SAP Knowledge Database @ Sapies

Tax on sales and purchases and Withholding tax

2011-12-16T02:08:00.001-08:00

Tax on sales and purchasesTaxes on sales and purchases are levied on every sales transaction in accordance with the principles of VAT. This applies to input and output tax, for example.Input tax is calculated using the net invoice amount and is charged by the vendor.Output tax is calculated using the net price of products and is charged to the customer.Companies can offset input tax against output tax, paying the balance to the tax authorities. Tax authorities can set a nondeductible portion for input tax which cannot then be claimed from the tax authorities.

Withholding taxIn some countries, a portion of the invoice amount must be withheld for certain vendors
and paid or reported directly to the tax authorities.SAP currently provides two functions for calculating withholding tax: Classic withholding tax and extended withholding tax.

Extended withholding tax includes all the features of classic withholding tax and, in addition, also fulfills a number of further country-specific requirements.If you wish to implement the withholding tax functions, you should choose extended
withholding tax.

Chart of Accounts and it's types

2011-12-15T20:00:00.000-08:00

Charts of accounts can have three different functions in the system:
•        Operating chart of accountsThe operating chart of accounts contains the G/L accounts that you use for posting in your
company code during daily activities. Financial Accounting and Controlling both use this
chart of accounts.
You have to assign an operating chart of accounts to a company code.
•        Group chart of accountsThe group chart of accounts contains the G/L accounts that are used by the entire
corporate group. This allows the company to provide reports for the entire corporate
group.
The assigning of an corporate group chart of accounts to a company code is optional.
•        Country-specific chart of accountsThe country-specific chart of accounts contains the G/L accounts needed to meet the
country's legal requirements. This allows you to provide statements for the country's legal
requirements.
The assigning of an country-specific chart of accounts to a company code is optional.

Assign sales order to profit center

2011-12-01T19:37:00.000-08:00

It is necessary to assign SD sales orders to profit centers in order to reflect receivables, sales revenues, and sales deductions on profit centers.

The profit center assignment is also passed on from the sales order through the supply chain: sales order -> delivery note-> goods issue-> billing document. This means that the when a goods issue is posted, the corresponding revenue value for the goods is also passed on to the profit center of the sales order.

Sales orders are divided into header data and item data. Each order item is assigned separately to a profit center, since this is the finer level of detail.

The system proposes the profit center of the material in the supplying plant as the default profit center. Consequently, you usually do not need to enter a profit center manually. This default supports both a product oriented and geographical division of your organization into profit centers.

You might want to divide your company into profit centers according to a sales-oriented structure. In that case, you can define substitution rules in Customizing of classic Profit Center Accounting or new General Ledger Accounting. The system uses these substitution rules to determine the profit center from sales orders. You also need to activate these substitutions for each individual controlling area.

SAP ECC6 FI Tcodes

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TCode Transaction Text
F-01 Enter Sample Document
F-02 Enter G/L Account Posting
F-03 Clear G/L Account
F-04 Post with Clearing
F-05 Post Foreign Currency Valuation
F-06 Post Incoming Payments
F-07 Post Outgoing Payments
F-18 Payment with Printout
F-19 Reverse Statistical Posting
F-20 Reverse Bill Liability
F-21 Enter Transfer Posting
F-22 Enter Customer Invoice
F-23 Return Bill of Exchange Pmt Request
F-25 Reverse Check/Bill of Exch.
F-26 Incoming Payments Fast Entry
F-27 Enter Customer Credit Memo
F-28 Post Incoming Payments
F-29 Post Customer Down Payment
F-30 Post with Clearing
F-31 Post Outgoing Payments
F-32 Clear Customer
F-33 Post Bill of Exchange Usage
F-34 Post Collection
F-35 Post Forfaiting
F-36 Bill of Exchange Payment
F-37 Customer Down Payment Request
F-38 Enter Statistical Posting
F-39 Clear Customer Down Payment
F-40 Bill of Exchange Payment
F-41 Enter Vendor Credit Memo
F-42 Enter Transfer Posting
F-43 Enter Vendor Invoice
F-44 Clear Vendor
F-46 Reverse Refinancing Acceptance
F-47 Down Payment Request
F-48 Post Vendor Down Payment
F-49 Customer Noted Item
F-51 Post with Clearing
F-52 Post Incoming Payments
F-53 Post Outgoing Payments
F-54 Clear Vendor Down Payment
F-55 Enter Statistical Posting
F-56 Reverse Statistical Posting
F-57 Vendor Noted Item
F-58 Payment with Printout
F-59 Payment Request
F-60 Maintain Table: Posting Periods
F-62 Maintain Table: Exchange Rates
F-63 Park Vendor Invoice
F-64 Park Customer Invoice
F-65 Preliminary Posting
F-66 Park Vendor Credit Memo
F-67 Park Customer Credit Memo
F-90 Acquisition from purchase w. vendor
F-91 Asset Acquis. Posted w/Clearing Acct
F-92 Asset Retire. frm Sale w/ Customer
F.01 ABAP Report: Financial Statements
F.02 Compact Journal
F.03 Reconciliation
F.04 G/L: Create Foreign Trade Report
F.05 Foreign Currency Valuation
F.06 Foreign Currency Valuation:G/L Assts
F.07 G/L: Balance Carryforward
F.08 G/L: Account Balances
F.09 G/L: Account List
F.0A G/L: FTR Report on Disk
F.0B G/L: Create Z2 to Z4
F.10 G/L: Chart of Accounts
F.11 G/L: General Ledger from Doc.File
F.12 Adv.Retrn for Tax on Sales/Purchases
F.13 Automatic Clearing without Currency
F.14 ABAP/4 Report: Recurring Entries
F.15 ABAP/4 Report: List Recurr.Entries
F.16 ABAP/4 Report: G/L Bal.Carryforward
F.17 ABAP/4 Report: Cust.Bal.Confirmation
F.18 ABAP/4 Report: Vend.Bal.Confirmation
F.19 G/L: Goods/Invoice Received Clearing
F.1A Customer/Vendor Statistics
F.1B Head Office and Branch Index
F.20 A/R: Account List
F.21 A/R: Open Items
F.22 A/R: Open Item Sorted List
F.23 A/R: Account Balances
F.24 A/R: Interest for Days Overdue
F.25 Bill of Exchange List
F.26 A/R: Balance Interest Calculation
F.27 Periodic Account Statements
F.28 Customers: Reset Credit Limit
F.29 A/R: Set Up Info System 1
F.2A A/R Overdue Int.: Post (Without OI)
F.2B A/R Overdue Int.: Post (with OI)
F.2C Calc.cust.int.on arr.: w/o postings
F.2D Customrs: FI-SD mast.data comparison
F.2E Reconciliation Btwn Affiliated Comps
F.2F Management Acct Group Reconciliation
F.2G Create Account Group Reconcil. G/L
F.2I Document Assignment User Settings
F.2K Manage Templates for Notifications
F.30 A/R: Evaluate Info System
F.31 Credit Management - Overview
F.32 Credit Management - Missing Data
F.33 Credit Management - Brief Overview
F.34 Credit Management - Mass Change
F.35 Credit Master Sheet
F.36 Adv.Ret.on Sls/Pur.Form Printout(DE)
F.37 Adv.rept.tx sls/purch.form print (BE
F.38 Transfer Posting of Deferred Tax
F.39 C FI Maint. table T042Z (BillExcTyp)
F.40 A/P: Account List
F.41 A/P: Open Items
F.42 A/P: Account Balances
F.44 A/P: Balance Interest Calculation
F.45 A/P: Set Up Info System 1
F.46 A/P: Evaluate Info System
F.47 Vendors: calc.of interest on arrears
F.48 Vendors: FI-MM mast.data comparison
F.4A Calc.vend.int.on arr.: Post (w/o OI)
F.4B Calc.vend.int.on arr.: Post(with OI)
F.4C Calc.vend.int.on arr.: w/o postings
F.50 G/L: Profitability Segment Adjustmnt
F.51 G/L: Open Items
F.52 G/L: Acct Bal.Interest Calculation
F.53 G/L: Account Assignment Manual
F.54 G/L: Structured Account Balances
F.56 Delete Recurring Entry Documents
F.57 G/L: Delete Sample Documents
F.58 OI Bal.Audit Trail: fr.Document File
F.59 Accum.Clas.Aud.Trail: Create Extract
F.5A Accum.Clas.Aud.Trail: Eval.Extract
F.5B Accum.OI Aud.Trail: Create Extract
F.5C Accum.OI Audit Trail: Display Extr.
F.5D G/L: Update Bal. Sheet Adjustment
F.5E G/L: Post Balance Sheet Adjustment
F.5F G/L: Balance Sheet Adjustment Log
F.5G G/L: Subseq.Adjustment(BA/PC) Sp.ErA
F.5I G/L: Adv.Rep.f.Tx on Sls/Purch.w.Jur
F.61 Correspondence: Print Requests
F.62 Correspondence: Print Int.Documents
F.63 Correspondence: Delete Requests
F.64 Correspondence: Maintain Requests
F.65 Correspondence: Print Letters (Cust)
F.66 Correspondence: Print Letters (Vend)
F.70 Bill/Exchange Pmnt Request Dunning
F.71 DME with Disk: B/Excha. Presentation
F.75 Extended Bill/Exchange Information
F.77 C FI Maintain Table T045D
F.78 C FI Maintain Table T045B
F.79 C FI Maintain Table T045G
F.80 Mass Reversal of Documents
F.81 Reverse Posting for Accr./Defer.Docs
F.90 C FI Maintain Table T045F
F.91 C FI Maintain Table T045L
F.92 C FI Maintain T012K (Bill/Exch.)
F.93 Maintain Bill Liability and Rem.Risk
F.97 General Ledger: Report Selection
F.98 Vendors: Report Selection
F.99 Customers: Report Selection
F/LA Create Pricing Report
F/LB Change pricing reports
F/LC Display pricing reports
F/LD Execute pricing reports
F00 SAPoffice: Short Message
F000 Accounting
F010 ABAP/4 Reporting: Fiscal Year Change
F01N Debit Position LO Single Reversal
F01O Vacancy RU single reversal
F01P Accruals/deferrals single reversal
F01Q Debit position MC single reversal
F01R MC settlement single reversal
F01S Reversal of Periodic Postings
F01T Reverse General Contract Accr./Def.
F04N Vendor Foreign Currency Valuation
F05N Customer Foreign Currency Valuation
F06N Foreign Currency Val. (G/L Accounts)
F101 ABAP/4 Reporting: Balance Sheet Adj.
F103 ABAP/4 Reporting: Trnsfr Receivables
F104 ABAP/4 Reporting: Receivables Prov.
F107 FI Valuation Run
F110 Parameters for Automatic Payment
F110S Automatic Scheduling of Payment Prog
F111 Parameters for Payment of PRequest
F11CS Config.TR Display Payment Program
F11CU Config.TR Maintain Payment Program
F13E Automatic Clearing With Currency
F15 F15 Interface
F150 Dunning Run
F48A Document Archiving
F53A Archiving of G/L Accounts
F53V Management of G/L Account Archives
F56A Customer Archiving
F58A Archiving of Vendors
F61A Bank archiving
F64A Transaction Figure Archiving
F66A Archiving of Bank Data Storage
F8+0 Display FI Main Role Definition
F8+1 Maintain FI Main Role Definition
F8+2 Display FI Amount Groups
F8+3 Maintain FI Amount Groups
F8+4 Maintain Account Assignment Groups
F8+5 Maintain General Role Definition
F801 Create Payment Request
F802 Change Payment Request
F803 Display Payment Request
F804 Changes to Payment Requests
F805 Delete Payment Request
F806 Create Payment Request
F807 Change Posted Payment Request
F808 Post Payment Request
F809 Post exchange rate differences
F810 Number Ranges Payment Request
F811 Create Collective Payment Request
F812 Change Collective Payment Request
F813 Delete Collective Payment Request
F814 Reverse Collective Payment Request
F815 Display Collective Payment Request
F816 Reset Reversal Coll. Payt Request
F817 Release Collective Payment Request
F820 Coll. Payment Request Number Ranges
F821 Default Doc. Type for Request Type
F822 Set Automatic Payment Block
F823 Revenue Type/Object Class Assignment
F824 Print Request

Currencies are valid in Controlling

2011-11-23T23:48:00.000-08:00

Controlling area currency
The system uses this currency for cost accounting. This currency is set up when you create the controlling area. It is based on the assignment control indicator and the currency type.

• Object currency
Each object in Controlling, such as cost center or internal order, may use a separate currency specified in its master data. When you create an object in CO, the SAP system defaults the currency of the company code to which the object is assigned as the object currency. You can specify a different object currency only if the controlling area currency is the same as the company code currency. There is an object currency for the sender
as well as one for the receiver.

• Transaction currency
Documents in Controlling are posted in the transaction currency. The transaction currency can differ from the controlling area currency and the object currency. The system automatically converts the values to the controlling area currency at the exchange rate specified.

The system always translates actual data with the average rate (exchange rate type M).

You store the exchange rate type for each currency. You can specify a different exchange rate type for planning data in the version.

All three currencies are saved in the totals records and the line items. This enables you to use the different currencies for evaluations in the information system. This is only possible if you specified that all currencies should be updated for the given controlling area.

Overhead Cost Controlling

2011-11-23T23:37:00.000-08:00

The key areas of Overhead Cost Controlling are:
Cost Element Accounting
Cost and Revenue Element Accounting details which costs and revenues have been incurred. Accrual is
calculated here for valuation differences and additional costs. Cost Accounting and Financial Accounting are
also reconciled in Cost Element Accounting. This means that the tasks of Cost and Revenue Element
Accounting stretch beyond the bounds of Overhead Cost Controlling.
Cost Center Accounting
Cost Center Accounting determines where costs are incurred in the organization. To achieve this aim, costs
are assigned to the subareas of the organization where they have the most influence.

By creating and assigning cost elements to cost centers, you not only make cost controlling possible, but also
provide data for other application components in Controlling, such as Cost Object Controlling. You can also
use a variety of allocation methods for allocating the collected costs of the given cost center/s to other
controlling objects.
Internal orders
Overhead Orders are internal orders used either to monitor overhead costs for a limited period, or overhead
incurred by executing a job, or for the long-term monitoring of specific parts of the overhead. Independently of
the cost center structure, internal orders collect the plan and actual costs incurred, enabling you to control the
costs continuously. You can also use internal orders to control a cost center in more detail. You can assign
budgets to jobs. These budgets are then monitored automatically by the SAP system to ensure that they are
kept to.
Activity-Based Costing
In contrast to the responsibility and function-oriented basis of Cost Center Accounting, Activity-Based Costing
provides a transaction-based and cross-functional approach for activity output in which several cost centers
are involved. The emphasis is not on cost optimization in individual departments, but the entire organization.

Purpose of Controlling

2011-11-23T23:28:00.000-08:00

Controlling provides you with information for management decision-making. It facilitates coordination,
monitoring and optimization of all processes in an organization. This involves recording both the consumption
of production factors and the services provided by an organization.

As well as documenting actual events, the main task of controlling is planning. You can determine variances by comparing actual data with plan data. These variance calculations enable you to control business flows.

Income statements such as, contribution margin accounting, are used to control the cost efficiency of individual areas of an organization, as well as the entire organization.

Controlling (CO) and Financial Accounting (FI) are independent components in the SAP system. The data flow between the two components takes place on a regular basis.

Therefore, all data relevant to cost flows automatically to Controlling from Financial Accounting. At the same time, the system assigns the costs and revenues to different CO account assignment objects, such as cost
centers, business processes, projects or orders. The relevant accounts in Financial Accounting are managed
in Controlling as cost elements or revenue elements. This enables you to compare and reconcile the values
from Controlling and Financial Accounting.

Although Controlling can be implemented independently of FI, there is some basic configuration that needs to be done in FI.

Cost elements in Controlling (CO)

2011-11-23T23:24:00.001-08:00

Cost elements in Controlling (CO) is closely related to the general ledger accounts used in Financial
Accounting (FI). This is because the SAP R/3 System is structured as an Integrated Accounting System:

Cost elements document which costs (differentiated by category) are incurred within a settlement period, and in which amount. They provide information concerning the value flow and the value consumption within the organization. Cost Element Accounting and Cost Center Accounting/Internal Orders are closely linked in the R/3 System. Each posting to an account that is also a cost element, is assigned either to a cost center or order. This ensures that at period-end the data is subdivided by cost elements and cost centers/internal orders for analysis purposes.

Primary Cost/Revenue Elements

A primary cost or revenue element is a cost or revenue-relevant item in the chart of accounts, for which a
corresponding general ledger (G/L) account exists in Financial Accounting (FI). You can only create the cost or revenue element if you have first defined it as a G/L account in the chart of accounts and created it as an account in Financial Accounting. The R/3 System checks whether a corresponding account exists in Financial Accounting.

Examples of primary cost elements include:
• Material costs
• Personnel costs
• Energy costs

Secondary Cost Elements

Secondary cost elements can only be created and administrated in cost accounting (CO). They portray internal value flows, such as those found in internal activity allocation, overhead calculations and settlement transactions.

When you create a secondary cost element, the R/3 System checks whether a corresponding account already exists in Financial Accounting. If one exists, you can not create the secondary cost element in cost accounting.

Examples of secondary cost elements include:
• Assessment cost elements
• Cost elements for Internal Activity Allocation
• Cost elements for Order Settlement

There are no Personnel cost elements in CO

SAP Best Practises - Frequently Asked Questions

2011-11-23T23:05:00.000-08:00

01. What are SAP Best Practices?
SAP Best Practices offerings provide detailed implementation documentation and a preconfigured system specifically tailored to support end-to-end business processes for specific industry and market needs. They are based on a building block methodology, providing enhanced flexibility for unique business needs, while simultaneously addressing key business operations and specific industry functionality.

02. How do SAP business partners and solution providers utilize SAP Best Practices?
SAP Partners can use SAP Best Practices as a standardized, industry-compliant solution development platform that allows additional virtualization (industry-specific and country-specific adaptation in configuration). SAP Best Practices can also serve as a basis for an SAP Partners' own SAP All-in-One offering. Partners can select what they need out of the SAP Best Practices package and add supplemental deliverables, such as consulting services, additional configuration or SAP application scope, training, or outsourcing, to create their unique SAP All-in-One solution.

03. How much do SAP Best Practices cost?
Customers and SAP partners can utilize SAP Best Practices at no additional charge. The underlying SAP software must be licensed and installed prior to utilization.

04. What are the main benefits of SAP Best Practices over a traditional implementation project?
SAP Best Practices incorporate vast expertise from over 36 SAP partners, and over 30 years of experience helping many thousands of customers implement SAP applications in their business. Recent studies have shown significant benefits in time and cost savings. Customers surveyed reported reduction of as much as 32% in implementation time, and a reduction in consulting and in-house resources of up to 50%. Other benefits are lower Total Cost of Ownership (11% decrease on average over a 3-year period) through use SAP Best Practices. This also results in lower maintenance costs (up to 22%) and reduced project risks (average of 71%) by using SAP’s Best Practices methodology.
05. Is SAP Best Practices a software solution?
SAP Best Practices offerings are preconfigured templates with documentation guides that are designed to be used with SAP applications. The preconfigured settings and guides are used in an existing system landscape and a specific SAP application release (SAP ERP, SAP NetWeaver Business Intelligence, SAP CRM, etc.). It pre-configures numerous industry-specific business scenarios, baseline scenarios and cross-industry scenarios.

06. Who can benefit from SAP Best Practices?
SAP Best Practices have been designed to support SAP customer implementations and to enable SAP Partners to create high quality SAP All-in-One solutions. Also, large enterprises can use SAP Best Practices as a basis for their SAP implementation or prototyping projects and for creating global templates for a worldwide roll out of an SAP Business Suite solution.

Distribution, Periodic Reposting and Assessment

2011-10-06T02:02:00.001-07:00

Distribution

The following information is passed on to the receivers:

The original, primary, cost element is retained.
Sender and receiver information is documented with line items in the CO document

Assessment

The following information is passed on to the receivers:

The original cost elements are grouped together into assessment cost elements (secondary cost elements).
The original cost elements are not displayed on the receivers.

Sender and receiver information is displayed in the CO document

CO allocations work in the same manner but there are differences regarding
which type of sender is accepted and the way postings are done.

The following should be considered when selecting the method to apply:

1. Senders

Distribution and Assessment will only accept Cost Centers as senders whilst
Reposting will accept all CO objects

2. Posting Method

Distribution and Reposting will only post primary cost elements whilst Assessment will allow posting of both primary and secondary cost elements.

Also Distribution and Reposting will show the costs in the receiver under the original cost element whilst Assessment will use an assessment cost element.

DISTRIBUTION CONTAIN PRIMARY COST AND IN ASSESSMENT THE

SECONDARY COST ELEMENT CARRY THE PRIMARY COST

In Distribution we can distribute only Primary cost but in Assessment both primary as well as secondary cost can be allocate

Performance wise assessment is better since detail line items not written.

Detail drill down is possible in distribution only in assessment only unclean DR and CR written

Distribution, Periodic Reposting and Assessment

DISTRIBUTION

Distribution was created for transfer primary costs from a sender cost center to receiving controlling objects. During distribution, only cost centers or business process can be used as sender.

A distribution receiver can be a cost center, WBS element, internal order, cost object, or a business process. You can restrict the number of receiver categories in customizing.

Primary Postings (such as, energy costs) are collected on a cost center, and allocated at the end of the period by means of the user-defined key.

You can only distribute primary costs. During this process, the original cost element remains the same.

Line items are posted for the sender as well as for the receiver, enabling the allocation to be recorded exactly.

You can reverse distributions as often as required.

You use the Cycle-Segment method to define sender-receiver relationships.

PERIODIC REPOSTING

Differences between periodic reposting and distribution are due to information content and performance.

For periodic reposting, no separate credit record is written on the sender for the cost element in the summary report. Instead, the totals record for the cost element is reduced on the debit side, which means that the original debit amount can no longer be checked there ("unclean credit").

However, during distribution, the system writes a totals record for the credit ("clean credit"). The information on the receiver is the same for periodic reposting and distribution ("clean debit").

Compared with periodic reposting, during distribution, the system also updates the partner in the totals record for the sender. This means that the partner can be displayed in the information system on the totals record level.

As fewer totals records are written during periodic reposting, performance is better than during distribution.

ASSESSMENT

Assessment was created to transfer primary and secondary costs from a sender cost center to receiving controlling objects.

During assessment, cost center or business processes can be used as senders.

The receivers for an assessment can be a cost center, WBS element, internal order, cost object, or a business process. You can restrict the number of receiver categories in customizing.

Primary and secondary posting are allocated at the end of the period by the user-defined key.

During assessment, the original cost elements are summarized into assessment cost elements (secondary cost element category = 42). As the system writes fewer total records, the assessment has a better performance than periodic reposting and distribution.

The system does not display the original cost elements in the receivers. Therefore, assessment is useful if the cost drilldown for the receiver is not important.

Similar to distribution, the partner is updated in the totals record during distribution
You can reverse assessments as often as required. You use the Cycle-Segment method to define sender-receiver relationships.

A: Its easiest to demonstrate this by way of an example

Lets say we have three cost elements with the following amounts to be allocated:

A Electricity $2000 B Water $3000 C Canteen Costs $4000

With assessment cycles the system groups all three together and summarizes the balance of 9000$ onto a separate cost element e.g. D.In order to allocate the costs to a receiving cost centre. Hence your sender cost element is D in your CO reporting and not A,B,C With distributions the costs are allocated from the original cost elements. Hence your senders are A,B,C

Only Balance in Local Currency

2011-10-05T03:37:00.000-07:00

When this option is selected, the balance of that particular account will display the balances only and only in local currency even though it has transactions dealing with foreign currency. Simply speaking, that account balance does not display total of the foreign currency.

The indicator must be set in cash discount and GR/IR clearing accounts.
It must not be set in reconciliation accounts for customers or vendors.

The indicator is usually set in balance sheet accounts that are not managed in foreign currencies and not managed on an open item basis.

"Transaction figures are only managed for amounts converted to the local currency."
For example, here INR is local currency.

Documents      INR                 USD        AUD      EUR

Doc 1             500.00             12.00

Doc 2             1100.00                        30.00

Doc 3              800.00                                      16.00

Balance            2400.00           NoDisp    NoDisp    NoDisp

This indicator indicates that balances are updated only in local currency when users post items to this account.

You can set this indicator for accounts in which you do not want the system to update transaction figures separately by currency.

Setting this indicator for accounts managed on an open item basis affects the clearing procedures. See the example below.

Set the indicator in cash discount clearing accounts and GR/IR clearing accounts. It cannot be set in reconciliation accounts for customers or vendors. Setting it in all other instances is optional.

It is usually set for particular balance sheet accounts including:

Accounts which are not managed on an open item basis and not kept in foreign currencies.

Accounts which are managed on an open item basis and have the same types of items posted in different currencies, but always allow clearing to be made if the local currency amounts correspond.

Simple Overview of Product Costing

2011-10-05T03:15:00.000-07:00

SAP Product Costing deals with Plan Costing + Actual Costing of Finish products or Services.
CO comprises Product Costing + cost accounting integrated with FI.

It uses Integrated Cost Accounting.

Product costing also has 2 phases depending on the Mfg Scenarios.

If you are a normal mfg comp, making goods to stock & sale, you have to first do planning of the costs of products initially as a STD COST of a product. This is used in many phases in SAP CO accounting.

In simple terms, you cost a product by different methods depending on different LIFE CYCLE phases of product. These are Development of new product. Growth stage by modifying it. Mature stage (mass prod). Decline Retirement of that product from Mfg+Mktng)

The whole CO process starts with these PLANNED costs of products & ends with totaling the STD Costs for Actual Production.

This is a simple STD cost Accounting system, in which the end result is calculating Variance bet Planned & Actual & analyzing those for further corrective actions.

Product costing is well integrated to FI, but only where overhead cost accounting is used. Otherwise normally it used only for settlement. All these actual costs of Prod are finally settled/offset to FI or Profitability segments. SAP CO is a very vast & complicated module of all. It needs deep understanding of the subject.

Product Costing

Identified Need: You need to accurately determine the costs incurred in producing the goods and services that your company provides.

Business Process to meet that Need: Product Costing
Product Costing helps a company know the costs incurred by its products in order to successfully manage its product portfolio. The product cost accounting business process calculates cost of goods manufactured (COGM) or cost of goods sold (COGS) broken down by each step of the production process.

How Do I Implement this Process with SAP Solutions?
mySAP ERP (Product Cost Controlling, CO-PC) enables a company to determine the costs incurred to make its products or to provide its services. It uses cost information gathered about the product automatically in other SAP applications (e.g., using the bills of material (BOMs) and routings in Production Planning).

Business Area Vs. Profit Center Vs. Profitability Segment

2011-10-05T03:12:00.000-07:00

What is the difference between Business Area, Profit center & Profitability Segment?

Business area is an organizational unit which corresponds to the specific business segment or area of responsibility. Identification of business area helps in segment reporting of a company in its financial statements. Business areas can be identified based on the products of the company or based on geographical area.

Profit centers are internal areas of a company that have the responsibility for achieving target profits or productivity goals.

The objective of business area is more for reporting purposes whereas profit center allows to analyze areas of responsibility and to delegate responsibility to decentralized units (eg., the various divisions within a company). Thus, profit center are basically treated as "companies within a company" and ensures effective control.
Profitability Segment corresponds to market segment. The market segments can be defined as products, product groups, customers, customer groups, geographic areas, etc. For example, a company may wish to analyze profitability for a specific group of products that the company sells to a particular customer (or group of customers). When setting up CO-PA, the company will have broad flexibility to choose whichever characteristics are relevant for defining the company's market segments. Each unique combination of characteristic values (e.g. sales of product A to customer X) defines a profitability segment.

Another viewpoint:

Difference between Profit Center and Business Area

Business area will have many profit centers. For example Vehicle is a business area in a company. Vehicle can be cars and Bikes etc. Here Vehicle is business area and Cars and Bike are profit centers. In broad Vehicle is a profit center. But as it has sub areas those are profit centers. So profit centers cannot be replaced with business area and vice versa. We can replace business area by Profit centre, only condition is that it should be in same controlling area. The business area is more like a business unit of a company. You can have multiple profit centers within a business area.

Main distinguish factor is that distribution and assessment is possible in profit center but not in business area.

One more distinction is that Business area need not be attached to any organization structure. But profit centers can be created only under the controlling area. Business area can be across controlling area.

Business area concept is used for making strategic decisions by the management whereas the primary purpose of profit centre accounting is responsibility accounting.