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Tuesday, December 13, 2011

Finance Terminology


Client: In commercial, organizational and technical terms, a self-contained unit in an R/3 System with separate master records and its own set of tables.
Company Code: The smallest organizational unit of Financial Accounting for which a complete self-contained set of accounts can be drawn up for purposes of external reporting.
Business Area: An organizational unit of financial accounting that represents a separate area of operations or responsibilities within an organization and to which value changes recorded in Financial Accounting can be allocated.
Enterprise structure: A portrayal of an enterprise's hierarchy. Logical enterprise structure, including the organizational units required to manage the SAP System such as plant or cost center.
Social enterprise structure, description of the way in which an enterprise is organized, in divisions or user departments. The HR application component portrays the social structure of an enterprise
fiscal year variant: A variant defining the relationship between the calendar and fiscal year. The fiscal year variant specifies the number of periods and special periods in a fiscal year and how the SAP System is to determine the assigned posting periods.
Fiscal Year: A period of usually 12 months, for which the company produces financial statements and takes inventory.
Annual displacement/Year shift: For the individual posting periods various entries may be necessary. For example, in the first six periods the fiscal year and calendar year may coincide, whereas for the remaining periods there may be a displacement of +1.
Chart of Accounts: Systematically organized list of all the G/L account master records that are required in a company codes. The COA contains the account number, the account name and control information for G/L account master record.
Financial statement version: A hierarchical positioning of G/L accounts. This positioning can be based on specific legal requirements for creating financial statements. It can also be a self-defined order.
Account group: An object that attributes that determine the creation of master records. The account group determines: The data that is relevant for the master record A number range from which numbers are selected for the master records.
Field status group: Field status groups control the additional account assignments and other fields that can be posted at the line item level for a G/L account.
Posting Key: A two-digit numerical key that determines the way line items are posted. This key determines several factors including the: Account type, Type of posting (debit or credit),Layout of entry screens .
Open item management: A stipulation that the items in an account must be used to clear other line items in the same account. Items must balance out to zero before they can be cleared. The account balance is therefore always equal to the sum of the open items.
Clearing: A procedure by which the open items belonging to one or more accounts are indicated as cleared (paid).
Reconciliation account: A G/L account, to which transactions in the subsidiary ledgers (such as in the customer, vendor or assets areas) are updated automatically.
Special G/L indicator: An indicator that identifies a special G/L transaction. Special G/L transactions include down payments and bills of exchange.
Special G/L transaction: The special transactions in accounts receivable and accounts payable that are shown separately in the general ledger and sub-ledger.
They include:
  • Bills of exchange
  • Down payments
  • Guarantees
House Bank: A business partner that represents a bank through which you can process your own internal transactions.
Document type: A key that distinguishes the business transactions to be posted. The document type determines where the document is stored as well as the account types to be posted.
Account type: A key that specifies the accounting area to which an account belongs.
Examples of account types are:
  • Asset accounts
  • Customer accounts
  • Vendor accounts
  • G/L accounts
Dunning procedure: A pre-defined procedure specifying how customers or vendors are dunned.
For each procedure, the user defines
  • Number of dunning levels
  • Dunning frequency
  • Amount limits
  • Texts for the dunning notices
Dunning level: A numeral indicating how often an item or an account has been dunned.
Dunning key: A tool that identifies items to be dunned separately, such as items you are not sure about or items for which payment information exists.
Year-end closing: An annual balance sheet and profit and loss statement, both of which must be created in accordance with the legal requirements of the country in question.
Standard accounting principles require that the following be listed:
  • All assets
  • All debts, accruals, and deferrals
  • All revenue and expenses
Month-end closing: The work that is performed at the end of a posting period.
Functional area: An organizational unit in Accounting that classifies the expenses of an organization by functions such as:
  • Administration
  • Sales and distribution
  • Marketing
  • Production
  • Research and development
Classification takes place to meet the needs of cost-of-sales accounting.
Noted item: A special item that does not affect any account balance. When you post a noted item, a document is generated. The item can be displayed using the line item display. Certain noted items are processed by the payment program or dunning program - for example, down payment requests.
Accrual and deferral: The assignment of an organization's receipts and expenditure to particular periods, for purposes of calculating the net income for a specific period.
A distinction is made between:
  • Accruals -
An accrual is any expenditure before the closing key date that represents an expense for any period after this date.
  • Deferral -
Deferred income is any receipts before the closing key date that represent revenue for any period after this date.
Statistical posting: The posting of a special G/L transaction where the offsetting entry is made to a specified clearing account automatically (for example, received guarantees of payment).
Statistical postings create statistical line items only.
Valuation area: An organizational unit in Logistics subdividing an enterprise for the purpose of uniform and complete valuation of material stocks.
Chart of depreciation: An object that contains the defined depreciation areas. It also contains the rules for the evaluation of assets that are valid in a specific country or economic area. Each company code is allocated to one chart of depreciation. Several company codes can work with the same chart of depreciation. The chart of depreciation and the chart of accounts are completely independent of one another.
Asset class: The main criterion for classifying fixed assets according to legal and management requirements.
For each asset class, control parameters and default values can be defined for depreciation calculation and other master data.
Each asset master record must be assigned to one asset class.
Special asset classes are, for example:
  • Assets under construction
  • Low-value assets
  • Leased assets
  • Financial assets
  • Technical assets
Depreciation area: An area showing the valuation of a fixed asset for a particular purpose (for example, for individual financial statements, balance sheets for tax purposes, or management accounting values).
Depreciation key: A key for calculating depreciation amounts.
The depreciation key controls the following for each asset and for each depreciation area:
  • Automatic calculation of planned depreciation
  • Automatic calculation of interest
  • Maximum percentages for manual depreciation
The depreciation key is defined by specifying:
  • Calculation methods for ordinary and special depreciation, for interest and for the cutoff value
  • Various control parameters
Period control method: A system object that controls what assumptions the system makes when revaluating asset transactions that are posted partway through a period.
Using the period control method, for example, you can instruct the system only to start revaluating asset acquisitions in the first full month after their acquisition.
The period control method allows different sets of rules for different types of asset transactions, for example, acquisitions and transfers.
Depreciation base: The base value for calculating periodic depreciation.
The following base values are possible, for example:
  • Acquisition and production costs
  • Net book value
  • Replacement value

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