10/15/2019 SAP FI-CO Accounting Entries

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SAP FI-CO Accounting Entries

Chandrashekhar Kulkarni Follow
Business Manager at IBM 79 7 5

In this article we shall go through the explanation of how and what debit credit entries are
posted to the system in SAP for AP, AR, Assets, Product Costing and in Bank Communication
Management. During interviews many a times these questions are tried out to check out the
basic understanding of the FI-CO consultant.

Types of FI accounts
Before we actually start checking entries in the SAP system for various processes a basic
understanding is necessary on how the classification of the accounts in SAP is done and its
treatment which is quite universally known nonetheless revisiting it again.
In Accounting there exists the following classification for all the accounts at a broader level.
Real Accounts
          Assets – Tangible, Goodwill - Intangible
2. Personal Accounts
          Natural Persons – eg Customers, Vendors

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3. Nominal Accounts
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          Temporary accounts like Expenses, Incomes or gains. Usually they go up during the year
and are not carried forward. Every year the balances are transferred to the retained earning
account and they start the next year with zero balances.
The three golden rules for account entries when transaction happen are as follows
Golden rule for real accounts
 Debit what comes in
 Credit what goes out
Golden rule for personal accounts
 Debit the receiver
 Credit the giver
 Golden rule for nominal accounts
 Debit all expenses & losses
 Credit all incomes & gains
 
In SAP we do the following classification of the GL accounts on the functional basis as below and
also there is an account type configuration A-Asset D-Customer K-Vendor M-Material S-GL
which are further linked to document types. However from a functional perspective the accounts
are to be looked from a Balance sheet and P/L statement perspective only.
Asset accounts
Liability accounts
Expense accounts
Income or Revenue accounts

Asset account:
An item of property owned by a person or company having value and available to meet debts,
commitments, or legacies. 
e.g.: Land, Vehicle, Cash, Bank, Debtors etc.

Liability account:
An obligation, responsibility, or debt owned by a person or company.
e.g.: Loans, Creditors etc.

Expense account:
The cost incurred in or required for something; an amount of money spent by a person or
company.
e.g.: purchases, costs, expenses, overheads

Income account:
 Money received, especially on a regular basis, for work or through investments
 e.g.: sales, revenue
 
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To understand the accounting entries, we need to just follow the rules

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Rules of debit and credit
                       INCREASE     DECREASE
ASSET                 Debit          Credit
EXPENDITURE   Debit           Credit
LIABILITY             Credit           Debit
REVENUE           Credit            Debit

P2P cycle accounting entries

When we receive the goods in the plant inventory will increase and Liability will increase. Hence
Inventory account will be debited while the GR/IR clearing account will be credited as we don’t
know as of now who is the person who sold us the goods.
GOODS/INVENTORY/GR A/C.......DR    
GR/IR A/C....................................CR
(being goods recvd),
When we receive the invoice we now know who had send the goods. Hence clearing liability
from GR/IR Goods receipts invoice receipts account to the actual vendor liability account.
GI/IR A/C ……...DR
TAX A/C ………..DR
VENDOR (ACCOUNTS PAYABLE) A/C....CR
When we do the payments the liability is decreased and our cash is also decreased.
VENDOR A/C ……………………....DR
BANK CLEARING / CASH A/C...CR
If we use an intermediary bank account then this asset account is increased and the actual bank
account is decreased.
BANK CLEARING A/C…….DR
BANK A/C.......................CR

O2C Order to Cash accounting entries

The integration of O2C with FI starts from the delivery process when material is moved for
deliveries.
Delivery accounting entries as inventory decreases
COST OF GOODS SOLD A/c ...Dr
STOCK A/c ….……………………...CR
Here COGS comprises of all cost for manufacturing the product to picking packing cost and
discounts.
Ones the goods are delivered we send an invoice in the form of a billing document to the
customer. The customer is a personal account and receives hence it will be debited while the
revenue account is nominal and increases the credit account.
CUSTOMER A/c ……….DR

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DISCOUNT A/c…………DR
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SALES REVENUE A/c…CR
TAX ACCOUNT…..…….CR
EXCISE/DUTY A/c…….CR
When we receive a payment from the customer through a bank doing Electronic Banking
Statement upload FF_5 or we receive an amount from the customer F-28. As cash/bank account
increases.
BANK ACCOUNT A/c ……… DR
CUSTOMER A/c ………………CR
The configuration for these settings are done under OBYC tcode where a transaction key is
assigned which finds depending on the movement type and valuation class or on the basis of
condition type and access sequence which GL account should be automatically picked for journal
entries.  

Asset FI entries
Asset Acquisition with Vendor F-90 
Dr.   Fixed Asset – Acquisition Cost
Cr.  Vendor (Accounts payable)
Posting date of the document will be copied into the asset master as the capitalization date.
The depreciation start date of each depreciation area will also be determined and updated in the
depreciation area data tab page.
Asset acquisition posting could also be done without PO from the MM module.  
Posting could be done in FI posting only.

Asset Disposal – Sales to a Customer using F-92

An asset having a price of 10,000 Rs. And accumulated depreciation of 1000 Rs is sold to to
customer at a price of 11,000 Rs the following entries will be made by SAP
 
Dr. Customer account (A/R)                   11,000 
Cr. Revenue for asset disposal               11,000-
Cr. Fixed asset – acquisition cost           10,000- 
Dr. Accumulated depreciation                    1000 
Dr. Clearing account for asset disposal   11,000 
Cr. Gain/loss of fixed asset disposal          2000-
 
 
The posting date of the retirement posting will also be updated into the field "deactivation date"
in the asset master as the retirement date.
 

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Asset Disposal – Scrap without Revenue Sign

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ABAVN
 
A asset can be disposed as scrap without any selling value or it could not generate any value. In
this case, no revenue is expected and a loss will be realized in the P&L if the fixed asset being
scrapped still carries a net book value.
For the same asset with historical cost Rs 10,000 and accumulated depreciation of Rs 1000, the
posting of the scrapping will be as follows:
Cr. Fixed asset – acquisition cost           10,000-
Dr. Accumulated depreciation                 1000
Dr. Gain/loss of fixed asset disposal         9000
 

 Asset Transfer within a Company –

Reclassification
The Net Book Valvue (NBV) of an existing asset master record could be transferred to another
asset within the same company. The transaction could be used in the following scenarios:
Reclassify an existing asset to a new class or to correct an error
Transfer an asset to a new one with the same class. This may be necessary to execute the change
of the remaining useful life of an asset but still spread the net book value evenly throughout the
remaining life without allowing the system to catch up the postings of the missing or extra
depreciation of the past periods
For an asset with historical cost Rs 10,000 and accumulated depreciation of 1000, the posting of
the intra-company transfer posting will be follows:
 
Cr. Fix asset – acquisition cost (old asset)                   10,000-
Dr. Accumulated depreciation (old asset)                     1000
Dr. Fix asset – acquisition cost (new asset)                  10,000
Cr. Accumulated depreciation (new asset)                   1000-
 
The old asset being transferred will become a retired asset and the transfer posting date will be
updated as the retirement date in the asset master record. 
For the new receiving asset, the transfer will be the same as if it is being acquired. The transfer
posting date will be used as the capitalization date.

 Month End Processing – Depreciation Run

AFAB
Dr. Depreciation expense

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Cr. Accumulated depreciation

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 Note that the above posting to G/L will be done in a summary level by G/L accounts and cost
center levels because the depreciation expense has to be charged to cost center in CO. However,
the detailed depreciation amount of each asset will also be stored in Asset Accounting such that
each unique asset master record will also have its unique posted depreciation amount. Besides,
after each depreciation run, the system will issue a report which list out the depreciation posting
amount of each individual assets as a record. It is advised that this report should be kept as an
additional audit trail.

 Asset under Construction AUC configuration

and processing steps till settlement
Internal Order as Investment Measure:
 1. Define the AuC Asset Class (with investment measure) - OAOA
2. Define the Asset Class – for Main Asset - OAOA
3. Define Investment Profile - OITA
a. Assign the AuC Asset Class (Step-1) in the investment profile
4. Assign Investment Profile to Model Order - OITA
5. Define Order Type (Investment) - KOT2
a. Settlement Profile - OKO7
b. Maintain Allocation Structures - OKO6
c. Planning Profile - OKOS
d. Budget Profile - OKOB
6. Create an Internal Order - KO01
a. With the Investment Profile (Step-2)
b. AuC automatically created by the system using Asset Class given in the Investment Profile
7. Post the amounts to IO - FB01
Dr. Material supplied to Asset (Expenditure)
Cr. Cash account
8. Settle the amounts to AuC from IO (Prcg type: Automatic) - KO88
Dr. Asset under Construction account
Cr. Contra Capitalized
9. Create the Main Asset - AS01
10. Settle the amounts to Main Asset from AuC (Prcg type: Full) - KO88
 Dr. Final Asset account
Cr. Asset under Construction account
 

Asset under Construction Line Item Settlement

Process
1. Define the AuC Asset Class (with Line Item Settlement) - OAOA
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2. Define the Asset Class – for Main Asset - OAOA

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3. Define Order Type (Overhead) - KOT2
4. Create an AuC-Asset (using Step-1 Asset Class) - AS01
5. Create an Internal Order - KO01
a. Assign the AuC – Asset in Settlement Rule in IO
6. Post the amounts to IO - FB01
7. Settle the amounts to AuC from IO - KO88
8. Create Main Asset (using Step-2 Asset Class) - AS01
9. Assign the Main Asset in IO (Step-5) - KO02
10. Settlement AuC – Line Item List - AIAB
11. Settlement AuC - Receiver – AIBU
 

Product Costing Accounting Entries

1. Material received against purchase orders (Raw Material). Asset and liability both have
increased in this case. (MIGO)
Inventory / Raw Material Stock A/c …............. DR   (BSX Key)
GR/IR Clearing A/c …………………………....CR   (WRX Key)
Entries for Payment to vendor according to P2P.
2. Material Consumption (Raw Material) Goods issue to Production order (MB1A)
Raw Material Consumption Stock A/c ……………...…..DR
Raw Material Inventory Stock A/c ……………………...CR
3. Activity is performed on this stock to manufacture the goods. Finished Material
Machine Allocation A/c …….DR
Labor Allocation A/c   ……...DR
Overhead Allocation A/c …..DR
Cost Center A/c ………………..CR
4. Goods Receipt from Production Order to Inventory Stock (Goods receipt WE) (MB31)
Finished Goods A/c ……….DR
Change in Inventory A/c….CR
PRICE DIFFERENCE A/c …..DR/CR depending on the difference
5. In case of Work In Progress Settlement
WIP Balance Sheet A/c ……………………DR
WIP Profit Loss A/c …………………………CR
The status of the order determines whether WIP calculation creates or cancels the work in
process. If the order has the status REL (released), the system can calculate work in process.
Once the order receives the status DLV (Delivered) or TECO (Technically completed), the work in
process calculated in a previous period is canceled.
6. WIP Cancellation if the order status is DLV or TECO
WIP Profit Loss A/c …………………………DR
WIP Balance Sheet A/c ……………………CR
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7. Goods Issue for Production Order to Inventory for stocks (Goods Issue WA) Tcode - MB1A
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Consumed Finished Goods A/c ….......…..DR
Finished Goods A/c ………………………CR
8. In case of direct Dispatch Delivery of goods to customer and then you have the normal O2C
Process.
Cost of Goods Sold A/c ………………….DR
Inventory A/c ………………………………..CR

In House Cash Management Accounting Entries

The basic usage of IHC is to minimize external bank transaction thus saving transaction costs,
utilizing available funds in a centralized treasury and add to efficiency of liquidity management.
With IHC it becomes easier to manage your intra group and external payment transactions in an
effective manner avoiding associated risks. Consider the trigger of Business Partners delivering
goods (Vendor) and sending an invoice to the company.
The sap presented solution works along the following lines
There are different unique independent companies (subsidiaries) which have their own
interaction systems.
The head office has a main bank called as the In House Cash Center.
Account management in the IHC Main is done via IDoc link to FI.
IHC manages all the current a/c of its subsidiaries.
For intercompany payments
Company COMP01 does the payment to COMP02 through the In House Cash Center. The In
House Cash Center posts the payment to relevant accounts in both these company accounts and
sends back the bank statements as well.All the data transfer is managed via IDoc (PAYEXT for
payment order and FINSTA for bank statements)
COMP02 sends invoice
EXPENSE OR GR/IR ACCOUNT A/c ….DR
IHC COMP02 A/c …………………………...CR
Payments using F110 where the company COMP01 pays the invoice amount to the COMP02. The
F110 record posts to the clearing account in IHC. The PAYEXT IDoc is generated and sent to the
IHC. F111 can be used to perform the payment requests that are generated.
IHC SUSBSIDIARY CLEARING COMP02 A/c …………………..…DR
IHC SUSBSIDIARY CLEARING COMP01 A/c ….………………....CR
IHC does the payment job to company 02 which in this intercompany is the vendor to the
company 01 and sends an FINSTA or bank statement
COMP01
IHC MAIN COMP01 A/c ……………….…..…DR
IHC SUSBSIDIARY CLEARING COMP02 A/c ….………………....CR
COMP02
IHC SUSBSIDIARY CLEARING COMP01 A/c ….………………....DR
IHC MAIN COMP02 A/c ……………………....CR
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Payments order generated by IHC in form of FINSTA can be accessed in the payment browser
transaction code IHCO. The order contains two payment items as pointed out above one which
debits the ordering party and one which credits the payment recipient. Transaction FEBP can
then be used to create these postings.

Central Outgoing Payments with In-House Cash

Several currencies are used for payments to suppliers by the companies under a group. The
central payments features allows to combine these payments and creates a centralized payment
process execution mechanism. In House cash handles all the payments of its subsidiaries to the
external world.
EXTERNAL VENDOR sends goods and invoices COMP01
EXPENSE OR GR/IR ACCOUNT A/c ….DR
IHC BUSINESS PARTNER A/c …………………………...CR
Payments using F110 where the company COMP01 pays the invoice amount to the external
Vendor. The F110 record posts to the clearing account in IHC. PAYEXT IDoc is generated and sent
to the IHC and with F111 these payment request instructions to the IHC can be viewed.
IHC BUSINESS PARTNER A/c …………………..…DR
IHC SUSBSIDIARY CLEARING COMP01 A/c ….………………....CR
IHC does the payment job to external vendor after netting or taking into consideration various
currencies and sends an FINSTA or bank statement back to the COMP01
IHC MAIN COMP01 A/c ……………….…..…DR
EXTERNAL VENDOR A/c ….………………....CR
IHC SUSBSIDIARY CLEARING COMP01 A/c….DR
IHC MAIN COMP01 A/c ……………………....CR

Chandrashekhar Kulkarni
Chandrashekhar
Business Manager at IBM Follow
Kulkarni

7 comments

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Anup Anup Deb

6mo
Deb SAP FI Consultant

Thanks
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R j
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Raj
Raj Jilla 9mo
Jilla Sign in Join now
Program Director at ZettaMine Labs

Thanks for the useful compilation

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Cma Cma B S Nanda

10mo
BS Manager costing and budgeting at hero group
Nanda
Very very useful
Like Reply

Ahmed Babalola BSc, ACA, ACIB, DipIFR, 12mo

Ahmed Assistant Manager at PricewaterhouseCoopers Nigeria
Babalola
BSc, This is great and very useful. many thanks 
ACA, Like Reply
ACIB,
DipIFR,
YOUNUS MOHAMMED 12mo
YOUNUSTreasury Officer J.K CEMENT WORK FUJAIRAH FZC
MOHAMMED
Excellent Documentation... Very Useful.  
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Vijay Vijay Malhotra

1y
MalhotraSoftware Engineer at Tata Consultancy Services

Excellent Documentation... Very Useful.

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