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Enterprise Structure four special periods. These periods are stored in what is called the fiscal
year variant.

There are two types of Fiscal Year Variant

What is a Company Code and what are the basic organizational
assignments to a company code?  Calendar Year – e.g. Jan-Dec
Company Code is a legal entity for which financial statements like Profit
 Year Dependent Fiscal Year .
and Loss and Balance Sheets are generated. Plants are assigned to the
company code, Purchasing organization is assigned to the company code,
and Sales organization is assigned to the company code.
What is a year dependent fiscal year variant ?
What is the relation between a Controlling Area and a Company
In a year dependent fiscal year variant the number of days in a month
code?
are not as per the calendar month. Let us take an example:- For the year
2005 the period January ends on 29th, Feb ends on 27th, March ends on
A Controlling area can have the following 2 type of relationship with a
29. For the year 2006 January ends on 30th, Feb ends on 26th, March
Company code
ends on 30th. This is applicable to many countries especially USA. Ever
a. Single Company code relation
year this fiscal year variant needs to be configured in such a case
b. Cross Company code relation

This means that one single controlling area can be assigned to several
How does posting happen in MM (Materials Management) during
different company codes. Controlling can have a one is to one special periods?
relationship or a one is to many relationship with different company
codes.
There is no posting which happens from MM in special periods. Special
periods are only applicable for the FI module. They are required for
Controlling Area is the umbrella under which all controlling activities of
making any additional posting such as closing entries, provisions. which
Cost Center Accounting, Product Costing, Profit Center and Profitability
happen during quarter end or year end.
Analysis are stored.

In a similar way Company Codes is the umbrella for Finance activities.

How many currencies can be configured for a company code?

A company code can have 3 currencies in total. They are local currency
ie company code currency) and 2 parallel currencies. This gives the
How many Chart of Accounts can a Company code have?
company the flexibility to report in the different currencies.
A single Company code can have only one Chart of Account assigned to
it. The Chart of Accounts is nothing but the list of General Ledger
Do you require to configure additional ledger for parallel currencies?
Accounts.
Where only 2 currencies are configured (Company code currency and a
parallel currency) there is no need for an additional ledger. In case the
third parallel currency is also configured and if it is different than the
What are the options in SAP when it comes to Fiscal years?
second currency type, you would then need to configure additional
ledger.
Fiscal year is nothing but the way financial data is stored in the system.
SAP provides you with the combination of 12 normal periods and also
If there are two company codes with different chart of accounts how
can you consolidate their activities?
FI-GL
In this case you either need to write an ABAP program or you need to
implement the Special Consolidation Module of SAP. If both the company
codes use the same chart of accounts then standard SAP reports give Give some examples of GL accounts that should be posted
you the consolidated figure. automatically through the system and how is this defined in the
system.

Stock and Consumption accounts are instances of GL accounts that

should be automatically posted . In the GL account master record, a
check box exists wherein the automatic posting option is selected called “
Post Automatically Only”

What is a Account group and where is it used?

An Account group controls the data that needs to be entered at the time
of creation of a master record. Account groups exist for the definition of a
GL account, Vendor and Customer master. It basically controls the fields
which pop up during master data creation in SAP.

What is a field status group?

Field status groups control the fields which come up when the user does
the transactions. There are three options for field selection. They are:

Display only
Suppressed
Mandatory

So basically you can have any field either for display only or you can
totally suppress it or make it mandatory.

The field status group is stored in the FI GL Master Record.

What is the purpose of a “Document type” in SAP?

A Document type is specified at the Header level during transaction entry

and serves the following purposes:
  It defines the Number range for documents Is it possible to maintain plant wise different GL codes?
 It controls the type of accounts that can be posted to eg
Assets, Vendor, Customer, Normal GL account Yes. To be able to do so the valuation group code should be activated.
 Document type to be used for reversal of entries The valuation grouping code is maintained per plant and is configured in
 Whether it can be used only for Batch input sessions the MM module. Account codes should be maintained per valuation
grouping code after doing this configuration.

Document Type is created for differentiating business transactions. Eg

Vendor Invoice, Credit Memo, Accrual Entries,Customer Invoice. It is a Is Business area at company code Level?
two digit character.
No. Business area is at client level. What this means is that other
company codes can also post to the same business area.

What is a Financial Statement Version?

What are the different scenarios under which a Business Area or a

A FSV (Financial Statement Version) is a reporting tool and can be used Profit Center may be defined?
to depict the manner in which the financial accounts like Profit and Loss
Account and Balance Sheet needs to be extracted from SAP. It is freely This question is usually very disputable. But both Business Areas and
definable and multiple FSV's can be defined for generating the output for Profit centers are created for internal reporting. Each has its own pros
various external agencies like Banks and other Statutory authorities. and cons but many companies nowadays go for Profit center as there is a
feeling that business area enhancements would not be supported by SAP
in future versions.

How are input and output taxes taken care of in SAP? There are typical month end procedures which need to be executed for
both of them and many times reconciliation might become a big issue. A
typical challenge in both of them is in cases where you do not know the
A tax procedure is defined for each country and tax codes are defined Business Area or Profit Center of the transaction at the time of posting.
within this. There is flexibility to either expense out the Tax amounts or
Capitalize the same to Stocks.
What are the problems faced when a Business area is configured?

What are Validations and Substitutions? The problem of splitting of account balance is more pertinent in case of
tax accounts.

Validations/Substitutions in SAP are defined for each functional area

e.g. FI-GL, Assets, Controlling etc at the following levels
1. Document level
2. Line item level Is it possible to default certain values for particular fields? For e.g.
company code.
These need to be specifically activated and setting them up are complex
and done only when it is really needed. Often help of the technical team Yes it is possible to default values for certain fields where a parameter id
is taken to do that. is present.

Step 1 Go to the input field to which you want to make defaults.

 account is credited. That way till the time that the invoice is not received
Step 2 Press F1, then click technical info push button. This would open the GR/IR is shown as uncleared items.
a window that displays the corresponding parameter id (if one has been
allocated to the field) in the field data section.
How many numbers of line items in one single entry you can have?
Step 3 Enter this parameter id using the following path on SAP Easy
access screen System  User profile  Own data. The number of line items in one document you can accommodate is 999
lines.
Step 4 Click on parameter tab. Enter the parameter id code and enter the
value you want as default. Save the usersettings.

A Finance Document usually has an assignment field. This field

automatically gets populated during data entry. Where does it get
Which is the default exchange rate type which is picked up for all its value?
SAP transactions?
This value comes from the Sort key entered in the Gl master record.
The default exchange rate type picked up for all SAP transactions is M
(average rate)

How do you maintain the number range in Production environment?

Is it possible to configure the system to pick up a different exchange Do you directly create it in the Production box or do you do it by
rate type for a particular transaction? means of transport?

Yes it is possible. In the document type definition of GL, you need to Number range is to be created in the production client. You can
attach a different exchange rate type. transport it also by way of request but creating in the production client is
more advisable.

What are the master data pre-requisites for document clearing?

In customizing “company code productive “means what? What does
The Gl Account must be managed as an ‘open item management’ . This it denote?
checkbox is there in the General Ledger Master Record called Open Item
Management. It helps you to manage your accounts in terms of cleared Once the company code is live(real time transactions have started) this
and uncleared items. A typical example would be GR/IR Account in SAP check box helps prevents deletion of many programs accidentally. This
(Goods Received/Invoice Received Account) check box is activated just before go live.

Explain the importance of the GR/IR clearing account.

GR/IR is an interim account. In the legacy system of a client if the goods What is done by GR/IR regrouping program?
are received and the invoice is not received the provision is made for the The balance in a GR/IR account is basically because of 2 main types of
same. transactions:-

In SAP at the Goods receipt stage the system passes an accounting entry Goods delivered but invoice not received – Here the Goods receipt is
debiting the Inventory and crediting the GR/IR Account .Subsequently made but no invoice has yet been received from the vendor. In such a
when an invoice is recd this GR/IR account is debited and the Vendor scenario GR/IR account will have a credit balance.
Invoiced received but goods not delivered – Here the Invoice is
received from the vendor and accounted for, but goods have not been Is it possible to keep the FI posting period open only for certain GL
received. In such a scenario GR/IR account will have a debit balance. codes?

The GR/IR account would contain the net value of the above two types of Yes. It is possible to keep open the FI posting period only for certain GL
transactions. The GR/IR regrouping program analyses the above codes.
transactions and regroups them to the correct adjustment account. The
balance on account of first transactions will be regrouped to another
liability account and the balance on account of second transactions will How do you keep the FI posting period open only for certain GL
be regrouped to an asset account. codes?

In transaction code OB52 click on new entries and maintain an interval

What are the functionalities available in the financial statement or a single GL code for the account type S with the posting period
version? variant. If the GL codes are not in sequence then you need to maintain
further entries for the posting period variant and account type S.
In the financial statement version the most important functionality
available is the debit credit shift. This is more important in case of
Bank overdraft accounts which can have a debit balance or a credit Can posting period variant be assigned to more than 1 company
balance. Thus in case of a debit balance you would require the overdraft code?
account to be shown on the Asset side. In case of credit balance you
would require the account to be shown on the Liability side. Yes. Posting period variant can be assigned to more than one company
code.

Is it possible to print the financial statement version on a SAPscript

form?

Yes. It is possible to print the financial statement version on a SAPscript

form.

How do you configure the SAPscript form financial statement

version?

It is possible to generate a form from the financial statement version and

print the financial statements on a SAPscript form. In the customizing for
financial statement version select the FSV you created and choose Goto
 Generate form  One column or Two column form.

You can also copy form from the standard system.

Is it possible to generate a financial statement form automatically?

Yes. It is possible to generate a form automatically.

Accounts Receivable and Accounts Form for payment advice

Payable Step 3 Set up the following:

Payment method per country

At what level are the customer and vendor codes stored in SAP? Whether Outgoing payment
Check or bank transfer or B/E
The customer and vendor code are at the client level. That means any Whether allowed for personnel payment
company code can use the customer and vendor code by extending the Required master data
company code view. Doc types
Payment medium programs
Currencies allowed
How are Vendor Invoice payments made?
Step 4 Set up the following:
Vendor payments can be made in the following manner:
Payment method per company code for payment transactions
Manual payments without the use of any output medium like cheques Set up per payment method and co. code
etc. The minimum and maximum amount.
Whether payment per due day
Automatic Payment program through cheques, Wire transfers, DME etc. Bank optimization by bank group or by postal code or no
optimization
Whether Foreign currency allowed
How do you configure the automatic payment program? Customer/Vendor bank abroad allowed
Attach the payment form check
Whether payment advice required
The following are the steps for configuring the automatic payment
program:- Step 5 Set up the following:

Bank Determination for Payment Transactions

Step 1 Set up the following: Rank the house banks as per the following
Payment method, currency and give them ranking nos
Co. code for Payment transaction Set up house bank sub account (GL code)
Define sending and paying company code. Available amounts for each bank
Tolerance days for payable House bank, account id, currency, available amount
Minimum % for cash discount Value date specification
Maximum cash discount
Special GL transactions to be paid

Step 2 Set up the following: Where do you attach the check payment form?

Paying company code for payment transaction It is attached to the payment method per company code.
Minimum amount for outgoing payment
No exchange rate diff
Separate payment for each ref
Bill/exch payment
Where are Payment terms for customer master maintained?
Payment terms for customer master can be maintained at two places i.e. These are the following steps:
in the accounting view and the sales view of the vendor master record.
A goods receipt in SAP for a purchased material is prepared referring a
purchase order.
Which is the payment term which actually gets defaulted when the
transaction is posted for the customer (accounting view or the sales When the goods receipt is posted in SAP the accounting entry passed is:-
view)? Inventory account Debit
GR/IR account credit
The payment term in the accounting view of the customer master comes
into picture if the transaction originates from the FI module. If an FI A GR/IR (which is Goods receipt/Invoice receipt) is a provision account
invoice is posted (FB70) to the customer, then the payment terms is which provides for the liability for the purchase. The rates for the
defaulted from the accounting view of the customer master. valuation of the material are picked up from the purchase order.

The payment term in the sales view of the customer master comes into When the invoice is booked in the system through Logistics invoice
picture if the transaction originates from the SD module. A sales order is verification the entry passed is as follows:-
created in the SD module. The payment terms are defaulted in the sales
order from the sales view of the customer master. GR/IR account debit
Vendor credit

How are Tolerances for Invoice verification defined?

Where are Payment terms for vendor master maintained?

Payment terms for Vendor master can be maintained at two places i.e. in The following are instances of tolerances that can be defined for Logistic
the accounting view and the purchasing view. Invoice Verification.
c. Small Differences
d. Moving Average Price variances
Which is the payment term which actually gets defaulted in e. Quantity variances
transaction (accounting view or purchasing view)? f. Price variances
The payment term in the accounting view of the vendor master comes
into picture if the transaction originates from the FI module. If an FI Based on the client requirement, the transaction can be “Blocked” or
invoice is posted (FB60) to the Vendor, then the payment terms is Posted with a “Warning” in the event of the Tolerances being exceeded.
defaulted from the accounting view of the vendor master.
Tolerances are nothing but the differences between invoice amount and
The payment term in the purchasing view of the vendor master comes payment amount or differences between goods receipt amount and
into picture if the transaction originates from the MM module. A invoice amount which is acceptable to the client.
purchase order is created in the MM module. The payment terms are
defaulted in the purchase order from the purchasing view of the vendor
master. Can we change the reconciliation account in the vendor master?

Yes. Reconciliation account can be changed in the vendor master

Explain the entire process of Invoice verification from GR to Invoice provided that the authority to change has been configured. Normally we
verification in SAP with accounting entries? should not change the reconciliation account.
 The special GL code should also be marked as a Reconciliation account.
What is the impact on the old balance when the reconciliation Switch on the relevant for credit limit and commitment warning
account in the vendor master is changed? indicators in the master record.

Any change you make to the reconciliation account is prospective and

not retrospective. The old items and balances do not reflect the new
account only the new transactions reflect the account.

There is an advance given by the customer which lies in a special GL

account indicator A. Will this advance amount be considered for
credit check?

It depends on the configuration setting in the special GL indicator A. If

the “Relevant to credit limit” indicator is switched on in the Special GL
indicator A the advances will be relevant for credit check, otherwise it will
not be relevant.

In payment term configuration what are the options available for

setting a default baseline date?

There are 4 options available:-

1) No default
2) Posting date
3) Document date
4) Entry date

What is generally configured in the payment term as a default for

baseline date?

Generally document date is configured in the payment term as a default

for base line date.

How do you configure a special GL indicator for Customer?

You can use an existing special GL indicator ID or create a new one.

After creating a special GL indicator id, update the chart of accounts and
the Reconciliation account. Also as a last step you need to update the
special GL code.
Bank Accounting:
The following are the steps for configuring manual bank statement:-
How is Bank Reconciliation handled in SAP? Step1: Create account symbols for the main bank and the sub accounts
The bank reco typically follows the below procedure: Step2: Assign accounts to account symbols
First, the payment made to a Vendor is posted to an interim bank Step3: Create keys for posting rules
clearing account. Subsequently, while performing reconciliation, an entry
is posted to the Main Bank account. You can do bank reconciliation Step4: Define posting rules
either manually or electronically.
Step5: Create business transaction and assign posting rule
How do you configure check deposit? Step6: Define variant for Manual Bank statement

The following are the steps for configuring check deposit:-

Step1: Create account symbols for the main bank and incoming check How do you configure Electronic bank statement?
account.
The steps for Electronic Bank Statement are the same except for couple
Step2: Assign accounts to account symbols of more additional steps which you will see down below
Step3: Create keys for posting rules Step1: Create account symbols for the main bank and the sub accounts
Step2: Assign accounts to account symbols
Step4: Define posting rules Step3: Create keys for posting rules
Step4: Define posting rules
Step5: Create business transactions and assign posting rule Step5: Create transaction type
Step6: Assign external transaction type to posting rules
Step6: Define variant for check deposit Step7: Assign Bank accounts to Transaction types

What is the clearing basis for check deposit?

In the variant for check deposit we need to set up the following

a) fields document number ( which is the invoice number),

b) amount
c) Short description of the customer.

The document number and the invoice amount acts as the clearing
basis.

How do you configure manual bank statement?

Fixed Assets The specifications and parameters that the system requires to calculate
depreciation amounts are entered in Calculation methods. Calculation
methods replace the internal calculation key of the depreciation key.
Depreciation keys are defaulted in Asset Master from the asset class.
What are the organizational assignments in asset accounting? Refer to the configuration for more details of how depreciation is
calculated.
Chart of depreciation is the highest node in Asset Accounting and this is
assigned to the company code.

Under the Chart of depreciation all the depreciation calculations are A company has its books prepared based on Jan –Dec calendar year
stored. for reporting to its parent company. It is also required to report
accounts to tax authorities based on April- March. Can assets be
managed in another depreciation area based on a different fiscal
How do you go about configuring Asset accounting? year variant?
The configuration steps in brief are as follows:- No. Assets accounting module cannot manage differing fiscal year variant
a) Copy a reference chart of depreciation areas which has a different start date (January for book depreciation and April
b) Assign Input Tax indicator for non taxable acquisitions for tax depreciation) and different end date (December for book
c) Assign chart of depreciation area to company code depreciation and March for tax depreciation). In this case you need to
d) Specify account determination implement the special purpose ledger.
e) Define number range interval
f) Define asset classes
g) Define depreciation areas posting to general ledger
h) Define depreciation key
What are the special steps and care to be taken in Fixed asset data
migration into SAP system especially when Profit center accounting
Explain the importance of asset classes. Give examples? is active?
The asset class is the main criterion for classifying assets. Every asset Data migration is slightly different from a normal transaction which
must be assigned to only one asset class. Examples of asset class are happens in Asset accounting module.
Plant& Machinery, Furniture & Fixtures, Computers etc. The asset class
also contains the Gl accounts which are debited when any asset is Normally, in asset accounting the day to day transactions is posted with
procured. It also contains the gl accounts for depreciation calculation, values through FI bookings and at the same time the asset reconciliation
scrapping etc is updated online realtime. Whereas In data Migration the asset master
is updated with values through a transaction code called as AS91. The
Whenever you create an asset master you need to mention the asset values updated on the master are Opening Gross value and the
class for which you are creating the required asset. In this manner accumulated depreciation. The reconciliation GL account is not
whenever any asset transaction happens the gl accounts attached to the automatically updated at this point of time.
asset class is automatically picked up and the entry passed.
The reconciliation accounts (GL codes) are updated manually through
You can also specify certain control parameters and default values for another transaction code called as OASV.
depreciation calculation and other master data in each asset class.
If profit center is active, then after uploading assets through AS91 you
should transfer the asset balances to profit center accounting through a
How are depreciation keys defined? program.
Thereafter you remove the Asset GL code (reconciliation accounts) from
the 3KEH table for PCA and update the Asset reconciliation account (GL What are evaluation groups?
code) through OASV.
The evaluation groups are an option for classifying assets for reports or
After this step you again update the Asset reconciliation account in the user defined match code (search code). You can configure 5 different
3KEH table. evaluation groups. You can update these evaluation groups on to the
asset master record.
The reason you remove the Asset reconciliation code from 3KEH table is
that double posting will happen to PCA when you update the Asset
reconciliation manually. What are group assets?

The tax requirements in some countries require calculation of

Is it possible to calculate multiple shift depreciation? Is any special depreciation at a higher group or level of assets. For this purpose you
configuration required? can group assets together into so-called group assets.

Yes it is possible to calculate multiple shift depreciation in SAP for all

types of depreciation except unit of production. No special configuration What are the steps to be taken into account during a depreciation
is required. run to ensure that the integration with the general ledger works
smoothly?

How do you maintain multiple shift depreciation in asset master? For each depreciation area and company code, specify the following:

The following steps are needed to maintain multiple shift depreciation: 1 The frequency of posting depreciation(monthly,quarterly etc)
2 CO account assignment (cost center)
1. The variable depreciation portion as a percentage rate is to be 3 For each company code you must define a document type for
maintained in the detail screen of the depreciation area. automatic depreciation posting: This document type requires its
2. The multiple shift factor is to be maintained in the time dependent own external number range.
data in the asset master record. This shift factor is multiplied by 4 You also need to specify the accounts for posting. (Account
the variable portion of ordinary depreciation. determination)

Once you have done the above the SAP system calculates the total Finally to ensure consistency between Asset Accounting and Financial
depreciation amount as follows:- Accounting, you must process the batch input session created by the
posting report. If you fail to process the batch input session, an error
Depreciation amount = Fixed depreciation + (variable depreciation * shift message will appear at the next posting run.
factor)
The depreciation calculation is a month end process which is run in
batches and then once the batch input is run the system posts the
Let’s say you have changed the depreciation rates in one of the accounting entries into Finance.
depreciation keys due to changes in legal requirements. Does
system automatically calculate the planned depreciation as per the
new rate?
How do you change fiscal year in Asset Accounting?
No. System does not automatically calculate the planned depreciation
after the change is made. You need to run a program for recalculation of  Run The fiscal year change program which would open new annual
planned depreciation. value fields for each asset. i e next year
  The earliest you can start this program is in the last posting period of want to maintain different texts for these assets. You can update
the current year. different details for all the 10 cars.
 You have to run the fiscal year change program for your whole
company code.
 You can only process a fiscal year change in a subsequent year if the
previous year has already been closed for business.

Take care not to confuse the fiscal year change program with year-end
closing for accounting purposes. This fiscal year change is needed only in
Asset Accounting for various technical reasons.

Is it possible to have depreciation calculated to the day?

Yes it is possible. You need to switch on the indicator “Dep to the day” in
the depreciation key configuration.

Is it possible to ensure that no capitalization be posted in the

subsequent years?

Yes it is possible. You need to set it in the depreciation key

configuration.

How are Capital Work in Progress and Assets accounted for in SAP?

Capital WIP is referred to as Assets under Construction in SAP and are

represented by a specific Asset class. Usually depreciation is not charged
on Capital WIP.

All costs incurred on building a capital asset can be booked to an

Internal Order and through the settlement procedure can be posted onto
an Asset Under Construction. Subsequently on the actual readiness of
the asset for commercial production, the Asset Under Construction gets
capitalized to an actual asset.

The company has procured 10 cars. You want to create asset

masters for each of this car. How do you create 10 asset masters at
the same time?

While creating asset master there is a field on the initial create screen
called as number of similar assets. Update this field with 10. When you
finally save this asset master you will get a pop up asking whether you
FI-MM-SD Integration Valuation also involves the Price Control .Each material is assigned to a
material type in Materials Management and every material is valuated
either in Moving Average Price or Standard Price in SAP. These are the
two types of price control available.
How do you go about setting the FI MM account determination ?
What is Valuation Class?
FI MM settings are maintained in transaction code OBYC. Within these
there are various transaction keys to be maintained like BSX, WRX, The Valuation Class in the Accounting 1 View in Material Master is the
GBB, PRD etc. In each of these transaction keys you specify the GL main link between Material Master and Finance. This Valuation Class
accounts which gets automatically passed at the time of entry. along with the combination of the transaction keys (BSX,WRX,GBB,PRD )
defined above determine the GL account during posting.
Few examples could be: BSX- Stands for Inventory Posting Debit
GBB-Standsfor Goods Issue/Scrapping/delivery We can group together different materials with similar properties by
of goods etc valuation class. Eg Raw material,Finsihed Goods, Semi Finished
PRD- Stands for Price Differences.
We can define the following assignments in customizing :

All materials with same material type are assigned to just one valuation
At what level is the FI-MM, FI-SD account determination settings? class.
They are at the chart of accounts level. Different materials with the same material type can be assigned to
different valuation classes.
What are the additional settings required while maintaining or Materials with different material types are assigned to a single valuation
creating the GL codes for Inventory accounts? class.

In the Inventory GL accounts (Balance sheet) you should switch on the Can we change the valuation class in the material master once it is
‘Post automatically only’ tick. It is also advisable to maintain the assigned?
aforesaid setting for all FI-MM accounts and FI-SD accounts. This helps
in preserving the sanctity of those accounts and prevents from having Once a material is assigned to a valuation class in the material master
any difference between FI and MM, FI and SD. record, we can change it only if the stocks for that material are nil. If the
stock exists for that material, then we cannot change the valuation class.
In such a case, if the stock exists, we have to transfer the stocks or issue
the stocks and make the stock nil for the specific valuation class. Then
What is Valuation and Account assignment in SAP? only we will be able to change the valuation class.
This is actually the link between Materials Management and Finance.
Does the moving average price change in the material master during
The valuation in SAP can be at the plant level or the company code level. issue of the stock assuming that the price control for the material is
If you define valuation at the plant level then you can have different Moving Average?
prices for the same material in the various plants. If you keep it at the
company code level you can have only price across all plants. The moving average price in the case of goods issue remains unchanged.
Goods issue are always valuated at the current moving average price. It
is only in goods receipt that the moving average price might change. A
goods issue only reduces the total quantity and the total value in relation assignment of a valuation class to a material group enables the system to
to the price and the moving price remains unchanged. Also read the determine different G/L accounts for the individual material groups.
next question to learn more about this topic.

If the answer to the above question is ‘Yes’, then list the scenario in What is the procedure in SAP for Initial stock uploading? Mention
which the moving average price of the material in the material the accounting entries also.
master changes when the goods are issued.

The moving average price in the material master changes in the scenario Initial stock uploading in SAP from the legacy system is done with
of Split Valuation which is sometimes used by many organizations. If the inventory movement type 561( a MM transaction which is performed).
material is subject to split valuation, the material is managed as Several
partial stocks and each partial stock is valuated separately. Material valuated at standard price: For a material valuated at
standard price, the initial entry of inventory data is valuated on the basis
In split valuation, the material with valuation header record will have ‘v’ of standard price in the material master. If you enter an alternative value
moving average price. This is where the individual stocks of a material at the time of the movement type 561, then the system posts the
are managed cumulatively. Here two valuation types are created, one difference to the price difference account.
valuation type can have ‘v’ (MAP) and the other valuation type can have
‘s’(standard price). Material valuated at moving average price: The initial entry of
inventory data is valuated as follows : If you enter a value when
In this case, whenever the goods are issued from the respective valuation uploading the initial data, the quantity entered is valuated at this price.
types, always the MAP for the valuation header changes. If you do not enter a value when entering initial data, then the quantity
entered is valuated at the MAP present in the material master.

The accounting entries are: Inventory account is debited and Inventory

What is the accounting entry in the Financial books of accounts Historical upload account is credited.
when the goods are received in unrestricted use stock? Also
mention the settings to be done in the ‘Automatic postings’ in SAP
for the specific G/L accounts.
How do you configure FI-SD account determination?
On receipt of the goods in unrestricted-use stock, the Inventory account
is debited and the GR/IR account gets credited. In customization, in the The FI-SD account determination happens through an access sequence.
automatic postings, the Inventory G/L account is assigned to the The system goes about finding accounts from more specific criteria to
Transaction event key BSX and the GR/IR account is assigned to the less specific criteria.
Transaction event key WRX.
This is the sequence it would follow:

1) It will first access and look for the combination of Customer

If a material has no material code in SAP, can you default the G/L accounts assignment grp/ Material account assignment grp/
account in Purchase order or it has to be manually entered?. Account key.
2) If it does not find the accounts for the first combination it will look
for Customer account assignment grp and account key
If a material has no material code in SAP, we can still, default the G/L combination.
account with the help of material groups. We can assign the valuation 3) Furthermore, if it does not find accounts for the first 2 criteria’s
class to a material group and then in FI-automatic posting, we can then it will look for Material account assignment grp/Account key.
assign the relevant G/L account in the Transaction event key. The
 4) If it does not find accounts for the all earlier criteria’s then finally it
will look for Account key and assign the GL code.
Logistics Invoice Verification
Thus posting of Sales Invoices into FI are effected on the basis of a
combination of Sales organization, Account type, or Customer and Can you assign multiple G/L accounts in the Purchase order for the
Material Account assignment groups and following are the options same line item?
available.
Yes, we can assign multiple G/L accounts in the Purchase order for the
a. Customer AAG/Material AAG/Account type same line item. The costs can be allocated on a percentage or quantity
b. Material AAG/Account type basis. If the partial goods receipt and partial invoice receipt has already
c. Customer AAG/Account type taken place, then the partial invoice amount can be distributed
proportionally, i.e. evenly among the account assigned items of a
For each of this option you can define a Gl account. Thus the system Purchase order. Alternatively the partial invoice amount can be
uses this gl account to automatically pass the entries. distributed on a progressive fill-up basis, i.e. the invoiced amount is
allocated to the individual account assignment items one after the other.

What is Credit memo and subsequent debit in Logistics Invoice

verification?

The term credit memo refers to the credit memo from the vendor.
Therefore posting a credit memo always leads to a debit posting on the
vendor account. Credit memos are used if the quantity invoiced is higher
than the quantity received or if part of the quantity was returned.

Accounting entries are : Vendor account is debited and GR/IR account is

credited.

Subsequent debit : If a transaction has already been invoiced and

additional costs are invoiced later, then subsequent debit is necessary. In
this case you can debit the material with additional costs, i.e. GR/IR
account debit and Vendor account credit. When entering the Subsequent
debit, if there is no sufficient stock coverage, only the portion for the
available stock gets posted to the stock account and rest is posted to the
price difference account.

What do you mean by Invoice parking, Invoice saving and Invoice

confirmation?

Invoice parking : Invoice Parking is a functionality which allows you to

create incomplete documents and the system does not check whether the
entries are balanced or not. An accounting documents is also not created
when the invoice is in parked mode. What is the basis on which the apportionment is done of unplanned
delivery costs?
Thus you can create incomplete documents and then post it later to
accounting when you feel it is complete. You can even rectify the Parked Unplanned delivery costs are either uniformly distributed among the
invoice. This feature is used by many companies as on many occasions items or posted to a separate G/L account.
all data relating to the invoice might not be available.
For a material subjected to Moving average price, the unplanned delivery
costs are posted to the stock account, provided sufficient stock coverage
Invoice saving : This is also called Invoice processing or Invoice posting. exists.
The accounting document gets created when the invoice is posted in SAP.
For a material subjected to Standard price, the unplanned delivery costs
are posted to the Price difference account.
Invoice confirmation : There is no terminology in SAP as Invoice
confirmation.
There are cases where Invoice verification is done first before the
Goods receipt is made for the purchase order . In these cases with
what values would the Goods receipt be posted ?
What are Planned delivery costs and Unplanned delivery costs?
Since the invoice verification has been done first the Goods Receipts will
Planned delivery costs: are entered at the time of Purchase order. At be valued with the Invoice value.
goods receipt, a provision is posted to the freight or customs clearing
account.

e.g. FRE is the account key for freight condition, hence the system can
post the freight charges to the relevant freight revenue account and FR3
is the account key for Customs duty, hence the system can post the
customs duty to the relevant G/L account.

These account keys are assigned to the specific condition types in the
MM Pricing schema.

In terms of Invoice verification : If the freight vendor and the material

vendor is the same : then we can choose the option : Goods service items
+ Planned delivery costs.

If the freight vendor is different from the material vendor: then for
crediting only the delivery costs, we can choose the option: Planned
delivery costs.

Unplanned delivery costs: are the costs which are not specified in the
Purchase order and are only entered when you enter the invoice.
FI Month End Closing Activities Controlling Module

Explain the organizational assignment in the controlling module?

What are the Month End Closing Activities in Finance?
Company codes are assigned to the controlling area. A controlling area
1. Recurring Documents. is assigned to the operating concern.
a) Create Recurring documents
b) Create Batch Input for Posting Recurring Documents Controlling Area is the umbrella under which all controlling activities of
c) Run the Batch Input Session Cost Center Accounting, Product costing, Profitability Analysis and Profit
Center are stored.

2. Posting Accruals or Provisions entries at month end Operating Concern is the highest node in Profitability Analysis

3. Managing the GR/IR Account-Run the GR/Ir Automatic Clearing

What is primary Cost element and secondary cost element?
4. Foreign Currency Open Item Revaluation-Revalue Open Items in
AR.AP Every Profit and Loss GL account that needs to be controlled has to be
defined as a cost element in SAP. Just as in FI General Ledger Accounts
5. Maintain Exchange Rates exist, in Controlling we have Cost element.

6. Run Balance Sheets –Run Financial Statement Version Each FI General Ledger Account that is a Profit and Loss Account is also
created as a Cost element in SAP.
7. Reclassify Payables and Receivables if necessary
Primary Cost Elements are those which are created from FI general
8. Run the Depreciation Calculation Ledger Accounts and impact the financial accounts eg. Travelling
expenses, consumption account infact, any Profit and Loss GL account
9. Fiscal Year Change of Asset Accounting if it is year end

10. Run the Bank Reconciliation Secondary Cost Elements are those which are created only in
controlling and does not affect the financials of the company. It is used
11. Open Next Accounting Period for internal reporting only. The postings to these accounts do not affect
the Profit or Loss of the company.

The following categories exist for secondary cost elements:

21 Internal Settlement:

Cost elements of this category is used to settle order costs to objects in

controlling such as cost centers, pa segments etc.

31 Order/Results Analysis:

Used to calculate WIP on the order/project

41 Overhead
Cost Center Accounting:
Used to calculate indirect costs from cost centers to orders

42. Assessment How is cost center accounting related to profit center?

Used to calculate costs during assessment In the master data of the Cost Center there is a provision to enter the
profit center. This way all costs which flow to the cost center are also
43 Internal Activity Allocation captured in the profit center.

Used to allocate costs during internal activity allocation such as Machine Cost centers are basically created to capture costs e.g. admin cost center,
Labour etc canteen cost center etc

Profit centers are created to capture cost and revenue for a particular
plant, business unit or product line.
What are cost objects?

A cost object means a cost or a revenue collector wherein all the costs or What is a cost element group?
revenues are collected for a particular cost object. Examples of this could
be cost center, production order, internal order, projects, sales order Cost element group is nothing but a group of cost elements which help
one to track and control cost more effectively. You can make as many
So whenever you look at any controlling function the basic thing you number of cost element groups as you feel necessary by combining
need to ask yourself is What is the cost element(expense) I want to various logical cost elements.
control and what is the cost object ( i.e. either the production order, sales
order, internal order) I am using to control this cost element. Sounds
confusing read it again it is very simple What is a cost center group?

Controlling is all about knowing the cost element and the cost In a similar line the cost center group is also a group of cost centers
object. Every time pose this question to yourself what is the cost which help one to track and control the cost of a department more
element what is the cost object. effectively. You can make as many number of cost centers as you feel
necessary by combining various logical cost centers
At the end of the period all costs or revenues in the cost object are settled
to their respective receivers which could be a gl account, a cost center, Infact you can use various combinations of cost center group with the
profitability analysis or asset. cost element group to track and control your costs per department or
across departments
It is very important that you understand this otherwise you would
struggle to understand Controlling.
What is the difference between Distribution and Assessment?

Distribution uses the original cost element for allocating cost to the
sender cost center. Thus on the receiving cost center we can see the
original cost element from the sender cost center. Distribution only
allocates primary cost.

Assessment uses assessment cost element No 43 defined above to

allocate cost. Thus various costs are summarized under a single
assessment cost element. In receiver cost center the original cost
breakup from sender is not available. Assessment allocates both primary Yes. It is possible to calculate the planned activity output through
as well as secondary cost. system by using Long term Planning process in PP module.

Explain the process of calculating the planned activity output

through Long term planning?
What are the other activities in Cost center?
In Long term planning process the planned production quantities are
If you have a manufacturing set up, entering of Activity prices per cost entered for the planning year in a particular scenario. The Long term
center/activity type is an important exercise undertaken in Cost center planning is executed for the scenario. This generates the planned activity
accounting. requirements taking the activity quantities from the routing and
multiplying with the planned production.

What is an Activity Type? The activity requirements are then transferred to the controlling module
as scheduled activity quantities. Thereafter you execute a plan activity
Activity types classify the activities produced in the cost centers. reconciliation which will reconcile the schedule activity and the activity
Examples of Activity Type could be Machine, Labour, Utilities you have planned manually. The reconciliation program updates the
scheduled activity quantity as the planned activity in the controlling
module.

You want to calculate the activity price through system? What are
the requirements for that?
You want to revalue the production orders using actual activity
In the activity type master you need to select price indicator 1 – Plan prices. Is there any configuration setting?
price, automatically based on activity.
Yes. There is a configuration setting to be done.
When activity price is calculated through system whether activity
price is shown as fixed or variable?
Where is the configuration setting to be done for carrying out
Normally when activity price is calculated through system it is shown as revaluation of planned activity prices in various cost objects?
fixed activity price since primary cost are planned as activity independent
costs. The configuration setting is to be done in the cost center accounting
version maintenance for fiscal year. This has to be maintained for version
0. You need to select revalue option either using own business
What is required to be done if activity price is to be shown both transaction or original business transaction.
fixed and variable?

In this case you need to plan both activity independent cost which are At month end you calculate actual activity prices in the system.
shown as fixed costs and activity dependent costs which are shown as You want to revalue the production orders with this actual activity
variable costs. prices. What are the options available in the system for revaluation?

The options available are as follows:-

Is it possible to calculate the planned activity output through You can revalue the transactions using periodic price, average price or
system? cumulative price.
Further you can revalue the various cost objects as follows:-
Own business transaction – Differential entries are posted
Internal orders
Original business transaction – The original business transaction is
changed.
What is the purpose of defining Internal orders.?

An example would help us understand this much better.

Lets say in an organization there are various events such as trade fairs,
training seminars, which occur during the year. Now lets assume for a
second that these Trade fairs are organized by the Marketing cost center
of the organization. Therefore in this case marketing cost center is
responsible for all the trade fairs costs. All these trade fairs costs are
posted to the marketing cost centers. Now if the management wants an
analysis of the cost incurred for each of the trade fair organized by
the marketing cost center how would the marketing manager get
this piece of information across to them? The cost center report
would not give this piece of info

Now this is where Internal Order steps in .If you go through all cost
center reports this information is not readily available since all the costs
are posted to the cost center.

SAP, therefore provides the facility of using internal orders which comes
in real handy in such situations. In the above scenario the controlling
department would then need to create an internal order for each of the
trade fair organized. The cost incurred for each of the trade fair will be
posted to the internal orders during the month. At the month end, these
costs which are collected in the internal order will be settled from these
orders to the marketing cost center. Thus the controlling person is now
in a position to analyze the cost for each of the trade fair separately.

Thus internal order is used to monitor costs for short term events,
activities. It helps in providing more information than that is provided on
the cost centers. It can be widely used for various purposes .

How can you default certain items while creation of internal order
master data?

You can do so by creating a model order and then update the fields
which you want to default in this model order. Finally attach this model
order in the internal order type in the field reference order.
Once the above is done whenever you create an internal order for this
order type the field entries will get copied from the model order.
Product Costing

What is the configuration setting for the release of the internal What are the important Terminologies in Product Costing?:
order immediately after creation?

You have to check the “release immediately” check box in the Results Analysis Key – This key determines how the Work in Progress is
internal order type. calculated

Cost Components - The break up of the costs which get reflected in

the product costing eg. Material Cost, Labour Cost, Overhead etc

Costing Sheets - This is used to calculate the overhead in

Controlling

Costing Variant - For All manufactured products the price control

recommended is Standard Price. To come up with this standard price for
the finished good material this material has to be costed. This is done
using Costing Variant. Further questions down below will explain this
concept better.

What are the configuration settings maintained in the costing

variant?

Costing variant forms the link between the application and Customizing,
since all cost estimates are carried out and saved with reference to a
costing variant. The costing variant contains all the control parameters
for costing.

The configuration parameters are maintained for costing type, valuation

variants, date control, and quantity structure control.

In costing type we specify which field in the material master should be

updated.

In valuation variant we specify the following

a) the sequence or order the system should go about accessing
prices for the material master (planned price, standard price,
moving average price etc).
b) It also contains which price should be considered for activity price
calculation and .
c) How the system should select BOM and routing.
 during creating of order.
.
How does SAP go about costing a Product having multiple Bill of Settlement profile includes:-
materials within it?
1) the retention period for the settlement documents.
SAP first costs the lowest level product, arrives at the cost and then goes
and cost the next highest level and finally arrives at the cost of the final 2) Valid receivers GL account, cost center, order, WBS element, fixed
product. asset, material, profitability segment, sales order, cost objects, order
items, business process
3) Document type is also attached here
What does the concept of cost roll up mean in product costing
4) Allocation structure and PA transfer structure is also attached to the
context?
settlement profile e.g. A1
The purpose of the cost roll up is to include the cost of goods
manufactured of all materials in a multilevel production structure at the The settlement profile created is then attached to the order type.
topmost level of the BOM(Bill of Material)

The costs are rolled up automatically using the costing levels.

1) The system first calculates the costs for the materials with the What is Transfer or Allocation structure?
lowest costing level and assigns them to cost components.
The transfer structure is what helps in settling the cost from one cost
2) The materials in the next highest costing level (such as semi- object to the receiver. It is maintained in the Settlement profile defined
finished materials) are then costed. The costs for the materials above.
costed first are rolled up and become part of the material costs of
the next highest level. The Transfer structure has 2 parts:

a) Source of cost elements you want to settle

What is a settlement profile and why is it needed? b) Target receiver whether it is a Profitability segment or fixed asset or
cost center
All the costs or revenues which are collected in the Production order or
Sales order for example have to be settled to a receiver at the end of the So basically for settling the costs of a cost object you need
period. This receiver could be a Gl account, a cost center, profitability to define the Transfer structure where you mention what
analysis or asset. Also read the question “What is a cost object “ in the are the costs you want to settle and the target receiver for
section Controlling.
that.
In order to settle the costs of the production order or sales order a
settlement profile is needed. This information you fit it in the settlement profile which
contains various other parameters and this settlement
In a settlement profile you define a range of control parameters for profile is defaulted in the Order type. So every time a
settlement. You must define the settlement profile before you can enter a order is executed the relevant settlement rule is stored
settlement rule for a sender. and at the month end by running the transaction of the
settlement of orders all the cost is passed on to the
The Settlement Profile is maintained in the Order Type and defaults receiver
 requirement class all configuration settings are maintained for
So to put in simple terms: controlling.

In the requirement class we attach the costing variant, we attach the

a) You define your cost object which could be a condition type EK02 where we want the sales order cost to be updated,
production order a sales order for eg and the account assignment category. In the account assignment
b) You collect costs or revenues for it category we define whether the sales order will carry cost or not. In case
c) You determine where you want to pass these costs or if we do not want to carry cost on the sales order we keep the
revenues to for eg if the sales order is the cost object consumption posting field blank.
all the costs or revenues of a sales order could be
We also define here the Results Analysis version which helps to calculate
passed to Profitability Analysis the Results Analysis for the Sales order if required.

What do you mean by primary cost component split? There are 2 plants in a company code. First plant is the
manufacturing plant and another plant is the selling plant. Finished
Primary cost split is defined when you create a cost component goods are manufactured at the manufacturing plant and transferred
structure. When you switch on this setting, the primary cost from the to the selling plant. How is standard cost estimate calculated at the
cost center are picked up and assigned to the various cost components. selling plant given the fact that the cost at both the plant should be
the same?
How do primary costs get picked up from cost center into the cost The special procurement type needs to be configured which specifies in
component structure? which plant the system is to look up for cost. Here a special procurement
This is possible when you do a plan activity price calculation from SAP. key specifying plant 1 (manufacturing plant) should be configured.
The primary cost component structure is assigned to the plan version 0
in Controlling . This special procurement type must be entered in the costing view or the
MRP view of the Finished good material master record in plant 2.
Is it possible to configure 2 cost component structures for the same When you cost the finished good at plant 2, the system will transfer the
product in order to have 2 different views? standard cost estimate from plant 1 to plant 2
Yes it is possible. We create another cost component structure and
assign it to the main cost component structure. This cost component What is mixed costing in SAP? Give an example to explain.
structure is called Auxiliary cost component structure which provides
another view of the cost component structure. Mixed costing is required when different processes are used to
manufacture the same material. Mixed costing is required when you have
different sources of supply for purchasing the material.
How do you go about configuring for the sales order costing?
Let us take an example:-
The flow is as follows:
There is a finished good Xylene which can be manufactured by 3
Sales order -> Requirement Type- Requirement Class-> All settings for different processes.
controlling
The first process uses an old machine and labour. The processing time is
In a sales order you have a requirement type .In configuration, the 9 hrs to manufacture.
requirement Class is attached to the requirement type and in this
The second process uses a semi-automatic machine and labour. The Procurement alternative 2 (production version 2) 35% will be
processing time is 7 hrs to manufacture. manufactured
Procurement alternative 3 (production version 3) 25% will be
The third process uses a fully automatic machine and the processing manufactured
time is 5 hrs.
This % will be maintained as mixing ratios.
Thus cost of manufacture for the 3 processes is different. By using Mixed
costing you can create a mixed price for the valuation of this finished Thus when system calculates the mixed cost estimate, system will first
good. cost each of the production version and then multiply each of the costs
with the weighting factors.

What configuration needs to done for using Mixed costing? Thus

Quantity Structure type for mixed costing must be configured. Here we 240 (cost of prod. Vers 1) X 40 = 9600
specify the time dependency of the structure type . The following options 210 (cost of prod. Vers 2) X 35 = 7350
exist 160 (cost of prod vers 3) X 25 = 4000
a) You have no time dependency. Mixed costs 17350/100 = 173.5
b) It is based on fiscal year
c) It is based on period
There are Result analysis categories in WIP (Work in Process). What
This quantity structure type is then assigned to the costing version. do you mean by the result analysis category Reserves for unrealized
costs?

Lets say for a product there exists three production versions. If you are calculating the work in process at actual costs, the system will
Explain the process how you would go about creating a mixed cost create reserves for unrealized costs if the credit for the production order
estimate? based on goods receipts is greater than the debit of the order with actual
costs incurred. The Result analysis category RUCR (Reserves for
The process of creating a Mixed cost estimate would be as follows:- unrealized cost) would need to be maintained. Normally this is not
1) Create procurement alternatives for each of the production version. maintained in most of the companies.
2) Define Mixing ratios for the procurement alternatives
3) Select the configured quantity structure type and execute a
material cost estimate based on the costing version. Which is the Result analysis category which is normally maintained
for the WIP (Work in Process) calculation?

What is Mixing ratios and why are they required to be maintained The Result analysis category WIPR - Work in process with requirement
before creation of cost estimate? to capitalize costs is normally maintained for WIP calculation

Mixing ratios are weighting factors assigned to the procurement

alternatives. This weighting factor is obtained from the planning How do you define a By-product in SAP?
department based on the usage of the procurement alternatives during
the planning year. A By-product in SAP is defined as an item with a negative quantity in the
Bill of Material. By-product reduces the cost of the main product. There
For e.g. is no Bill of Material for a By-product.
Procurement alternative 1 (production version 1) 40% will be
manufactured
How do you calculate the cost for a By-product in SAP?
 In the above scenario how do you know which cost element is being
The cost for the By-product is the net realizable value. This is manually called for?
maintained in the system for the by-product through transaction code
MR21 Price change. In this case you need to the use simulation mode OMWB in MM and
enter the material code plant and the movement type 261 (issue against
production order). You will see the account modifier VBR and against
How do you define a Co-Product in SAP? which the GL code is available.

A Co-product (primary product or by-product) is indicated by a tick in

the costing view of the material master. In the BOM all the primary
products are represented as an item with negative quantity. A primary You get an error while executing a cost estimate, which says” Item
product is also indicated as a co-product in the BOM of the leading co- no. 1 (which is a raw material) is not assigned to the cost
product. For primary products the costs are calculated using the component structure?
apportionment method, while for by-products the net realizable value In this case everything is perfectly configured, what could be the
method applies. possible error in this scenario?

In the material master of the raw material the valuation class updated in
the accounting view will be incorrect.
Is it possible to use Standard SAP Co-product functionality in
Repetitive manufacturing?
Is it possible to calculate standard cost estimate for a past date?
No. It is not possible to use the Standard Co-product functionality in
repetitive manufacturing No. It is not possible to calculate standard cost estimate for a past date.

How do you got about defining CO-Product functionality in What is the difference between a product cost collector and
Repetitive manufacturing? production order?

In the Repetitive manufacturing you need to use the Costing BOM for the Both of these are cost objects which collect production costs for
other co-product. Through arithmetical calculation you need to maintain manufactured product. Product cost collector is a single order created for
the quantities in the costing BOM. This co-product will be shown as a a material. All the costs during the month for that material is debited to
negative item in the leading co-product. single product cost collector. No costing by lot size is required in case of
product cost collector.

The latter is where there are many production orders for a single material
You get an error while executing a cost estimate which says” Item during the month. Costs are collected on each of this production order.
no 1 (which is a raw material) is not assigned to the cost component Costing by lot size is the main requirement in case of production orders.
structure?
What could be the possible cause of error in this scenario?
What is the meaning of preliminary cost estimate for product cost
The consumption GL code for the material master is not assigned to the collector?
cost component structure. To find out how you can know which GL code
to assign read the next question. Preliminary costing in the product cost by period component calculates
the costs for the product cost collector. In repetitive manufacturing you
can create cost estimate for specific production version.
Why is preliminary cost estimate required?
How are scrap costs shows in the standard cost estimate?
The preliminary cost estimate is required for the following:-
Scrap costs are assigned to the relevant cost component and can be
Confirm the actual activity quantities. shown separately for a material in the costed multilevel BOM.
Valuate work in process
Calculate production variances in variance calculation
Valuate the unplanned scrap in variance calculation How are scrap variances calculated?

Scrap variance are calculated by valuating the scrap quantities with the
amount of the actual costs less the planned scrap costs.

Is it possible to update the results of the standard cost estimate to

other fields such as commercial price, tax price fields in the
accounting view? What do you mean by Component scrap and how is it maintained in
SAP?
Yes. It is possible to update the standard cost estimate to other fields
such as commercial price etc. in accounting view. Component scrap is the scrap of a material that is expected to occur
during production. When an assembly is produced with this component,
the system has to increase the component quantity to enable to reach
the required lot size. The component scrap can be entered in the BOM
How do you configure that the results of the standard cost estimate item or in the MRP 4 view of the material master
are updated in other fields other than the standard price?

The price update in the material master is defined in Costing type. This What do you mean by Operation scrap and how is it maintained in
costing type is attached to the costing variant. SAP?

Operation scrap is a scrap that is expected to occur during production.

What do you mean by Assembly scrap and how is it maintained in Operation scrap is used to reduce the planned input quantities in follow
SAP? up operations and to calculate the precise amount of assembly scrap.
Operation scrap can be maintained in % in the routing and in the BOM.
Assembly scrap is scrap that is expected to occur during the production
of a material which is used as an assembly.
What are the implications if the operation scrap is maintained in
If a certain amount of scrap always occurs during the production of an the routing and if it maintained in the BOM?
assembly, the quantities and activities used must be increased by the
system so that the required lot size can be produced. If the operation scrap is maintained only in the routing, the costing lot
size is reduced by this percentage.
To increase the lot size of an assembly you can enter a percentage, flat-
rate assembly scrap in the MRP 1 view of the material master record. If the operation scrap is maintained in the BOM, the planned input (not
This assembly scrap is reflected in all the subordinate components. The the output quantity) is increased and any assembly scrap is reduced.
system increases the quantity to be produced by the calculated scrap
quantity. This increases both the materials consumed and the activities
consumed and consequently the cost.
What is the meaning of additive costs in SAP and why is it required? Valuation types are assigned to valuation categories.

Additive costs are used to add costs manually to a material cost estimate
when it cannot be calculated by the system. Examples of such costs are What are the steps involved before you run a cost estimate for a
freight charges, insurance costs and stock transfer costs. split valuated material?

The following are the steps:-

What is the configuration required for additive costs? 1) Create procurement alternatives based on the valuation types for
the material.
To include additive costs in the material cost estimate you need to set the 2) Maintain Mixing ratios for the procurement alternatives
indicator “Incl. additive costs” for each valuation strategy in the valuation
variant.
Further you also need to set in the costing variant to include additive
costs. How do you create a material master with split valuation?

To create a split valuated material master proceed as follows:-

How do you configure split valuation? 1. First create a valuation header record for the material. Update the
Valuation category field on the accounting screen; leave the
The configuration steps involved in split valuation:- Valuation type field blank. In the Price control field, enter V
1) Activate split valuation – Configure whether split valuation is (moving average price). When you save, the system creates the
allowed for the company code. valuation header record.
2) Determine the valuation categories and valuation types that are
allowed for all valuation areas.
3) Allocate the valuation types to the valuation categories
4) Determine the local valuation categories for each valuation area 2. Then create the material for a valuation type.
and activate the categories to be used in your valuation area.
Call up the same material in creation mode again. Due to the fact
that a valuation header record exists, the system requires you to
What is valuation category and valuation type in split valuation? enter a valuation type for the valuation category.

In split valuation the material stock is divided according to valuation 3. Repeat Step two for every valuation type planned.
category and valuation type.

Valuation category determines how the partial stocks are divided

according to which criteria. The following valuation categories are preset When a standard cost estimate is run for a finished good does SAP
in the standard SAP R/3 system – calculate cost estimate for its components such as raw and packing
material?
B - Procurement type
H – Origin type Yes. SAP calculates the cost estimate even for raw and packing material
X – Automatic batch valuation and stores it in the standard price field for information purposes

Valuation type describes the characteristic of individual stock.

e.g. EIGEN Inhouse production (SAP standard)
FREMD External procurement (SAP standard)
How do you prevent the system from calculating the cost estimate
for raw and packing material when you run a standard cost estimate
Work in Progress
for the finished goods?

To prevent the system from calculating cost estimates for raw and In period 1 there is a WIP posted of 22000 USD in period 2 some
packing material, you need to select the “No costing” checkbox in the further goods issue are done to the extent of 15000 USD . How will
costing view of the material master. system calculate WIP for period 2?

System will post a delta WIP of 15000 USD in period 2.

How is it possible to apply 2 different overhead rates for 2 different
finished goods?
What is the basic difference in WIP calculation in product cost by
It is possible through overhead groups. You configure 2 overhead keys. order and product cost by period (repetitive manufacturing)?
Define rates for each of this overhead key. These two overhead keys is
then assigned to the two overhead groups. These overhead groups are Generally in product cost by order, WIP is calculated at actual costs and
attached in the costing view of the finished goods material master. in product cost by period WIP is calculated at target costs

What are the configuration settings for calculating WIP in SAP?

You define secondary cost elements of type 31 first.

You then need to define the Results Analysis version

This results analysis contains line ids which are basically nothing but
break up of costs

Next you define assignments-> here you assign source cost elements to
the line ids defined above

You also define the secondary cost elements which are assigned to the
line ids.

In the end you define the Finance GL accounts which are debited and
credited when a Work in Progress is calculated.

Please refer to the configuration document for more detailed information

How does SAP calculate Work in Process (WIP) in product cost by

order?

The system first runs through all the production order for the month and
checks for the status of each production order. If the status of the
production order is REL (Released) or PREL (Partially released) and if
costs are incurred for that order system calculates WIP for the
production order.
Material Ledger
The system cancels the WIP for the production order when the status of
the order becomes DLV (delivered) or TECO (Technically complete).
What precautions have to be taken while switching on the material
ledger for a plant?
There is a production order with order quantity 1000 kgs. During
the month 500 kgs of goods were produced. What will be the system A material ledger once activated for a plant cannot be switched off.
treatment at the month end? Therefore it is important that the material ledger be activated carefully
for a plant.
The system will first check the status of the production order. Since the
status of the order is not DLV (Delivered) it will calculate a WIP for the
production order. How do you go about configuring material ledger?

The following are the steps:-

Why does the system not calculate variance for the 500 kgs which
has been delivered? 1) Activate Valuation Areas for Material Ledger

In the product cost by order component the system does not calculate a 2) Assign Currency Types to Material Ledger Type
variance for partially delivered stock on the production order. Whatever
is the balance on the production order is considered as WIP. In the 3) Assign Material Ledger Types to Valuation Area
product cost by period component, system will calculate WIP as well as
variance provided 4) Maintain Number Ranges for Material Ledger Documents

5) Activate Actual costing (whether activity update relevant for price

Is the WIP calculated in the product cost by order component at determination)
actual costs or standard costs?
6) Activate Actual cost component split
In the product cost by order component the WIP is calculated at actual
costs. 7) Customizing settings in OBYC

Is the WIP calculated in the product cost by period component at What are the problems faced when a material ledger is activated?
actual costs or target costs?

In the product cost by period component the WIP is calculated at target When a material ledger is activated it is imperative that actual costing
costs. run has to be done every month. Actual costing run needs to be done
immediately after the new month roll over. After the actual costing run
you cannot post any MM(Materials Management) entry to the previous
period.
What are the options available while performing revaluation in an During single level price determination the price difference collected on a
actual costing run? single finished product is allocated to consumption. This allocation to the
consumption is not individually allocated to the good issues.
There are 2 options available:-
In multi level price determination the price difference is allocated to
Revaluation – You can revalue the finished goods stock individual goods issue. The price differences are passed on to the next
Accrual – You can accrue the revaluation gain or loss without actually level of consumption.
changing the price in the material master.
The system calculates a weighted average price for the finished goods
and semi finished goods. This weighted average price is called as the
periodic unit price
What is the configuration setting to be done for posting the accrual
in the actual costing run?
What happens when the revaluation is done in actual costing run for
In transaction code OBYC select transaction key LKW and maintain the the previous period?
balance sheet account for accrual.
When revaluation is performed in actual costing for the previous period
the price control in the material master is changed from S to V and the
periodic price is updated as the valuation price for the previous period.
What are the steps to be taken before you execute an actual costing
run?
What is the importance of the price determination indicator in the
The following are the steps to be taken: material master for the purpose of actual costing run?

1.) Execute all the allocation cycles in the cost center There are 2 price determination indicators in the material master when
accounting module. material ledger is activated.
2.) Execute actual activity price calculation.
3.) Revalue all the production orders with the actual activity They are as follows:-
prices. The under or over absorbed cost on cost centers are 2 – transaction based
passed on to the production order through this step of 3 – Single level / multi level
revaluation of production orders.
4.) Calculate overheads, do a variance calculation and finally In case of material masters having price determination indicator 2 no
settle the production order. actual costing will take place. In case of material masters having price
5.) Finally execute the actual costing run. determination indicator 3 actual costing will take place.

What should be the price control for a material master which has a
price determination indicator 3 where material ledger is activated?
What happens in an actual costing run?
In such a case only price control S is possible where the price
In actual costing run there is a process of single level price determination determination 3 is activated in material master.
and multi level price determination. The production price difference
variances are collected on the material ledger for each of the finished
goods and semi finished goods.
 To do so while defining Operating concern one has to define
Profitability Analysis Characteristics and Value fields.

What are characteristics and Value Fields?

Explain the organizational assignment in the PA module?
In the operating concern two things are basically defined
The operating Concern is the highest node in Profitability Analysis.
a) Characteristics
The operating concern is assigned to the Controlling Area. b) Value Fields
Within the operating concern all the transactions of Profitability Analysis Characteristics are nothing but those aspects on which we want to break
are stored. down the profit logically such as customer, region product, product
hierarchy, sales person etc
The operating concern is nothing but a nomenclature for defining the
highest node in PA. Value Fields are nothing but the values associated with these
characteristics
Eg Sales, Raw Material Cost, Labour Cost, Overheads etc
What is the functionality of the PA module?
Once you define the characteristics and value fields these values are
PA module is the most important module when it comes to analyzing the updated in the table.
results of the organization.

In this module you basically collect the revenues from the sale order , the From where does the characteristics come from?
costs from the production order, cost center or internal order and
analyze their results. The characteristics which are defined above basically comes from either
the Customer Master or the Material Master.
The interesting part about this module is that when it collects the costs
and revenues it also collects the characteristics associated with the costs
and revenues and this is what makes it stand out

So for e.g. using PA module you can find out the following: How does various values( revenues and costs) flow into PA?
Profit of a certain product The Sales Revenue comes from the Condition Type in SD.
Profit of a certain product in a certain region
Profit of a certain product in a certain region by a certain customer We need to map the Condition Type in SD to the respective value fields in
Profit of a certain product in a certain region by a certain sales person customizing to have the revenue flow into PA.
And the list can go on in depth
The Cost comes from Cost estimates which are transferred using the PA
It is one of the most wonderful modules in the SAP transfer structure which we have covered in the Product costing section.

The various cost components of the cost component structure is assigned

to the value field of PA module and this is how the costs come into PA.
How do you get all those characteristics defined above and how do
you analyze them? Once the actual revenue and the std cost defined above are captured in
PA the variances are also transferred into PA.
This way the std cost variances equal the actual cost. What is the difference between Account based Profitability Analysis
and Costing based Profitability Analysis?
So actual revenue- actual cost helps us determine the profit.
Account based Profitability analysis is a form of Profitability analysis (PA)
that uses accounts as its base and has an account based approach. It
uses costs and revenue elements.
How do you configure the assignment of variances from product
costing to COPA module? Costing based Profitability Analysis is a form of profitability analysis that
groups costs and revenues according to value fields and costing based
The variance categories from product costing along with cost element is valuation approaches. The cost and revenues are shown in value fields.
to be assigned to the value fields in COPA

What are the advantages and disadvantages of Account based

Once you have captured all the costs and revenues how do you profitability analysis vis-à-vis costing based profitability analysis?
analyze them?
The advantage of Account based PA is that it is permanently reconciled
The costs and revenues which we have captured in the above manner are with Financial accounting.
then analysed by writing reports using the Report Painter Functionality
in SAP. The disadvantages are that it is not powerful as the costing based PA,
since it uses accounts to get values. No Contribution margin planning
can be done since it cannot access the standard cost estimate. Further
no variance analysis is readily available.
What is characteristic Derivation in Profitability Analysis Module?

Characteristic Derivation is usually used when you want to derive the The advantages of the Costing based PA are manifold. They are as
characteristics . An example of this could be say you want to derive the follows: -
first two characteristics of product hierarchy.  Greater Reporting capabilities since lot of characteristics are
available for analysis.
In such cases you define characteristic derivation where you maintain  This form of PA accesses the Standard cost estimate of the
the rules, which contain the table names of the product hierarchy fields manufactured product and gives a split according to the cost
and the number of characters to be extracted, and it also specifies the component split (from the product costing module) when the bills
target characteristic field in PA. are posted.
 Contribution margin can be planned in this module since the
system automatically accesses the standard cost estimate of the
product based on the valuation approaches.
What is the basic difference in customizing in Profitability analysis  Variance analysis is ready available here since the variance
as compared to other modules? categories can be individually mapped to the value fields.

In PA when we configure the system i.e. creating operating concern, Disadvantages:-

maintain structures no customizing request is generated. The Since it uses a costing based approach, it does not sometime reconcile
configuration needs to be transported through a different transaction with financial accounting.
called as KE3I.
Can both Account based and Costing based Profitability analysis be
configured at the same time? In the costing key you specify whether the system should read the
current standard cost estimate, the previous standard cost estimate or
Yes. It is possible to configure both types of costing based profitability the future standard cost estimate or a saved cost estimate.
analysis at the same time. The configuration settings to determine this costing key is as follows:-
1) Assign costing keys to the products – Three costing keys can be
attached to a single product for a specific point of valuation, record
What is the advantage of configuring both the type of Profitability type, plan version.
analysis together? 2) Assign costing keys to Material types
3) Assign costing keys to any characteristics – You can use your own
The advantage of activating account based profitability analysis along strategy to determine the costing keys. This is through user
with costing based PA is that you can easily reconcile costing based defined assignment tables.
profitability analysis to account based profitability analysis, which means
indirectly reconciling with Financial accounting.

Is there any additional configuration required for Account based

profitability analysis as compared to costing based profitability
analysis?

No. There are no special configurations required except for activating the
account based profitability analysis while maintaining the operating
concern.

What is the difference between Profitability analysis and Profit

center accounting?

Profitability analysis lets you analyze the profitability of segments of your

market according to products, customers, regions, division. It provides
your sales, marketing, planning and management organizations with
decision support from a market oriented view point.

Profit center accounting lets you analyze profit and loss for profit centers.
It makes it possible to evaluate different areas or units within your
company. Profit center can be structured according to region, plants,
functions or products (product ranges).

What configuration settings are available to set up valuation using

material cost estimate in costing based profitability analysis?

In Costing based Profitability analysis you define costing keys. A costing

key is a set of access parameters which are used in valuation to
determine which data in Product cost planning should be read. In the
costing key you attach the costing variant.
 figure is created for the controlling area and as such is available in profit
Profit Center center accounting module.

What are the precautions to be taken while maintaining the 3KEH

table for profit center accounting?
What is the basic purpose of creating a Profit Center?

The basic purpose of creating a Profit Center is to analyse the revenues You should not maintain the customer and vendor reconciliation
and costs for a particular product line, or a plant or a business unit. accounts in the 3KEH table. Further you should also not maintain the
Though you can generate balance sheets and profit and loss accounts special GL accounts in this table. Since we are transferring the customer
per Profit Center still a profit center should basically be used as a tool and vendor balances to profit center module through separate month end
only for internal reporting purposes. programs. If the reconciliation’s accounts are maintained here it will
result in double posting in the profit center module.
If legally one has to produce the Balance sheets and Profit and Loss
Accounts for a profit center then it is advisable to create it as a company
code instead of a profit center
Should secondary cost elements be maintained in the 3KEH table?

No. Since here we maintain only those accounts for which the value
How does the cost and revenue flow to the Profit Center? should flow from FI to PCA. Secondary cost elements are already defined
in the controlling module which will reflect in the postings in PCA also
The profit center is stored in the cost center this way the costs flow to the
profit center.

The profit center is also stored in material master. This way all sales How can the default settings be maintained for cost elements per
orders created for the finished product automatically picks up the profit company code?
center from the material master and all the revenues and costs coming
from this sales order for that finished product is passed on to this profit The default settings can be maintained in transaction OKB9. Here we
center. can specify for a company code, cost element which is the cost center to
be defaulted or whether profitability segment is to be automatically
A profit center document is created in addition to the Finance document derived. Further we can also maintain whether business area is
whenever revenue or consumption takes place. This document contains mandatory or profit center is mandatory and can maintain the default
the details of the profit center. business areas and profit centers.
Once both the costs and revenues flow to the profit center you can write
reports using the Report Painter to get intelligent analysis. You can also
use SAP standard reports What are the other important activities in Profit Center?

Statistical key figures are created in the cost center accounting The assignments of profit center to the cost center and also assignment
module. Now the same statistical key figures are required in the of profit center to the material master is what will determine the success
profit center accounting module. Is it required to maintain the of the Profit center posting. If these assignments are wrongly done then
statistical key figure in PCA module? the profit center postings will not come in properly.

No. Since the statistical key figures are created in a controlling area.
Profit center is a sub module within controlling area. The statistical key
Period End Closing Activities in
Controlling:

What are the period end closing activities in controlling ?

The following are the period end closing activities in Controlling:

Repost CO Documents that was incorrectly posted

Run Distribution or Assessment Cycles

Run the Overhead Calculation in Product Costing

Run the WIP Calculation in Product Costing

Run the Variance Calculation in Product Costing

Run the Settlement Calculation in Product Costing which will post all the
WIP and variance to Finance and PA.

Calculate FI Data for Transfer to Profit Center

Transfer Balance Sheet Items like Recievables, Payables, Assets and

Stock

Run Results Analysis for Sales Order if applicable

Run Settlement of Sales Orders to PA.