Business Process FI

Organization structure
Crompton Greaves Limited (CGL)

 The Organization Structure of CGL to be mapped in SAP

as below:
Opearting Concen
Controlling area
Company
:
Company Code
Credit Control Area

: CGL
: CGL
CGL
: CGL
: CGL

 Business Area :
Each Manafacturing division and marketing branches are to be
defined as separate business area
Currently , the whole business of CGL is running on five different
servers
All Manafacturing Divisions and marketing branches as
independent company Codes

Document Type & No Range

IN CGL , Division Wise document Types and no ranges
will be maintained for the following transaction
Logistics invoice verification
FI Direct Invoice
Bank Payments
Bank receipts
Petty Cash transaction
For all other Transaction , the number range will be
maintained at CGL Level

Vendor Master Data

Vendor Account Group
Vendor Master for Local Vendor , import vendor ,
onetime Vendor , IDT Vendor and SSI Vendors,
employees Vendor
No range
External No range will be continued.
Reconciliation Accounts
Separate reconcilation Accounts will be maintained for
the following:

 Sundry Creditors (Domestic ) A/C : Local

vendors ,Service vendors, one time Vendors
Sundry Creditors(Foreign)A/c : Import vendors
Sundry Creditors (SSI ) A/C : SSI Vendors
Sundry Creditors (Employess A/c): Employess
Sundry Creditors (IDT) A/C : IDT Vendors

 Vendor Master Creation

For the purchasing vendor, collection of purchase related

data of the new vendor will be the responsibility of the
purchasing department, who will forward that in the predefined template to the Finance. The Finance
department will create such vendor master using
transaction code XK01. Non-purchasing vendors (not
having any purchasing data) will be created directly by
the Finance using the transaction code FK01.

Chart of Accounts : Six-digit GL codes will be

maintained. The chart of accounts will accommodate all

the items necessary for FI and CO. The final list will be
circulated in due time to the locations
Financial Statement Version : Two separate financial
statement versions will be designed in SAP as per
prescribed format of Schedule VI and US GAAP.

 General Data
As a corporate Policy , Only banks will be
accepted as alternate payee for vendors
Purchasing Data
Separate Purchasing Organization for
purchasing and Sub contracting
IN Company Code Data service vendor for
Account group , this field should be mentioned
as mandatory

Vendor Invoice
Incoming invoice for services like Taxi,freight ,
courier ,annual Maintaince Contracts , telephone
bills , Water , electricity , legal dues will be
booked directly in FI
Service tax needs to be posted manually in
separate General Ledger Code .Detailed in the
relevent BBP
Mention Appropriate Payment Terms ,cost
center , business Area ,Text information describe
nature of payment etc.

 For Sales Tax to be automatically

calculated by the system appropriately ,
MM route is recommended in lieu of FI
Direct invoice.
In case of direct FI invoice posting for
services, service tax calculation and
posting will be done manually with
separate GL Line item.

 Credit Memo (Debit note to vendor)

Facility is given to print this document
called adjustment debit note to Finance
Department
Standard format will be designed for
printing of such debit notes

Logistic invoice verification

1.

After CCI (Goods Receipt Document) is prepared by

D&R Section, it will be sent to the Finance department.
The finance person will book the liability to vendor
account thru the new transaction for Logistics Invoice
Verification (MIRO). Invoice verification for goods/
supplies/ services/ assets/ etc will be done thru this
transaction.

2.

The same will also be used to post credit memo

(quantity relevance), subsequent debit/ credit (value
relevance), transporters bill. Reference will be made,
depending on the requirement, to PO number/ GR/
Vendor/ Delivery Note/ Service Entry/ Bill of Lading.
Since MIRO this is a new transaction for the CGL
users, detail steps will be elaborated in the relevant
user process manual. Refer to BBP number CN01 for
capturing of Incoming Excise Invoices.

1. Capturing all related expenses like Octroi,

Freight, Packing charges etc and other
delivery costs will be done thru PO pricing
conditions (separate condition type for each
element)
2. TDS code will be automatically copied from
the vendor master
3. Service Tax will be captured thru PO pricing
conditions (separate condition type

5 Sales tax code will be copied from the

relevant purchase Order. The sales tax
set-off amount will be automatically
posted based on the tax code.
6 In case of Logistics Invoice verification,
the payment term defaulted from the PO
will not be allowed to be changed by
defining transaction variant.

Vendor Down Payment

Purchase order
PO will be created following the normal process
by the Materials department. Additionally, since
advances should be strictly based on PO,
relevant information needs to be stored in PO (a
field in PO needs to be decided for this and
should be strictly adhered to by the users while
creating PO).
Down Payment Request
For down payments relating to PO, the person
creating the PO (in Materials department) should
simultaneously create a DP Request in the system

 Transaction Code is F-47.

The document type for this transaction will be
KA and the special GL indicator F.
Input
For linking DP request this with PO, the PO
number will be mentioned in the Assignment
field (default sorting field) in the item screen.
Due date for the payment of advance needs to
be specified in the Due On field.
TDS information defaults from vendor master.
Should be changed if required.

 For down payments relating to other

services (not being routed thru MM route),
the respective department or the Finance
will create DP Request. In such cases,
there is no such reference to PO.

 Down Payment
Down payments will be made on the basis of DP
requests. Finance department will see the list of DP
Requests every day in the system and decide on
their payments. The down payment requests can be
displayed through the report on vendor line items
Transaction Code is S_ALR_87012103 - List of
Vendor Line Items
Input
Apart from other selection parameters, need to
indicate against Noted Items

 Manual Payment
Transaction Code for manual posting is F-48
The document type for this transaction will be KZ
(defaulted based on configuration)
Input
Mention the vendor number and the Spl GL
Indicator as A
Mention the bank account number

 Automatic Payment
Transaction Code for manual posting is F110
For automatic payment the document type will be ZP
(assigned by the system based on configuration).
The programmed processes the down payment
requests, which fulfill the necessary parameters. Where
the parameters have not been completed in full, such
down payment requests appear as exceptions. One
example of exception would be an item where the
payment method has not been specified.

 Down payment requests are cancelled

automatically when a down payment
referencing that request is paid using
either automatic payment program or
manual payment.
The system computes and posts the TDS
automatically both during manual and
automatic payment.

 Clearing of Down payments:

Post With Clearing Posting Final Payment
(balance amount) by clearing Open Invoice &
Open Down Payments
Situation say, one DP was made of Rs 100.
Then, Invoice received of Rs 200. Now, the
invoice is being paid (balance Rs 100), along
with clearing the DP. This is possible in both
manual payment and automatic payment

MannualPayment
Transaction Code is F-53
Input
For open item selection, select both
standard open items as well as Spl GL
indicator.

 Automatic Payment:
Transaction Code is F110
The automatic payment program clears
the down payment and pays open items
duly reduced by the down payment.

 Specification in the configuration of Automatic

Payment Programme If the automatic payment program is to clear the
down payments, the special G/L indicators must
be specified in the company code specifications
for the payment program. If this is done, the
system automatically sets a payment block
when a down payment is posted. This block
indicator prevents the down payments from
being cleared straight away

 By canceling the block indicator with the

document change function, the down payment
can be released for clearing. A due date for the
down payment can also be entered; this
specifies from which date the payment program
can then clear the down payment. The payment
program clears by subtracting the down
payment amount from the corresponding invoice
amounts and pays the difference. The program
clears the down payment automatically.

Account Clearing Clearing Open Invoices & Open Down Payments

with the vendor

Situation: Down Payment made of Rs 100. Then, Invoice received of

Rs 100. Now, both should be cleared against each other
This can be carried out both manually and through automatic clearing
procedure

Manual Clearing
Transaction code is F-44
Select the vendor a/c
Select both normal open items and Spl GL indicator - A
System shows the list of all normal open items and Down Payments not
yet cleared
Select appropriate items and post.

 Transfer postings ( Down payment Clearing)

Generally the down payments can be cleared directly
if the closing invoice is received. Alternatively, the
down payment can be transferred manually.
Transaction code is F-54
In this case, the down payment is cleared via a credit
posting of the same amount to the same vendor as
normal item. Consequently, the amount is no longer
displayed on the balance sheet as Advance To
Vendor but represents a "payment made" in the
Payables account.

 It is then important to clear this transferred

amount when the invoice is paid, either
manually or automatically. However unlike
clearing, several postings are required
when transferring a down payment.

Bill of Exchange - Payables

Purchase Order
PO will be created following the normal process
by the Materials department.
Letter Of Credit
Additionally, Letter of Credit will be opened and
given to the vendor. The LC register
maintenance, tracking of LC amount, etc. need
to be continued as being done presently
(manually).

 Goods Receipt
GR will be posted following the normal process.
Vendor Invoice
On receipt of invoices from the vendor, the posting
needs to be carried out in the normal way. Invoice can
be coming from MM thru Logistics Invoice Verification
(MIRO) or can be directly booked in FI (F-43/ FB60).
Expense A/c or GR/IR Clg. A/c Dr.
40

Vendor (Sundry Creditors) A/c

31

 Acceptance of BOE Payable

On issue of BOE to the vendor, the
posting will be carried for BOE Payment
(F-40). This clears the payable to the
vendor.
Vendor (Sundry Creditors) A/c
25

Vendor (BOE - Payable) A/c

39W

 Three separate special GL indicators will be

defined for the following:
BOE against LC
BOE against Corporate Bill Discounting Scheme
BOE
Against each of the above, two separate Special
GL accounts will be maintained one for SSI
and another for normal vendors.

 Payment Against BOE Payable

On receiving bank advice for payment against
the BOE Payable, outgoing payment will be
posted. When Automatic payment program or a
manual payment (F-53) is executed processing
the BOE payable, the system debits (clears) the
BOE Spl GL liability in the vendor account and
credits the bank account.
Vendor (BOE - Payable) A/c
29W

Bank A/c
50

Manual Outgoing Payment

Outgoing Payments - Manual

To effect the outgoing payment, use the Transaction Code
F-53. Payments will be made strictly as per payment
terms agreed with the vendor. Normally, payment terms
are predetermined at Vendor master creation stage.
However facility will be given to change this at the time of
creation of Purchase Order.

At the time of Logistics invoice verification (MIRO), system

copies payment term from purchase order in open line
items of vendor. However, in the standard system, it is
possible to change this. If required by all the divisions, the
users can be restricted from changing payment term while
doing MIRO by defining transaction variant.

In case of vendor invoices booked

directly in FI, the payment term is
defaulted from the vendor master and
can be changed if required. While
effecting manual outgoing payment
vendor open items as well as any
existing special GL items should be
cleared so as to recover properly

Cheque Printing
In CGL, cheque printing will be done with check
management i.e. at first, check lots will be created in the
system and those will be used serially while printing.
Print Process
Depending on business case, following processes will be
used for cheque printing
Individually Online Printing: If the Cheque is to be printed
online i.e. along with the payment posting, proceed as
follows Accounts payable Document Entry Outgoing
Payment Post+ Print Form (transaction code F-58).

 Individually Subsequent Printing: If the Cheque

is to be printed individually for each payment
document, already posted in the system,
proceed as follows Accounts payable
Document More Functions Print Payment
Forms (transaction code FBZ5).
Collectively Subsequent Printing: Use the
appropriate program (RFFOUS_C from SE38).
It will allow printing cheques for the stipulated
payment document(s).

 Print Form
Printing format needs to be standardized
and used by all the locations.

Automatic Outgoing Payment

Automatic payment facility will be used in
CGL
Standard procedure will be followed

Bank Masters & Bank

Reconcilation
Initial Accounting For Banking Transactions:
Banking transactions will be done through
reconciliation accounts. All cheques issued will
be credited to the cheques issued reconciliation
account and all cheques deposited will be
debited to the cheques deposited reconciliation
account. Similar accounting is done for bank
transfers issued and received.

 Subsequent Posting to house bank

accounts:
After receiving the bank statements from the
bank, either daily or otherwise, the entries will be
shifted from reconciliation accounts to the house
bank GL account. All payments and receipts
actually debited and credited by the bank are to
be shifted from reconciliation accounts to house
bank GL account. So all the amounts remaining
pending in the reconciliation accounts are
considered as un-reconciled entries.

 Manual Bank Statement (FF67): This functionality will be

used to manually enter bank account statements
received from the bank. Statement entry is usually a twostep process - first, you enter the account line items in
the system and in the second step is to post the line
items you have entered. The account assignment variant
can be changed at any time during processing. You can
also enter more than one value in an account
assignment field. The system highlights account
assignment fields for which you do this. In the manual
bank statement function, you can create up to two
postings for each line item.

 A bank account posting (for example, debit

bank account and credit bank clearing
account)
A sub ledger posting (for example, debit
bank clearing account and credit customer
account with clearing)

 Posting will be carried out by running batch input

session.
Electronic Bank Statement: Following procedure need
to be followed for entering data contained in electronic
account statements. Processing always takes place in
three stages.
First, each file is transferred (in the relevant account
statement format) to the bank data storage.
The data that is used to derive the clearing information
from unstructured information is then interpreted. This
clearing information is stored in bank data storage.
Batch input sessions are then created, or the account
statements are posted directly.

 To ensure statements are posted properly,

certain requirements need to be fulfilled.
An internal posting rule will be defined for all
posting transactions. This posting rule
represents the business transactions relevant to
account statement entry and controls postings to
G/L and sub ledger accounts.
External transactions will be defined for those
keys (business transaction code, text key,
posting text) that may be used differently by
each bank.

 External transactions will be assigned to a

posting rule so that the system can post them.
If, during data import, the program encounters
an "unknown" external business transaction
code, it terminates after the entire account
statement is imported and outputs a list of the
missing entries. The missing external
transactions must then be entered. You then
restart the report.

 Un-reconciled Entries:
Daily/ periodic analysis of items pending in
the following GL reconciliation accounts is
required.
Cheques issued account
Transfers issued account
Cheques deposited account
Transfers received account

 All the pending entries which remains unshifted from reconciliation account to
house bank GL account and other direct
entries available in bank statements but
not appearing in the reconciliation
accounts are required to be analyzed to
find out the reasons. After analyzing,
entries if any, are to be made in the books
of CGL and a note will be sent to the bank
for wrong or un-reconciled entries.

 Interest Calculation:
Since our house bank account is a similar
bank statement with value dates the same
can be used for calculation of interest
every month, based on which provision
can be booked. For detail, refer to FI23.

Petty Cash Management

Location wise separate Petty cash journal
will be created.
Separate petty cash GL accounts will be
created for each cash journal.
Separate document type for each cash
journal will be maintained along with
different number ranges for each such
document type.

 Posting petty cash transactions will be

carried out thru transaction code FBCJ. In
the single screen, it will be possible to
enter, display, and change cash
transaction documents. In the same
screen, the system automatically
calculates and displays the opening and
closing balances, and the receipts and
payments totals. Following options are
available

 Entering, saving, and posting cash journal

entries: It is possible to save cash journal entries
locally in the cash journal. The system also
calculates the balances. The cash journal entries
saved is then posted to the general ledger. For a
cash journal document, you can carry out CO
account assignments, and have taxes, including
withholding taxes, calculated by the system with
reference to business transactions, taking
account of tax jurisdiction codes.

 Apart from defining cash journal business

transactions in Customizing, it is also, if
necessary, possible to define a new business
transaction while making entries in the cash
journal.
Displaying follow-on documents arising for the
cash journal entries posted.

 Printing the cash journal entries posted in the

given time period. Here, select the print form
as defined in Customizing.
Deleting cash journal entries saved, if the
user has the appropriate authorization.

 Displaying all cash journal documents that

have been deleted within a specific time
period.
Changing the cash journal
Daily reconciliation of Cash book: Through
SAP, it will be possible on daily basis to
analyze Petty Cash Account and reconcile
book balance to physical balance

 IOUs: The IOUs can be accounted for as

noted items (Memorandum accounting) by
way of a special GL Indicator. Use a
separate Document type to track these
transactions. A listing of these documents
can be obtained at any point of time. As
and when the IOUs are settled either in
part or full, the relevant Special G/L
documents should be modified or deleted
as the case may be.

Fixed Asset
Asset Class
In CGL, the asset classes will be created
for each valuation parameter (depreciation
rate).
Separate asset class will be created for
Low Value Assets
Separate asset classes will be maintained
to represent assets under construction in
buildings, plant and machinery, etc.

 Separate asset classes will be created for

Intangible Assets as well.
Leasehold assets When CGL is the lessee;
the assets would be represented in the Asset
Management only if it is a financial lease.
Such leasehold assets will be capitalized in
the books of CGL following AS 19. In addition
to the capitalization value, other parameters
like the period of lease, interest rate,
frequency of installment payment and the
first date of installment payment will also be
maintained in the asset master record.

 Based on this information, the equated

installment amount may be calculated in the
system and recurring entry documents can be
generated in accounts payable (refer BBP FI24).
These documents would have the outgoing
payment date and the rental amount, which
would get triggered as and when the installment
payment falls due. For payment of lease rentals,
there is a direct integration with the accounts
payable module. Recurring entries are
generated in AP directly from parameters
entered in assets.

 Account Determination
In CGL, separate account determinations will be
maintained for each type of assets, keeping in
mind the schedule-VI format. The gross block
and accumulated depreciation will be posted to
different GL a/cs for each type of assets.
However, Depreciation Expense A/c, Loss/ Gain
on Sale of Asset A/c will be used as common for
all the asset classes.

 Depreciation Areas
In CGL, following depreciation areas will
be created for different valuation
requirement
Companies Act
Income Tax Act

 Out of these, the depreciation area for

companys act depreciation will post to the
general ledger online.
The Income Tax depreciation area will all
adopt APC values from the Companys
depreciation area; but can be changed.

 The net book value in both the

depreciation areas will always be positive
Both the depreciation areas will support
both ordinary and unplanned depreciation.
The maximum value for low value assets
would be Rs 5,000 and the rounding
principle for APC would be commercial
rounding

 Both the depreciation areas will be

managed in INR
Both the depreciation areas will use the
same fiscal period i.e. April to March.

 Companys Act Depreciation Area:

In SAP, separate depreciation area will be created for
Companys act depreciation. This depreciation area will
have parameters as specified above. The companys
depreciation area will post to the general ledger online.
Separate depreciation keys will be defined for different
useful lives for SLM method of depreciation and WDV
method of depreciation. These depreciation keys are
then defaulted in the asset classes for the companys act
depreciation area. Depreciation area for Companys act
will be used to manage assets gross block and
depreciation values as per the Indian companys act. The
following parameters will be specified for this
depreciation area in CGL:

 depreciation area in CGL:

ParameterRequirement1Depreciation
TypeOrdinary Depreciation2Depreciation
MethodSLM & WDV - both3Depreciation
RateStated percentages4CurrencyINR5Salvage
value conditions5% (Re 1 for LVAs)6Updation of
General LedgerOnline7Periodicity for Posting to
General LedgerMonthly8Conditions for Net Book
ValueAlways Positive9Fiscal Year April - March

 10Rounding of DepreciationMaintain 2 places of

decimals11Depreciation for Acquisition PostingsWhere, during the
financial year, any addition has been made to any asset, the
depreciation on such assets shall be calculated on a pro rata basis
from the date of such addition. However, in case of low value items,
it will be written off fully in the relevant period (needs adequate
disclosure of such accounting policy in the accounts)12Depreciation
for Retirement PostingsWhere, during the financial year, any asset
has been sold, discarded, demolished or destroyed, the
depreciation on such assets shall be calculated on a pro rata basis
up to the date on which such asset has been sold, discarded,
demolished or destroyed.Accumulated depreciation is to be
reversed to arrive at the profit/ loss.13Depreciation for transfer of
assetDetailed in the respective segment discussed below.

 Income Tax Act Depreciation Area:

In SAP, separate deprecation area will be created for Income Tax
depreciation. Income Tax depreciation is managed in a separate
depreciation area to take care of tax reporting and other
calculations. This depreciation (as per Income Tax) should be
considered for calculation of deferred tax asset/liability.
Depreciation area for Income Tax will be used to manage assets
gross block and depreciation values as per the requirements of
Indian Income Tax Act. Income Tax Act stipulates the depreciation to
be carried out for a block of assets. Distinct rates are specified for
specific blocks of assets. The depreciation calculation is based on
WDV of the block. This area will not post values to general ledger
online.

 In addition, the following configurations would

have to be done:
Group assets will be created for every Income
Tax block depreciation rate. The income tax
depreciation area will be deactivated in the other
asset classes.
The fiscal year of the Income Tax depreciation
area will have a same fiscal year variant April
to March.
Depreciation keys will be created for income
tax depreciation- WDV with stated
percentage

 Separate screen layout rules will be

created for the income tax depreciation
area. This screen layout rule will have the
group asset field mandatory
Period controls would have to be set up
for the income tax depreciation area

The following parameters are specified for the Income Tax depreciation area
for CGL
Sl NoParameterRequirement1Depreciation TypeOrdinary
Depreciation2Depreciation MethodWDV only3Depreciation RateFixed
percentage for a block of assets. Percentages as per the Indian Income Tax
Act 4CurrencyINR5Salvage value conditionsNone6Updation of General
LedgerNo updates to the General Ledger7Periodicity for Updation of
depreciation in the General LedgerNot Applicable8Conditions for Net Book
ValueAlways Positive9Fiscal YearApril to March. 10Rounding of
DepreciationMaintain 2 places of decimals11Depreciation for Acquisition
PostingsWhere an asset is acquired during the previous year and is put to
use for the purposes of business or profession for a period of less than 180
days in that previous year, the depreciation in respect of such asset shall be
restricted to fifty per cent of the amount calculated at the prescribed
percentage. (It implies if within first 180 days, charge whole year
depreciation and if after 180 days, charge half rate of depreciation)

 Asset Acquisitions
External Acquisition
Create FAAP and get the approval from the
management (Outside SAP). Create Internal Order with
FAAP number. Record the sanctioned budget amount
therein.
Create Purchase Order with account assignment to that
Internal Order. Here use the dummy material code
created for the relevant chapter ID.
Post goods receipt (MIGO) in two-steps 103 and 105. At
the time of 105, RG23C Part I will be updated with the
quantity and FI posting will be as below:

 Asset Procurement Expense A/c Dr

(Internal Order)
To GR/IR Clg A/c
The quantity of the dummy material will later on
be issued to a cost center with movement type
201. This will have no resultant FI Document.
Capture Excise Invoice (J1IEX)
CENVAT Receivable a/c Dr.
CENVAT On Hold A/c Dr.
To CENVAT Clg. A/c
It will update the RG23C Part II.

Logistics Invoice Verification (MIRO)

GR/IR Clg A/c Dr.
CENVAT Clg. A/c Dr.
To Vendor A/c
On capitalization date, create an asset under
the appropriate asset class and settle the
internal order (KO88) to Asset as follows
Asset A/c Dr.
To Asset Procurement Expense A/c

At the period end, if the acquisition process is

still on, settle the internal order (KO88) to
Asset Under Construction as follows
AuC A/c Dr.
To Asset Procurement Expense A/c
At the beginning of the next period, reverse the
settlement as shown in (8) above to re-instate
the cost in the internal order.

At the beginning of the next year,

transfer the available balance 50% from
CENVAT on Hold A/c to CENVAT
Receivable A/c (RG23C Part II) thru
transaction code J2I8.
CENVAT Receivable A/c Dr.
To CENVAT On Hold A/c

 In-house Development
Create FAAP and get the approval from the
management (Outside SAP). Create Internal
Order with FAAP number. Record the sanctioned
budget amount therein.
For all the procurements,
Create Purchase Orders with account assignment to
that Internal Order. Here use the dummy material
codes created for the relevant chapter IDs.

Post goods receipt (MIGO) in two-steps 103 and

105. At the time of 105, RG23C Part I will be
updated with the quantity and FI posting will be as
below:

Asset Procurement Expense A/c Dr

(Internal Order)
To GR/IR Clg A/c
The quantity of the dummy material will later
on be issued to a cost center with movement
type 201. This will have no resultant FI
Document.

CENVAT Receivable a/c Dr.

CENVAT On Hold A/c Dr.
To CENVAT Clg. A/c
It will update the RG23C Part II.

Capture Excise Invoice (J1IEX)

Logistics Invoice Verification (MIRO)

GR/IR Clg A/c Dr.

CENVAT Clg. A/c Dr.
To Vendor A/c

All other expenses directly being booked in FI

should be with cost object assignment to the
designated Internal Order.
On capitalization date, create an asset under
the appropriate asset class and settle the
internal order (KO88) to Asset as follows
Asset A/c Dr.
Expense A/c Dr. ()
To Asset Procurement Expense A/c
(Internal Order)

 Expenses, which have been accumulated

in the internal order but are not to be
capitalized, will be charged off.
At the period end, if the construction
process is still on, settle the internal
order (KO88) to Asset Under
Construction as follows
AuC A/c Dr.
To Asset Procurement Expense A/c

At the beginning of the next period, reverse

the settlement as shown in (8) above to reinstate the cost in the internal order.
At the beginning of the next year, transfer the
available balance 50% from CENVAT on Hold
A/c to CENVAT Receivable A/c (RG23C Part II)
thru transaction code J2I8 (not available in the
menu path).
CENVAT Receivable A/c Dr.
To CENVAT On Hold A/c

 Credit Memo: In CGL credit memos can be posted if

there is any correction on the purchase cost in the
suppliers invoice or if there has been any errors in
capitalization. To that extent, a portion of the asset may
need to get de-capitalized.
Subsequent Acquisitions (In the Current Fiscal Year): As
per CGL requirements, depending on the scenario,
partial additions may or may not be treated as sub
assets. In CGL, all sub assets will have the same
depreciation as the parent asset and would depreciate
fully within the useful life specified for the parent asset.

 Post Capitalization (In the Previous Fiscal

Year): As per CGLs requirement, the
depreciation on post capitalization would
have to be calculated from the initial start
date of depreciation of the original asset.

 Retirement of Asset With Revenue Sale

The division/ branch owning the asset will create the FADP (Fixed
Asset Disposal Proposal) and after getting due approval, notify the
asset management person regarding the customer, asset code
number, quantity of the asset to be sold and the applicable sales
tax. For Companies Act, on sale of the asset, the gross block of the
asset will be removed from the books (by quantity or value-as
specified by the user), the accumulated depreciation will be
reversed and the loss/ gain on sale of asset will be debited or
credited accordingly. Under the Income Tax Act, the sale proceeds
from the sale of asset are deducted from the net asset block in the
income tax depreciation area. For asset retirement (and finally sold
to customer), it is recommended to create Sales order with excise
conditions and follow normal Sales process so as to get all the tax
calculations and documentations available from system. However,
the sale transaction in FI-AA would have to be executed first.

 The process flow will be as below:

Create FADP and get the approval from
the management (Outside SAP). Create
Internal Order with FADP number. Record
the expected realization amount therein.
Here use the dummy material code
created for the relevant chapter ID, bring
the quantity of that material by movement
type 202.

Create a Sales Order with that material and mention

that Internal Order in the line item.
Retirement Posting: Create delivery against the sales
order. It will update the quantity of the material. The
system will be so configured that it will not create any
resultant FI document. Rather, the asset retirement
posting will be done in Asset Management with
transaction code ABAON. Here, mention the dates,
asset number, the amount of sale proceed and the
transaction type 210. As a result, following FI
document will be posted:
Sale of Asset A/c Dr.
Accumulated Depreciation A/c Dr.
To Asset A/c

 Difference - will go to Gain/ Loss on Sale of

Asset A/c
Revenue Posting: Create Billing against the
sales order. Following FI document will be
posted:
Customer A/c Dr.
To Sale of Asset A/c
To CST/ LST Payable A/c
To CENVAT Recovered On Sale Of Asset A/c

Create Outgoing Excise Invoice (J1IIN)

CENVAT Paid On Sale Of Asset A/c Dr.
To CENVAT Payable A/c
This is similar to sale of manufactured
goods.

In case of sale within the year of

acquisition (i.e. before availing the
CENVAT credit for balance 50%), such
balance available in the CENVAT On
Hold A/c should not be transferred to
CENVAT Receivable A/c thru J2I8.
Needs to check from MRG about their
present practice.

 Retirement of Assets Without Revenue Scrap

Retirement of Asset without revenue is deemed as
scrapping of Asset. The division/ branch owning the
asset will create the FADP (Fixed Asset Disposal
Proposal) and after getting due approval, notify the asset
management person regarding the asset code number,
quantity of the asset to be scrapped. For Companies Act,
on sale of the asset, the gross block of the asset will be
removed from the books (by quantity or value-as
specified by the user), the accumulated depreciation will
be reversed and the loss/ gain on scrapping will be
debited or credited accordingly.

 The process flow will be as below:

Retirement Posting: The asset retirement posting will be
done in Asset Management with transaction code
ABAVN. Here, mention the dates, asset number and the
transaction type 200. As a result, following FI document
will be posted:
Accumulated Depreciation A/c Dr.
To Asset A/c
Difference - will go to Loss on Scrap of Asset A/c

 Asset Transfers
Inter Cost Center Asset Transfers: In CGL,
assets may be transferred from one cost
center to another. After transfer, the
depreciation expense should get booked to
the new cost center. If the transfer is within
two cost centers but within the same
business area (division/ branch), only the
cost center data in the asset master record
needs to be changed. In SAP, cost centers
are assigned at the asset master level.

 When an asset is physically moved from one

cost center to another, the cost center
assignment for that asset have to be changed.
The cost center field in the asset master data is
a time dependent field. Whenever there is a
change in cost center, the user has to key in the
new cost center in the asset master record.
Such change of the cost center implies that the
depreciation expense on the asset is now
booked to the new cost center. The depreciation
booked in the earlier cost center remains as
such.

 Depreciation Posting
Book depreciation will be posted automatically to the general ledger
at the end of every month based on the rates and other depreciation
terms maintained in the asset master record. It will be possible to
execute multiple repeat runs for depreciation posting in any given
period. In the repeat runs, the system would not post depreciation
twice, but only pick up additional data to be posted. The
depreciation expense will get booked to the cost center/ business
area of the assets. In CGL, unplanned depreciation may be required
to be posted in order to carry out value adjustments to the
depreciation posted. Unplanned depreciation will be shown
separately at the time of asset reporting. CGL would require to writeup depreciation for assets in order to make corrections to
depreciation posted erroneously in closed fiscal years.

Closing Procedure

It is recommended to carry out all the closing activities in

CGL as discussed above so as to extract final accounts
from the system. For quarterly closing, only FI period will
be kept open (for GL posting only) for the time instructed
by COFA. Only one senior user per location will be given
the authorization to make posting in the last period. Once
accounts are audited/ signed for a location, immediate
communication should go to Corporate IT for removing
such special authorization. There may be a gap of
maximum one working day between account signing and
removal of such authorization. During this time gap, that
user should ensure that no prior period posting takes
place.

Interest Calculation
Interest On Banks Overdrafts
Considering the specific requirement of CGL, it
appears that SAP standard functionality logic
may not be useful in this respect.
Interest Credit Notes From Vendors For
Delayed Payments
Considering the specific requirement of CGL, it
appears that SAP standard functionality logic
may not be useful in this respect.

 Interest Debit Notes To Customers For

Delayed Payments
Considering the specific requirement of
CGL, it appears that SAP standard
functionality logic may not be useful in this
respect.

Forex Management
Imports and Exports:
Imports:
Import Purchase orders will be raised only in foreign
currency.
Goods receipt will be recorded at the rate prevailing
on the date of Bill of Entry.
Vendors will be settled using the bank rate existing on
the payment date. The exchange difference between
the BOE rate and the rate at which payment is made
will be accounted for as FOREX gain / loss.

 Exports:
Export Sales order will be raised only in foreign
currency.
Billing will be effected in foreign currency and the
accounting for revenue would be at the rate prevailing
on Bill of Lading date.
Settlement from customers will be effected using the
bank rate existing on the payment date. The
exchange difference between the BOL rate and the
rate at which payment is received should be
accounted for as FOREX gain / loss.

 Assets Purchase in Foreign Currency:

Exchange differences arising on
repayment/ period end revaluation of
liabilities incurred for the purposes of
acquiring fixed assets, which are carried in
terms of historical cost, should be charged
off as FOREX gain/ loss in the relevant
period. This accounting treatment is in line
with AS-11.

 Maintaining Exchange Rate Type:

Following exchange rate types will be
maintained in CGL:

Maintaining Exchange Rates:

The exchange rates will be regularly updated in the system so as

to enable the system to
Translate foreign currency amounts when posting a foreign
currency document
Check the deviation of exchange rate entered manually
Determine the gain and loss from exchange rate differences while
settling open items in foreign currency
Revaluate open items in foreign currency and the foreign
currency balance sheet accounts at the period end.

 The exchange rates are defined by period

("valid from"). Exchange rates are entered
using the OBO8 transaction. This screen
is used for manual entry of the different
exchange rates. Exchange rates must be
entered for all exchange rate types.