Operating Concern:

Controlling Area: Controlling area is mandatory for controlling module. It records all overhead
related like OH management activities , all manufacturing relating activities and also profit centre
accounting related activities.

Assignment of Company code to Controlling Area:

Controlling Area 1 Company Code 1

Company Code 2
Company Code 3
Operating Concern
Controlling Area 2 Company Code 4
Company Code 5
Company Code 6
 Accounting structure should be same between company code and controlling area. (Chart of
accounts)
 The fiscal year variant should satisfy the following conditions:
i) Number of posting periods should be the same.
ii) Starting period and ending period should be the same.
iii) Starting date and ending date of each period should be the same between company
code and controlling area.
iv) If fiscal years are different multiple controlling areas needs to be defined.

Assignment of Controlling area to Operating Concern:

FY variant should be same between controlling area and operating concern. We can assign multiple
controlling areas under one operating concern, if fiscal year variant is same between controlling area
and operating concern.

Currency and Valuation Profile:

The currency and valuation profile is possible to use only if Material Ledger is activated.
It specified which valuation views to be valuated with which currency type.

Legal Valuation For actual procurement of production cost

Group Valuation Excluding the internal profit between co codes from legal price
Profit Centre Valuation Adding internal profits between profit centres to legal price.
Parallel Valuation Valuating inventory differently according to different accounting
principles and valuation can be posting to respective ledgers

Cost Centre standard Hierarchy:

It is the highest node in cost centre accounting. It represents all the cost centres in the structural
form which are created in controlling area.
Actual Activity Price = Actual cost for specific activity / Actual activity Quantity.

Example: Labour activity price = Actual cost for labour activity / Labour activity quantity.

Prerequisites:

Activity type indicator to be activated in controlling area. We can post the values against activity
type in the below areas.

1) Financial transactions in FI – FB50

2) Asset Accounting in FI – Asset Master data
3) HR – Payroll Master data.
4) CO – Reposting’s.
Important settings:
Order Management: To update the transaction to the orders.
Commitment Mgmt: To track and update commitment against budget
Profitability Analysis: To use the functionality of COPA
Profit Centre accounting: To activate classical profit centre accounting
Not required to activate in case if we are using the new GL accounting
Projects: To update transactions to the projects.
Sales Orders: To update transactions to Sales Order. Especially required in the make
to order scenario.
All Currencies: Blank System updates only in controlling area currency.
All Currencies: X System update in controlling area currency, objective currency and
transaction currency. All currencies indicator active or deactive is not
possible after creation of controlling area. We need to active it at the
time creation of controlling area.
CoCode Validation : X In the case system allow to allocate the values both sender and
receiver objects belong to the same company code
CoCode Validation: Blank Above functionality is not possible.

Number ranges for controlling documents:

 Number rages – Year independent or Controlling area specific.

 System posts the CO document for every posting from FI to CO and also for every posting
with in CO. System use CO business transactions while postings to CO.
 CO number range group contains the number range interval and it year independent and
defined at controlling area level.
 One number range group can be assigned to multiple CO business transactions.
 Maximum 10 digits numbering code.
Version Control Parameters:

Planning It controls whether allow to do

integrated planning or manual
planning. Planning copy
Version Control Parameters allowed or not.
Price Calculation It controls activity price
calculation and revaluation of
activity.

Version Control Parameters—Planning:

Integrated Planning: Sys updates cost centre planning to other dependent components Ex: PCTR
Copying Allowed: Version allows to copy values from one version to another version. We can
copy from plan to actual and actual to plan.
Exchange Rate Type: We need to specify which exchange rate type to be used for planning. We
usually use exchange rate type ‘P’
Value Date:  Value date specifies which date exchange rate to be consider for
planning.
 If we specify date then system takes the specific date conversion
rate in planning for all periods.
 If we leave blank, then system takes the latest exchange rate in
planning.
 Prefer to give year beginning date (01.04.2018)

Version Control Parameters—Price Calculation:

Periodic price method Plan cost for specific period for specific activity
Plan activity units for specific period.

Resulted price is valid only for specific period.

Plan Method
Average price method Plan cost of all periods for specific activity
Plan activity units for all periods.

Resulted price is valid for all periods.

Periodic price mthod Actual cost for specific period for specific activity
Actual activity units for specific period.

Resulted price is valid only for specific period.

Average price method Plan cost of all periods for specific activity
Actual Method Plan activity units for all periods.

Resulted price is valid for all periods.

Cumulative price method Actual cost till period
Actual activity units till period.
Resulted price is valid only for specific period.
Revaluation Methods:

Do not revaluation In this case cost centres are under absorbed or over absorbed.
Own Business transaction Allocating activity price difference to the order. In this case system
uses separate CO business transaction for revaluation. By using CO
business transaction, we can differenciate what is the original
allocated amount and revaluation amount.
Original Business transaction System uses same original CO business transaction type for booking
and also for revaluation. In this case we can not differenciate original
allocated amount and revaluation amount by using the CO business
transaction.
Cost Element

Primary Cost Element: This is main integration to transfer values from FI to CO. The primary p&l gl
accounts can be crated as primary cost elements in CO to get values from FI. All income and expense
accounts can be called as primary cost elements.

Secondary Cost Elements: Secondary cost elements are created with in the controlling modules.
These cost elements are used to transfer data from one controlling object to other controlling object
with in the controlling module.

01-Primary Cost All expense GL accounts other than

Primary 11-Revenue Element
Cost 12-Sales Deductioins
Element 22-External settlement
90-Balance sheet statistical cost element
21-Internal settlement
Secondary 31-Results analysis
Cost 41-Overhead cost
Element 43-Activity cost
42-Assessment

01-Primary Cost: This category can be used for all expenses gl accounts other than sales expenses.
12-Sales Deductioins: This category can be used for all direct expenses gl accounts which are
generating from billing
11- Revenue: This category is used for all revenue related GL accounts. Cost element categories 11
and 12 are required to transfer values from billing documents to COPA.
22- External Settlement: This category is used to transfer values from CO to FI. Example, Internal
Order values can be transferred or settled to fixed assets or AUC assets or differed expense.
90-Statistical cost element: This category is used for all balance sheet fixed assets GL accounts and
also for inventory GL accounts.

21-Internal settlement: This category is used to transfer values from order to other cost object.
Example, to transfer values from IO to CCTR or from IO to Sales Order or IO to COPA.
31-RA Cost Element/WIP: This category is used in the results analysis calculation and WIP values are
updated under this RA cost element.
41-order Rates: This category is used to allocate overhead from cost center to the order not based
on activity. This explicitly used to allocate the indirect overhead not based on activity.
43-Internal activity allocation:This category is used to allocate overhead (direct / indirect overhead)
based on the activity from cost center to order.
42-Assessment:This category is used to allocate OH from cost center to cost center in case of
assessment method and also to transfer values from cost center to COPA.
Attribute Matrix: This is used for further classification of cost elements for reporting purpose. In
case of planning, we can maintain planning with the combination cost element, attribute matrix and
cost center. We can assign maximum 8 attributes to the cost element master. Example: Variable
cost, fixed cost, service cost, skilled labour, unskilled labour etc.,

Record Quantity: If the indicator is activated both cost element master and cost centre master data,
system gives warning message as you are not entered any quantity while posting to cost center.

Default account assignment: To post transactions to the specific CO object. Example, bank charges
account need to post always to the Admin Cost Centre, then we can maintain Admin cost centre in
the cost element master data.

Cost Element Group: Grouping of cost elements either for reporting or configuration purpose.

Example:
Total cost Element Grp Primary Cost Element Primary Material
Grp Overhead
Sale Expense
Revenue
Secondary Cost WIP
element Grp
Direct OH
Indirect OH
Allocation
Cost Centre Hierarchy: The cost centre hierarchy is the highest node in cost centre accounting. It
represents all cost centres which are created in controlling in the hierarchy pre structure form
All the cost centres are created under only standard hierarchy. Standard hierarchy can be defined at
controlling area level. We can not define more than one standard hierarchy per controlling area.
But we can define alternative standard hierarchy to meet different reporting and configuration.

Cost Centre Categories: It specified further classification of cost centres. Used for reporting
configuration and controlling purpose. Cost centre categories can have default values. Example, lock
indicator for posting, actual primary posting, actual secondary posting, planning primary posting,
planning secondary postings.

Cost centre category in Activity type: By assigning cost centre category in activity type master, we
can specify that this activity can be used only for the cost centres relevant for the assigned category.

Cost centre categories can be used in validation. Example, Material consumption transactions do not
allow to post manufacturing cost centre category cost centres.

Cost centre categories can be used in substitutions. Example, We can substitute functional area,
based on category while posting transactions to cost centres.

Cost centre categories are defined at client level. Cost centre categories can defined in single
character

Cost centre:

Cost Centre represents location or responsible area which incurs the cost and influencing costs. The
cost centre can be created location wise, dept wise, division wise, equipment wise, responsibility
person wise etc., Below factors to be considered while finalising cost centres.

 Planning level
 Reporting criteria
 Profit centre structure
 Work centres,
 Allocation critera

Purpose of linking Cost centre to work centre:

 To collect cost belongs to work centre

 To allocate cost to jobs based on resource / activities used from the specific work location.
 Every work centre linked to cost centre
 One cost centre can be assigned to multiple work centre
 Multiple cost centres not possible to assign single work centre
Purpose of linking Activity Type to work centre:

To plan activities
To record the actual activities
To allocate the overheads to the job based on activities used from work centre

Statistical Key Figures:

Represents key figures for cost centres and internal orders. Used for information purpose and
allocation purpose. Example, no of employees, no of systems, no of users, no of power units,
telephone units etc.,

Defined at controlling area level.

Example: Canteen department expenses allocated to other departments based on number of

employees. Here, number of employees can be called statistical key figure.

Example: Software licence fees allocated to other departments based on number of licences used in
each department.

Example: IT department overhead allocated to other departments based on number of systems used
in each department.

SKF Categories Fixed Category

Total Category

Fixed category: Fixed category key figures represent the constant behaviour. Need to be selected
for those key figures which are having constant behaviour, i.e. not frequently changing values. In
case of fixed category, the entered values are valid for all the periods, till the next change or till the
end of the current fiscal year.

Example, no of systems, no of employees, no of licences etc.,

Total category: Need to be selected for those key figures regularly changing or irregular behaviour.
The entered figures are valid for the specific period and need to be enter values for every period.

Example, Power units, telephone units etc.,

ACTIVITY TYPE:

Activity Type Categories: specified how the valued to be entered or determined for the specific
activity type. There are two ways we can determine the values.
 Direct Activity allocation [Manual]
Manual entry, manual allocation
Manual entry, no allocation
 Indirect Activity Allocation [Based on reference]
Indirect determination, indirect allocation.
Manual entry, indirect allocation.

Manual entry, manual allocation: By using this category, we can able to enter the quantities and
also possible to allocate the amount.

Manual entry, no allocation: We can able to enter the quantities in the sender cost centre side, but
not possible to allocate the amount from the sender to receivers.

Indirect determination, indirect allocation: Sender department output determine based on

receivers department activity output. Example, power activity output determine based on the
resource department (production department) machine activity and also the sender department
activities further divided to the receiver on proportionate of receiver department activities.

Manually entry, indirect allocation: In this category we can able to enter the activity quantities
manually in the sender side and these activities can be allocated to the receivers based on the
receivers department reference activity.

Planned price Indicator:

Planned price indicator specifies, how the planned activity price to be calculated for the specific
activity.

1—Plan price automatically based on activities:

Total plan price = Plan fixed activity price + Plan variable activity price

Plan fixed cost

Plan fixed price =---------------------------
Plan activity units

Plan variable cost

Plan variable price =---------------------------
Plan activity units
2—Plan price automatically based on capacity:

Total plan price = Plan fixed activity price + Plan variable activity price

Plan fixed cost

Plan fixed price =---------------------------
Plan capacity

Plan variable cost

Plan variable price =---------------------------
Plan capacity

3—Determined manually:
Manual price can be entered .

Average price: Calculated activity price updates same price for all the periods of specific fiscal year.

Actual quantity set: If the indicator is activated, then we can able to enter the manual quantities in
the sender side in addition to activities determined indirectly.

Planned quantity set: If this indicator is activated, then it wont overwrite the planned activity units
which are entered manually.
If this indicator is not activated, then system updates the planned activity units during the planned
activity reconciliation.
Cost centre splitting structure:
Cost centre splitting structure contains the distribution rules and these distribution rules specify
which cost element values to be consider for which activity and also it specifies how the amount to
be split and allocated to the individual activity.

Splitting method: It specifies how the amount to be split among the activities. Example, based on
actual activity units, based on plan activity units, SKFs etc.,

Activity dependent planning: Cost element planning with reference to activity, can be called as
activity dependent planning.

Cost element Vs Activity Type Vs Cost Centre

Distribution Vs Assessment:

Distribution Assessment
Possible to transfer only primary element cost Possible to transfer both primary cost element
cost and secondary cost element cost.
In this method, system uses same original cost It uses separate secondary cost element (CE 42)
element to credit in the receiver side. to credit in the sender side and debit in the
receiver side.
In the receiver side, it is difficult to track what is In the sender side, the total allocated amount it
originally posted amount and allocated amount. sumup and it credits under the secondary cost
element
In the receiver side, we can able to view the In the receiver side, not possible to trace or view
values original cost element wise. the primary cost element wise details for
allocation amount.

Segment: Segment contains the distribution rules. It specifies who is the sender and who is the
receiver; which cost element to be allocated and it specifies the sender and receiver rules (on what
proportionate the amount to be allocated for different receiver)

Cycle: By using cycle, we can process all segments parallel at the same time.

Iterative indicator: It establishes relationship between segments. System allocate the amount till
fully credited in the sender side. System keep on run the cycle unless the sender amount is fully
credited.

Cumulative: Applicable only in case sender rule is posted amount, receiver rule is variable portion
type.
Allocation Structure:

Allocation structure can be used in cost centre assessment and order settlement.
Allocation structure contains assignment. Each assignment represent group of source cost elements
and further it is assigned to the secondary cost element. And further it specifies which receiver
category allow to settle.

Manual reposting of cost: We can repost the cost manually from one cost centre to the other CO
object. We can able to transfer any primary cost and not possible to transfer secondary cost. In
this method the value directly deducted from the sender cost element in the sender side and it
updates under the same cost element in receiver cost centres.

Manual cost allocation: It is used to transfer the cost manually from one cost centre to the another
CO object. It is possible to transfer both primary cost and secondary cost. In the sender cost centre
it is credited separately under the sender cost element and it updates under the same CE in the
receiver side.

Repost line items: By using, reposting of line items, we can repost values from one cost centre to
other cost object with reference to FI document line item. The changes will impact only in CO not in
FI.
 FI-MM INTEGRATION
MM Organization Units:

Plant: Place or location where products are stored. We can define multiple plants. Multiple plants
can be assigned to single company code. But same plant not possible to assign to the multiple
company codes.

Storage location: Represents the place where inventory stored physically. Storage locations defined
at the plant level. Each plant can have multiple storage locations.

Purchase Organisation: is responsible to procure the material from external vendors. One purchase
organization can be linked to multiple plants.

OBYC Settings:

Vlauation area T key General modifier Valuation Class GL account

Determination of valuation class:

Determination of general modifier:

With the combination of valuation class , transaction key and general modifier it checks OBYC
settings to determine GL account while posting inventory movement and invoice postings.

Valuation class contains the list of GL accounts or grouping of GL accounts. Valuation class is the
main integration between MM and FI. That means valuation class linked between material master
and GL account. Valuation class is used to determine GL account while posting inventory and invoice
postings.

Account category reference: It contains valuation key, or grouping of valuation classes. One account
category reference can have multiple valuation classes and same valuation class can be assigned to
multiple category references. One ACR can be assigned to multiple material types. One material
type can have maximum one ACR.

Material Type: Grouping of similar nature or attributes of the materials. It control the material
number. Material types specifies which material master view allow to be used for the specific
material type. Example, Raw material type do not allow to create the sales views.

ACR to Material Type: One ACR can be assigned to multiple material type. One material type can
have maximum 1 ACR. Valuation class can not be directly link to material type. Valuation class can
be assigned through the ACR to the material type.

Note: Through this, we can restrict which valuation class allow to be used for the specific material
type through the account category reference

Transaction Key: is the internal processing key or technical key which is used in account
determination process to determine the GL accounts. Minimum two transaction keys required to
post the document. That means one line item requires one transaction key.

BSX- Inventory Posting: This key is used to update inventory account.

WRX-GRIR Clearing Account: This key is used to update offset account of goods receipt from external
procurement and also offset amount of invoice amount.

BSV-Change in Stock Account: This key is used to update

FRL-Process charges or contract charges or external process charges.

GBB-VBO-Material consumption against subcontract process:

UMB-Gain or loss on revaluation of inventory: This key used to update the gain or loss on
revaluation of inventory. This key is used during the standard cost estimate release and during the
manual material master price changes if the stock is available.
AUM-Gain / Loss on stock transfer: This transaction key is used during stock transfer from one plant
to other plant. When the sender and receiver plants having different prices with price control ‘S’,
then system generates the gain or loss stock transfer account, if any price difference between the
sending plant and receiving plant.

KDM-Exchange rate difference: This transaction key is used to account the exchange rate
differences from MM transactions. Example, Exchange rate differences between PO and invoice.

FR1-Freight Clearing
FR2-Freight provision.
FR3-Custom Clearing
FR4-Custom provision.

GBB: Offset account of inventory

a) Goods issue to the order ----- VBR
b) Goods issue to sample ---------VQP
c) Goods delivered to customer -----VAX / VAY
d) Goods issue to subcontractor------VBO
e) Goods issue to scrap -----VSG
f) Goods received from particular order --- AUF

General modifier: can be called as further classification of transaction key. General modifier can be
defined on our own.

1) Goods issued to order

Material Consumption A/C DR GBB_VBR
To Stock A/C BSX

2) Goods received from production order

3) Goods dispatched to the customer:

Cost of goods sold A/C Dr GBB-VAX / GBB-VAY
To Stock A/C BSX

4) Physical inventory difference:

Inventory Difference A/C Dr GBB-INV
To Stock A/C BSX

5) Scrap of Material
Material consumption scrap A/c GBB-VMG
To Stock A/C BSX
 6) Goods issue to samples:
Material consumption scrap A/C Dr GBB-VQP
To Stock A/C BSX

7) PRD Transaction key: This is used to account purchase price difference and production
variances.

PRD for if price indicator for Material is V: If any price differences between PO and invoice
Case 1: If full stock is available ( PO price is 100 and invoice price 110)
Stock Account DR 100 BSX
GIIR Cleating Account DR 1000 WRX
To Vendor Account 1100 KBS

Case 2: If No stock ( PO price is 100 and invoice price 110)

Price difference account DR 100 BSX
GIIR Cleating Account DR 1000 WRX
To Vendor Account 1100 KBS

PRD for if price indicator for Material is S: Always Purchase price difference account will
trigger.’

Movement Types: Following is the list of important movement types

a) Goods issue to cost centre -201
b) Goods issue to project - 221
c) Goods issue to production order 261
d) Goods delivered to customers – 601
e) Initial stock upload - 561
f) Scrap - 551
g) Goods issue to subcontract 541 ( NO FI entry)
h) Goods receipt from subcontractor - 543

Valuation level:

Company code level: Plant level:

Not possible to maintain different price Possible to maintain different prices for the
same material across plants
Possible to maintain same price same valuation It possible to maintain price of valuation for the
for the same material across plants in company combination of material, valuation type and
code plant.
Group together valuation areas:
Valuation grouping code should be active to use the valuation modifier functionality.

Special Procurement Type:

Back Flush: Auto goods issue

Bulk Material: Not relevant for costing. This indicator can be selected either at material
master level or bill of material level. Material master level is the highest priority. Bulk
material cost will be booked to the cost centre at the time of procurement. Through
overhead method the amount allocated from cost centre to production order.

CO Product: Apportionment structure contains distribution rules. Distribution rules specifies

how the amount to be distributed between main product and by product.

Availability Check: It checks the availability of material while creation of the production
order.

Production version: Production version represents Bill of material and routing.

Standard price vs Moving average price: In case of standard price, system calculates
moving average price for information purpose or can not be used for valuation of stock. This
price can be treated as a statistical price.

Creation of purchase order:

Account assignment purpose: is procurement of material for specific account assignment. E

Example: Direct procurement of material against the project, against sales order.
Item category purpose: Item category specifies the characteristics of the specific line items.
This also specifies the specific line item whether it is relevant for valuate and whether it is
relevant for stockable And also specifies whether it is service related or stockable. And also
specifies subcontracting.
 FI-SD INTEGRATION

Sales Organisational units: Following are the sales organisational units.

 Sales Organisation
 Distribution Channel
 Division
 Sales Office

Single plant can have multiple sales orgnisations. Same sales organisation can be assigned to
multiple plants. Single company code can have multiple sales organisations.

Distribution channel: It specifies how products or services reaches to the end customers. Example,
ecommerce, wholesale, retail etc., In SAP we can maintain minimum price. Minimum order quantity
to be delivered for the combination of sales organisation and distribution channel. Distribution
channel linked to multiple sales organisations. Sales organisation can have multiple distribution
channel.

Division: It is used to classify products or services for reporting and analysis purpose. Divisions are
used to define and identify sales area. Example: Products division, service division, bpo division,
spareparts division, it division etc.,, Sales organisation can have multiple division. Single division can
be linked to multiple sales organisations.

Sales area: Combination of sales organisation, distribution channel and division is called sales area.
In SD all sales transactions are performed

Condition types are two types:

1) Real condition type 2) Statistical condition type

Statistical condition type can be used for information purpose. Statistical condition type values are
not possible to post to financial accounts.
Real condition type values are possible to post to financial accounts.

Real Condition Type in SD Pricing Procedure >>>>>>Transaction Key>>>>>GL Account>>>>VKOA

For COPA, it is possible to update both real and statistical condition type values.

Account Key: Account key is used in account determination process to determine GL accounts while
posting sales transactions. Account key is main link between in SD condition type and GL account in
financial accounting. Account key is not required to assign to the statistical condition type. In the SD
pricing procedure, we need to specify as real or statistical condition as against each condition type.
If we activate statistical indicator against condition type in the SD pricing procedure then that
condition type can be called statistical condition type. If the indicator is not activated then it can be
treated as real condition type.

How the values are determined for condition type

Manually we can enter prices Automatically from

against condition type in sale order item SD pricing condition records

By assigning access key to condition type, we can specify that the condition should read or assess the
values from pricing condition records.

Access sequence Key: Access sequence key determines values for the condition types from the
pricing condition records. Access sequence key contains sequence of tables. Each table contains
grouping of fields. These condition tables are used to pulled the pricing condition records for the
condition types.

SD Pricing Procedure: SD pricing procedure contains conditions formulas and rules to arrive the
price like net sales price, discount, rebate, sales commission , insurance , taxes on sales. , insurance ,
taxes on sales.
SD pricing procedure determination:

Sales area + Customer pricing procedure (CPP) + Document pricing procedure

Customer Master under sales area sales tab Sales order type

FISD Integration Key elements: