"An asset is a resource controlled by the entity as a result of past events from which future economic benefits are

expected to flow to the entity

CURRENCIES:
Legal means of payment in a country. We define currencies at General Settings Currencies
Check Currency Codes.
National currency, foreign currency, parallel currencies (are two in number can be other than local or national
currency. For example group currency at client level, company currency at company code level, hard currency at
country level (second currency with high rate of inflation), index-based currency at country level (high inflation
currency as compared to currency for purpose of statutory reporting)).
In Financial Accounting, currencies and currency translation are relevant in the following circumstances:

General Ledger

Account master data

Defining account currencies

Posting

Posting documents in foreign currency

Clearing

Clearing open items in foreign currency

Foreign currency valuation

Foreign currency valuation

Accounts Receivable and

Accounts Payable

Defining reconciliation accounts

Local currency is the currency of a company code (country currency) in which the local ledgers are
managed.

Foreign currency is a currency that differs from the company code currency (country currency).

A group currency is used in the consolidated financial statements. Before the consolidation process can be
completed, all values in the individual financial statements must be translated from the local or transaction
currency into group currency. It is defined at client level. If you have defined the group currency as the
second local currency, this has no additional effects. In all other cases, in the application component
Special Purpose Ledger you have to define an additional ledger in which transaction figures are managed.

Company currency is a currency used for an internal trading partner. It is defined at company level.
Hard currency is a country-specific second currency used in countries with high rates of inflation. It is
defined when we define the country that our company code is assigned to.

Index-based currency is a country-specific A country-specific theoretical currency used in some countries

with high inflation as a comparison currency for purposes of statutory reporting. It is defined when we define
the country that our company code is assigned to.

GENERAL LEDGER ACCOUNTING

The central task of G/L accounting is to provide a comprehensive picture for external accounting and accounts.
Recording all business transactions (primary postings as well as settlements from internal accounting) in a software
system that is fully integrated with all the other operational areas of a company ensures that the accounting data is
always complete and accurate.
Actual individual transactions can be checked at any time in realtime processing by displaying the original
documents, line items, and transaction figures at various levels such as:

Account information

Journals

Totals/transaction figures

Balance sheet/profit and loss evaluations

The profit and loss statement of an organization can be created according to two different procedures:
Period accounting
Cost of sales accounting: Cost of sales accounting compares the sales revenue for a given accounting period with
the manufacturing costs of the deducted activity. The expenses are allocated to the commercial functional areas
(production, sales and distribution, administration, and so on. These are defined at define your functional areas in

Customizing under Financial Accounting Financial Accounting Global Settings Company code Cost of Sales
Accounting Define Functional Area.). Expenses and revenues that cannot be assigned to the functional areas are
reported in further profit and loss items, sorted according to expense and revenue type. With this type of grouping,
cost of sales accounting identifies where costs originate in a company. It identifies the economic reason for a
particular expense.
Financial Accounting Global Settings Company Code Cost of Sales Accounting.
We make settings for cost of sales accounting in Customizing, under Financial Accounting Financial Accounting
Global Settings Company Code Cost of Sales Accounting.
We can enter the functional area in the master data of the following objects:
G/L account
Cost element
Cost center
Orders

Order type
Internal orders
Sales order for make-to-order production and requirements class
Maintenance, service, and QM order
Production order, product cost controller, and cost object hierarchy

WBS elements

Project profile and project definition

WBS element

Networks

Network type
Network header
Network activity

SAP provides the user exit COOPA_01 in the standard system. You can use this to check whether the functional area
in the master data matches the functional area in the order type. You can also define your own checks in this user
exit. To ensure the consistency of the functional area in the master data of internal orders and the responsible cost
center, you define the Functional Area field as output field. In this way, you ensure that the functional area cannot be
entered manually in the internal order. In Customizing for Controlling, choose Internal Orders Order Master Data
Screen Layout Select Fields.
Controlling Internal Orders Master Data Order Create or Change.
In order that expenses can be sorted according to corporate functions, the system derives the functional area for the
following postings.

 Primary postings (postings in Financial Accounting) to a profit and loss account

Secondary postings (allocations in Controlling)

The functional area is derived for both objects involved in the allocation.
No functional area is derived in the following cases:
Postings to balance sheet accounts
When creating statistical key figures in Controlling
During allocations in Controlling, postings are created that do not affect Financial Accounting. These postings do not
update any G/L account transaction figures, rather they are ordinary postings within Controlling. If, however, an
allocation in Controlling leads to a change in the functional area, a shift occurs in the affected items in the profit and
loss statement. The change of functional area has therefore to be communicated back to Financial Accounting. This
reconciliation between Controlling and Financial Accounting is effected with so-called reconciliation postings. To carry
out reconciliation postings, you have to activate the Reconciliation Ledger and define the adjustment accounts for the
reconciliation postings. You can find the necessary settings in Customizing under Controlling Cost Element
Accounting Reconciliation Posting.

PARALLEL ACCOUNTING:
This will allow you to carry out valuations and closing operations for a company code according to a local accounting
principle and a second (parallel) accounting principle, for example the group accounting principle. This is necessary,
for example, for German subsidiaries of American groups. Here, the German subsidiary must provide financial
statements according to both the German Commercial Code and the group accounting principle (such as US GAAP).
The Customizing settings from the various SAP application components (FI, AA, CFM, CO) that you need to be able
to depict a parallel valuation method are grouped together in a section of the SAP Reference IMG. You can find this
section in Customizing, under Financial Accounting Financial Accounting Global Settings Company Code
Parallel Valuation Methods.
The phrase "generally accepted accounting principles" (or "GAAP") consists of three important sets of rules: (1) the
basic accounting principles and guidelines, (2) the detailed rules and standards issued by FASB (Financial
Accounting Standard Board) and its predecessor the AccIf a company distributes its financial statements to the
public, it is required to follow generally accepted accounting principles in the preparation of those statements. Further,
if a company's stock is publicly traded, federal law requires the company's financial statements be audited by
independent public accountants. Both the company's management and the independent accountants must certify that
the financial statements and the related notes to the financial statements have been prepared in accordance with
GAAP. Ounting Principles Board (APB), and (3) the generally accepted industry practices.

Parallel valuation using additional accounts approach is particularly suitable if:

The number of valuation differences is limited in your accounting principles.

You work with just one fiscal year variant
Multiple valuation approaches in your general ledger do not pose a problem
You can accept a large number of G/L accounts

If the parallel valuation approach is suitable in your case, we should note the following points:
Systematic Assignment of Account Numbers
Before you create the general ledger accounts for the specific account areas, you should set up a concept for number
assignment.
Retained Earnings Account and Balance Carry forward
You can manage a separate retained earnings account for each accounting principle. This means that, at a fiscal year
change, you can carry forward the balances of the profit and loss accounts from the specific account areas to the
retained earnings account specified. You only have to carry forward the balances once.
When you create the general ledger accounts for the specific account areas, make sure that you assign a separate
P&L statement account type for each account area. Then assign a separate retained earnings account to each P&L
statement account type.
Financial Statement Versions
You can create a separate financial statement version for each accounting principle. This means that when you
create financial statements, you can select a separate structure for each accounting principle.
Complete Postings versus Difference Postings
You can perform parallel postings in the specific account areas either as complete postings in both areas or as
difference postings:
In Asset Accounting (FI-AA), both difference postings and complete postings are supported.
All other application components (FI, CO, CFM) support only complete postings.
To create additional accounts, from the SAP Easy Access screen, choose Accounting Financial Accounting
General Ledger Master Data G/L Account Individual Processing Create.
Parallel accounting with additional ledger
We can depict parallel accounting in your SAP system by storing posting data for the various accounting principles in
separate ledgers.
The data for one accounting principle is stored in the general ledger. This is known as the leading valuation view.
For each additional (parallel) accounting principle, you create an additional ledger in the Special Ledger
component.

The approach (additional ledger) is suitable if:

The number of G/L accounts would be too large to depict parallel accounting using additional
accounts
Keeping a separate ledger per accounting principle offers advantages to you
You do not have to post any line items from subsidiary ledgers
You do not need to access FI data from SL reports
The additional data volume created by the additional ledger does not represent a problem

The advantages of this approach are:

You do not have to create any additional G/L accounts.

You manage a separate ledger for each accounting principle.

You can use the standard reporting functions to create a financial statement.

In some cases, the postings to the additional ledger are made as complete postings,
whereas in other cases they are made as delta postings.

With this approach, you can portray different fiscal year variants.

BANK ACCOUNTING

It includes the management of bank master data, cash balance management (check and bill of exchange
management), and the creation and processing of incoming and outgoing payments. It is possible to freely
define all country-specific characteristics, such as the specifications for manual and electronic payment
procedures, payment forms, or data media.

House banks are banks with which your company code maintains accounts.

The bank directory contains the bank master data. This includes the bank address data and control data,
such as the SWIFT Code and Bank Groups. Details for post office banks should be identified specially.
Using program RFBVALL_0, you can import a bank directory into the SAP system from an ASCII file. You
usually obtain a national bank directory on a data medium at a banking organization in your country. You
should regularly update the bank directory. Using program RFBVBIC_0, you can import a bank directory that
you have created using the BIC Database Plus into the SAP system. The bank directory can be transferred
either by country specific data transfer (The bank directory is in the form of an ASCII file that you usually
obtain from a banking organization in your country) or international data transfer (The bank directory is a file
that you have created using the BIC Database Plus).

SWIFT (Society for Worldwide Interbank Financial Telecommunication) code is a code used in
international payment transactions. Each bank is identified without address and bank code by this code.

Bank groups are used to group banks together for payment optimization purposes.

Each bank ID is unique within a company code. For each bank, enter the bank country, and either the bank
number or an appropriate country-specific key. The system uses this information to identify the correct bank
master data.

ASSET ACCOUNTING

you need to classify assets according to various accounting criteria (such as depreciation methods). This
classification assists in management-accounting-oriented tasks, and in the summarization of asset values
in the general ledger.

The chart of depreciation, is a directory of depreciation areas organized according to business

management requirements. You define the characteristics, and thereby the significance, of the
individual depreciation areas in each chart of depreciation. A depreciation area is always
assigned to only one chart of depreciation.

As a result of the integration in the R/3 System, Asset Accounting (FI-AA) transfers data directly to and from other R/3
components. For example, it is possible to post from the Materials Management (MM) component directly to FI-AA.
When an asset is purchased or produced in-house, you can directly post the invoice receipt or goods receipt, or the
withdrawal from the warehouse, to assets in the Asset Accounting component. At the same time, you can pass on
depreciation and interest directly to the Financial Accounting (FI) and Controlling (CO) components. From the Plant
Maintenance (PM) component, you can settle maintenance activities that require capitalization to assets.
Traditional asset accounting encompasses the entire lifetime of the asset from purchase order or the initial acquisition
(possibly managed as an asset under construction) through its retirement. The system calculates, to a large extent
automatically, the values for depreciation, interest, insurance and other purposes between these two points in time,
and places this information at your disposal in varied form using the Information System. There is a report for
depreciation forecasting and simulation of the development of asset values.

The chart of depreciation consists of the following parts:

In general, you are required to calculate values for assets for different needs, both internal and
external (such as book depreciation and cost depreciation). Therefore, the Asset Accounting
component enables you to manage values for assets in parallel in up to 99 depreciation areas.

You flexibly define the keys for the automatic depreciation of assets in each chart of depreciation.
They are based on elements for calculation (calculation methods, period controls, and so on) that
are available client-wide.

There are specific objects in the chart of depreciation for special calculations of asset values
(for example, investment support keys for investment support - refer to Special Valuation ).