Finance Terms in FI/CO

Finance Terms
Client:

In commercial, organizational and technical terms, a self-contained unit in an R/3System with separate master
records and its own set of tables.

Company Code

: The smallest organizational unit of Financial Accounting for which a complete self-contained set of accounts can be
drawn up for purposes of external reporting.

Business Area:

An organizational unit of financial accounting that represents a separate area of operations or responsibilities within
an organization and to which value changes recorded in Financial Accounting can be allocated.

Enterprise structure:

A portrayal of an enterprise's hierarchy. Logical enterprise structure, including the organizational units required to
manage the SAP System such as plant or cost center. Social enterprise structure, description of the way in which an
enterprise is organized, in divisions or user departments. The HR application component portrays the social structure
of an enterprise

fiscal year variant:

A variant defining the relationship between the calendar and fiscal year. The fiscal year variant specifies the number
of periods and special periods in a fiscal year and how the SAP System is to determine the assigned posting periods.

Fiscal Year:

A period of usually 12 months, for which the company produces financial statements and takes inventory.

Annual displacement/Year shift:

For the individual posting periods various entries maybe necessary. For example, in the first six periods the fiscal year
and calendar year may coincide, whereas for the remaining periods there may be a displacement of +1.

Chart of Accounts:

Systematically organized list of all the G/L account master records that are required in a company codes. The COA
contains the account number, the account name and control information for G/L account master record.

Financial statement version:

A hierarchical positioning of G/L accounts. This positioning an be based on specific legal requirements for creating
financial statements. It can also be a self-defined order.
Account group:

An object that attributes that determine the creation of master records. The account group determines: The data
that is relevant for the master record A number range from which numbers are selected for the master records.

Field status group:

Field status groups control the additional account assignments and other fields that can be posted at the line item
level for a G/L account.

Posting Key

: A two-digit numerical key that determines the way line items are posted. This key determines several factors
including the: Account type, Type of posting (debit or credit),Layout of entry screens .

Open item management:

A stipulation that the items in an account must be used to clear other line items in the same account. Items must
balance out to zero before they can be cleared. The account balance is therefore always equal to the sum of the open
items.

Clearing:

A procedure by which the open items belonging to one or more accounts are indicated as cleared (paid).

Reconciliation account:

A G/L account, to which transactions in the subsidiary ledgers(such as in the customer, vendor or assets areas) are
updated automatically.

Special G/L indicator:

An indicator that identifies a special G/L transaction. Special G/L transactions include down payments and bills of
exchange.

Special G/L transaction

: The special transactions in accounts receivable and accounts payable that are shown separately in the general
ledger and sub-ledger.

They include:

Bills of exchange
Down payments
Guarantees

House Bank:

A business partner that represents a bank through which you can process your own internal transactions.

Document type:

A key that distinguishes the business transactions to be posted. The document type determines where the document
is stored as well as the account types to be posted.

Account type:

A key that specifies the accounting area to which an account belongs.

Examples of account types are:

Asset accounts
Customer accounts
 Vendor accounts
G/L accounts

Dunning procedure:

A pre-defined procedure specifying how customers or vendors are dunned.

For each procedure, the user defines

Number of dunning levels

Dunning frequency
Amount limits
Texts for the dunning notices

Dunning level:

A numeral indicating how often an item or an account has been dunned.

Dunning key:

A tool that identifies items to be dunned separately, such as items you are not sure about or items for which payment
information exists.

Year-end closing:

An annual balance sheet and profit and loss statement, both of which must be created in accordance with the legal
requirements of the country in question.

Standard accounting principles require that the following be listed:

All assets
All debts, accruals, and deferrals
All revenue and expenses

Month-end closing:

The work that is performed at the end of a posting period.

Functional area:

An organizational unit in Accounting that classifies the expenses of an organization by functions such as:

Administration

Sales and distribution

Marketing
Production
Research and development Classification takes place to meet the needs of cost-of-sales accounting.

Noted item:

A special item that does not affect any account balance. When you post a noted item, a document is generated. The
item can be displayed using the line item display. Certain noted items are processed by the payment program or
dunning program for example, down payment requests.

Accrual and deferral:

The assignment of an organization's receipts and expenditure to particular periods, for purposes of calculating the
net income for a specific period.

A distinction is made between:

 Accruals

An accrual is any expenditure before the closing key date that represents an expense for any period after this date.

Deferral -

Deferred income is any receipts before the closing key date that represent revenue for any period after this date.

Statistical posting:

The posting of a special G/L transaction where the offsetting entry is made to a specified clearing account
automatically (for example, received guarantees of payment).

Statistical postings create statistical line items only.

Valuation area:

An organizational unit in Logistics subdividing an enterprise for the purpose of uniform and complete valuation of
material stocks.

Chart of depreciation:

An object that contains the defined depreciation areas. It also contains the rules for the evaluation of assets that are
valid in a specific country or economic area. Each company code is allocated to one chart of depreciation. Several
company codes can work with the same chart of depreciation

T ACCOUNT CONCEPT
Accountants record increases in asset, expense, and owner's drawing accounts on the debit side, and they record
increases in liability, revenue, and owner's capital accounts on the credit side. An account's assigned normal balance
is on the side where increases go because the increases in any account are usually greater than the decreases.
Therefore, asset, expense, and owner's drawing accounts normally have debit balances. Liability, revenue, and
owner's capital accounts normally have credit balances. To determine the correct entry, identify the accounts
affected by a transaction, which category each account falls into, and whether the transaction increases or decreases
the account's balance. You may find the following chart helpful as a reference.