The Asset Accounting (FI-AA) component is used for managing and supervising fixed assets with the SAP System. In Financial Accounting, it serves as a subsidiary ledger to the General Ledger, providing detailed information on transactions involving fixed assets.

Asset Accounting and its interaction with the General Ledger module. The article aims to cover intricacies involved with respect to Asset Accounting to minimize the challenges faced during the set-up.

The usage of Asset Accounting is not just restricted in S/4 HANA.  It can be used with ECC system also (from EHP 7 onwards), provided New GL is activated. However, the difference is while it is mandatory to activate new Asset Accounting in S/4, it is an optional feature in ECC. Additionally, AA in S/4 provides additional features that are not available in ECC.

Before configuring Asset Accounting, it is important to list out all the accounting principles that the organization desires to follow while preparing its financials and to determine whether each of these accounting principles would translate into separate parallel ledgers.

1. INTRODUCTION (PROCURE TO PAY PROCESS)

All enterprises and corporate aspire to improve their bottom line. Basically, there are two ways to do it, either to increase the top line or reducing the cost. Increasing the top line or the revenues in today’s competitive markets is not a very easy option. That’s why, now a day’s the sourcing and procurement functions are being examined, by the companies, in order to find ways to cut costs and control spending. Thus, for all such enterprises the procurement process is very important, so here in this article we will try to focus on the P2P process of an enterprise. For ease of understanding I have kept the language of the whole article very simple and specific to the topic.

STEP 1: IDENTIFICATION OF REQUIREMENT

This is the first stage, at which the user department (say, Maintenance, Production, Sales and distribution, administration, accounts etc) identifies their requirements, that is what are the items they require and based upon which they create a document called as the Purchase requisition /Purchase request (PR). This document normally contains description of material, quantity, approximated cost, material requirement date, preferred or standard vendor etc.

STEP 2: AUTHORIZATION OF PR

Then, the PR is to be first approved by the head or the senior authority of the user department. At this stage, the authority may return the PR to the originator for modification or can approve it.

STEP 3: FINAL APPROVAL OF PR/ROLE OF INVENTORY CONTROLLER

Once the PR has been authorized by user department then it is available to the inventory controller, or the materials management department, who are responsible for handling all the materials in the organization. Inventory controller shall review the PR and shall check the open Purchase Orders (PO), any other scheduled or planned delivery for the material. If there is any planned delivery or any existing open PO then Inventory controller can return the PR or request the user department to revise the quantity of the material (if required). After the approval of Inventory controller, the approved PR is available to the Procurement department.

STEP 4: PROCUREMENT

After final authorization of PR, that it is found out that there is no planned delivery of such a material, it is available to procurement department. The department shall check for any existing contract for the material. If any contract exists then a call-out shall be generated and shall be sent to the existing supplier. In case no contract exists then the procurement department shall initiate supplier search and floating inquires.

STEP 5: IDENTIFICATION OF SUPPLIERS

If no already contracted supplier exists, then the procurement department shall interact with the user for the possible suppliers or search on the internet or use referrals or search data base, etc. to identify the suppliers for the said material.

STEP 6: FLOATING OF INQUIRES

Once the suppliers are identified, procurement department shall send the Request For Quotations/Proposal (RFQ/RFP) to the supplier, based upon the PR. RFQ normally contains description, technical specifications of the material, quantity of the material, term and conditions, delivery date of the material, date of submission of the RFQ, quality standards, validity of the suppliers offer, etc.

STEP 7: RECEIPT OF TECHNICAL QUOTATIONS

After sending the RFQ/RFP to vendors, the procurement department shall receive the quotations from the suppliers. These technical quotations contain the information pertaining to the technical specifications of the material, if there are any. Normally, vendors are instructed to send their quotation in a sealed envelope, mentioning only RFQ reference number on it. Quotations are normally opened and signed by two or more persons of the procurement department.

STEP 8: TECHNICAL EVALUATION OF QUOTATIONS

Quotations are sent to technical department for technical evaluations of the quotations. Here, technical department shall shortlist the quotations based on the technical specifications.

STEP 9: RECEIPT OF COMMERCIAL QUOTATIONS

Once the technical evaluation is over, the procurement department shall send the advice to shortlisted suppliers for commercial quotations. These commercial quotation will contain details about the payment terms, discounts etc. Quotation comparison statement is prepared by the procurement department to compare all the quotations of the supplies and suppliers are short listed for negotiations.

STEP 10: NEGOTIATION

Based upon the commercial quotation, the procurement department will short list the suppliers and will invite then for negotiations. The negotiation can happen on various grounds like, reduction in the prices of the materials, quantity and price breaks, delivery terms and conditions, freight charges, payment terms etc.

STEP 11: SELECTION OF THE VENDOR

After negotiations with all the selected vendors, the revised quotations are prepared and vendor is finalized for award of contract based on the weightage to the commercial, technical parameters, previous performance of the vendor, delivery dates of the material, etc.

STEP 12: AWARD OF CONTRACT

After the vendor is finalized, LOI (Letter of Intent) can be sent to him and he may be asked to deposit security or bank guaranty before signing the agreement. Agreement can be of Fixed or Blanket (the same can be mentioned in the RFQ).

STEP 13: PURCHASE ORDER (PO)

The procurement department then shall raise the purchase order against the contracts and then is send to the supplier. This PO is prepared in reference of the initial document prepared in the process i.e. PR.

STEP 14: PO ACKNOWLEDGEMENT

After receiving the PO the supplier sends the acknowledgement to procurement department and they record the acknowledgement. If any ERP is being used for procurement functions then supplier can remotely download purchase orders and can acknowledge the PO.

STEP 15: ADVANCE SHIPMENT NOTE (ASN)

The supplier sends the Advance Shipment to procurement department as soon as he ships the material to the buying organization. This note normally contains shipping date, transporter’s name, airway bill number, number of packages, weight of the packages, receiving location address, description of goods, etc.

STEP 16: GOODS RECEIPT

When the goods are received at the warehouse of the organization, the receiving staffs checks the delivery note, PO number etc and acknowledges the receipt of material. After the material is received the same is checked for quantity in case of discrepancy the same is reported to the vendor. After the quantity verification the material is kept at inspection locations and material inspector is called for inspection of material. If material is rejected by the inspector the same is sent back to the vendor or the vendor is asked for the rectification at the site. The sound material is moved to respective warehouse locations.

(i) GOODS RECEIPT – ACCOUNTING ENTRY

           RECEIVING INVENTORY A/C Dr.

                To GR-IR A/C

(Note: With this entry, the goods are received in the organization, hence the inventory has to debited, but since the invoice is not received yet, thus the vendor cannot be credited, and thus a clearing account is used as GR-IR A/C i.e. Goods Receipt-Invoice Receipt A/C)

(ii) GOODS ISSUED TO THE DEPARTMENT – ACCOUNTING ENTRY

(Note: As the inventory department issues the goods to the user department, the accounting entry should be passed on, on the basis of the nature of the material and the use of it.)

(a)If goods are used in consumption:

           EXPENSE A/C Dr.

             To RECEIVING INVENTORY A/C

(b)or,if goods are used as assets:

           ASSET A/C Dr.

              To RECEIVING INVENTORY A/C

STEP 17: INVOICE RECORDING

Vendor sends the invoice to accounts department of buying organization for claiming payment. This invoice is entered in to the system.

(i) INVOICE RECORDING – ACCOUNTING ENTRY

           GR-IR A/C Dr

           INDIRECT TAX A/C Dr

              To VENDOR A/C

(Note: Since now the invoice is received, thus the vendor is credited, and the clearing account ‘GR-IR A/C i.e. Goods Receipt-Invoice Receipt A/C’ gets cleared)

STEP 18: PAYMENT TO SUPPLIER

And in the last the supplier is paid as the terms of the payments and the invoice.

(i) PAYMENT TO SUPPLIER – ACCOUNTING ENTRY

           VENDOR A/C Dr

              To BANK A/C

CONCLUSION

The very processes and documents in procure to pay cycle may differ from company to company, but a generic process more or less remains the same. During the process we have seen various documents being created and the accounting entries that happen (if any). These documents and the accounting entries and name of the accounts used may differ from various ERP or accounting systems, but the basic things remain the same

Here are the important tables and their links for the SAP P2P (Procure-to-Pay) process:

Procurement Process

1. EKPO (Purchasing Document Item): Contains item-level data for purchasing documents.
2. EKKO (Purchasing Document Header): Contains header-level data for purchasing documents.
3. EKET (Purchasing Document Scheduling Agreement): Contains scheduling agreement data for purchasing documents.
4. EKKN (Purchasing Document Account Assignment): Contains account assignment data for purchasing documents.

Purchase Order Process

1. EKPO (Purchasing Document Item): Contains item-level data for purchase orders.
2. EKKO (Purchasing Document Header): Contains header-level data for purchase orders.
3. EBAN (Purchase Requisition): Contains purchase requisition data.
4. EBKN (Purchase Requisition Account Assignment): Contains account assignment data for purchase requisitions.

Goods Receipt Process

1. MSEG (Material Document Header): Contains header-level data for material documents.
2. MSEGT (Material Document Item): Contains item-level data for material documents.
3. EKBE (Purchasing Document History): Contains history data for purchasing documents.
4. EKET (Purchasing Document Scheduling Agreement): Contains scheduling agreement data for purchasing documents.

Invoice Verification Process

1. MIRO (Invoice Verification Header): Contains header-level data for invoice verification.
2. MIR7 (Invoice Verification Item): Contains item-level data for invoice verification.
3. EKBE (Purchasing Document History): Contains history data for purchasing documents.
4. EKET (Purchasing Document Scheduling Agreement): Contains scheduling agreement data for purchasing documents.

Payment Process

1. FKBK (Vendor Master Bank Details): Contains bank details for vendors.
2. FKB1 (Vendor Master Company Code Data): Contains company code data for vendors.
3. FB03 (Document Posting): Contains posting data for financial documents.
4. FB05 (Document Display): Contains display data for financial documents.

Links between tables

1. EKPO-EKKO: Purchasing document item to purchasing document header.
2. EKKO-EKET: Purchasing document header to purchasing document scheduling agreement.
3. EKPO-EKKN: Purchasing document item to purchasing document account assignment.
4. MSEG-MSEGT: Material document header to material document item.
5. MIRO-MIR7: Invoice verification header to invoice verification item.
6. FKBK-FKB1: Vendor master bank details to vendor master company code data.
7. FB03-FB05: Document posting to document display.

These tables and links are crucial for understanding the SAP P2P process and for troubleshooting and analyzing data.

Enterprises and established organizations such as IBM, Accenture, HCL, and Hewlett-Packard(HP) have been implementing SAP ERP systems. A career in SAP FICO is in demand with an exponential rise in the market. The growth curve is expected to be sharper in the upcoming five years for a fresher with an account or finance background. Currently, there are very few certified SAP FICO Consultants in the market. It’s the right time to make your way by cracking the most challenging SAP FICO interview questions with proven subject knowledge.

SAP FICO, which stands for Financial Accounting (FI) and Controlling (CO), is a critical module within the SAP ERP system, playing a pivotal role in managing an organization’s financial processes. In Financial Accounting, SAP FICO encompasses functionalities such as General Ledger, Accounts Payable, Accounts Receivable, and Asset Accounting. The General Ledger provides an overarching view of financial transactions, while Accounts Payable and Receivable manage outgoing and incoming payments, respectively. Asset Accounting tracks and manages fixed assets, covering acquisition, depreciation, and disposal.

Preparing for an SAP FICO (Financial Accounting and Controlling) technical interview for a top SAP IT company , requires a solid understanding of both the core SAP FICO modules as well as the technical aspects associated with implementing and maintaining SAP solutions. Here’s a breakdown of the key topics and concepts you should focus on:

Core SAP FICO Knowledge

Financial Accounting (FI) Module

• General Ledger (G/L): Chart of accounts, posting keys, document types, etc.
• Accounts Payable (AP) and Accounts Receivable (AR): Vendor and customer transactions, aging reports, payment processing.
• Asset Accounting (AA): Asset lifecycle, depreciation, asset transactions.
• Bank Accounting (BA): Bank master data, payment processing, cash management.

Controlling (CO) Module

Technical Skills and Concepts

ABAP (Advanced Business Application Programming) Basics

Basic knowledge of ABAP is important for troubleshooting or debugging during an implementation.

Focus on understanding data dictionary objects (tables, views), simple reports, and performance optimization techniques.

Understanding of user exits, BADI (Business Add-Ins), BAPI (Business Application Programming Interfaces), and IDocs for integrating SAP with external systems.

SAP S/4HANA

Knowledge of the HANA database and its advantages in terms of performance and real-time analytics.

Focus on Financial Closing Cockpit (FCC), SAP Fiori, and SAP FICO in the S/4HANA context (e.g., universal journal, ledger configuration).

Data Migration Techniques

Understand LSMW (Legacy System Migration Workbench), SAP Data Services, and SAP S/4HANA Migration Cockpit for migrating data into SAP FICO.

SAP Configuration

Be prepared to demonstrate how you would configure the key components of SAP FICO.

You may be asked to walk through configurations like company code, fiscal year variant, and posting periods.

Document Splitting, Real-time integration between FI and CO, Taxation in FICO, Cost element configuration, and Period-End Closing.

Integration with Other Modules

Understanding of integration points with modules like MM (Materials Management), SD (Sales and Distribution), and PP (Production Planning) within SAP FICO.

Be able to explain processes like how procurement and inventory affect financial transactions in SAP.

Reporting and Analytics

Ability to navigate standard FICO reports such as balance sheets, profit and loss statements, cost center reports, internal order reports, and profitability analysis reports.

Understanding of SAP BW (Business Warehouse) and SAP Analytics Cloud for FICO-related data analysis and reporting.

Advanced Topics

SAP Fiori for Finance: Modern interfaces for SAP FICO transactions, real-time reporting, and analytics in FICO using Fiori.

SAP Finance in the Cloud: Understanding of SAP’s cloud offerings for finance such as SAP Central Finance and integration with other cloud solutions.

SAP FI/CO in Global Implementations: Understanding how SAP FI/CO handles multiple currencies, international tax laws, intercompany transactions, and global reporting.

Financial Planning & Analysis (FP&A) in SAP: Key considerations and tools for financial planning and analysis within SAP systems.

Common Interview Questions and Answers

Q : Tell me about the integration between FI and CO

Ans : The integration between SAP Financial Accounting (FI) and Controlling (CO) modules is fundamental in providing a comprehensive financial and cost management system within an organization. The FI and CO modules are tightly integrated to ensure that financial transactions are recorded, managed, and analyzed in a way that aligns with both external financial reporting and internal cost management.

Here’s a detailed explanation of how FI and CO are integrated:

• Automatic Posting to CO from FI: When a financial transaction is posted in the FI module (e.g., posting an invoice to a vendor or a customer payment), the system automatically creates an equivalent entry in the CO module. For example:
  • A vendor invoice posted in FI might trigger a corresponding cost element entry in CO, reflecting the expense.
  • If the transaction involves a cost center (e.g., overhead cost), the posting is automatically recorded in the relevant cost center in CO.
  • The CO module captures the internal cost of the transaction, helping in cost tracking and analysis.
• Cost Element Accounting:
  • In FI, every expense or revenue is posted to a GL account, which could correspond to a cost element in CO.
  • Primary cost elements represent expenses and revenues directly related to business operations (e.g., salaries, material costs). These are mapped to corresponding GL accounts in FI.
  • Secondary cost elements are used for internal allocations (e.g., distribution, assessment) between cost centers or internal orders in CO. They don’t have direct counterparts in FI.

• Integration via GL Accounts:
  • Cost elements (from CO) are mapped to GL accounts in FI. This allows cost-related financial transactions to be reflected in both FI (for external reporting) and CO (for internal cost tracking and analysis).
  • When a cost or revenue is posted in FI, it is automatically reflected in CO, which facilitates cost analysis, reporting, and allocation.
  • The integration ensures that financial reporting in FI and cost tracking in CO are aligned and can be reconciled during the period-end closing process.
• Real-Time Integration (SAP S/4HANA):
  • In SAP S/4HANA, the integration between FI and CO is further enhanced through the Universal Journal. This combines the data from FI and CO into a single journal entry, enabling real-time financial and management accounting reporting.
  • This eliminates the need for separate reconciliation between FI and CO, as the data is now unified and stored in a single table (ACDOCA), providing better transparency and accuracy.

• Transfer of Cost of Goods Sold (COGS):
  • During period-end closing, the cost of goods sold (COGS) is calculated in CO based on cost center allocations or internal orders. These costs are then posted to the FI module for financial reporting.
  • The integration ensures that the cost of sales is accurately reflected in both management accounting (CO) and financial accounting (FI).
• Cost Allocation:
  • In some cases, costs in CO may need to be allocated across different cost centers or departments. This allocation process is done using methods like distributions, assessments, or settlements.
  • Once these internal transactions are processed, they can be posted to FI for external reporting purposes.

• Reconciliation Between FI and CO:
  • Since both FI and CO deal with financial data, they need to be reconciled periodically. While FI focuses on external reporting (e.g., balance sheets, P&L), CO is primarily concerned with internal cost tracking and profitability analysis.
  • The reconciliation process ensures that the costs captured in the CO module match the financial results in FI, ensuring accuracy in financial reporting.
• FAGLFLEXA (Universal Journal):
  • With SAP S/4HANA, the Universal Journal (ACDOCA) combines the financial and management accounting data in one table, making it easier to perform real-time reconciliations. The universal journal allows for a single source of truth, simplifying the reconciliation process.

• Integration with Profitability Analysis:
  • CO-PA in CO helps track profitability based on market segments, such as product, customer, region, etc. The integration with FI ensures that revenue and costs related to these segments are captured accurately for profitability reporting.
  • When sales revenue or costs are posted in FI, the corresponding values are transferred to CO-PA for profitability analysis.

• Handling Intercompany Postings:
  • In a multi-company environment, intercompany transactions (e.g., sales between different company codes) are common. These transactions need to be reflected in both FI and CO to ensure proper financial accounting and cost allocation.
  • The intercompany transaction is posted to the FI module (via the respective company codes) and can be tracked and allocated to the relevant cost centers or internal orders in the CO module.

Let’s consider an example of a vendor invoice posting:

• A vendor invoice for office supplies is posted in the FI module with the following details:
  • Debit: Expense GL account (e.g., Office Supplies) – 1000 USD
  • Credit: Accounts Payable (Vendor) – 1000 USD
• In the CO module, the cost element associated with the Office Supplies account is posted to the relevant cost center (e.g., Administration). This allows the organization to track the cost incurred by the administration department.

• Accuracy and Efficiency: Ensures that financial transactions are accurately recorded in both external (FI) and internal (CO) reports.
• Real-Time Data: In S/4HANA, the real-time integration allows for up-to-date financial and cost information.
• Streamlined Reporting: Provides both internal and external stakeholders with accurate and aligned data for decision-making.
• Improved Compliance and Audit Trail: Integrated systems create a clear and auditable trail of financial and cost transactions, enhancing compliance.

The integration between SAP FI and CO modules is crucial for maintaining accurate and aligned financial and cost accounting data. This integration ensures that all business transactions are reflected in both external financial reports (FI) and internal cost tracking (CO). With newer systems like SAP S/4HANA, this integration is enhanced, offering real-time insights, better data consistency, and streamlined reporting.

Soft Skills and Problem-Solving Ability :

Communication: Be ready to explain technical concepts clearly and concisely.

Problem-Solving Skills: You may be given a scenario related to SAP FICO and asked how you would solve it. Be prepared to walk through your thought process logically.

Project Experience: If you have worked on SAP FICO implementations, migrations, or upgrades, be prepared to discuss your role in detail.