SAP Controlling  QUESTIONS and ANSWERS 

FI-MM- Integration

How do you go about setting the FI MM account determination?

FI MM settings are maintained in transaction code OBYC. Within these there are various transaction keys to be maintained like BSX, WRX, GBB, PRD etc. In each of these transaction keys you specify the GL accounts which gets automatically passed at the time of entry.

Few examples could be:

• BSX- Stands for Inventory Posting Debit
• GBB-Stands for Goods Issue/Scrapping/delivery of goods etc.
• PRD- Stands for Price Differences

What are the additional settings required while maintaining or creating the GL codes for Inventory accounts?

In the Inventory GL accounts (Balance sheet) you should switch on the ‘Post automatically only’ tick. It is also advisable to maintain the aforesaid setting for all FI-MM accounts and FI-SD accounts. This helps in preserving the sanctity of those accounts and prevents from having any difference between FI and MM, FI and SD

What is Valuation and Account assignment in SAP?

This is the link between Materials Management and Finance.

The valuation in SAP can be at the plant level or the company code level. If you define valuation at the plant level, then you can have different prices for the same material in the various plants. If you keep it at the company code level, you can have only one price across all plants. Valuation also involves the Price Control. Each material is assigned to a material type in Materials Management and every material is valuated either in Moving Average Price or Standard Price in SAP.

What is Valuation Class?

The Valuation Class in the Accounting 1 View in Material Master is the main link between Material Master and Finance. This Valuation Class along with the combination of the transaction keys (BSX, WRX, GBB,PRD ) defined above determine the GL account during posting. We can group together different materials with similar properties by valuation class. E.g., Raw Material, Finished Goods, Semi Finished. We can define the following assignments in customizing :

All materials with same material type are assigned to just one valuation class.

Different materials with the same material type can be assigned to different valuation classes.

Materials with different material types are assigned to a single valuation class.

Can we change the valuation class in the material master once it is assigned?

Once a material is assigned to a valuation class in the material master record, we can change it only if the stocks for that material are nil. If the stock exists for that material, then we cannot change the valuation class. In such a case, if the stock exists, we have to transfer the stocks or issue the stocks and make the stock nil for the specific valuation class. Then only we will be able to change the valuation class.

If the material is assigned a moving average price in the material master and the stock of such material is issued, then does the moving average price change in the material master?

The moving average price in the case of goods issue remains unchanged. Goods issue are always valuated at the current moving average price. Consequently, a goods issue reduces the total quantity and the total value in relation to the price and the moving price remains unchanged.

What is the accounting entry in the Financial books of accounts when the goods are received in unrestricted use stock? Also mention the settings to be done in the ‘Automatic postings’ in SAP for the specific G/L accounts.

On receipt of the goods in unrestricted-use stock, the Inventory account is debited, and the GR/IR account gets credited. In the customization, in the automatic postings, the Inventory G/L account is assigned to the Transaction event key BSX and the GR/IR account is assigned to the Transaction event key WRX.

What is the procedure in SAP for Initial stock uploading? Mention the accounting entries also.

Initial stock uploading in SAP from the legacy system is done with inventory movement type 561.

Material valuated at standard price: For a material valuated at standard price, the initial entry of inventory data is valuated on the basis of standard price. If you enter an alternative value at the time of 561, then the system posts the difference to the price difference account.

Material valuated at moving average price: The initial entry of inventory data is valuated as follows: If you enter a value when entering initial data, the quantity entered is valuated at this price. If you do not enter a value when entering initial data, then the quantity entered is valuated at the MAP present in the material master. The accounting entries are: Inventory account is debited, and Inventory Historical upload account is credited.

SAP Controlling Module

Explain the organizational assignment in the controlling module?

Company codes are assigned to the controlling area. A controlling area is assigned to the operating concern. Controlling Area is the umbrella under which all controlling activities of Cost Center Accounting, Product costing, Profitability Analysis and Profit Center are stored. Operating Concern is the highest node.

Please refer following tutorial for details: SAP Controlling

What is primary Cost element and secondary cost element?

Every Profit and Loss GL account that needs to be controlled has to be defined as a cost element in SAP. Each FI General Ledger Account which is a Profit and Loss Account is also created as a Cost element in SAP.

Primary Cost Elements are those which are created from FI general Ledger Accounts and impact the financial accounts e.g., Travelling expenses, consumption account etc.

Secondary Cost Elements are those which are created only in controlling and does not affect the financials of the company. It is used for internal reporting only.

The following categories exist for secondary cost elements:

• 21 Internal Settlement: Cost elements of this category is used to settle order costs to objects in controlling such as cost centers, pa segments etc.
• 31 Order/Results Analysis: Used to calculate WIP on the order/project.
• 41 Overhead: Used to calculate indirect costs from cost centers to orders.
• 42 Assessment: Used to calculate costs during assessment.
• 43 Internal Activity Allocation: Used to allocate costs during internal activity allocation such as Machine, Labor etc.

Fore details please refer to section Cost Element Categories in the tutorial SAP Controlling.

What are cost objects?

A cost object means a cost or a revenue collector wherein all the costs or revenues are collected for a particular cost object. Examples of this could be cost center, production order, internal order, projects, sales order.

So whenever you look at any controlling function the basic thing you need to ask yourself is What is the cost element (expense) I want to control and what is the cost object (i.e. either the production order, sales order, internal order) I am using to control this cost element

How is cost center accounting related to profit center?

In the master data of the Cost Center there is a provision to enter the profit center. This way all costs which flow to the cost center are also captured in the profit center. Cost centers are created to capture costs e.g. admin cost center, canteen cost center etc.

Profit centers are created to capture cost and revenue for a particular plant, business unit or product line.

What is a cost element group?

Cost element group is a group of cost elements which help one to track and control cost more effectively. You can make as many numbers of cost element groups as you feel necessary by combining various logical cost elements.

What is a cost center group?

Cost center group is also a group of cost centers which help one to track and control the cost of a department more effectively. You can make as many numbers of cost centers as you feel necessary by combining various logical cost centers.

For details on step to create Cost Element or Cost Center group please refer SAP Controlling tutorial

What is the difference between Distribution and Assessment?

Distribution uses the original cost element for allocating cost to the sender cost center. Thus, on receiving cost center we can see the original cost element from the sender cost center. Distribution only allocates primary cost.

Assessment uses assessment cost element Number 43 to allocate cost. Thus, various costs are summarized under a single assessment cost element. In receiver cost center the original cost breakup from sender is not available. Assessment allocates both primary as well as secondary cost.

Please refer tutorial SAP Cost Center Allocation

SAP Product Costing

What are the configuration settings maintained in the costing variant?

Costing variant forms the link between the application and Customizing, since all cost estimates are carried out and saved with reference to a costing variant. Costing variant contains all the control parameters for costing. The configuration parameters are maintained for Costing type, Valuation variants, Date control, and Quantity structure control. In costing type, we specify which field in the material master the standard has to price be updated. In valuation variant we specify in what order the system should go about accessing prices for the material master (planned price, standard price, moving average price etc.). Further what price should be considered for activity price. How the system should select BOM and routing. Please refer following tutorial for details on Costing Variant Configuration

What does the concept of cost roll up mean in product costing context?

The purpose of the cost roll up is to include the cost of goods manufactured of all materials in a multilevel production structure within the cost of material located at the top of the structure.

The costs are rolled up automatically using the costing levels.

• The system first calculates the costs for the materials with the lowest costing level and assigns them to cost components.
• The materials in the next highest costing level (such as semi-finished materials) are then costed. The costs for the materials costed first are rolled up and become part of the material costs.

What is a settlement profile and why is it needed?

All costs collected in the Production order have to be settled to a receiver at the end of the period. This receiver could be a GL account, a Cost center, Profitability analysis or Asset. To settle the costs of the production order a settlement profile is needed. In a settlement profile you define a range of control parameters for settlement. You must define the settlement profile before you can enter a settlement rule for a sender. The Settlement Profile is maintained in the Order Type and defaults during order creation. For details please refer section Settlement profile in SAP Product Costing Tutorial Part 1

What is Transfer or Allocation structure?

The transfer structure is what helps in settling the cost from one cost object to the receiver. It is maintained in the Settlement profile defined above.

The Transfer structure has 2 parts:

• Source of cost elements you want to settle.
• Target receiver whether it is a Profitability segment or fixed asset or cost center.

So basically, for settling the costs of a cost object you need to define the Transfer structure where you mention what are the costs you want to settle and the target receiver for that. For details, please refer section Settlement profile in SAP Product Costing Tutorial Part 1

What do you mean by primary cost component split?

Primary cost split is defined when you create a cost component structure. When you switch on this setting, the primary costs from the cost center are picked up and assigned to the various cost components. For configuration details please refer to section Cost Component Structure in SAP Product Costing Tutorial Part-1

What is the basic difference in WIP calculation in product cost by order and product cost by period ?

In product cost by order WIP is calculated at actual costs and in product cost by period WIP is calculated at target costs. For details, please refer SAP Product Costing Advance Course

What are the configuration settings for calculating WIP in SAP?

• First you define secondary cost elements of type 31.
• Then you need to define the Results Analysis version
• This results analysis contains line ids which are basically nothing but break up of costs.
• Next you define Assignments. Here you assign source cost elements to the line ids defined above
• You also define the secondary cost elements which are assigned to the line ids.
• In the end you define the Finance GL accounts which are debited and credited when a Work in Progress is calculated.

Please refer to section WIP Settings in SAP Product Costing Part 1 tutorial. For detailed step by step guidance please take the video course SAP Controlling & Management Accounting Training