Depreciation is a month end process.

Every month end, depreciation run is executed which

performs depreciation of fixed asset and corresponding accounting document for depreciation
is posted.

What parameters need to be maintained for depreciation calculation?

For calculation of depreciation amount, system needs

— Portion of APC (Acquisition & Production cost) which is yet to be depreciated

— Useful life

— Depreciation key

Now let’s understand what steps need to be executed to post depreciation in sap.

Depreciation run is executed using T code: AFAB

Planned depreciation:

Every month end, planned depreciation is posted.

Planned depreciation cannot be executed for specific asset. Planned depreciation run is
always carried out for all the asset of the company code. If a single asset has error then
planned depreciation will fail leading and no asset will get depreciated.

Next month depreciation cannot be executed until & unless depreciation for all previous
periods is complete.

Repeat depreciation:

When depreciation is executed successfully but some asset transactions were posted after
depreciation run. Since these asset transactions were posted after depreciation run hence these
transactions were not included in depreciation amount calculation.
It often happens that depreciation was executed on last day of month but user posted some
asset transaction after depreciation run. Hence depreciation already posted for the period
needs to be corrected.

In order to post delta depreciation (depreciation to be posted – depreciation which were

already posted), depreciation run is executed in repeat mode.

Restart depreciation:

If depreciation is not complete due to some reason like power failure, depreciation program
forcefully stopped system crash etc. Then deprecation run can be executed in restart mode so
that depreciation can be completed successfully.

Unplanned depreciation:

In case of occurrence of some unforeseen or unplanned event with an asset, unplanned

depreciation needs to be posted to the particular asset. To handle such situations, sap has the
functionality to post unplanned depreciation to specific asset.

Unplanned depreciation is posted to specific asset using T code: ABAA

But using ABAA will not generate any financial accounting document. Accounting document
will get generated after month end depreciation run is performed.

Thank you !

Automatic generation of accounting document due to sales activity is referred as SD FI

integration.

Below article will help you understand SD FI integration in Order To Cash cycle (sales
cycle).
Lets understand accounting document generation at
the time of goods issue/ dispatch.
When goods are dispatched, finance document as shown below is posted automatically.
Question is how system determines the GL account and amount to post the accounting
document?

Since goods are moved hence material document is created. Corresponding finance document
gets created as a result of MM-FI integration. GL account for inventory account is picked
from OBYC setting (transaction key BSX). GL account for COGS is picked from OBYC
setting (transaction key GBB and account modifier VAX).
Inventory & COGS is always valued at standard cost of the material.
Amount calculated = Quantity * standard cost of material per unit.

Let's understand accounting document generation

when billing document is released to accounting.
When billing document is released to accounting, accounting document gets posted
automatically. Question is how system determines GL account and amount to post accounting
document?

Let’s understand how SD-FI integration enables GL account and amount determination for
posting accounting entry.

SD FI integration in detail
Price determination procedure or pricing procedure:

Price determination procedure is basically combination of multiple condition type. Condition

type represents different prices that are put together (addition or subtraction) to arrive at net
sales price.

Net price = Base price –Discount + surcharge + tax

Each of these prices “Base price, Discount, Surcharge, Tax etc. is created as condition type in
sap.

Once pricing procedure is selected, list of all condition types involved is known. Now for
each condition type system has to determine the condition value.

Each condition type is linked to an access sequence. Access sequence is basically sequence in
which condition tables are to be accessed to search for condition record (Condition records
are maintained in condition table).

As per sequence maintained in access sequence, system starts with table 1. If condition record
is found then system picks the condition value and stops searching any further. If condition
record is not found in table 1 then system starts searching for table 2. If condition record is
found then system picks the condition value and stops searching any further, if not found in
table 2 then system starts searching in table 3.

If no condition record is found in all the tables, system issues message no record found.
Condition type gets zero value.

Similarly value for each & every condition type is determined. System calculates (addition &
subtraction of condition values) to arrive at net sales price. This net price is basically the
price which is charged to customer. Hence GL account for account receivable is debited with
this net price.

Note: Condition types can be real or statistical. Only real condition types are included in
price calculation. Statistical condition types are not included in price calculation and are only
for information/ reporting purpose.

GL account determination for each condition type:

Till now system has calculated condition type value but GL account needs to be determined
for posting accounting entry.

Now business might require to record sales price & discount separately. This can be done by
assigning condition type to account key and mapping account key to GL account.

Sap provides large number of predefined account keys. Below are just two examples of
account key

ERL – Sales

ERS – Sales deduction or sales discount

All those condition types whose value needs to be posted to sales account are assigned
account key ERL

All those condition types whose value needs to be posted to discount account are assigned
account key ERS.

We understood how pricing procedure works. How system determines the GL account and
amount for posting accounting entry. Now let’s understand how pricing procedure is selected.
Pricing procedure selection process:
Selection of pricing procedure plays a big role in calculation of sale price.

In practical business scenario, sale price depends upon:

Customer:
Company offers different prices to different customers depending upon the kind of business
relation that the customer has with company. Hence company categorizes the customers into
different categories and customers in a particular category can be offered special discount.

Hence customer play role in selection of pricing procedure.

Distribution channel + Division + Sales organization

Price for online order might be different from showroom price. Wholesale order might be
eligible for additional wholesale discount. (Hence distribution channel play role in selection
of pricing procedure.)

If you are buying car, price may be composed of base price, insurance charge, road tax etc.
But if you are buying bicycle, price may not have insurance charge & road tax. Goods which
are being sold play role in selection of pricing procedure. (Hence division play role in
selection of pricing procedure)

If you purchase product directly from company or if your purchase from marketing agency
(selling on behalf of company), price may differ. (Hence sales organization play role in
selection of pricing procedure).

Above examples are given just to help you understand that selection of pricing procedure
depends upon combination of Sales organization + Distribution channel + Division

Order type:
Different business scenarios (sales order, return sales order, free samples, rework order etc.)
will have different nature of prices involved. Price components involved in sales order can be
different from price component involved in return sales order.

Hence, order type play role in selection of pricing procedure.

Overall, selection of pricing procedure depends upon combination of

Order type + Customer + Sales area (sales organization + distribution
channel + division)

→ When a sales order is created, sales order has all information (order
type, customer, sales area) necessary for selection of pricing
procedure.
From pricing procedure system determines GL account & amount for accounting entry.
When billing document (sales document) is released then accounting document (finance
document) gets generated automatically. This is referred as SD FI integration.

SAP FI stands for sap finance. Before understanding sap fi we need to understand the duties
and responsibility of finance department in an organization.

Duties of finance department are:

 Book keeping/ recording accounting entry for day to day business

transactions
 Generating balance sheet and profit & loss statement
 Generating financial reports for legal/ statutory purposes e.g. tax
reporting to government, reports for auditors etc.)
Now let’s understand what is meant by day to day activities in a business.

In order to understand activities in a business, we need to understand operations of a

business. Every business will have customers to whom it will sell either services or product.
Product/services may be purchased from outside or produced in-house. Purchase department
has to purchase and supply to production department for production of finished goods.
Distribution department has to deliver finished goods to customer.

Supplier/ vendor have to be paid.

Money from customer has to be collected.

Employees need to be paid.

Assets (machine/ vehicle/ building/ land etc.) need to be purchased or produced in-
house. Depreciation of assets needs to be recorded.
Assume no IT system is used in organization, keeping track of activities and recording
corresponding accounting entry becomes challenging. This challenge increases many folds by
the fact that people are spread across geography. Improper and slow coordination between
departments lead to slow business cycle. Manual recording of accounting entries increases
the chances of in-accurate data being recorded.

Sap finance module deals with all the activities of finance department. At the same time
overcomes the challenges of department’s coordination and manual recording of accounting
entry.

Most of the manual activities are automated. Less manual intervention ensures more accurate
data. Real time coordination between departments (sap finance module with other modules)
ensures all affected parties are updated simultaneously.

Sap finance helps in generating faster financial reports e.g. balance sheet/ profit & loss
statement/ tax reports for tax authority/ reports for auditors etc.
Above picture depicts coordination between various modules and FI module.

Sap finance module is composed to several sub modules. Each sub-module is designed to
handle specific business activity and corresponding accounting entry.

-General ledger accounting

-Account receivable

-Accounts payable

-Asset accounting

-Bank accounting

Sap CO stands for sap controlling.

Sap finance & sap controlling modules are placed close and overlapping (as shown in above
picture) because sap finance and controlling modules are very closely integrated. A business
activity often generates accounting entry in finance and corresponding entry in controlling as
well.