Financial Accounting Initialization: Unit Objectives After
completing this unit, you will be able to: Set up definitions in
the implementation process. Explain the consequences of each
definition on the financial accounting process. Give examples of
some processes in SAP Business One. You need to make decisions
about these definitions together with the client accountant.
Financial Accounting Initialization: Business Example You are
implementing SAP Business One at a new customer, OEC Computers.
Your main contact at the customer site is Maria the accountant. You
and Maria will work together to set cross-company definitions: Tax
system. Currencies. Perpetual inventory/ non-perpetual inventory
system. The setup begins when initializing the company and
continues in defining the Business Partner Master Data records and
the Items. Those definitions are reflected in the: Sales,
purchasing and inventory documents and transactions. Automatic
journal entries created by documents. Company reports. You discuss
those definitions with Maria to see how to implement them in OEC
Computers.
Slide 5
Tax System Financial Accounting Initialization Topic 1: Tax
System Topic 2: Currencies Topic 3: Perpetual Inventory/
Non-Perpetual Inventory System
Slide 6
Tax System: Topic Purpose After completing this topic, you will
be able to: Define the tax system according to your localization.
Explain the consequences of the tax system defined in your company
on the financial accounting process. Give examples of some tax
issues in SAP Business One.
Slide 7
Tax System: Business Example You discuss the tax definition
with Maria, the accountant: You explain to Maria that in order to
issue A/R and A/P Invoices, she needs to define some initial
settings. Maria is happy to hear that when you both created a new
database in SAP Business One, a set of Incoming and Outgoing Tax
Groups was defined automatically according to the UK localization
you chose.
Slide 8
Tax Process - Europe Setup - Tax Groups Tax Group Business
Partner Master Date- Tax Liable/Exempt/ EU Item Master Data - Tax
Group: Sales/ Purchasing A/R A/P Invoice - Tax Group: in the
document row Automatic Journal Entry - VAT row Tax Report
Output/Input tax groups
Slide 9
Sales Tax Process - US Setup - Sales Tax Codes County 2% State
6% City 1% Tax Jurisdictions: Sales Tax Code 9% Business Partner
Master Date- Tax Liable/Exempt Sales Tax Code: Customer Ship to
Address Vendor Tax Code defined for the Warehouse receiving the
goods A/R A/P Invoice - Sales Tax Code: in the document row
Automatic Journal Entry: Row for each jurisdiction Tax Jurisdiction
Report According to Tax Codes or Jurisdiction Codes. Item Master
Data Tax Liable: Yes/ No
Slide 10
Tax System: Question How was this topic handled in
implementation projects you were involved in?
Slide 11
Currencies Financial Accounting Initialization Topic 1: Tax
System Topic 2: Currencies Topic 3: Perpetual Inventory/
Non-Perpetual Inventory System
Slide 12
Currencies: Topic Purpose After completing this topic, you will
be able to: Set up the definition of currencies in the
implementation process. Explain the consequences of the currencies
defined in your company on the financial accounting process. Give
examples of some currency issues in SAP Business One.
Slide 13
Currencies: Business Example You discuss the currencies
definition with Maria: Maria says that most of their customers are
located in the UK. However few customers and vendors they work with
are located in the US. You tell Maria about the working methods
with currencies in SAP Business One.
Slide 14
Currencies: Reflection Question OEC Computers is pricing some
of their items in US Dollars for UK customers. What will be the
currency of the A/R Invoice total amount? What will be the currency
in the automatic journal entry created by the A/R Invoice?
Slide 15
Company Level Local and System Currencies SAP BW mySAP Business
Suite Currency: USD SAP Business One Local Currency: EUR System
Currency: USD SAP Business One Local Currency: USD System Currency:
USD SAP Business One Local Currency: JPY System Currency: USD
Microsoft Excel
Slide 16
Account Currencies Currencies for Entering Journal Entries
Currencies of the Account Balance Account Currency = Local Currency
Local Currency System Currency Account Currency = Specific Foreign
Currency Local Currency Specified Foreign Currency Local Currency
System Currency Specified Foreign Currency Account Currency = All
Currencies Local Currency Any Foreign Currency Local Currency
System Currency
Slide 17
Define Currencies - Summary Company Level Local Currency and
the System Currency. Account Currency Options - Local Currency,
specific Foreign Currency, All Currencies Business Partner Master
Data record - Local Currency is the default currency for all
Business Partner Master Data records. G/L Account - You can define
a default currency for new G/L accounts. At any point, you can
change an account/ BP currency to be All Currencies, but you will
not be able to change it back once you update. Currencies - Setup
Window Enter a code of up to three characters for the currency, for
example, USD, EUR. You will use this code in the pricing fields,
document amounts and journal entries. Pricelist You can enter a
Unit Price in any Foreign Currency defined in the Currencies Setup
window. SAP Business One will convert the total row value and the
total document value to the BP Currency/ Local Currency/ System
Currency. Exchange Rates and Indexes Window This window lets you
define, either manually or automatically exchange rates for the
foreign currencies defined in the Currencies - Setup window.
Slide 18
Value Calculation in Marketing Documents: Business Example A/P
Invoice Business partners currency = foreign currency USD Unit
price in foreign currency USD Unit price in local currency Posting
date: xx/yy/zzzz Exchange rate Total row value Total document value
Total row value BP Currency USD Row rate
Slide 19
Row Exchange Rate for Prices: Draw Document Wizard Draw
Document Wizard Row Ex, Rate for Prices Use Row Exchange Rate from
Base Document Use Document and Row Exchange Rate from Base Document
Use Current Exchange Rate from the Exchange Rate Table Draw all
data (Freight and Withholding Tax) Customize A/R InvoiceA/P
InvoiceGood Receipt PODelivery
Exchange Rate Differences, Conversion Differences at Period End
Closing Account in Foreign Currency 10 LC Exchange Rate Differences
10 LC 200 LC 100 FC 190 LC 100 FC Valuated Balance Valuation or
Proposals from Difference Postings Reject Proposal Accept and Post
Proposal LC: Local Currency FC: Foreign Currency Non-Valuated
Bal.
Slide 22
Exercise - Currencies
Slide 23
Perpetual Inventory/ Non-Perpetual Inventory System Financial
Accounting Initialization Topic 1: Tax System Topic 2: Currencies
Topic 3: Perpetual Inventory/ Non-Perpetual Inventory System
Slide 24
Perpetual Inventory/ Non-Perpetual Inventory System: Topic
Purpose After completing this topic, you will be able to: Define
Perpetual Inventory/ Non-Perpetual Inventory System in the
implementation process. Explain the consequences of the inventory
system defined in your company on the financial accounting process.
Give examples of Perpetual Inventory/ Non-Perpetual Inventory
System in SAP Business One.
Slide 25
Inventory System: Business Example You discuss the inventory
system definition with Maria: Maria says that most of their
inventory valuation is calculated according to Moving Average. She
asks you what the best way is to set up the system so that all
items are handled by moving average and the values calculated
automatically. Maria says she wants to minimize any manual
corrections in the Inventory valuation. You set up a Perpetual
Inventory System.
Slide 26
Perpetual / Non-Perpetual Inventory System: Reflection Question
What is the difference between perpetual/ non-perpetual inventory
systems? What is commonly used in your localization? What is the
calculation for Moving Average?
Slide 27
Perpetual Inventory or Non-Perpetual Inventory System According
to local legal settings - control the inventory valuation: Define a
perpetual inventory system that automatically controls stock value
and affects the financial system. Or: use a non-perpetual inventory
system in which sales, purchasing, inventory, and production
transactions create inventory transactions and affect the inventory
levels but do not generate inventory related monetary entries
directly into the general ledger.
Slide 28
Perpetual Inventory System - Example for Monetary Value of
Inventory Postings Inventory Account Balance Inventory Item
Delivery Inventory Transactions Good Receipt PO
Slide 29
Perpetual Inventory System - G/L Account Determination Set G/L
Accounts by Warehouse Set G/L Accounts by Item Group Set G/L
Accounts by Item Level #WH CodeWH NameAccounts Types 101General
Warehouse 202Drop Shipment 303Consignation Accounts from Warehouse
Definition #WH CodeWH NameAccounts Types 101General Warehouse
202Drop Shipment 303Consignation Accounts from Item Group
Definition #WH CodeWH NameAccounts Types 101General Warehouse
202Drop Shipment 303Consignation Accounts Entered Manually
Slide 30
Perpetual Inventory System Valuation Methods Moving Average
Price First In First Out (FIFO) Standard Price SAP Business One
provides the following three valuation methods for calculating the
inventory value : Moving average Calculates the average cost for
the item in each sales, purchasing, inventory, and production
transaction. FIFO Calculates the inventory value by the FIFO (first
in first out) method. This means that goods purchased first (or
produced first) are sold first, regardless of the actual goods
flow. Standard Calculates the inventory value by a fixed price,
which is then used for all transactions
Slide 31
FIFO - Example The item cost is calculated as the cost of the
oldest unit on hand. The item cost is managed by layers for each
item. Purchasing Purchase 5 Units for 100 each Inventory Value =
500 Purchasing Purchase 5 Units for 200 each Inventory Value = 1500
Sales Sell 7 for sales price of 300 Total COGS = 900 (5X100+2X200)
New Inventory Value 600
Slide 32
Standard Cost - Example The unit cost is determined manually
when you setup the item. Variances that occur due to a different
purchase price are recorded to a variance account, and the unit
cost is not affected. Purchasing Set manually unit cost to100
Purchase 5 Units for 100 each. Inventory Value = 500 Purchasing
Purchase 5 Units for 200 each Current Unit cost = 100 New Inventory
Value = 1000 (Variance of 500) Sales Sell 7 for sales price of 300
Current Unit cost = 100 Total COGS = 700 New Inventory value
300
Slide 33
Moving Average - Example The item cost is calculated by
dividing the total inventory value by the on-hand quantity.
Purchasing Purchase 5 Units for 100 each Unit cost = 100 Inventory
Value = 500 Purchasing Purchase 5 Units for 200 each Current Unit
cost = 150 New Inventory Value = 1500 Sales Sell 7 for sales price
of 300 Current Unit cost = 150 Total COGS = 1050 New Inventory
value 450
Slide 34
Perpetual Inventory System Definitions and Updates: You should
determine a perpetual inventory system during basic initialization,
before posting any transactions. If selected, each transaction of
inventory items is reflected also in the inventory related G/L
accounts. When you use a perpetual inventory system, SAP Business
One lets you do the following: Specify the default valuation method
for newly added item groups. Specify a default valuation method per
item group. Specify the default G/L method for new items. Manage
the three valuation methods in the same company. Select a certain
valuation method and/ or G/L method for each item individually.
Update the valuation method of your items globally. Update the
calculated item cost for each item, if required.
Slide 35
Use this report to make comparisons between the accounting view
(inventory balance accounts) and the logistics view (inventory
value displayed by the audit report). The report explains the value
changes in inventory accounts. This report does not recalculate the
item cost but displays the information from the database. In
addition, only inventory related transactions are displayed in the
report. Transactions with non- inventory items or drop-ship
warehouses are not displayed. Inventory Audit Report Generating
Inventory Audit Reports: The Inventory Audit report provides an
audit trail for the posted inventory transactions in the chart of
accounts.
Slide 36
Value Calculation Inventory Process Reminder from Unit 1:
Standard Financial Processes Purchasing Price List = 100 Reseller
Price List = 110 Retail Price List = 120 100 * 10 = 1000 Purchase
Order Good Receipt PO DebitCredit Cost of Goods Sold acc. 360
Inventory acc.360 Item Cost Calculated Value = 90 A/P Invoice Unit
Price * Quantity = Total Value Sales Quotation Sales Order Delivery
A/R Invoice Item Cost * Quantity = Total Value 90 * 4 = 360
DebitCredit Clearing acc.1000 Inventory acc.1000
Slide 37
Exercise - Perpetual Inventory System
Slide 38
Non-Perpetual Inventory System In SAP Business One, the
Inventory Valuation report is central to the non- perpetual
inventory system. To calculate the value of inventory at any given
time, you need to run the Inventory Valuation report. This report
lets you obtain an up-to-date valuation of the existing inventory
and to create what-if scenarios. A non perpetual inventory system
is an inventory management system in which costs of inventories are
not maintained on a constant basis: In a non-perpetual inventory
system, sales, purchasing, inventory, and production transactions,
which reflect the inventory levels, do not generate inventory
related monetary entries directly into the general ledger.
Therefore, the inventory value of a company is not revalued on
every inventory release or receipt. Instead, the inventory account
balance is updated by manual journal entry once in every accounting
period or after a physical inventory count.
Slide 39
Financial Accounting Initialization: Unit Summary Main Terms:
Tax System : Tax Process Europe Tax Groups. Tax Process US Tax
Codes, Jurisdictions. Currencies: Company Level: Local Currency
System Currency BP and G/L Account Currency: Local Currency
Specific Foreign Currency All Currencies Perpetual Inventory/
Non-Perpetual Inventory System: Inventory postings Monetary
transactions The three valuation methods for calculating the
inventory value: Moving Average Standard FIFO
