounts contained in a Chart of Accounts Assets Liabilities Equity Revenues Enroll EnrollNow Now: : Expenses https://goo.gl/H4HFKP https://goo.gl/H4HFKP There are two primary accounting reports prepared from the General Ledger Chart of Accounts Balance Sheet Income Statement
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FI Master Data
General Ledger (G/L) Accounts
The unique combination of Company Code and Chart of Account creates a data storage area called a General Ledger. The General Ledger contains a listing of the transactions effecting each account in the Chart of Accounts and the respective account balance. It is utilized in the preparation of financial accounting statements.
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FI Master Data
Customer and Vendor Master Data
Customer and vendor account balances are maintained in FI through fully integrated accounts receivable and accounts payable sub-modules.
Financial postings for customers and vendors are made directly to their respective individual accounts and accompanied by a concurrent automatic posting to the General Ledger.
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Customer Accounts
Accounts Receivable Sub-Module (FI-AR)
Information with respect to customers who purchase the enterprise’s goods and services such as sales and payments made
Substantive and important integration between Sales and Distribution (SD) and Financial Accounting (FI)
Billings in SD generate FI journal entries for sales activity
Customer 189
100
Customer 142
300 950
Customer 135
400
Customer 123
150
Vendor Accounts
Accounts Payable Sub-Module (FI-AP)
Information with respect to Vendors from whom the enterprise purchases goods and services such as purchases and payments made
Substantive and important integration between Materials Management (MM) and Financial Accounting (FI)
Purchase and goods receipt activities in MM generate FI journal entries
Vendor 100234
200
Vendor 100435
250
Accounts Payable (General Ledger)
850 Vendor 100621
100
Vendor 100846
300
FI Processes
Posting a G/L Entry
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FI Reporting
G/L Account Summary
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FI Reporting
Balance Sheet
Presentation of an organization’s Assets, Liabilities, and Equity at a point in time Assets: What the company owns Liabilities: What the company owes For ForMore MoreVideos: Videos: Equity: The difference between Assets and Liabilities https://goo.gl/Als1si https://goo.gl/Als1si Assets = Liabilities + Equity
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FI Reporting  Balance Sheet Example Assets Cash Accounts Receivable Equipment Total Assets
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1,000 3,000 500 4,500
Liabilities Accounts Payable Taxes Payable Total Liabilities
750 250 1,250
Equity Common Stock Retained Earnings Total Equity
2,000 250 2,250
Total Liabilities and Equity
4,500
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FI Reporting
Income Statement
Presentation of an organization’s revenues and expenses for a given period of time (e.g. monthly, quarterly, or yearly) Revenues, in a simple sense, are inflows of cash as a result of selling activities or the disposal of company assets. Expenses, in a simple sense, are outflows of cash or the creation of liabilities to support company operations. Revenues - Expenses = Net Income For ForMore MoreVideos: Videos: https://goo.gl/Als1si https://goo.gl/Als1si
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FI Reporting  Income Statement Example Revenue Sales Deductions Total Revenue
11,000 750 10,250
Operating Expenses Cost of Goods Sold Operating Expenses Total Expenses
4,500 3,750 8,250
Net Income Before Taxes Taxes Net Income
2,000 750 1,250
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FI Reporting
Statement of Cash Flows
Considers the associated changes, both inflows and outflows, that have occurred in cash – arguably the most important of all assets – over a given period of time (e.g. monthly, quarterly, or annually)
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Accountants and Audit Trails ď ˝
Audit trails allow an auditor to begin with an account balance on a financial statement and trace through the accounting records to the transactions that support the account balance.
ď ˝
Audit trails enable an auditor to trace individual transactions to the effected account balance(s) on a financial statement.
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SAP Document Principle
Each business transaction impacting FI writes data to the SAP database creating a uniquely numbered electronic document. The document number can be used to recall the transaction at a later date. It contains, for example, such critical and necessary information as:
Responsible person Date and time of the transaction Commercial content
Once written to the SAP database, a financial document (one impacting the financial position of the company) can not be deleted from the database. It can be changed to some degree. The SAP document principle provides a solid and important framework for a strong internal control system – a requirement of law for companies that operate in the United States and in most other countries in the world.
SAP Document Principle
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Goal of Controlling (CO)
Managerial Accounting – also termed Controlling – is designed to collect transactional data that provides a foundation for preparing internal reports that support decision-making within the enterprise. These reports are exclusively for use within the enterprise and include:
Cost center performance
Profit center performance
Budgets analyses
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CO Organizational Structure
Represents the legal and/or organizational views of an enterprise Forms a framework that supports the activities of a business in the manner desired by management Permits the accurate and organized collection of business information Supports the development and presentation of relevant information in order to enable and support business decisions
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CO Organizational Structure
Client
An independent environment in the system
Company Code
Represents an independent legal accounting unit
Balanced set of books, as required by law, are prepared at this level.
A client may have more than one company code
United States
Germany
United Kingdom
Australia
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Assets
Liabilities & Owners Equity
CO Organizational Structure
Chart of Accounts
Controlling Area
A classification scheme consisting of a group of general ledger (G/L) 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. A self-contained, organizational unit for which the management of revenues and expenses can be performed May include one or more company codes; therefore, an enterprise can perform management accounting analyses and reports across several companies A way to identify and track where revenues and costs are incurred for evaluation purposes
Operating Concern
Represents a part of an organization for which the sales market is structured in a uniform manner A operating profit for the individual market segments can be calculated. Multiple controlling areas can be assigned to one operating concern.
GBI 2.0 Structure for Controlling Client
Global Bike
Operating Concern
Global Concern
Controlling North America
Controlling Europe
Controlling Area
Global Bike Inc.
Global Bike Germany GmbH
Company Code
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Global Bike Chart of Accounts
Chart of Accounts
CO Master Data
Profit Center
Responsible for revenue generation and cost containment Evaluated on profit or return on investment Enterprises are commonly divided into profit centers based on
Region Function Product
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Cost Center
Responsible for cost containment, not responsible for revenue generation
One or more value-added activities are performed within each cost center. Unit that is distinguished, for example, by area of responsibility, location, or type of activity
Copy center Security department Maintenance department USA : +1 940 440 8084, IND : +91 953 383 7156 Email Id : info@maxonlinetraining.com
CO Master Data
Internal Order
Temporary cost center responsible for cost containment, not responsible for revenue generation It is used to plan, collect, and monitor the costs associated with a distinct short-term event, activity, or project
Company picnic Trade show/Fair Recruiting campaign
Revenue Element
A one-to-one linkage (mapping) between General Ledger revenue accounts and CO revenue elements is established to permit the transfer of FI revenue information to CO. Posting in FI that impact revenue accounts lead to a posting in CO to a revenue element. In other words, revenue account = revenue element – just different words depending on whether FI object or CO object. USA : +1 940 440 8084, IND : +91 953 383 7156 Email Id : info@maxonlinetraining.com
Cost Element
A one-to-one linkage (mapping) between General Ledger expense accounts and CO cost elements is established to permit the transfer of FI expense information to CO.
Postings in FI that impact cost accounts lead to a posting in CO to a cost element.
In other words, expense account = cost element – just different words depending on whether FI object or CO object.
Primary Cost Element
Originate in the General Ledger within FI and are automatically transferred to CO when an FI transaction is recorded in the General Ledger
Secondary Cost Element
Used exclusively in CO for allocations and settlements between and amongst cost centers
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Primary vs. Secondary Cost Elements Managerial Accounting (CO)
Financial Accounting (FI)
Aggregated Cost Elements
General Ledger Accounts Income Statement
Secondary Cost Elements
Primary Cost Elements
Balance Sheet
Expense Accounts Revenue Accounts
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CO Master Data
Statistical Key Figures
Provide the foundation for accurate and effective cost allocations between cost objects
Utilized to support internal cost allocations involving allocations, assessments, and distributions
Examples: number of employees,square footage, minutes of computer usage
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Copy Center Activity (20 Hours)
6 Hours
Executive Offices
10 Hours
Maintenance Department
4 Hours
IT Department
This figure shows an example of statistical key figures. A project cost center has 12 hours worth the activity. The statistical key figure is hours and is split at: 30% to the Work Center 50% to maintenance 20% to IS All costs for the labor will be allocated in this fashion Enroll EnrollNow Now: : https://goo.gl/H4HFKP https://goo.gl/H4HFKP
CO Processes 
Posting Primary Cost Element Financial Accounting (FI) Supplies Expense Debit Credit 1,500
Cash Debit Credit 1,500
Managerial Accounting (CO) Cost Center A
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CO Processes (FI) Transaction Document Amount G/L Account # Cost Center 1900012432 (CO) Transaction Document Cost Center Cost Element 20000657
Financial Accounting (FI) Supplies Expense Debit Credit
Cash Debit Credit
1,500
1,500
Managerial Accounting (CO) Cost Center 1,500
Transactions can have an effect on both FI and CO. The transaction will create a debit and a credit for FI (FI transaction) If CO is turned on a cost center or cost element bucket will be updated (CO transactions)
CO Processes 
Posting Secondary Cost Element Financial Accounting (FI) Supplies Expense Debit Credit
Cash Debit Credit 1,500
1,500
Managerial Accounting (CO) Cost Center A
CC 1 CC 2
Secondary Cost Element
CO Processes 
Posting Secondary Cost Element
Executive Offices
Rent Expense
Debit 1,500
Credit Prim ary
Cos t El
e me nt
Supplies Expense
Debit 2,500
e nt t Elem s o C ry Prima
Labor Expense
Debit Credit 2,000
s Co y r ma i r P
1,500 2,500
Credit
tE
Copy Center
t en m le
Se
s Co . c
l tE
em
t en
Maintenance Department
Sec. Cost Element
2,000 Se
c. C
os tE
1,800
3,000
Information Services lem
en t
1,200
Types of Allocation
Distribution
Method for periodically allocating primary cost elements
Primary cost elements maintain their identities in both the sending and receiving objects
Sender and receiver cost centers are fully documented in a unique Controlling (CO) document.
Assessment
A method of allocating both primary and secondary cost elements
Primary and/or secondary cost elements are grouped together and transferred to receiver cost centers through use of a secondary cost element.
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Types of Allocation
In Distribution and Assessment, you further allocate costs (or quantities for Indirect Activity Allocations) collected on a cost center during the accounting period to receivers, according to user-defined keys. These are therefore indirect allocation methods, because the exchange of activity is not the basis for allocating costs/quantities. Instead, user-defined keys such as percentage rates, amounts, statistical key figures, or posted amounts provide the cost/quantity assignment basis.
The advantage of these methods is that they are easy to use.You usually define the keys and the sender/receiver relationships only once.
Distribution and assessment are used primarily for cost centers. This is because direct cost allocation is not possible here due to the variety of transactions, the lack of clearly defined individual activity types and the fact that the entry of the activity is too time-consuming. For example, the costs of the company cafeteria may be assigned based on the number of employees in each cost center. Telephone costs are seldom allocated directly to the individual cost centers, but are collected on a clearing cost center for each period. They are then reposted or distributed at the end of the period according to the number of telephone units or telephone installations in each cost center.
Assessment is a method of allocating primary and secondary costs in Cost Center Accounting and Activity-Based Costing. The following information is passed on to the receivers:
The original cost elements are assigned cumulatively, or in groups, to assessment (secondary) cost elements. The original cost elements are not recorded on the receivers.
Sender and receiver information (sender cost center, receiver cost center, or business process) appears in the Controlling (CO) document.
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Distribution Sending cost center
Receiving cost centers Primary cost element maintains its identity D010 – 550 sft
A010 – Administration Rent Expense $1,500
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A005 – 400 sft
Distribution D005 – 900 sft
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A010 – 600 sft
A015 A020 150 100 S005 – 200
Sending cost center
Receiving cost centers Primary cost element maintains its identity D010 – $275
A010 – Administration Rent Expense $1,500
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A005 – $200
Distribution D005 – $450
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A010 – $300
A015 A020 $75 $50 S005 – $100
Assessment Receiving cost centers
Sending cost center
A020 – IT Software Expense $4,200 A020 – IT Supplies Expense $500
Primary and secondary cost elements
D010 – 10%
A005 – 15% A010 – 5%
D005 – 20% A015 – 10%
Assessment S010 – 10%
A020 – 0% S005 – 30%
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Sending cost center
A020 – IT Software Expense $4,200 A020 – IT Supplies Expense $500
Receiving cost centers Primary and secondary cost elements
Assessment
A005 – $705 D010 – $470 A010 – $235
D005 – $940
A015 – $470 A020 –$0
S010 – $470
S005 – $1,410
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SAP CO Module
Fully integrated with other SAP modules including, but not limited to:
Financial Accounting (FI)
Materials Management (MM)
Sales and Distribution (SD)
Production Planning and Execution (PP)
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