INTRODUCTION TO SAP FICO

What is SAP FICO?

SAP FICO is a module used for financial reporting both externally and internally. The objective is to
record all financial transactions that are posted by an entity and produce financial statements that are
accurate at the end of the trading period. Full form or SAP FICO stands for FI (Financial Accounting) and
CO (Controlling). This tutorial is going to explain the major functionalities with SAP FI module.

SAP FI

SAP FI is made up of sub modules. The sub-modules that are often used are accounts receivables,
accounts payables, asset accounting, general ledger Accounting and bank accounting.

All the sub modules are interlinked and integrate in real time. A trial balance can be extracted at an time
and it will always balance because all the sub modules are connected. The diagram below shows the the
integration between SAP FI modules.

General ledger accounting

All general ledger accounts that are used for reporting are managed through general ledger accounting.
In SAP a set of all general ledger accounts used by a company or a group of companies is called a chart
of accounts. These are the accounts that will be used for the preparation of financial statements. Most of
the transactions are recorded in sub modules and they are reconciled with the general ledgers in real
time. Transactions that can be done in direct in general ledger Accounting include journal vouchers which
are posted to adjust or correct transactions. Reversals can also be done from general ledger accounting.
Balances in general ledger accounts can be displayed and trial balances extracted from the system.

Accounts receivables

Accounts receivables is a sub module that captures all transactions with customers and manages
customer accounts. Separate customer accounts will be maintained and when transactions are posted in
customer accounts, reconciliation accounts in general ledger are updated with the figures in real time.
Transactions in accounts receivables include invoice posting, credit memo posting, down payments,
invoice payment, dunning and executing customer reports.
Accounts payables

Accounts payables is a sub module that captures all transactions with vendors and manages vendor
accounts. Separate vendor accounts are maintained and when transactions are posted in customer
accounts, reconciliation accounts in general ledger are updated with the figures in real time. Transactions
in accounts payables include invoice posting, credit memo posting, down payments, invoice payment,
automatic payment program and executing vendor reports.

Asset accounting

Asset accounting manages all transactions realted to assets for an entity. When transactions are posted
in asset accounts,reconciliation accounts in general ledger are updated in real time. Transactions in asset
accounting include asset acquisition, asset retirement, asset sale, asset transfer, asset revaluation and
asset depreciation.

Bank accounting

Bank accounting captures all transactions with the banks. Bank reconciliation is done to reconcile all
transactions recorded on bank statements comparing them to transactions in the system.

All SAP FI sub-modules are integrated and transactions are updated in real time which means accurate
financial statements can be extracted from the system at any time.

SAP CO

SAP Controlling (CO) is another important SAP module offered to an organization. It supports
coordination, monitoring, and optimization of all the processes in an organization. SAP CO involves
recording both the consumption of production factors and the services provided by an organization.

SAP CO includes managing and configuring master data that covers cost and profit centers, internal
orders, and other cost elements and functional areas.

The main purpose of SAP controlling module is planning. It enables you to determine variances by
comparing actual data with plan data and thus enables you to control business flows in your organization.

SAP CO Integration with Financial Accounting

Both SAP CO and SAP FI modules are independent components in a SAP system. The data flow
between these components takes place on a regular basis.

Data flows relevant to cost flows to Controlling from Financial Accounting. At the same time, the system
assigns the costs and revenues to different CO account assignment objects, such as cost centers,
business processes, projects or orders.

What is a Chart of Account?

In SAP, the Chart of Accounts (COA) is defined at the client level and assigned to each company code. It
is a list of General Ledger account’s master data that fall under different account groups of a company
code. This grouping mechanism helps to develop better financial reports.
Types of Chart of Accounts

There are three types of Chart of Accounts, viz

Operating chart of accounts: They are used to post daily expenses. The accounts in Operating Chart of
Accounts could be either expense or revenue accounts, and the information is shared by Finance as well
as Controlling modules.

Group Chart of Accounts: These are accounts used by the entire corporate group. They help in
generating reports at the corporate

Country-specific chart of accounts: This Chart Of Accounts help meet country-specific legal requirements

General Ledger posting

General Ledger posting is the process of posting the Payroll results to the appropriate GL accounts
including the cost centres. Posting payroll results to Accounting is one of the subsequent activities
performed after a successful payroll run. It usually takes place once each payroll period, as well as after
each off-cycle payroll run. GL posting does the following

 Groups together posting-relevant information from the payroll results.

How posting is evaluated?

Each employee’s payroll result contains different wage types that are relevant to accounting:

Wage types such as standard salary, bonuses, and overtime represent expenses for the company, which
are posted to a corresponding expense account.

Wage types such as bank transfer, employment tax, employee’s contribution to social insurance, etc. are
the employer’s payables to the employee, the tax office, etc. and are posted as credits to a corresponding
payables or financial account.

In addition, there are wage types such as the employer’s health insurance contribution, which represents
an expense for the enterprise and, at the same time, a payable to the social insurance agency. For this
reason, such wage types are posted to two accounts - once debited as an expense, and once credited
as a payable.

Other types of wage types also exist, for example accruals, provisions, etc. These types of wage types
are usually posted to two accounts, once debited as an expense and once credited as a provision.

Posting to General Ledger is a 2 STEP process:-

STEP 1) Create a Posting Run

This step creates a posting run based on the payroll results, with a “distinctive number”, a “run type PP”,
and the accompanying posting documents.
The posting run ensures that payroll results for an employee are only posted once

Processed payroll results for an employee are flagged

If the posting run is successful, it gets the status “Documents Created”.

If the posting run is unsuccessful, it gets the status “Incorrect Documents”. Relevant error messages will
appear in the Output Log.

A posting run can be executed in 3 Modes:

 A test run without documents (T)

Test (T)

In a test run, the system checks only whether the balance of expenses and payables is zero, as it should
be.

Simulation (S)

In both simulation and productive runs, the system checks all HR and RT tables and the posting
information in master data to determine whether they exist and whether they are consistent.

Productive Run (P)

When you choose Execute Run for a productive run, the system performs the following steps:

 Selects the employees and their payroll results for the evaluation
 Creates a posting run
 Creates posting documents