Unit 1: Management Accounting Overview

I. General Tasks of Management Accounting

A. Financial Accounting

- involves General ledger, receivables, payables and asset accounting

B. Investment Management

- planning, investment and finance processes

- for capital investment measures

C. Management Accounting

- offer tools for preparing operating data

- for business analysts and management deicisions
- necessary for effective cost and revenue controlling

D. Financial Reports

- external reporting purposes

- Balance sheets and Profit and Loss Statement
- Prescribed thru general accounting standards
o GAAP Generally accepted Accounting Principles
o International Financial Reporting Standard

II. Reporting Requiremements

Internal and external users

- Much of underlying data in relevant for both purposes

- Standardized accounting: Extenral users
 o Financial accounting
- Management accounting: Non-standardized accounting approach for
decision makkng

III. Management Accounting Components

- Typical flow of cost and activity qualities (working hours)
- Costs transferred as overhead allocation to production order
- Overhead costs to same production order
o Working hours
o Labor costs
o Calculated by multiplying number of hours by specific hourly
rate

IV. Management Accounting Architecuture

Overhead Cost Controlling + Product Cost Accounting  Profitability

Analysis
Costs and Revenues Postings to Management Accounting  Expense
Account in Financial Accinting

V. Important Controlling Areas

Overhead Cost Controlling (CO-OM)

- Cost cant assign directly to goods and services of a company

- Allocate them
- Account Assignment Objects for such cost
 o Cost Centers
o Internal Orders

Planning Process: Plan not just cost but also Internal Activities

- Used to calculate prices for activity types

Overhead Cost Object balances calculated

- Allocated to Product Cost Controlling or Profitability and Sales

Accounting

Product Cost Controlling

- Costs for producing goods and services

- Settles to financial accounting or profitability and sales accounting

Profitability and Sales Accouting

- Determine actual business profit and loss

- External View in Market for analyzing Profitability segment
- Internal View – responsibility for profit

E. Main Components of Management Accounting

- Classify Costs and Reconcile Data

- Cost Element Accounting
o classify cost and revenues
o reconcile costs between Management Accounting and Financial
Accounting
Reconciliation Ledger

- Reporting function to identify cost and revenue differences

- Reconciliation postings to Finacial Accounting

Control Overhead Costs and Allocate Cost

- Overhead Cost Controlling

o Origin of costs
o Includes cost cant directly assign product or service
o Can use Activity-Based Costing

Evaluate the Cost of Goods and Services

- Product Cost Controlling

o Cost and evaluate cost of goods manufactured
o Cost associated with product or service
o Carrying out a project (plan and actual)
o Analysis of Value Adding Process

Analyze Profit

- Profitability Analysis
o Analyze effects of enterprise to external market
o How successful enterprise

Analyze Success of Individual Profit Center

- Profit Center Accounting

o Success of profit centers
o Represent internal market
o Multiple valuation approaches and transfer prices
VI. Classifying Costs and Reconciling Data

Cost and Revenue Element Accounting is part of Overhead cost

Controlling

- Classifying transaction items to corresponding Controlling Object

(Cost Center or Internal Order)
- Cost Flow
- Necessary to reconcile internal and external accounting

VII. Controlling and Allocating Costs

Overhead Cost Controlling

- Two Components: Cost Center Accounting & Cost and Revenue

Element Accounting
- Analyzing and controlling overhead costs
- Activity- Based Costing
- More cost allocation options

Cost Center Accounting

- Costs incurred in your organization

- Costs are incurred you assign or post them to corresponding cost
center
o Personnel Cost
o Rental Cost
 o Assign each cost center to Cost Center Type
 Administration cost Center
 Production Cost Center

Cost Center Grouping

o Can be grouped together and provide summary cost information

o Creation of standard hierarchy for controlling area
o Standard Hierarchy: whole structure of all cost centers

VIII. Internal Order

- To tract cost and revenues within controlling area
- To Plan, Monitor, and allocate costs
- Can be Split to Categories
o Overhead Cost Order: monitor overhead costs, documenting
costs for mainainenance and repair
o Investment Order: monitor costs incurred for assets
o Accural Order : Offset entries

Activity Based Costing

- Overhead costs are still assigned to cost centers

- Cost Drivers
- Basis for allocating process quantities
- Include output quantity or scrap quantity for a production order
- Number of processed sales order items
IX. Evaluating Cos of Goods or Services
Product Cost Controlling – all aspect of planning the cost of producing
products and services
Product Cost Planning

- BOM
- Routing
- Estimate costs to produce goods or services

Cost Object Controlling

- Plan Costs, Actual Costs

- Material + Labor + Overhead + Process (Cost Components)
- Costs during production of a product
- Collected on cost objects (Production Orders)
o Sales Orders
o Production Orders
o Process Orders
o Production Costs Collectors
- Focuses on costing and period-end closing
- Calculates WIP, Scrap Cost, and Variances
- PLAN vs. Actual Costs

F. Cost Object Controlling

3 Principal Steps

1. Preliminary Costing
a. Calculate planned cost for cost object ( Production Order)
 b. Plan Variances = compare preliminary cost estimate w/
standard cost estimate
c. Raw Materials consumed  Value assigned to cost object
d. Activity  Quantity of Units & Activity Type  Assigned to Cost
Object
e. SIMULTANEOUS Costing – valuation of quantity flow on a cost
object
2. Period-End Closing –
a. End of accounting period
b. Calculate overhead cost, WIP, Variances and Settlement
3. Actual Costing
a. Material ledger – provide actual cost for each material at end of
period
b. Can be Standard Price ( Variances are collected in material
ledger) & variances are used to calculate actual price at period
closing  Transferred to Material Master Data

Material Ledger

- Collects movement of values

- Collects data for materials saved in material master record
- Uses data to calculate prices
- Prerequisite for multiple valuation approaches
- Can manage inventory value in two more currencies

X. Actual Costing

Single Level Price Determination

 - Assign variances per material at end of period
- Can proportionally assign cumulated price differences to Ending
Inventory Quantity
- Material Consumption per material
- Periodic Unit price in inventory can be valuated using actual price for
period
- System calculates the price differences

Multilevel Price Determination

- Project variances at high levels of production quantity with Multilevel

Actual Quantity Structure

Revaluation

- Revaluate Products or raw material using actual price

- Allows to use actual costing in parallel with standard cost accounting

XI. Analyzing Profit and Success

Profitability and Sales Accounting

- COPA
- EC-PCA

CO-PA

- Profitability segment in external market

 - Defined by product, customer, geographic area, characteristics

PCA Profit Center Accounting

- Analyze internal profit and loss of profit center

- Valuate different areas or units
- Structure profit centers by
o Region ( branches)
o Function ( production,sales)
o Product (product group and divisions)
- Make conclusions on internal aspects of profitability
- Reports can be executed here for profit center or profit center groups
- Can report selected balance sheet items
- Used to evaluate plan and actual data

Profit Center

o Management-oriented org unit

o Internal controlling purposes
o Analyze responsibility of units

XII. Profitability and Sales Accounting: Methods

2 Methods: to make or compile external financial reports

1. Cost of Sales Accounting

 2. Period Accounting

 Choice of method may have country-specifc factors

Cost of Sales Accounting

- Compare revenues from goods and and services with the cost and
expenses for those items
- Profit and Loss information

Period Acconting

- Revenue realized for period and various cost and expense

- Includes inventory value, WIP, and Assets
- Measure for profitability of profit centers

Solution 1: Management Accounting Components

Task:
Answer the following questions about Management Accounting
components.
1. Which component or components would be useful for managing
overhead
costs?
Answer: A
Overhead Cost Controlling and its applications are useful for monitoring
and
controlling overhead costs.
2. Cost and Revenue Element Accounting is used to assign
Management
Accounting data by classifying transaction line items according to the type
of cost or revenue being posted.
Answer: Cost and Revenue Element Accounting
3. Cost Center Accounting is used to track where costs occur in your
organization.
Answer: Cost Center Accounting
4. Overhead Order Accounting describes the costs of single tasks or
current
activities within a controlling area. Internal orders are used to show the
costs of single tasks, such as holding a trade fair or building a warehouse,
or current activities such as maintaining an administrative building or
maintaining a vehicle.
Answer: Overhead Order Accounting
5. Company managers use Activity-Based Costing for a process-oriented
view of financial data. It provides a clear and precise view of the activities
provided in your organization and the related costs.
Answer: Activity-Based Costing
6. Product Cost Planning is used to calculate the cost of producing
materials
or providing services.
Answer: Product Cost Planning
7. Cost Object Accounting is used to monitor actual production costs and
to
control period-end closing activities that affect production.
Answer: Cost Object Accounting
Continued on next page
8. Actual Costing with the material ledger provides the actual costs for
each
material at the end of the period.
Answer: Actual Costing
9. With Profitability Analysis, you can analyze profits and contribution
margins for market segments of your company. It supports sales, product
management, and corporate-wide planning and decision making, using an
external view with a market-oriented perspective.
Answer: Profitability Analysis
10. With Profit Center Accounting you can calculate internal
measurements of
profitability. It portrays the earnings of each profit center relative to its
planned profitability targets for the enterprise.
Answer: Profit Center Accounting

XIII. Integration of MA with other SAP

Unit 2: Management Accounting Organization

I. Organizational Units used in SAP Solutions

- Operating Concern
- Controlling Area
- Company Code
 - Business Area
- Plant
- Purchasing Org
- Sales organization

Controlling Area

- Basic organizational unit in Management Accounting

- Allocate costs only in controlling area
- Can assign more than one company code to controlling area

Operating Concern

- Represents structure of external market segment

- Where you use Profitability Analysis (Co-Pa)

Company Code

- Independent accounting unit

- P&L Statements
- Prepared at Company Code Level

Business Area

- Used to group strategic business fileds for preporting in P&L and and
financial statements
- Can be Cross-company code

Plant

- Production unit is central organizational unit

Purchasing Organization

- Used in material management – Purchasing

Sales Organization

- Organization used in Sales Order Management

 Can assign More than one Company Code to Controlling area

 Can perform cost accounting for all company codes
 Can use 3 Currencies in MA
o Controlling Area Currency
o Company Code Currency
o Transaction Currency

II. Basic Data for Overhead Management Accounting

- Master data required for Management Accountng

A. Master Data Used In Cost and Revenue Accounting

- Cost and Revenue Element Accounting

o Chart of Accounts
o Primary Cost Element
o Sencondary Cost Element
o Revenue Elements
o Cost Element Category

B. Accounts and Cost Elements

Cost Elements

- Expense accounts which costs are posted

- Ensured all posting to type of expense account will arrive MA
  Only Primary Cost Elements  FI G/L Accounts  Chart Of
Accounts

Primary Cost Elements

- Must exist in general ledger expense account in FA

- Posting made to FA to Expense Account  Account assignment
object from MA
- Not possible to post costs to FA without posted to MA

Secondary Cost Element

- Defined only in MA
- Used for Internal allocations
- ASSESSMENTS and SETTLEMENT
- No corresponding GL Account in FA

Revenue Elements

- Record revenue from FA to MA

Cost Element Category

- Assigned cost element

- Type of transaction which cost element can be used

III. Master Data in Overhead Cost Controlling

C. Overhead Cost Controlling Master Data
 - Cost Centers
- Activity Types
- Statistical Key Figures
- Internal Orders
- Business Processes

Cost Center Master Record

- Header Data:
o Cost Center ID
o Controlling Area
o Validity Period
- Basic Data
o Name and Description of Cost Center
- Cost Center Hierarchy
o Standard hierarchy node which cost center is assigned
- Profit Center
o Purpose of cost center
 Production
 Service
 Sales
 Administration
- Company Code & Business Area

Activity Type Master Data

- Basic Data
o Name and description
 o Activity Unit: Specify how activity type is to be measured
- Cost Center Categories:
o Specify cost center category
- Allocation default values
o Specify how activity type is used in activity allocation
- Price Indicator
o How price is calculated
o Manually or calculate using plan and actual cost

Statistical Key Figures

- Measurable quantity that can be assigned to cost center overhead

cost orders
- Business processes and profit center
- Allocation base (tracing factor)
- Measurable values for cost center, profit center, internal order, or
processes
o # of Employees
- Fixed and Total Value
o Fixed: carried over from the periods
o Totals: not transferred to subsequent periods, entered
individually for each period

Internal Order Master Record

- Order Type:
o Most important field in internal order master data
 o Allows to specify the DEFAULT values for different master data
fields
- Internal Orders are used for
o PLANNING, Monitoring, Collecting, and Settling Cost of Certain
Operations

Master Data Groups

- Group different master data items from Overhead Cost Controlling for
Analysis and Reporting
- Reporting:
o Hierearchial level  Automatic totals of levels beneath it
- Each name of Master data Group, only one in a client

Unit 3: Meeting Reporting Requirements

I. Analytics in MA
- Created actual and planned data  Evaluate postings to standard
reporting

A. Reporting Tools in MA

Tools are:

1. Report Writer
2. Report Painter
3. Drilldown Reporting
4. SAP List Viewer
Report Writer

- Use data in MA and other SAP Application

- Config reports based on requirements
- Available standard reports available

Report Painter

- Modify look and layout of report

Drilldown Reporting

- Used in CO-PA ( Profitability Analysis) and Product Cost Controlling

- Characteristics used to classify business transactions (used to
navigate report)
o Controlling Area
o Company Code
o Customer
o Product Group
o Order
o Product
- Drilldown can summarize data according to characteristics and more
interactive
-
- May have time dimension
o Fiscal year
o Period
-

SAP List Viewer

 - Simplifies list output of SAP System
- Line-item reporting
- List have uniform interface and format
- Recommended for all types of list-based reports
- Can choose different standard display variants ( layouts) for line item
display

B. Information System

- Can valuate posted data immediately after posted in SAP System

- Invididual movement is summarized automatically in total record

Unit 4: Planning in Management Accounting

I. Introduction to Planning
Planning

- Provides baseline measurement against which actual operating

results
- Easier to analyze and control business operations  desired results
- Basis for comparing the actual operating results against the plan
- Basic GOALS:
o Benchmarks and Monitoring
o Plan Structures for future operations
o Monitor Efficiency at end of Posting Period
 Using plan and actual comparison
II. Planning Views and Functions
Version

- Unique view of planed cost and revenues

- Different planned values can be created for each version
- SAP automatically created VERSION 0
o When you create Controlling Area
o Version used for plan and actual cost comparison
o Used for Analyzing ACTUAL DATA
- Given Version: Certain SETTINGS apply INDIVIDUALLY to each
Controlling area
o When copying version, planned data version is LOCKED

Planning

- Takes place within PLAN Version

- Particular version  Consistent Results

Copy Planning

- Reuse large parts of cost and revenue planning from previous year
for current fiscal year, Transfer Plan values within fiscal year to
different period
- Can be used to COPY Actual data from cost center and use data as
basis for future planning data

Revaluation

- Increase or decrease planning results

- Multiple Planning Versions: Combine Copy planning and Revaluation
III. Cost Accounting Methods
- Differ on level of detail
- Select valid for whole enterprise
- Planning detail and accuracy

A. Planning Options for Overhead Management Accounting

Simple Planning Methods

- Using Statistical Key Figures

o Calculate ratios in Cost Center Accounting
o Allocation factors for allocations
 ASSESSMENT
 DISTRIBUTION

Statistical Key Figures

- Can be FIXED or TOTAL Value

o FIXED VALUE:
 Enter number of employees who are assigned to cost
center
o TOTAL VALUE:
 Distributed to the period according to assigned
distribution key

Primary Cost Planning

- Activity-independent primary cost structured by COST ELEMENT

o Assign actual data
- Most Cost Elements
 o Material Costs
o Raw Material Costs
o Operating Materials

B. Cost Allocation Method for Planning

DISTRIBUTION and ASSESSMENT costs

- Planned on a cost center

- Using user-defined keys
o Percentage
o Amounts
o Statistical Key Figures
- Advantage: EASY TO USE

PURE COST ALLOCATION

- Cost accounting methods are based on pure cost allocation don’t

require planning
- Many types of Cost Allocation only possible with Overhead Cost
Controlling
o Cost Accounting Method is recommended only for Simple Cost
Accounting Systems
 No require special integration

IV. Activity Type and Other Planning Methods

Activity Types

- Measure cost center performance

- Describe activity output (output quantity) of cont center
 - Used to calculate operating rate and target cost
- Classifies activity done in a company or a work center

Activity Type Planning

- Manage performance of cost center by measuring and controlling

output
- Input Manually:
o Activity Type
 Set Manual Activity Prices ( Combination of fixed and
variable)
o Price for each cost Center

C. Planning Activity-Dependent Primary Cost

- Plan primary costs that are activity-dependent

- Depend on activity type provided by cost center

V. Planning Secondary Cost

- Secondary costs based on use of services (activity input)
- Kind of activity is either activity-independent or activity-dependent

Activity-Independent

- Services such as Plant Maintenance Hours

- Regardless of activity of receiver of cost center
- Activity input is FIXED

Activity Dependent Cost

- Depends on output of an activity

 - Can be FIXED or Variable for Activity output quantity

Cost Accounting Method W/ Activity Based Costs

- Do not need planning but Activity Type

o Assigned to Cost Center
o Price is Stored
- Allocate Costs using Activity Types
o Planning Function is recommended
o Plan the output quantites of activity types
o Can overwrite manually stored prices

Fair Allocation Price

- Result of price calculation prices that bring cost center balance to

zero

VI. Typical Planning Steps for Cost Centers

1. Plan Statistical Key Figures
a. Tracing Factors in distribution and assessment
2. Assign Activity Type to Cost Center
3. Plan Activity Input
a. Activity-Dependent
b. Activity-Independent
4. Reconciliation
a. Scheduled Activity Quantity
b. Plan Activity Quantity
5. Plan Primary Cost
6. Plan Additional Secondary Cost
 7. Automatic Price Allocation

Target Cost

- Expected for certain operating rate

- Target.actual cost comparison

VII. Easy Cost Planning

Easy Cost Planning

- Enter data in system

- Execution Services: Automatically Proposes the data to be posted

Unit 5: Integrated Planning Process in MA

I. Integrated Planning Cycle

Sales Plan (w/ Sales Information System)  Plan Sales quantity (Product
Group Level or Product) 

- Single forecasts can be transferred to Sales and Operations Planning

- Capacity-based comparison of plan quantities with production
resources

Activity Requirements

- Created in SOP or long term requirement planning

- Then transferred to scheduled activities to cost center planning

Cost Center Planning

- Plan activity quantities

 - Basis for scheduled quantities
- Cost Planning is performed for cost centers and internal orders

Calculated Plan Activity  Product Cost Planning

- Estimates production cost of planned products

o Use Bill Materials and Routings

Cost of Goods Manufactured

- Calculated basis of the sales plan

II. Using Application Components in Planning Cycle

Profitability Analysis

- Plan sales, revenue, and profitability

Sales and Profit Planning

- Integrated planning
- Uses various Approaches
o Top-down
o Centralized Planning
o Bottom-up
o Decentralized Planning

Planning Framework

- Structure of plan by planning level and content

- Displayed in tree structure
A. Top-Down Distribution Concept

- Data planned at one level is distributed to other levels

- Planning values to Product Group Level  Distribute these values to
individual products in the group
- OR
- Planning values at individual product levels and distributing those
values to PLANTS

B. Integrated Planning with PP

- Transfer data from one plant to several plant

- Transfer sales quantity plan created in Profitability Analysis to Sales
and Operations Planning
o Sales quantity for individual products or
o Product group level

C. Master Data in PP Integration and Product Cost Accounting

- Material Master – raw materials, assemblies and products

- Bill of Materials – list of components
- Work Centers –
o physical location where operations are performed,
o linked to the cost center and various activity types of the cost
centers
 Activity Price: Valuate Labor or Machine Time
- Routings – sequence of work steps, determine activity quantities to
be used in Cost Center Accounting
D. Planning Internal Orders

3 Different Cost Planning Levels for Planning Internal Orders

1. Overall Planning – simplest level for planning order cost, plan overall
values and annual values
2. Primary/Secondary Cost and Revenue Planning – use detailed
information about internal order
3. Unit Costing – carry out more detailed planning

Integrated Planning for Internal Orders

- Can include:
o Cost element
o Activity input planning
o

E. Various Tools for Product Cost Planning

- Product Costing with Quantity Structures

- Product Costing without Quantity Structures
- Reference and Simulation Costing

Product Costing with Quantity Structures

- Calculated for material via. Automatic derivation of

o Bill of materials
o Routings
o Material recipe
- Results can be updated in Standard Price Field

Product Costing without Quantity Structures

 - Execute a cost estimate  Enter quantity Structure manually or copy
from template
- Results can be updated in standard price field or in another price field

Reference and Simulation Costing

- Calculated for an abstract object known as base planning costing

- Enter manually quantity structure or copy template
- Use subsequent costings under name of base planning object

F. Product Cost Planning Overview

- Create cost estimate with quantity structure

- Must enter:
o Costing variant
 Specify the ff
 Period of validity of cost estimate
 Selection data for Bill of Material and Routing
 Pricing Date for components and activities
(Valuation date)
o Material
o Plant
o Lot Size
- Transfer Control to specify you want to use existing cost estimate or
create new cost estimate
o Analyze the result of the cost estimate

Cost Element Itemization

 - Groups the individual cost items into cost elements
- Groups it in cost in order of appearance
- Individual Cost Items Grouping  Cost Elements

Cost Component Split

- Group cost elements into cost components

- Multilevel is costed, cost component split is rolled up
o Original identity of cost is retained for analysis
- Cost Element  Grouping  Cost Components
o Cost Elements into Material, Labor, OH, Process (Cost
Components)

Costing Sheets

- Calculate your own overhead cost\

- Apply overhead cost to reference object as percentage or quantity
rate
- Assigned to valuation variant

G. Cost Rollup in Product Cost Planning

Cost Rollup

- Ensure cost of goods manufactures (BOM and Routing) of all

materials is in Multilevel Bill of Materials are INCLUDED IN Cost
Estimate of Higher-level material
- Cost Estimate of Multilevel BOM, COST are ROLLED UP
 o Cost components of the cost component split are Passed
Upward the hierarchy to cost estimate of higher level material

H. Price Update

Standard Cost Estimate  Marking and Releasing  Update Standard

Price

Prerequisites before Standard Cost Estimate

- Standard Cost Estimate free of errors

- Marking and Release must be allowed
-

Release of Standard Cost Estimate  Future Price updated as Current

Standard Price

III. Integration of Activity Based Costing

Master Data in Activity Based Costing

- Business Process MD – business transaction or series of actions

o Header and
o 4 Major Areas
 Basic Data – text description, name of responsible
person, item of process, company code, business area,
process currency
  Organizational Units – field for assigning business
process to plant, sales area, cost center and cost center
group
 Attributes
 Allocation View
 How business process can be used in allocation
 Includes
o Unit of measure
o Allocation cost element
o Method (price indicator)
o This can be planned and posted to similar cost center
 Costs can be allocated using PUSH and PULL Approach

I. Activity Based Costing: Push and Pull

Push Approach

- Pure cost distribution

- Costs are distributed using tracing factors (resource and cost drive)
- Quantity flow is not significant
- Easy to understand and implement
- Has disadvantage unlike pull approach
o Not enable retroactive withdrawal of sales quantities up to
resource level for cost center
o

Pull Approach or Quantity Consumption

- Allocation of activity and business process quantities

- Value are allocated using cost element
 - Provide solution to calculate idle-capacity costs
-

Fair Costing

- Cant be guaranteed if push costing

o Idle-capacity costs are distributes to products and customers
are not necessary responsible for these costs

Process Template

- Central tool for assigning or tracing process quantites to cost object

- Allocate indirect costs to single cost object using overheads

Unit 6: Integration Aspects of the Accounting Logic

I. Posting from Other Applications

BE:

- Enter actual cost and revenues

- Primary costs Entered in FA  MA
o Transfer is in real time

MA Document

- Unique Number
- Details
o Management accounting Object
o Cost Element used
o Posted Amount
- Ex:
o FA:
  Dr. P&L Account,
 Cr. Balance Sheet Account
o MA:
 Dr. Controlling Object,
 No Corresponding Cr.
- Primary Cost posted to MA, One-Sided Journal Entry
o Any transaction that create Cost Movement: BALANCED
ENTRIES
o Cost is moved from one controlling object to another
o CREDIT: Sending Object
o DEBIT: Receiving Object

A. True and Statistical Objects in CO

- Posting in Cost and Revenue MA

o True Object ( Settle with other MA Objects)
o Statistical Object ( Information Purposes Only)

True Objects

- SENDING or RECEIVING Object in cost allocation

- Ex.
o Cost Centers
o Internal Orders
o Make to Order Production

Statistical Objects

- Cant allocate to other objects

- Includes
o Statistical Orders
 o Statistical Projects
o Profit Centers

Note:
Overhead Cost Order

- Can be True or Statistical, either

o True Order – takes only True Posting
o Statistical Order – Takes only Statistical Postings

Cost Center

- Exception as always being true Objects

Posting Cost in MA

- Identify True MA Account Assignment Object in Source Document

o Source Document: Journal Entry in Fa
- Only True Object is allowed for each document item in source system
- Additional Statistical objects can be entered or derived from system

II. Posting from FA and SAP ERP HCM

Journal Entry in FA is Created

- Includes expense line item Journal Entry

- Expense can be posted in MA as a cost
- Must Meet Conditions
o Primary Cost Element  Expense Account used in Journal
Entry in FA
o Valid Cost Center
- 2 Documents are created
 o FA and MA
o Each document UNIQUE Document Number

Payroll Accounting

- Calculates various salary and wages amount

o Creates FA Posting & Costs to Cost Centers
- Employee Master Data  Assigned to InfoTypes
o InfoType: Company Code, Personnel Area, Personnel Subarea
o Enables you to determine COST CENTER which
 Dr. Personnel Cost
 Assign Employee to Business Area
o

III. Posting from Asset Accounting to a Cost Center

FIXED ASSET  (Initiates FA Transaction)  Affect P&L Account

- Primary Cost Element

- MA Posting will also be created
- Asset Master Record has a COST CENTER
- ASSET ACCOUNTING initiated
o Interest Expense and DEPRECIATION and generate cost
posting in MA

IV. Posting from MM to Cost Center

GOODS ISSUE TRANSACTION

- Can be assigned to Cost Center

 o Ex. Parts in R&D Cost Center for Prototype
o Perspective of Cost Center, Transaction is a MATERIAL
CONSUMPTION
 Must Enter Movement Type
 Movement Type: Identification key for Control functions
- GOODS iSSUE In Cost Center  FA Transaction
o Dr. Material Consumption
 Cr. Material Stock (Inventory)
- Cost Center is DEBITED
o Value of goods using Primary Cost Element

COMMITMENTS

- Used on Controlling Objects to show CONSUMPTION of BUDGET

o Even if consumption yet is not considered as COST
- MM Purchase ORDERS
o Not Posted in FA, No Entry in FA
o BUT Item in PO can be assigned to separate Cost Center or
Controlling Object
 Once posted, creates COMMITMENT LINE ITEM
o When Ordered Goods Delivered, ACTUAL COST INCURRED,
 Clears Commitment and Post the ACTUAL COST\
- PR: Provisional Commitment
o Internal Procurement Requirement
o Can be changed at any time
o Commitment in MA, assign MA Object for PR Item
- PO: FIRM COMMITMENT
o Contractual Commitment of Purchased goods
 o Purchase Item entered under Cost Element, Enter MA Object
- Reduce Commitments using GOODS RECEIPT against PO
o Actual Costs are posted in MA Object

Note:

- If Invoice Receipt is assigned to different Cost Centers,

o DOCUMENT SPLIT in FI Document

V. Statistical and Real Postings

- Statistical Data doesn’t affect cost
o Used for Reporting

B. Posting to Statistical and Real Orders

Statistical Orders

- Used to evaluate costs

- Cant be itemized in detail In Cost Center Accounting

Example:

- FA Document assign cost Posting to COnt Center and Statistical

Internal Order
o Cost Apprear on both Orginal Cost Element
 Cost Center ( Real Costs)
 Statistical Order ( For Information Purposes)

Example:

- Statistical Orders
o For invidiual trucks monitored in vehicle pool cost center
**** I don’t Understand fully Ststistical Order and Posting to Profitability
Segment

Unit 7: Daily Postings in Management Accounting

I. Actual Posting in Overhead Management Accounting

Correcting Posting Errors
2 Ways

1. Reverse the Original Document & Post Corrected Document in

Original Application
2. Correct Data Records in MA
a. By Reposting cost manually or reposting line items

Note:

- You can only use correction methods if the correction is not relevant
in original application
o Ex. Original Expense Account Correct, Cost Object, NOT
- Repost Primary Costs from one Controlling Object to Another
Controlling Object
o Transaction-based Reporting
o Orginal Cost Element is RETAINED

Two Types of Reposting

1. Manual Reposting of Cost

a. Transfer Cost from MA Object to another MA Object
 b. Does not preserve a direct link between amount transferred

2. Repost Line Items

a. Specify FA Document Number
b. Contains reference to original FA document
c. Link to Original FA document is PRESERVED after correction
posting

II. Allocating Direct Activities

- Allocation Data must be entered to System

Indirect activity Allocation

- Enter quantity of an activity type provided by cost center

Direct Activity Allocation

- Cost center Providing activity (SENDER)

- Cost Center Receiving Activity (RECEIVER)
- Type of Activity and Activity Quantity
- Only Cost Center may be SENDER
o Receiver can be ANY Controlling Object
- CR. SENDER COST CENTER
o DR. RECEIVER COST CENTER (Secondary Cost Element)

Real-Time Reconciiication (I DON’T UNDERSTAND)

- When posting Direct Activity allocation: Cost Center Controlling

Object of Different Profit Center/ Business Area
o Posting carried out in FI
Cross-Application Time Sheets (CATS)

- Simplified Cross-application time entry

- Time sheets combine functions for recording

III. Managing Project Costs

- Expenses in project, monitored by allocating budget

Budget Types for Internal Orders

1. Original Budget – Original Budget

2. Budget Updates – Suppliments & Returns, Unforseen events
3. Current Budgets – original budget + All Updates
4.

Budget Management

- Can change roginal budget to update it

- Can lock original budget using status management
- Update Budget
o Documented Transaction
o Enter Explain text for budget terms

IV. Availability Control

- Additional to Budget Profile Control
- Specify the availability control is activated
- TOLERANCE LIMIT: how system

V. Execution Services
- Use execution services to record commitments and actual costs
 - System automatically proposes resources and quantites
- Supports the following postings
o Internal Activity Allocations (for internal activities)
o Direct Process allocation ( for processes)
o Reservations ( for material items)
o Goods Issue ( for material items)
o Purchase Requisitions and Purchase Orders ( for material
items, external activity, service items, variable items)

VI. Postings to Make to Stock Production

- Postings using LOT-SIZE-BASED, MAKE TO STOCK, Production
- How to create production orders for manufacturing and how to post
transactions to Order
- How to Create PO, Post Activities, Material Consumption

Analyze Production Costs

- Enter production costs for Materials and products

- Analyze Production Cost in Three Ways
o Lot Size using Product Cost by Order
o Period Using Product Cost by Period
o Sales Order using Product Cost by Sales Order

Production Cost by Order

- Lot-oriented production of goods

- Always set on a fixed quantity ( LOT SIZE)
- Display costs in reporting for specific period
 - EX: Order-related production using Production order for a specific
quantity
o Sales Order are also lot-sized-related because they are created
for specific quantites
- Each ProductionOrder, can
o Calculate PLANNED and ACTUAL Cost
o Transfer ACTUAL Cost to Other SAP System
o Analyze Planned and Actual Costs
 Determine Any Production Variances

Product Cost By Period

- Analyze cost by period

- Cost collected and analyzed over a specific time using PRODUCT
COST COLLECTOR
- Time-oriented production of goods
- Used for Mass Production (can’t enter production quantity)

Product Cost Collector

- Collect product cost regardless of production type

- Production cost can be collected in same product cost collecter for
each period

Product Cost by Sales Order

- Production of goods for a specific customer requirements at the time

of production, refer to specific quantity

Monitoring Production Costs

 - Product Cost Controlling at Order Level:
o Production orders are the cost objects
o Costs debited to orders are analyzed and settled in lots
 Variances can be analyzed after whole production
quantity has been delivered to inventory
o Analyze Plan, Target, and Actual Costs for Production Orders,
o Calculate WIP using Actual Costs
 Analyze Variances
o Transfer Data to FA, PA, Profit Center Accouunting

VII. Using Production Orders

- Manufacture of materials or products, production orders are used to
enter production cost
- Order-related production as production process
o Derive quantity Structure from BOM, ROUTINGS and Decide if
use Manufacturing Production Order as COST OBJECT

Process Chain: Order Related Manufacturing

1. Order Request – comes from Sales & Operation Planning based on

external request
2. Order Creation – preliminary cost estimate generated, used to
calculate planned cost for the order
3. Availability Check – check the availability of raw materials and
semifinished goods, if not available, these can create additional
planned orders is converted to Production Order, Purchase
Requisition, or Purchase Order
 4. Order Release -
5. Shop Paper Printing
6. Material Witherawal
7. Confirmations
8. Allocate Process Quantities
9. Revaluate at Actual Prices
10. Overhead Cost
11. WIP Calculation
12. Goods Receipt
13. Variance Calculation
14. Settlement
15. Order Archived/Deleted

Order Release, Material Withrawal, Confirmation, and Shop Paper

- Actual costs are incurred when material is WITHRAWNED for the

order + CONFIRMATIONS generated for consumption of activity
Types

Delivery to Stock

- Production process is complete, WIP is delivered to stock

- Partial deliveries any time

Note:

- Price Differences are accounted after final Delivery

Price Control Indicator

 - S: Standard Price
o Difference between actual costs and credit posting for Inventory
o Difference is charged to price difference account
o Recalculates the moving average price
- V: Moving Average
o Difference between actual and credit posting
o Charged to material stock accunt
o Recalculates total warehouse stock and moving average price

IF Warehouse Stock is LESS than Order Quantity

- Costs for remaining warehouse wuantity are posted to Mateiral’s

Stock account
- Remaining Costs are automatically posted to price difference account

VIII. Posting Sales of Makes to Stock Goods

- How sales of Make to Stock entered in system
- Sales Order is processed thru billing and posting revenues

Selling Goods

- Sales Order – sell manufactured goods from warehouse, completed

using sales order line item NOT COST OBJECT

Steps In Sales Order Procesiing

Sales Order  Delivery  Billling  Payment

Sales Order
 - Preceeded by Customer Inquiry and Quotation

Revenues and Cost of Goods Sold are calculated when products are
delivered and billing takes place

- Products are Delivered to Customer – stock reduced by Cost of

Goods Sold
- Delivered Products are BILLED, company can see the revenues
generated
o Billing document is when customer is Invoiced

Billing Document

- Completes business transaction in

- Billing data sent to FA

Unit 8: Period-End Closing Aspects of Management

Accounting

I. Using Schedule Manager for Fast Close Options

A. Schedule manager Features

- Helps carry out period-end closing activities

- Combine all related transactions in one central application
- Provides all data that is required for execuring period-end closing
task

To Use Schedule Manager

1. Create Structured TASK LIST ( To Group Individual Tasks together)

 a. Flows
b. Individual Jobs
c. Programs and Transactions
d.
2. RUN Flows and Invididual Jobs in background
3. Run Programs or Transactions
4. Store Detailed Information for each taskk

II. Period-End Closing for Overhead Cost Controlling

- Periodic transactions in Overhead Cost Controlling

B. Values used in Overhead Management Accounting

- SKF are used for calculations

o SKF as Master Data Records
 Key Figures
 Fixed Values
- Basis for period-based allocations

C. Cost Allocation

- Several methods to carry out periodic allocations in Overhead Cost

Controlling
- PURE COST ALLOCATION
o Transfer costs from sender objects to receiver objects
o Known as VALUE FLOW and also include QUANTITY FLOW
- ACTIVITY ALLOCATIONS
o Used in periodic allocation
o Allocate activities, use quantity flow
 Refers to quantity of different activity units
 o When Activity Based Costing is activated, periodic cost
allocations using templates

D. Periodic Activities in Overhead Cost Controlling

Operating Expenses – often posted differently in FA than in MA

- FA Expense posting in posting period can actually refer to entire year

Periodic Cost Allocation

- Avoid periodic cost fluctuations in Cost Center Accounting caused by

payment flows for specific periods
- Costs attributed to relevant periods of time
- Costs created in way also known as ACCRUED COST

Accrued cost, posted 2 ways

1. Recurring Entry Transaction in FA and cost transfer in MA

2. Accural Value is calculated in MA using costs

Calculate Accrual Value in MA, choose the ff methods:

1. Percentage Method – determine accrued cost using percentage

based on cost elements
2. Target = Actual Cost

Percentage Method

- Enables accrued cost using percentage based on cost element

- Advantage:
o Accrued cost are calculated on basis of actual cost
o Recommended for Accrual Calculation of WAGE Costs
 - In Accrual Calculations, accrued costs are debited to Cost Center
o At same time Accrual Objects are credited
- Actual costs are also posted to accrual object to calculate, analyze,
and allocate all balances between expenses

P359 TO CONTINUE

III. Period-End Closing for Product Cost Controlling

- Processing steps necessary at the end of the period for cost object

E. Settlement and Other Period-End Task

- Costs are settled to price different account

- Cost objects are settled at the end of a period
o 2 Ways
 Product Cost by Order
 Product Cost by Period

Product Cost by Order

- Work in Process calculated at actual cost

- As long as Cost Object is not yet delivered, there will be WIP but no
variance
- Cost Object is delivere, WIP is calcleled and variances are calculated

Product Cost by Period

 - WIP is calculated at target cost
- Both WIP and Variances

During Period-End Closing, Remaining costs are first collected to cost

object

- Activities and processes are allocated using template allocation

- Activity Quantities are revaluated at actual prices
- Overhead rates allocate overhead costs to the cost object and credit
a cost center or internal order
-
-

IV. Profit NAalysis in MA

V. Profit Analysis with Actual Costing or Transfer Prices

HARD TO UNDERSTAND

Unit 9: Reconciliation between MA and FA

I. General Ledger Acounting

II. Reconciliation Ledger
III. Master Data Governance for Financials