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SAP FI END USER QUESTION :

1) Explain the term SAP FICO?
SAP FICO stands for FI ( Financial Accounting) and CO (controlling). In SAP FICO, SAP FI take cares about
accounting, preparation of financial statements, tax computations etc, while SAP CO take cares of inter
orders, cost sheet, inventory sheet, cost allocations etc. It is the software that stores data, and also
computes them and retrieves the result based on the current marketing scenario. SAP FICO prevents data
lost and also does the verification and reporting of data.

2) What are the other modules to which 'Financial Accounting' is integrated?

The other modules to which 'Financial Accounting' is integrated are
a) Sales and Distribution
b) Material Management
c) Human Resource
d) Production Planning
e) Controlling of financial transaction

3) In SAP FI what are the organizational elements?

The organizational elements in SAP FI are:
a) Company Code
b) Business Area
c) Chart of Account
d) Functional Area

4) Explain what is posting key and what does it control?

In order to determine the transaction type which is entered in the line item, a two digit numerical is used
known as 'Posting Key'
Posting key determines
a) Account Types
b) Types of posting. Debit or Credit
c) Field status of transaction

5) What is the company code in SAP?

To generate financial statements like Profit and Loss statement, Balance sheets etc. company code is used.

6) How many Chart of Accounts can company code have?

You can have one Chart of Account for one company code which is assigned.

7) For a Company Code how many currencies can be configured?

There are three currencies that can be configured for a Company code, one is a local currency and two are
the parallel currencies.

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8) What are the options in SAP for Fiscal years?

Fiscal year in SAP is the way financial data is stored in the system. In SAP, you have 12 periods and four
special periods. These periods are stored in fiscal year variant that is:
a) Calendar Year: From Jan-Dec, April-March
b) Year dependent fiscal year

9) What is a 'year shift' in SAP calendar?

SAP system does not know what is broken fiscal year e.g April 2012 to March 2013 and only understand the
calendar year. If, for any business, the fiscal year is not a calendar year but the combination of the different
months of two different calendar year and then one of the calendar year has to classified as a fiscal year for
SAP and the month falling in another year has to be adjusted into the fiscal year by shifting the year by
using the sign -1 or +1. This shift in the year is known as 'year shift'.
Example: April 2012 to Dec 2012 is our first calendar year, and Jan 2013 to March 2013 is our second year,
now if you are taking April-12 to Dec-12 as your fiscal year, then Jan-13 to March-13 automatically becomes
the second year, and you have to adjust this year by using -1 shift, and vice versa if the scenario is reversed,
here you will use +1 shift.

10) What is year dependent fiscal year variant?

In a year dependent fiscal year variant, the number of days in a month is not as per the calendar month. For
example, in year 2005, month January end on 29th, month Feb ends on 26th etc.

11) In SAP how input and output taxes are taken care?
For each country tax procedure is defined, and tax codes are defined within this. There is a flexibility to
either expense out the Tax amounts or capitalise the same to stocks.

12) Explain what is validations and substitutions in SAP?

For each functional area in SAP Validation or Substitution is defined eg, Assets, Controlling etc. at the
following levels
a) Document Level
b) Line item Level

13) What are the application areas that use validation and substitutions?
a) FI- Financial accounting
b) CO-Cost accounting
c) AM-Asset accounting
d) GL-Special purpose ledger
e) CS-Consolidation
f) PS-Project system
g) RE-Real estate
h) PC-Profit center accounting

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14) In SAP what is the use of FSV ( Financial Statement Version) ?

FSV ( Financial Statement Version) is a reporting tool. It can be used to extract final accounts from SAP like
Profit and Loss Account and Balance Sheet. The multiple FSV's can be used for generating the output of
various external agencies like Banks and other statutory authorities.

15) What is a field status group?

'Field status groups' control the fields which come up when the user does the transactions. In FIGL (Financial
General Ledger) master, the field status group is stored.

16) What is FI-GL (Financial- General Ledger) Accounting does?

To get an overview of external Accounting and accounts, G L (General Ledger) Accounting is used. It does
the recording of all business transactions incorporated with all other operational areas in a software system
and also ensures that the Accounting data is always complete and accurate.

17) What is the default exchange rate type which is picked up for all SAP transactions?
For all SAP transaction, the default exchange rate is M (Average Rate).

18) What are the methods by which vendor invoice payments can be made?
a) Manual payment without the use of any output medium like cheques etc.
b) Automatic payments like DME (Data Medium Exchange), cheques, Wire transfer

19) What are the problems when business area is configured?

The problem faced when a business area is configured, is splitting of account balance which is more
pertinent in the case of tax accounts.

20) For document clearing what are the customizing prerequisites ?

The customizing pre-requisite for document clearing is to check the items cleared and uncleared, and this is
done by open item management. Open item management manages your outstanding account, i.e account
payable and account receivable. For instance, an invoice item that has not yet been paid is recorded as open
account until it is paid.

21) What is the importance of GR/IR ( Good Received/ Invoice Received) clearing account?
GR/IR ( Good Received/ Invoice Received) is an interim account. In the legacy system, if the goods are
received and the invoice is not received, the provision is made, in SAP at the goods receipt. It passes the
Accounting entry debiting the Inventory and crediting the GR/IR account. Similarly, when an invoice is
received the vendor account is credited, and the GR/IR account is debited, the GR/IR will show as an un-
cleared items till the time the invoice is not received.

22) What is parallel and local currency in SAP?

Each company code can have two additional currencies, in addition to the company code, currency entered
to the company code data. The currency entered in the company code creation is called local currency and
the other two additional currencies are called parallel currencies. Parallel Currencies can be used in foreign
business transactions. In order to do international transaction, parallel currency can be used. The two

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parallel currencies would be GROUP CURRENCY and HARD CURRENCY.

23) Where can you use the internal order?

To track the cost, internal orders are used; they are proposed to be incurred over on a short term basis.

24) Is it possible to calculate depreciation to the day?

Yes, it is possible to calculate depreciation, to do that you have to switch on the indicator Dep. to the day in
the depreciation key configuration.

25) In Asset Accounting what is the organizational assignments?

In Asset Accounting, chart of depreciation is rated as the highest node, and this is assigned to the company
node. All the depreciation calculations are stored under the chart of depreciation.

26) What is the importance of asset classes? What asset classes are there?
The asset class is the main class to classify assets. Every asset must be assigned to only one asset class.
Example of asset class is Furniture & Fixtures, Plant & Machinery, and Computers etc. The asset class also
contains G1 account, when any asset is procured, G1 account is debited. Whenever you create and asset
master, it becomes mandatory to mention the assest class for which you are creating the required assets.
So, whenever any asset transaction occurs, the G1 account attached to the asset class is automatically
picked up and the entry is passed. You can also specify the default values for calculating the depreciation
values and other master data in each asset class.

27) How capital WIP (Work In Process) and Assets accounted for in SAP?
'Capital WIP' is referred to as Assets under construction in SAP and is represented under specific asset class.
Depreciation is not charged under 'Capital WIP' usually. The cost incurred on building a capital asset can be
booked to an 'internal order' and through the settlement procedures, and can be posted onto an 'Asset
Under Construction'.

28) What are the major components of Chart of Accounts?

The major components of Chart of Accounts are:
a) Chart of account key
b) Name
c) Maintain Language
d) Length GL account number
e) Controlling Integration
f) Consolidation-Group chart of accounts
g) Block indicator

29) What is credit control area in SAP?

To immune your company from the risk of bad debts and multiple outstanding receivable, you can set a
credit limit for your customer by using credit control area in SAP. With the help of SAP, you can block the
deliveries to your customer based on the credit limit and the accounts receivable balance in their account
which is maintained by you.

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30) How can you create Credit Control Area in SAP?

By using transaction code OB45 or path you can create Credit Control Area in SAP
SPRO> enterprise structure >maintain structure>definition>financial accounting>maintain credit control
area and then enter the following description
a) Update
b) Name of the credit control area in SAP
c) Currency
d) Description
e) Credit Limit
f) Risk Category
g) Fiscal Variant
h) Rep group

31) What is posting period variants?

In fiscal year posting period is a period for which the transactions figures are updated. The posting period
variants in SAP is accountable to control which Accounting period is open for posting and ensures that the
closed periods remain balanced.

32) Explain in simple terms what is field status and what does it control?
Field status group is a group configured in FSV (Field Status Variant) to maintain field status for G/L (General
Ledger) accounts. It controls which field should suppress, display, optional and required.

33) What is short-end fiscal year?

A short-end fiscal year results when you change from a normal fiscal year to a non-calendar fiscal year, or
other way around. This type of change happens when an enterprise becomes part of a new co-corporate
group.

34) What is an account group and where it is used?

To control the data that needs to be entered at the time of the creation of a master record an account group
is used. Account group exist for the definition of GL account, Customer Master and Vendor.

35) What is the purpose of "Document type" in SAP?

The purpose of " Document type" in SAP is
a) Number range for documents are defined by it
b) Types of accounts that can be posted are controlled by it, e.g Assets, Vendor, Customer, Normal GL
account
c) It is used for the reversal of entries

36) Is business area at company code level?

No. Business area is at client level which means other company codes can also be posted to the same
business area.

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37) In SAP, Customer and Vendor code are stored at what level?
The Vendor and Customer codes are stored at the client level. It means that by extending the company code
view any company code can use the customer and vendor code.

38) How are tolerances for invoice verification defined?

Tolerance determines whether the payable places matching or tax hold on the invoice. The following are the
instances of tolerance can be defined for Logistic Invoice Verification.
a) Small differences
b) Moving average price variances
c) Quantity variances
d) Price variances

39) What is a country Chart of Accounts?

Country Chart of Accounts contains G/L (General Ledger) accounts needed to meet the country's legal
requirements.

40) What is APP in SAP Fico?

APP stands for 'Automatic Payment Program'; it is a tool provided by SAP to companies to pay its vendors
and customers. APP tools help to avoid any mistakes taken place in posting manually. Also, when number of
employees is more in the company, payment through APP becomes more feasible.

41) In SAP FICO what are the terms of payment and where are they stored?
Payment terms are created in the configuration and determine the payment due date for vendor/customer
invoice.
They are stored on the customer or vendor master record and are pulled through onto the customer/vendor
invoice postings. The due date can be changed on each individual invoice if required.

42) What are one-time vendors?

In certain companies, especially the one dealing with high cash transactions, it is not practical to create new
master records for every vendor trading partner. One time vendors allows a dummy vendor code to be used
on invoice entry and also the information which is usually stored in the vendor master.

43) What are the standard stages of the SAP payment run?
The following steps are the standard stages of the SAP payment run
a) Entering of parameters ( Vendor Accounts, Company Codes, Payment Methods)
b) Proposal Scheduling – the system proposes the list of invoice paid
c) Payment booking- the booking of the actual payments in the ledger
d) Printing of payment forms ,example cheques

44) In Accounts Receivable, what is the difference between the 'Residual Payment' and 'Part
Payment' methods of allocating cash?
'Residual payment' and 'Part payment' are the two methods for allocating partial methods from customers.

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For example, an invoice for $100 is generated, customer has paid $70. Now this $70 will be off-set and
leaving the remaining balance $30. With residual payment, the invoice is cleared for the full value of $100
and a new invoice is generated for the remaining balances $30.

45) What is "dunning" in SAP?

'Dunning' is the process by which payment chasing letters are issued to customers. SAP can determine which
customers should receive the letters and for which overdue items. Different letters can be printed in SAP
depending on the overdue payment date, with a simple reminder. With the help of dunning level on the
customer master, we can know which letter has been issued to the customer.

46) What is the purpose of the account type field in the GL (General Ledger) master record?
At the end of the year, profit and loss accounts are cleared down to the retained earnings balance sheets
account. The field contains an indicator which is linked to a specific GL (General Ledger) accounts to use in
this clear down.

47) Explain what is recurring entries and why are they used?
Recurring entries can eliminate the need for the manual posting of Accounting documents which do not
change from month to month. For example, an expense document can be generated which can be scheduled
for the last days of each month or whenever an individual wants it. Usually multiple recurring entries are
created at one go and then processed all together as a batch month end using transaction.

48) What is a 'Value Field' in the CO-PA module?

Value fields are number or value related fields in profitability analysis such as quantity, sales revenue,
discount value etc.

49) What are the statistical internal orders?

Statistical internal orders are dummy cost objects used for reporting and analysis purposes. It must be
posted to in conjunction with a real object such as a cost center.

50) For what purposes internal orders can be used?

You can use internal orders for
a) Overhead Orders: It monitors internal jobs settled to cost centres
b) Investment Orders: It monitors internal jobs settled to fixed assets
c) Accrual Orders: Offsetting posting of accrued costs calculated in CO
d) Orders with Revenue: It display the cost controlling parts of Sales and Distribution, it does not affect the
core business of the company

51. SAP P2P PROCESS (PROCURE TO PAY PROCESS)

SAP P2P Process (procure to pay process) is essential for purchasing activities in a company. We will observe
in viewpoint of SAP MM. It is essential and useful to buying of material or service and it is essential for the
smooth functioning of a department.
It can be also termed in different ways like:

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Procurement Cycle
Source to Pay
Procure to Pay

PURCHASE REQUISITION(PR)
Purchase requisition is internal document i.e. within company. No external stakeholder or third party is
involved in this. It is demand for a certain kind of material for a specified quantity to fulfill the requirements
within time.
We can raise PR for the following procurement types:
Standard
Subcontracting
Consignment
Stock Transfer
External Service
REQUEST FOR QUOTATION(RFQ)
Once we gather all the requirements, purchasing department will send request to all the prospective vendors
for the said material who can fulfill the requirement at best possible price. This is called as RFQ. Vendor
sends a reply against RFQ which is called as Quotation.
RFQ can be created by two different ways:
Manually
With reference to PR

SAP P2P PROCESS

QUOTATION
Vendor in response to RFQ which is send by company purchasing department sends information regarding
Price and other related factors. This is called as Quotation. We have to maintain Quotation in our system by
following the transaction code ME47.
When we received multiple quotations from vendors we have to compare all these by following transaction
code ME49 for the best available quotation.
PURCHASE ORDER
This is important stage of P2P Process.A Purchase Order is formal and legal document asking vendor to
supply certain quantity of material at specified price to respective plant within time limit. Purchase Order can
be raised not only for procurement of material but also for services. Purchase Orders can be raised with or
without reference of Purchase Requisition.
When PO is raised for procurement of stock material ( T Code: ME21N), one must have to specify the
material number( which is created in Material Master).
PO can also be raised for the procurement of direct consumable material. For example, if anyone procures
material for a specific project or work that material is treated as consumed on receipt, hence inventory not
gets updated in such cases. We have to mention account assignment in PO for proper effect to cost object.

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PURCHASE ORDER TYPES

SAP provides many Purchase Order types. User gets different screens for each type of PO.
FRAMEWORK ORDER
If anyone wants to buy product which has very small value, Blanket Purchase Order has to be raised for the
specific maximum value and validity period, with document type FO and item category Limit.
STOCK TRANSPORT ORDER(STO)
Sometimes company dispatches material from one plant to another Plant. It is called as STO. This can be
done by using document type as UB for created a purchase order called Stock transport order.
GOODS RECEIPT NOTE
It is a confirmation that vendor has dispatched material which were mentioned in PO at the specific Plant. (
Refer Enterprise Structure). User has to follow MIGO t code for GRN.
There is certain procedure or steps involved in GR:
Company sends PO to Vendor
Vendor dispatches material at plant mentioned in PO, may be full or partial quantity
Goods Receipt at plant
At time of GRN system generates document as a proof of GR and accordingly accounting document
also gets generated.
LOGISTICS INVOICE VERIFICATION
It is a part of SAP MM and closely integrated with other functional modules like FI and CO. It is also
associated with Empties Management where one can track movement and stock of reusable packaging. It
completes the process of material procurement and also allows for credit memos for return deliveries or
invoice reversal. We can follow MIRO T code for invoice verification.
There are various ways to process invoice in Invoice verification like:
Document Parking
Automatic Settlements
Invoice Received via EDI etc.
Ideally with view point of materials management this is the last stage of SAP P2P Process.
VENDOR PAYMENT
Every company needs to pay its vendors once material is received at plant. Often, payments are made
against invoice and posted to vendor accounts.
Like invoice verification there are several ways to pay vendor:
Cash .( Follow FBCJ t code)
Cheque
Manual Electronic Transfer ( Follow F-53 )
File Electronic Transfer
Letter of Credit
Ideally, for viewpoint of Materials Management SAP P2P Process will end at the stage of Logistics Invoice
Verification.

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52. R TO R CYCLE ( RECORD TO REPORT)

Record to Report (R2R) is a Finance and Accounting (F&A) management process which involves collecting,
processing and delivering relevant, timely and accurate information. It provides strategic, financial and
operational feedback on how a business is performing. Stakeholders read the feedback and gain insights into
whether an organization is performing successfully or not, and if their expectations have been met.
Stages of Record to Report
• The groundwork for the Record to Report cycle is laid from the data processing stage itself. This is
where most of the data that is essential for creating the reports is generated. If the data entry teams enter
the records correctly at this stage with minimum errors, then the rest of the process goes smoothly. If not,
then much time is wasted on manual intervention and re-working.
• During the end of a financial period, the finance team and everyone else associated with any kind of
accounting work are given a deadline. They have to finish all their postings before the deadline so that the
general ledger can be closed and the reconciliation and validation work can begin. The integrity of the data
flowing into the general ledger is improved, and efforts are taken to reduce the need for manual journal
entries.Most companies try to complete the closing cycle as quickly as possible. But large companies that
have legacy systems carried over from acquisition of other companies, and complex internal procedures, take
a lot of time over the closing. This subsequently delays the entire R2R process, and for many finance teams,
completing the closing cycle on time is a constant challenge.
• Once the closing cycle is over, the accountants start reconciling intercompany balances, performing
eliminations, and validating the information that will eventually go into the financial statements. The finance
team is well aware at this point that the reports it prepares has to address the needs of both internal and
external stakeholders.The reconciliation exercise is quite complicated in the case of multinational entities
with vast operations. Typically, however, companies try and complete the consolidation work within as short
a span of time as possible after the close of the general ledger.
• Once all the data has been gathered, validated and assimilated, the analytical process starts. A wide
range of reports are subsequently prepared that contain a variety of statistics and key performance
indicators. These reports are distributed to both internal and external stakeholders that include senior
management, operational heads, investors and industry regulators.
Importance of a Streamlined Record to Report Process
1. Strategic Decision-making:
It is based on these reports that senior management plans the strategies of the company. These reports tell
operational heads whether their teams are meeting their targets, and if not, what actions they need to take.
In conglomerates, the chief executives use the financial reports to decide which subsidiaries to drop and
which ones to support.
2. Compliance:
Post the 2008 recession, financial market regulations have become more stringent. Companies have to meet
many more guidelines. Compliance issues have become a huge talking point after the Enron and Arthur
Andersen scandals. Regulators are concerned that balance sheets and revenue statements could be
manipulated. In such an environment where meeting regulatory requirements has become vital, preparing
accurate reports becomes much more important.
3. Tax Planning:
The tax planners in the company calculate their estimations based on the numbers in these reports. They
have to understand how much tax the company needs to pay and what strategies they can use to reduce
their tax liability.
It is highly important for the company to have a stable and efficient Record to Report process in place.
Optimizing the cycle and reducing its length can enable scarce financial resources to be employed for
mission-critical objectives. Completion of the cycle in fewer days will also aid in analysis and decision-making.

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An efficient Record to Report cycle can thus, bring about a reduction in the cost of finance and enhance the
value of the finance function to the business.
Also Read Related Articles:
Sl.No Article
1 The Ten Generally Accepted Accounting Principles (GAAP)

2 How to Analyze a Balance Sheet

3 16 Tips for Effective Invoicing for Businesses

53. What Is SAP Order-to-Cash?

Order-to-Cash is an integration point between Finance (FI) and Sales (SD). It is also known as OTC or O2C
in short form. It is a business process that involves sales order from customers to delivery and invoice. It
comprises SO, Delivery, Post Goods Issue (PGI) and billing to customers. OTC process is a very important
process in Enterprise Resource Planning software(ERP Software). Both major ERP software SAP and Oracle
include this process.
Its configuration touches both Finance and Sales & Distribution modules.This is an end to end process from
customer Inquiry to goods delivery, billing and payment of money. The process starts when a customer
inquires for an inventory item (finished goods for a company). The customer gets quote for the item and
place an order for the quantity needed. A user from company place the order and pass it for processing.
Inventory gets picked up from warehouse and shipped to customer. Billing process also starts with delivery
and it can be sent with the item or later. This is an overall OTC scenario in general.
This process gives integration between customer master record, sales organization, sales offices, distribution
channels, divisions and plants.
Here in this article, we are going to discuss the steps in details.
SAP Order-to-Cash Process

SAP OTC Process Flow

SAP OTC is a process involved customer sales order creation and satisfying customer requirements via
delivery.
Prerequisites are customer master record is set up, sales area (sales organization, divisions and distribution
channels) was set up already.
Generally steps are as follows:
• Customer Inquiry
• Quotation for customer inquiry
• Sales Order creation
• Post Goods issue (PGI)
• Delivery
• Billing- Bill sent to customer
• Receipt of money- Customer Payment
The First two steps that are inquiry and quotation may or may not happen. A new customer may inquire and
ask for quotation but an old customer may not inquire. Moreover, if you have contracted agreement to sell
products at a certain price than customer will directly order without quotation.
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Now, let's see what is the impact on the accounting entries for this cycle steps. Each step has it's own
different configuration these steps used in business workflow.As I mentioned earlier, this process involves
many different organizational levels. Most important organizational levels in this process is Company code,
sales organizations, distribution channels, divisions and plants.

SAP OTC Sales & Distribution

OTC Process Steps Transaction Code Accounting Entries
Inquiry VA11 No
Quotation VA21 No
Sales Order VA01 No
Post Goods Issue (PGI) VL01n Yes
Delivery VL01n Yes
Billing VF01 Yes
Receipt of Money FB50 Yes
Business Process Associated With SAP

54. What is the most important integration in SAP ?

• Order to Cash (OTC) (FI-SD Integration)
• Procure to Pay (PTP) (FI-MM Integration)
• FI-HR Integration
• FI-CO Integration
See results
Order-to-Cash Configuration
This is an imported integration in SAP landscape. Here are the configuration steps in details. Its configuration
happened in transaction code OBYC.
• Inquiry : A customer inquire about the product price and service. This is a very starting point of OTC
process. This process does not have any effect on general ledger accounts and do not have any accounting
entries. Once a customer creates inquiry, an inquiry number is generated. Inquiry is created by transaction
code VA11.
• Quotation: Quotation is a price quote given to the customer. A quotation follows inquiry steps. A
quotation can be created via inquiry or without inquiry reference number. A quotation is created by
transaction code VA21.
• Sales: According to some SAP experts, Sales order is actually the first step of OTC process. After
inquiry and quotation, once it's gets created. Sales order can be created with reference of quotation or
without reference. It does not make any accounting book entry and it does not make any change in General
Ledger accounts. It is just a commitment to deliver goods to the customer. SO can be created with
transaction code VA01.
• Post Goods Issue: Post goods issue is the steps where goods are being picked by warehouse, packed
and shipped to the customer's given shipping address as per the sales order. We have accounting entries as
inventory is being credited against the cost of goods sales (COGS) debited. General ledger accounts
associated with the cost of goods sales and inventory is affected respectively.
• Delivery: Delivery follows post goods issue (PGI).Delivery is the actual fulfillment of goods to the
customer shipping address. At delivery stage, we have accounting entries in the books. At this stage, we
debit revenue account and credit customer account. Transaction code for delivery is VL01n.
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• Billing: At billing stage, we send the bill to customer for the goods delivered. We have accounting
entries at this stage where we debit customer and credit cash account. Transaction code for billing in SAP is
VF01.

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