Sap Fico Business Blueprint Sample PDF

Business Blueprint
Submitted
To
X GROUP
By
KPIT CUMMINS INFOSYSTEMS
Financial Accounting
December, 2013
Version 0.0
Project xxxxxx Blue Print Document – Financial Accounting
DOCUMENT RELEASE NOTICE
Customer: X CompanyGroup
Project : XXXXX
Document details:
Name Version No. Description

Financial Accounting 1.0 This document outlines the Financialaccountingbusiness processes
of X COMPANY and how these will be implemented in SAP.
Document details:
Revision Action taken Preceding New Revision

Number (add/del/chg) Page No. Page No. Description
0.0 Initial draft
1.0 Final draft
2.0 Final Document
These are confidential documents. Unauthorized access or copying is prohibited.
Confidential 2 of 97
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 Version Author
Sign Off
Role Name Signature Date

Mr.
Functional Consultant
GajananMankeshwarkar
Project Manager- KPIT

Mr.Ravichandra
Cummins Infosystems Ltd.
Business Process Owner Mr. Jayaprakash
Project Manager- X
Mr. Padma Kumar
Company Group
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.
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
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
4.5. GAP ANALYSIS: ............................................................................................................... 60
4.6. INTEGRATION CONSIDERATION: ..................................................................................... 60
5. BUSINESS PROCESSES - ACCOUNTS RECEIVABLES ............................................................ 61
5.1. GENERAL EXPLANATIONS (AS IS): .................................................................................... 61
5.5. GAP ANALYSIS: ............................................................................................................... 73
6. ASSET ACCOUNTING ....................................................................................................... 75
6.1. GENERAL EXPLANATIONS (AS-IS) ..................................................................................... 75
6.2. FUNCTIONS AND EVENTS (TO BE): ................................................................................... 75
6.5. GAP ANALYSIS: ............................................................................................................... 84
7. CASH AND BANK ACCOUNTING ....................................................................................... 85
7.1. GENERAL EXPLANATIONS- (AS IS): ................................................................................... 85
7.2. SOLUTION IN SAP............................................................................................................ 85
7.5. GAP ANALYSIS: ............................................................................................................... 87
8. PROFIT CENTER ACCOUNTING ......................................................................................... 88
8.1. GENERAL EXPLANATIONS- (AS IS): ................................................................................... 88
8.5. GAP ANALYSIS: ............................................................................................................... 89
9. PROCESS MAPPING ......................................................................................................... 90
10. REPORTS ......................................................................................................................... 96
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
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.
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 group-
internal business partners, and are not operational in each system, must be maintained
in each client. This is a precondition for the account assignment of a group-internal
trading partner.
 Companies must be cataloged in a list of company IDs which is consistent across the
group. The parent company usually provides this list of company IDs.
 It is also acceptable to designate legally dependent branches 'companies' and join them
together as a legal unit by consolidation.
 In case of X Company group, the consolidation is required for all 9 legal entities. And
this is required only at group level. Therefore 1 company would be set up in the
system.
1.1.3. Naming Convention
COMPANY DESCRIPTION
1000 X Company Group
1.2. COMPANY CODE

1.2.1. Definition
The company code is an organizational unit used in accounting. It is used to structure the
business organization from a financial accounting perspective.
A company Code represents an independent accounting unit, for example, a Company within a
Corporate Group (Client).
1.2.2. Application
The Company Code is the smallest Organizational unit for which a complete self-contained set
of accounts can be drawn up for purposes of external reporting.
Balance sheets and Profit and Loss statements, required by law, are created at company code
level.
We can set up several company codes in one client in order to manage various separate legal
entities simultaneously, each with their own balanced set of financial books.
Different Currency requirement will need additional company code.
In case of X Company group, it consists of 9 legal entities. It individual entity prepares and files
the financial statements and income tax returns. Therefore 9 company codes would be set up
in the system.
Sr. No. Company Code Description

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
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 Description

YAIN 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.
Sr. No. Credit Control Area Description

1 1000 X Company Paints Credit Control area
2 1500 X Company Auto Credit Control area
3 1600 Sheenworld Services Credit Control area
4 1700 Sphinax Chemicals Credit Control area
5 5000 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.
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.
1.6.2. Application
 X COMPANY will have profit centre accounting taking into consideration of location wise
trial balance requirement
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 2011-
March 2012, then the fiscal year will be 2012. A fiscal year will consist of twelve normal posting periods and
four special posting periods.
Fiscal Year Variant V3 will be used
Sixteen periods will be defined in the system. The first period will be April and the twelfth period will be
March. The four extra periods will be used for posting year-end /closing adjustment entries. Special
restrictions will be made on the accounts that can be posted to in the 4 special periods.
A Posting Period Variant is defined & assigned to one or more company codes. This variant controls
opening and closing of one or more posting periods in Financial Accounting.
It is further desired by X Company, that the controlling the posting period should be possible at the
individual location level. I.e. a posting period can be opened only for Hyderabad branch. To cater this need,
authorization groups would be created per various locations. Users from the locations would be assigned to
the respective authorization group.
Sr. No. Posting period variant Description

1 1000 X Company Paints Posting period variant
2 1100 X Company Financial Posting period variant
3 1200 Sphinax Organic Posting period variant
4 1300 Sphinax Info Posting period variant
5 1400 TechServices Posting period variant
6 1500 X Company Auto Posting period variant
7 1600 Sheenworld Services Posting period variant
8 1700 Sphinax Chemicals Posting period variant
9 5000 X Company Lanka Posting period variant
Posting Periods:
 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
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. Description No. From To Number External Reverse Doc.

Type Range Number Type
AA Asset posting 01 100000000 199999999 AA
AB Accounting document 01 100000000 199999999 AB
AF Dep. Postings 03 300000000 399999999 AF
DG Customer credit memo 16 1600000000 1699999999 DA
DR Customer invoice 18 1800000000 1899999999 DR
DZ Customer payment 14 1400000000 1499999999 DA
KG Vendor credit memo 17 1700000000 1799999999 KA
KR Vendor invoice 19 1900000000 1999999999 KA
KZ Vendor payment 15 1500000000 1599999999 KA
PR Price change 48 4800000000 4899999999 PR
RE Invoice – gross 51 5100000000 5199999999 RE
WA Goods issue 49 4900000000 4999999999 WA
WE Goods receipt 50 5000000000 5999999999 WE
ZP Payment posting 20 2000000000 2999999999 ZP
Account type:
Account type is a key that specifies the accounting area to which an account belongs.Examples of account
types are:
 Asset accounts - A
 Customer accounts - D
 Vendor accounts - K
 G/L accounts - S
 Materials accounts - M
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.
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
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
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.
 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
General Ledger
S
Master does not exist
Check the Chart of

S
Accounts
Account Exists in Account Exists in

STOP Yes Company Code?
Yes Chart of Accounts?
No
Create at Chart of
S
Accounts Level
Account required in
STOP No Company Code
Yes
Create at Company
S
Code Level
Yes
End
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:
A/C
COA Description From To
Group
YAIN LIAB Balance Sheet A/C - Liabilities 10000000 15999999
YAIN PABL Reconciliations Account - Vendor 16000000 16999999
YAIN DEPN Accumulated Depreciation 20100000 20999999
YAIN FXAS Fixed Assets 21000000 21999999
YAIN MATL Material Management - Inventories 22000000 22999999
YAIN RCBL Reconciliations Account - Customer 23000000 23999999
YAIN CASH Cash and bank Accounts 24000000 24999999
YAIN ASET Balance sheet Accounts - Assets 25000000 25999999
YAIN REVN P&L A/Cs - Revenues 31000000 39999999
YAIN CONS Material Management - Consumption 40100000 40199999
YAIN EXPN P&L A/Cs - Expenses 40000000 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.
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.
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 Asset Class

Land and buildings 1000
Plant and Machinery 2000
Fixtures and fittings 3000
Office Equipments 4000
Vehicles 5000
Computer equipments 6000
Low-value assets 7000
Assets under construction 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.
The bank key contains the addresses and valid control data of all banks used in the SAP
System. The bank key has to be created in the system, if a bank is set up in the bank key,
this information could then, for example, be accessed when entering the bank information
in a customer or vendor master record. You would only need to enter the country of the
bank and the country key; the system would determine the name and address in the
background.
A G/L account master record must be created for each bank account. The house bank and
account ID must be entered in the GL account master record to ensure the accounting
transactions involving the bank account will be reflected in the general ledger.
The following bank accounts would be set up in the system per legal entity:
X Company Paints Pvt. Ltd.
Bank name Account No. A/C Type

The South Indian bank 0138083000001620 Cash Credit
HDFC Bank Ltd 00040330012166 Current A/c
Axis bank Ltd 909030033210563 Cash Credit
Axis bank Ltd 911020056012528 Current A/c
ICICI bank Ltd 000905019304 Current A/c
Sphinax Chemicals Pvt. Ltd.
Bank name Account No A/c Type

HDFC Bank 00040330002962 Current A/c
The South Indian Bank 0138073000001792 Current A/c
ICICI Bank Ltd 000905024635 Current A/c
Axis Bank Ltd 911020055957657 Current A/c
State bank of India 30861566143 Current A/c
2.4. MATERIAL MASTER

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

time customer
Account Groups:
Sr. No. Customer Account Group From To

1 Customer domestic 10000000 19999999
2 Customer export 20000000 29999999
3 One time customer 30000000 39999999
4 Project customers 40000000 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)
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 Description
0001 Payable Immediate
NT07 Payable in 7 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
 Releasing Process of Blocked documents
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
 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.
 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
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.
Post general ledger documents
To make general ledger business transaction available, you must post them to the general ledger
account. The system creates the document and makes the data available in accounts.
When you carry out the postings to G/L accounts, you enter the document header data and line
items data. Upon simulation of the document, the system carries out the consistency checks before
posting the data. If the error exists, the data will not be posted and proposes error information. Once
the data is error free, then the system updates the document file and G/L accounts amount may be
posted.
The expense GL account is made mandatory to input a cost centre.
Journal creation will be mainly used for adjustments of incorrect postings, ad-hoc entries, or period-
end adjustments. All GL transactions from other modules will be generated automatically with their
own document types and number ranges.
In addition, the standard journal creation program provides for the creation of an Account
Assignment Template. At any time during the creation of a document, the user may save the
document as a template for future use. The template may contain any number of individual line
items (up to the SAP maximum of 999), and any combination of GL account assignments and
individual line item values.
The values posted to the G/L accounts appear in the Trial Balance which will provide financial
statements like Balance Sheet, Profit and Loss Statement.
Flow diagram:Document parking and posting
Start
GL document
S
entered
Post the Authorized to

S Yes
document post?
No
Park the document S
Authorized person
accesses the S
parked document
Correct the
S No Accept?
document
Yes

S Yes
document Post?
No
Authorized person
accesses the S
parked document
Post the document S
End
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.
 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:
o Account clearing (ad hoc).
o Automatic clearing (part of closing activities).
o Post with clearing (during the course of posting a document).
3.2.6. 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.
3.2.7. 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
3.2.10. 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 FI Book all provisions Enter Accrual / Deferral Document for the period
This process involves execution of monthly depreciation run
and will be centrally executed in X COMPANY on a pre-
3 FI Depreciation Run defined date. It has to be ensured that before execution of
this process, all asset capitalization entries must be
completed.
This process is for running automatic bank Reconciliation for
4 FI Bank Reconciliation
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
Clearing of
Receipt Credits for which the Invoice Verification has not yet
5 FI GL/Customer/Vendor
been done (or Invoice not yet received). This Process (T-
accounts
Code-F-44 Vendor & F-32 Customer) Involves clearing of
Vendor Invoice against unmatched payments / advance /
debit credit note or JV passed in the Vendor account.
This process discuss about Provision of withholding Tax
6 FI Withholding Tax Provision 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
Open next FI Posting
7 FI the opening and closing of the posting periods. SAP permits
Period
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.
8 FI Financial Statement
Financial Statement Versions will be created for external
reporting.
No. Area Description Business Process Description

These transactions carry forwards the Vendor & Customer
Customer & vendor balances to next fiscal year. For carry forwards of Balances
9 FI
Balance Carry forward. 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
10 balances to next fiscal year. For carry forwards of Balances
FI GL Balance Carry forward
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
Asset Balance Carry
11 FI any postings to Fixed Assets for the closed fiscal year.This
Forward
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
Foreign Currency be manually calculated and posted or automatically
12 FI
Revaluation 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)
 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)
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.
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.
Material document will be for accounting stock into stores and FI entry will
Inventory / Stock A/c Dr.
GR/IR Clearing A/c Cr.
Here GR / IR clearing account is a clearing account and gets knocked off at the time posting the invoice
(MIRO execution).
All the Incoming Invoices are verified in terms of their content, prices and arithmetic and the invoice is
posted, the data is saved in the system. The system updates the data saved in the invoice documents in
Materials Management and Financial Accounting.
After the invoice has been posted, the document appears as an open item in the vendor account. (Payment
proposal list).
Accounting Entries when invoice is posted will be:
GR/IR A/c Dr.
CENVAT Clearing A/c Dr (if applicable)
VAT Clearing A/c Dr (if applicable)
Vendor Account Cr.
In case of Service PO following entry will be triggered:-
Goods Receipt:
Expense a/c Dr.
Service GR / IR A/c CR
Invoice Posting:
Service GR/IR A/c Dr.
Vendor Account Cr.
Delivery costs can be divided into:
 Planned delivery costs

 Unplanned delivery costs
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 Dr
Customs Officer’s A/c 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
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
GR/IR A/c Dr
Vendor Payable A/c Cr
Import Purchases (material) -- which includes fright, Duty
During Customs Duty Clearing Invoice:
Custom Clearing A/c Dr
Custom Officer A/c Cr
Here Custom Officer is created as a vendor.
During GR:
Material Stock 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)
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
 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) Dr
Bank A/c Cr
4.2.4. 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
4.2.6. 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:
 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.
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
 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
Vendor master creation
Start
Create Vendor Decide the account

Centrally ?
No M
group
Yes
Materials
Purchasing view Create vendor in that
management S No created?
S
account group
process
Yes
Create Accounting
Yes View
Create accounting
S
views
No
Vendor is created
Stop
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.
Start
Vendor invoice
S
entered

S Yes
invoice post?
No
Park the invoice S
Authorized person
accesses the S
parked invoice
Accept? No Correct the invoice S
Yes
Authorized
person Authorized to
S No
accesses post?
the invoice
Yes
Post the
S
invoice
End
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
S
Purchase
Department
Read the purchase

M
order
Stop No Down payment to

be made?
Yes
Make down payment

through check/ S
transfer
Vendor Account
updated
End
Flow diagram Vendor Payment Process
Start
Check the vendor

S
due list
Stop No Payment due?
Yes
Wait for
M No Funds exist?
funds
Yes
Clear the
Down payment
down S Yes
exists?
payment
No
Part
S No Full Payment?
payment
Yes
Vendor Paid
Document
generated
End
4.3. CHANGES TO EXISTING ORGANIZATION PROCESS:

N.A.

N.A.
4.5. GAP ANALYSIS:

N.A.
4.6. INTEGRATION CONSIDERATION:

FI-MM Integration
5. BUSINESS PROCESSES - ACCOUNTS RECEIVABLES

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

sellers of paints, thinners, wood finishes, putties and other
materials. As on date ‘X CompanyPaint sales their products
X Company Paints Corporation
1 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.
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
2 Sphinax Chemicals Pvt. Ltd. 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 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
3 Sheenworld Services LLP
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’ is in the trading business. The

imports some auto paints and sale them into domestic
market. They earn their revenue through the trading activity.
4 X Company Auto Solutions 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
branches.
‘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
5 TechServices
Corporation Ltd’. Tech Services raises invoices for the sale of
material and earns their revenue. As on date they the sales
is made only ‘X Company Paints Corporation Ltd.’
‘Sphinax Info Systems’ 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
6 Sphinax Info Systems
based on the number of users. It is likely possible that
Sphinax would sale some computer peripherals to the sister
concerns companies as a part of service contract.
‘Sphinax Organic and research P. Ltd.’is into agriculture

Sphinax Organic & research P. activities. They have procured some farming land and they
7
Ltd. cultivate crops there. The food grains thus farmed are sold
into local market. Revenue is earnedthrough crop sale.
‘Sheelac Financial Services’ are into business of lending

funds to other sister concern companies in the group. They
8 X Company Financial services
charge interest to the loan provided and the revenue is
recognized.
‘X Company Lanka Paints P. Ltd.’ is in the trading business.

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

Overview: The Accounts Receivable module records and administers accounting data of all customers, and
is also an integral part of sales management.
All postings in Accounts Receivable are also updated in the General Ledger. Different G/L accounts are
updated depending on the transaction involved (for example regular invoice posting, advance payments).
The system contains a range of tools that can use to monitor open items, customer account balance
analysis, ageing analysis. The correspondence linked to these tools can be individually formulated to suit
the requirements. This caters to the requirement of sending payment notices, balance confirmations,
account statements, and interest calculations.
Accounts receivable also provides the data required for effective credit management, (as a result of its
close integration with the Sales and Distribution component).
Accounts receivable sub module of financial accounting also enables to post customer invoices directly
through financial accounting.
This also caters to the requirement of dealing with outgoing taxes on customer invoices.
 Accounts Receivable is not merely one of the branches of accounting that forms the basis of
adequate and orderly accounting. It also provides the data required for effective credit
management, (as a result of its close integration with the Sales and Distribution component)
 All postings in Accounts Receivable are also recorded directly in the General Ledger. Different G/L
accounts are updated depending on the transaction involved (for example, receivables, down
payments, and bills of exchange). The system contains a range of tools that you can use to monitor
open items, such as account analyses, alarm reports, due date lists. The correspondence linked to
these tools can be individually formulated to suit X 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.
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
Decide the account
customer No M
group
centrally?
Yes
Sales Organization Create customer in

No S
Sales and views Created? that account group
S
distribution process
Yes Create
Yes Accounting
view?
Create accounting
S
views
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.
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
S
entered

S Yes
invoice post?
No
Park the invoice S
Authorized person
accesses the S
parked invoice
Correct the invoice S

No
Accept?
Yes
Authorized
person
access the
S No Authorized to
invoice post?
Post the
S
invoice
End
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.
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 Cr.
5.2.5. 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.
Customer Incoming Payment Process (Regular/Advance/Adhoc)
Start
Payment
received from M
customer
Down Payment
No
exists?
Yes
Clear the down

S
payment
No Part Payment? No Full Payment?
Y
Yes
Enter payment S
Enter payment S
Enter residual
S
payment
Payment
Document Posted
End
5.2.6. CUSTOMER INCOMING PAYMENT PROCESS (DIRECT DEPOSIT INTO BANK)
Collections received from customers in two ways. The first one is check or draft directly received from
customer and deposit into Bank. Second one is Customer directly deposit into our specified bank account.
Further entries are to be updated based on the Bank statement and the RTGS / E-net receipts.
Customer incoming payment process (Direct deposit into bank)
Start
Payment
received by M
bank
Yes
CMS from Bank M
Down Payment
No
exists?
Yes
Clear the down

S
payment
No Part Payment? No Full Payment?
Y
Yes
Enter payment S
Enter payment S
Enter residual
S
payment
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
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
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.

N.A.

N.A.
5.5. GAP ANALYSIS:

N.A.

FI-SD Integration
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.
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.
6.2.3. 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.
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.
Create Asset Master:
Start
Check the Asset

S
Master List
Asset Master
Stop Yes
Exist?
No
Decide Asset Class M
Create Asset Master

S
in Asset Class
End
Settlement of Assets under Construction
Start
Form C2 to be
approved
M No End
Yes
Relevant
Create Assets S No
Assets created?
Yes
Define
Distribution
distribution S No
rules defined?
rules
Yes
Execute
S
Settlement
Assets Settled
End
Retirement of Assets
Start
Asset is to be
S
retired
Yes
Form C2 to be
M No End
approved
Yes
Create Customer Retirement

S No Y
customer in AR exist? with customer?
Yes No
Retirement
No Partial
with revenue? Retirement?
No
Post book
S
Yes value
Post partial Partial

S Yes No Post full entries S
entries Retirement?
Yes
Profit/Loss Posted
Asset Retired
End
Depreciation posting process
Start
Review Run Batch

Perform Batch
Planned Yes Recalculation
Recalculation?
Depreciation Program
No
Perform
Depreciation
Run in Test
Mode
Run
Review Results
Amend No Depreciation in
and Error Log
Items? Actual Mode
Yes
Review and
Correct/Amend
Release Batch,
Entries
Post-process
Errors
Run Reports
and Review
Postings
End
6.2.6. 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.

N.A.

N.A.
6.5. GAP ANALYSIS:

N.A.

FI-MM Integration
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.
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.
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.

N.A.

N.A.
7.5. GAP ANALYSIS:

N.A.

FI-MM Integration
FI-SD Integration
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.
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.

N.A.

N.A.
8.5. GAP ANALYSIS:

N.A.

N.A.
9. PROCESS MAPPING
Sr. Process Name  As-IS Process To-Be Process WA/GAP System
1 
GL - Accounting
1.1 GL –  As a part of day to  GL A/c master data N.A. SAP

Accounting:Docu accounting and
ment processing monthly closing X  GL Accounting
Company
 Document parking
Accounting team
posts some journal  Document posting
voucher entries,
makes monthly  Document editing
provisions entries
 Document reversal
etc.
 Sample Document
 Voucher printing
1.2 GL - Accounting :  To meet business  Period end closing N.A. SAP

requirements X
Further functions
Company team  Recurring document
does period end
 Foreign currency
closing, foreign
valuations
currency
valuations, interest  Interest calculations
calculations
manually. Also as a  Open item clearing
part of process the
account balances
clearing done
regularly.
1.3 GL Accounting  The accounting  GL Account balance report N.A. SAP

reports team uses GL A/c
balance, item wise  GL Account line item
reports for internal report
analysis.
 GL Account master data
report
1.4 Taxes and duties  Passing JV for  Excise JV

CENVAT credit set
off  Journal voucher entry
2 
Accounts payable
2.1 Vendor invoice  Vendor invoice  Vendor master record N.A. SAP
document verification
postings reference to PO  PO based invoice
verification
 Vendor invoice
verification non-  Vendor invoice parking
reference to PO
 Vendor invoice posting
 Vendor invoice
 Handling delivery costs
posting
 Vendor credit/debit notes
 Vendor
Debit/credit note
 Vendor credit
period
2.2 Vendor payment  Depending upon  Payment terms N.A. SAP

credit period understanding with
business partner,
the credit limit is
utilized for
releasing the
payments.
2.3 Outgoing  Manual check  Manual payment entry N.A. SAP

payments payment entry
 Regular payment
 Check lot tracking
 Payments in foreign
 Generation of ‘.csv’ currency
file
 Advance payment
 Check printing
facility from bank  Advance payment
settlement
 Outward
remittances  Automatic payments
 Payment block
 Generation of ‘.csv’ file
 Vendor open item clearing
2.4 Communications  Vendor balance  Account statements N.A. SAP

with vendors confirmation
letters  Balance confirmations
 Payment advices  Payment advices
2.5 Accounts payable  X Company team  Vendor Account balance N.A. SAP
reports uses vendor report
balances, vendor
open invoices and  Vendor Account line item
vendor ageing report
analysis reports.
 Vendor Account master
data report
2.6 Input  Input taxes: Excise,  Tax codes for : Input taxes: N.A. SAP
Taxes/duties VAT, CST, service Excise, VAT, CST, service
tax, customs duty, tax, customs duty, GTA
GTA
 Automatic posting of input
 Input tax credit taxes to current assets
 No inputs credit  Automatic loading of input

taxes to expenses
 Withholding taxes
 Withholding taxes at
invoice posting or
payment posting
3 Accounts
receivable
3.1 Customer  Manual periodic  Customer master record N.A. SAP

document accounting of :
posting Sales invoices,  Real time automatic
Credit notes, Debit accounting of sales
notes invoices, credit notes,
debit notes
3.2 Customer credit  Credit limit based  Credit management N.A. SAP
limits on the security
deposit  Processing block
 Automatic credit checks
3.3 customer credit  7 days and 30days  Payment terms N.A. SAP
period credit period
3.4 Customer  Regular payments  Incoming payments N.A. SAP

payment receipts
 Partial payments  Partial incoming payments
 Advance payments  Advance incoming

payment
 Customer A/c clearing
3.5 Customer interest  Not followed  Customer balance Interest N.A. SAP
calculations currently calculations
 Customer item Interest

calculations
3.6 Communications  Balance  Dunning N.A. SAP

with customer confirmation
 Balance confirmation
 Payment reminders
 Account statements
 Payment advices
3.7 Accounts  Customer balances  Customer Account balance N.A. SAP

receivable report
reports  Customer open
invoices  Customer Account line
item report
 Customer aging
report  Customer Account master
data report
3.8 Output  Input taxes: Excise,  Tax codes for : output N.A. SAP
Taxes/duties VAT, CST, service taxes: Excise, VAT, CST,
tax service tax
 Withholding taxes  Automatic posting of
output taxes to current

liabilities
 Withholding taxes credit
4 Asset Accounting
4.1 Asset Master  Assets are Asset class N.A. SAP

record managed in excel.
Asset Master record
Asset with
individual tags
4.1 Asset acquisition  Procurement Asset acquisition N.A. SAP

and retirement through PO
Asset under constructions
 Capitalization from
Asset retirement
the put to use
Asset scrap
4.2 Asset  Manual Planned depreciation N.A. SAP

depreciation depreciation
Scheduled depreciation run
calculation at the
year end and Depreciation as per
posting into system company’s act
Depreciation as per Income

Tax act
4.3 Asset report  Asset balances Asset explorer N.A. SAP
 Depreciation Asset balances

balance
Depreciation schedule
5 Cash and bank

accounting
5.1 Petty cash book  Petty cash book for Cash Journal N.A. SAP
each branch
Cash receipts
 Cash payments
Cash payments
 Cash closing
5.2 Bank accounting  Individual bank a/c Bank master record N.A. SAP
for each legal entity
House banks
 CMS A/c for
Check lot management
Sphinax Chemicals
Check register
 Fund transfer
Check cancellation
 Balance tracking for
all CMS branches
5.3  Manual bank Manual bank reconciliation N.A. SAP

reconciliation
6 Profit Center
Accounting
6.1 Cost allocation  Posting expenses Profit center assignment N.A. SAP
per unit of per location-branch
responsibility
6.2 Profitability  Income expenses Profitability analysis report N.A. SAP

analysis for analysis for various
branch locations locations/branches
10. REPORTS
Transaction Code of SAP Standard

Name of the Reports Details of the Report
Report /Customized
GL Accounting
List of Ledger accounts in
S_ALR_87012326 Chart of Accounts SAP Standard
Chart of accounts
S_ALR_87012328 GL Account List Details of Ledger accounts SAP Standard
Display Changes to GL
S_ALR_87012308 Display Changes to GL Accounts SAP Standard
Accounts
Structured Account
Structured Account Balances (Balance
Balances (Balance Sheet &
S_ALR_87012279 Sheet & P&L Account in FS Version SAP Standard
P&L Account in FS Version
Format)
Format)
GL Account Balances (Totals & GL Account Balances (Totals
S_ALR_87012301 SAP Standard
Balances ) & Balances )- Trial balance
S_ALR_87012282 GL Line Items GL Line Items SAP Standard
Statements for GL
Statements for GL Accounts,
S_ALR_87012332 Accounts, Customers & SAP Standard
Customers & Vendors
Vendors
S_ALR_87012287 Document Journal Document Journal SAP Standard
S_ALR_87012289 Compact Document Journal Compact Document Journal SAP Standard
Periodic list of Journal
S_ALR_87012291 Line Item Journal SAP Standard
posting
Display of Changed
S_ALR_87012293 Display of Changed Documents SAP Standard
Documents
Invoice Numbers assigned
S_ALR_87012341 Invoice Numbers assigned Twice SAP Standard
Twice
Posting Totals Document
S_ALR_87012344 Posting Totals Document Type wise SAP Standard
Type wise
S_ALR_87012346 Recurring Entry Documents Recurring Entry Documents SAP Standard
S_PL0_86000030 G/L Account Balances G/L Account Balances SAP Standard
Accounts receivables
Customer Balances in Local
S_ALR_87012172 Customer Balances in Local Currency SAP Standard
Currency
S_ALR_87012197 Customer Line Items Customer Line Items SAP Standard
Due Dates Analysis for
S_ALR_87012168 Due Dates Analysis for Open Items SAP Standard
Open Items
List of Customer Open
S_ALR_87012173 List of Customer Open Items SAP Standard
Items
Customer Evaluation with Open Item Customer Evaluation with
Sorted List Open Item Sorted List
S_ALR_87012177 Customer Payment History Customer Payment History SAP Standard
Customer Open Item
Customer Open Item Analysis
S_ALR_87012178 Analysis (Overdue Items SAP Standard
(Overdue Items Balance)
Balance)
List of Customer Cleared
S_ALR_87012198 List of Customer Cleared Line Items SAP Standard
Line Items
S_ALR_87012199 List of Down Payments open at key List of Down Payments SAP Standard
date open at key date

Debit & Credit Notes Register – Debit & Credit Notes
Monthly Register – Monthly
S_ALR_87012186 Customer wise Sales Customer wise Sales SAP Standard
Transaction Figures Account
S_ALR_87012169 Transaction Figures Account Balance SAP Standard
Balance
S_ALR_87012197 List Of Customer Line Items List Of Customer Line Items SAP Standard
Accounts payable
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 Vendor Balances SAP Standard
Due Date Analysis for Open
S_ALR_87012078 Due Date Analysis for Open Items SAP Standard
Items
S_ALR_87012103 List of Vendor Line Items List of Vendor Line Items SAP Standard
Vendor Debit/Credit Memo
S_ALR_87012287 Vendor Debit/Credit Memo Register SAP Standard
Register
S_ALR_87012089 Display Changes to Vendors Display Changes to Vendors SAP Standard
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
Asset accounting
AW01N Asset Explorer Asset Explorer SAP Standard
AR02 Asset History Sheet Asset History Sheet SAP Standard
Asset Balance by Asset
S_ALR_87011963 Asset Balance by Asset Number SAP Standard
Number
S_ALR_87011964 Asset Balance by Asset Class Asset Balance by Asset Class SAP Standard
Asset Balance by Business
S_ALR_87011965 Asset Balance by Business Area SAP Standard
Area
Asset Balance by Cost
S_ALR_87011966 Asset Balance by Cost Center SAP Standard
Center
S_ALR_87011967 Asset Balance by Plant Asset Balance by Plant SAP Standard
Asset Balance by Cost
S_ALR_87011968 Asset Balance by Cost Location SAP Standard
Location

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Business Blueprint

DOCUMENT RELEASE NOTICE

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Purpose of this Document

Related Documents/ References

Sl. No. Title Version Author

Role Name Signature Date

Project Manager- KPIT

Business Process Owner Mr. Jayaprakash

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.

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

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

7.1. GENERAL EXPLANATIONS- (AS IS): ................................................................................... 85

7.2. SOLUTION IN SAP............................................................................................................ 85