-

Project-
ASAP Business Blueprint
Financial Accounting
Business Process
FI Team

Bharat Aluminium Co. Ltd.

October 2009

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ASAP Business Blueprint

Business Blue Print

Project

Created by: FICO Team

Date of creation: October 2009

Changed by:

Date of the last changes: October 2009

Version:

____________ ___________________ ___ ________________________

Sign Off Date Signature Customer Signature Consultant

INTRODUCTION:

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1. OBJECTIVE OF BUSINESS BLUE PRINT (OR FUNCTIONAL REQ. PHASE)

The objective of Design phase is to furnish the following:

1. SAP Organization Model in context of existing business scenario and future

requirement as envisaged by VEDANTA ALUMINIUM LTD.

2. Mapping of business process with SAP functionality

3. Gaps & issues emerged during the mapping phase

4. Business Process Flows mapped in SAP as per the scope defined by Prince Plastic Pvt.
Limited.

5. Closure of Mapping Phase and start of Piloting Phase of implementation.

1. SCOPE OF THE DOCUMENT

The scope of this Blue Print is to document the following:

a) Business Requirements of Prince Plastic Pvt. Limited needs to be translated into

SAP.
This has been prepared by SAP consultant on the basis of, workshop conducted
for finalizing the Organization Units and functional level process requirement
gathered by SAP consultant by respective core users.

b) SAP Gaps as identified by CO Consultant w.r.t. the present scope of

implementation and Business Requirements of Prince Plastic Pvt. Limited
Details of SAP Business Process description supported by Process Flow

MISSION AND OBJECTIVE OF Bharat Aluminium Co. Ltd. THROUGH

THIS PROJECT:

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OBJECTIVE: To become a highly profitable organization. To achieve high profitability, SAP

implementation project has been taken up to achieve the following objectives
towards fulfillment of this goal:

 Reorganizes the structure of the organization to become lean and efficient.

 Reengineer business process to achieve smoother workflow, superior control,
High efficiency and low cost.
 Implement SAP, the world number one ERP, in all functions of business to
provide fully integrated business operations and management system, with
business processes and the global best practices.

 Set up performance measurement and control system for continuous

monitoring, control and improvement.

 Implement best of the IT and communications infrastructure to facilitate ERP

implementation and improve business and operations efficiency.

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In order to bring the clarity and better understanding, the document has been divided in two
sections:

SECTION I : This section is giving FINANCE summary view of the Scope of the project
including
Business processes finalized and their mapping summary into SAP

SECTION II : This section is giving CONTROLING summary view of the Scope of the
project including Business processes finalized and their mapping summary
into SAP

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AS-IS AND TO-BE BUSINESS PROCESS – FI/CO

Section – I
1.1.0 Introduction

1.2.0 Company Code

1.3.0 Manufacturing Units (Plant)

1.4.0 Business Area

1.5.1 Basic Settings of Accounting

1.5.2 Fiscal Year Variant

1.5.3 Posting Period Variant

1.5.4 Open Posting Periods

1.6.0 Field Status Variant

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1.7.0 Tolerance Groups

1.8.0 Posting Keys

1.9.0 General Ledger Accounting

1.9.1 Chart of Accounts

1.10.0 Account Groups

1.11.0 Retained Earnings

1.12.0 General Master Record

1.13.0 Bank Accounting

1.14.0 Cash Journal

1.15.0 Terms of Payment

1.16.0 Interest Settings

1.17.0 Dunning Procedure

1.18.0 With Holding Tax

1.18.1 Taxes on Sales and Purchases

1.18.2 Tax Procedure

1.18.3 Tax Codes

1.19.0 Accounts Receivable

1.19.1 Customer Account Groups

1.19.2 Customer Master Record

1.19.3 Customer Billing

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1.20.0 Integration with Sales and Distribution

1.21.0 Special General Ledger Transactions (Incoming Payments)

1.21.1 Special General Ledger Indicators (Incoming Payments)

1.22.0 Accounts Payable

1.22.1 Vendor Account Groups

1.22.2 Vendor Master Record

1.22.3 Invoicing

1.23.0 Integration with Material Management

1.24.0 Special General Ledger Transactions (Out going Payments)

1.24.1 Special General Ledger Indicators (Out going Payments)

1.25.0 Asset Accounting

1.25.1 Chart of Depreciation

1.25.2 Asset Class

1.25.3 Account Determination

1.25.4 Depreciation Keys

1.26.0 Integration With Other Modules

1.27.0 Information System

1.27.1 External Reports

1.27.2 Internal reports

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Section- II
2.1.0 Controlling

2.1.1 Cost Element Accounting

2.1.2 Cost Centre Accounting

2.2.0 Statistical Key Figures

2.3.0 Activity Types

2.4.0 Over Head Structure

2.5.0 Product cost Controlling

2.5.1 Product cost Controlling (Integration with Other Modules)

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2.5.2 Product Cost Controller

2.5.3 Standard Cost Estimator

2.5.4 Internal Orders

2.6.0 Profitability Analysis

2.6.1 Profit Centre Accounting

2.7.0 Information System

2.7.1 Internal Reports

2.8.0 Gaps to Be Addressed

1.1.0 INTRODUCTION

Bharat Aluminium Co. Ltd. (BALCO) was incorporated in the year 1965 as a Public Sector
Undertaking (PSU). In 1987-88, a captive power plant of 270 MW was added to cater to the power
requirement of the unit. BALCO has been the first in the Indian Aluminium Industry to produce
the Alloy Rods, which is a Feedstock for all Aluminium Alloy Conductors, needed for today’s
power transmission lines. Till 2001, BALCO was a public sector enterprise owned 100% by
Government of India (GoI). In the year 2001, GoI divested 51% equity and management control in
favor of Sterlite Industries (I) Limited. In the last 41 years, BALCO has built up a production
capacity of 200,000 tones per annum of alumina production capacity, 350,000 tones per annum of
smelting capacity and expanded its fabrication facility to include three Properzi Rod Mills, three
pig casting machines, integrated hot and cold rolling mills, and captive power plants of 810MW
capacity. Produced 219,485 tonnes of calcined alumina and 173,743 tonnes of hot metal in FY 2005-

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06 and sold 171,206 tonnes of aluminium. Fully computerized Cold Rolling mill installed, which
has precise temperature controls. Hot Rolling Mill, widest 4 high hot rolling facilities. Received ISO
9001:2000 for manufacture and supply of calcined alumina, aluminium ingots/billets, aluminium
rods and aluminium rolled products. The company in a short period of time has developed as
No. 1 manufacturer and exporter of Aluminium products

. Company turnover is more than Rs. 1000 Crores

It follows highest international standards. ISO 14001 and OHSAS 18001. VEDANTA
ALUMINIUM LTD. is the holding company for BALCO (Bharat Aluminium Company)
which operates three plants, one in Lanjighar & two in Korba

1.2.0 Company

Concept- Company
Description Particulars Remarks
The smallest organizational unit for which individual
financial statements can be drawn up according to the
Definition
relevant commercial law. A company can include one or
more company codes.

AS-IS Vedanta Aluminum Ltd.

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A six character Company’s code is created for Vedanta Company

Limited Consists of One Company.
TO-BE Company’s Code – VEDANT

T Code:- OX15

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Concept- Company Code

Description Particulars Remarks
The smallest organizational unit of Financial Accounting for
Definition which a complete self-contained set of accounts can be drawn up
for purposes of external reporting.

AS-IS Vedanta Aluminum Ltd.

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A four character Company Code is created for Company.

Limited Consists of One Company.
BALCO, with a share capital of Rs.600 corers
Company Code – BLCO

TO-BE T Code:- OX02

Company Code is assigned to Company.

T Code:- OX16

Gap
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1.3.0. PLANTS

CONCEPT- PLANTS
Description Particulars Remarks
The plant is an operating area or branch within a company.
Definition
A Plant could be either a factory or a warehouse or a sales branch
AS-IS
Bharat Aluminium Co. LTD consists of two manufacturing units
with state of the art technology & one refinery to convert bauxite

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into alumina

BALCO Refinery Plant 1 – Lanjigarh

BALCO Plant 2 – Korba

BALCO Plant 3 - Korba

Bharat Aluminium Co. LTD consists of two manufacturing units at Korba &
one refinery unit at Lanjigarh

Plants are created with a four-character code.

Lanjigarh Plant 1: LJPL

Korba Plant 1: K1PL

Korba Plant 2: - K2PL

T-Code – OX10

These Production Plants are being assigned to Company Code

T-Code – OX18

TO-BE

28 STATE WISE PLANTS:-

NORTH ZONE SOUTH ZONE EAST ZONE WEST ZONE

(ZNPL) (ZSPL) (ZEPL) (ZWPL)

DLPL APPL WBPL MHPL

CHPL KAPL ARPL GJPL

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PUPL KEPL ASPL GOPL

UPPL TMPL MNPL MPPL

UTPL MEPL RJPL

HAPL MZPL

HPPL ORPL

JKPL TRPL

JHPL SKPL

BIPL

Plants are assigned to their respective zonal Business Areas

T CODE:- OX10 AND OVF0
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1.4.0. BUSINESS AREAS

CONCEPT- BUSINESS AREAS

Description Particulars Remarks
A business area is an organizational unit within accounting that
Definition represents a separate area of operations or responsibilities in a
business organization. It could be depots, geographical Ares etc.

AS-IS

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TO-BE
One consolidation Business area, four zonal Business areas & 28
business areas for each state are created.

One Consolidation Business Areas:

 COBA
T CODE: - OCC1

Four Zonal Business Areas:-

 ZBNO

 ZBSU

 ZBEA

 ZBWE

28 STATE WISE BUSINESS AREAS:-

NORTH ZONE SOUTH ZONE EAST ZONE WEST ZONE

DLBA APBA WBBA MHBA

CHBA KABA ARBA GJBA

PUBA KEBA ASBA GOBA

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UPBA TMBA MNBA RJBA

UTBA MEBA MPBA

HABA MZBA

HPBA ORBA

JKBA TRBA

JHBA SKBA

BIBA

Four zonal business areas are assigned to one Consolidation

Business Area. 28 business areas are assigned to 28 plants & 28
plants area assigned to Four Zonal Business Areas.

Assign Business Ares to consolidation business area –

T Code – OBB6

Assign Business area to Plant –

T Code - OVFO

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1.5.1. BASIC SETTINGS OF ACCOUNTING

CONCEPT- BASIC SETTINGS OF ACCOUNTING

Description Particulars Remarks
A fiscal year is the financial year in which we are working e.g.:
Definition January to December, April to March, October to September etc

AS-IS Client maintains Books of Accounts with Financial year – April to

March.

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Books of Accounts are maintained by the Company with Fiscal

year April to March.
TO-BE Fiscal year:

Gap
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flow
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1.5.2. FISCAL YEAR VARIANT

CONCEPT- FISCAL YEAR VARIANT

Description Particulars Remarks
The fiscal year variant specifies the number of periods and special
Definition periods in a fiscal year and how the SAP System is to determine
the assigned posting periods.

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For every financial year, books are opened on April 1st and closed
AS-IS
on 31st March. Books are closed in every month and balances are
carried forward to next month.

It is maintained for the Financial Year. Fiscal Year Variant consists

12 periods starting from April to March. 4 special periods can be
maintained for closing purpose. For Non Leading Ledgers FY
Variant is maintained, it consist of 24 posting periods & 4 Special
posting periods

Standard Fiscal year variant V3 is copied as BO and used.

TO-BE
T CODE:-OB29

Fiscal Year variant BO is assigned to the Company Code.

T CODE:-OB37

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1.5.3. POSTING PERIOD VARIANT

CONCEPT- POSTING PERIOD VARIANT

Description Particulars Remarks
In this activity, you can specify which periods are open for
Definition
posting for each variant

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Previous month balance will carry forward to the current month

AS-IS and last month open period will close and the current period’s
books are opened for posting for each month.

In every financial year books are opened on April 1st and closed
on 31st March. Books are closed in every month and balances are
carried forward to next month. Posting period variant is created.
Posting Period Variant for company is BLCO
TO-BE
T Code - OBBO

Posting period variant is assigned to Company Code.

T CODE: - OBBP
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1.5.4. OPEN POSTING PERIODS

CONCEPT- Open posting periods

Description Particulars Remarks
In this activity, you can specify which periods are open for
Definition
posting for each variant

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AS-IS The current period’s books are opened for posting for each month.

Periods are opened for the fiscal year through the posting period
variant.

Posting Periods are set for D, K, A, M, S, V & +

TO-BE
D – Customers, K – Vendors, A – Assets, M – Material, S – GL A/C

V – Contract Accounts & + for all accounts

T CODE:-OB52
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1.6.0. FIELD STATUS VARIANT

CONCEPT- FIELD STATUS VARIANT

Description Particulars Remarks
Definition
In this activity you can define and edit field status variants and
groups. You group several field status groups together in one field
status variant. You assign the field status variants to a company
code in the activity Assign Company Code to Field Status

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Variants.

AS-IS

Field Status Variant with 41 field status groups is created.

Field Status group defines the status of the fields while making
posting to the GL accounts.

TO-BE Field status variant – BLCO

T CODE: - OBC4
Field Status variant is assigned to Company Code.

T CODE:- OBC5
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LEADING LEDGER

CONCEPT- LEADING LEDGERS

Description Particulars Remarks
Definition
Leading Ledgers are used for external accounting. Leading
Ledgers are maintained at client level & group Currency is
maintained for leading ledger. The leading ledger is based on the same
accounting principle as that of the consolidated financial statement. It is
integrated with all subsidiary ledgers and is updated in all company

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codes. You must designate one ledger as the leading ledger. In each
company code, the leading ledger automatically receives the settings
that apply to that company code: the currencies, the fiscal year variant,
and the variant of the posting periods.

AS-IS

TO-BE
Leading Ledger is pre – defined by SAP as 0L

Gap
Process
flow
Reports

DEFINE NON - LEADING LEDGERS

CONCEPT- NON - LEADING LEDGERS

Description Particulars Remarks
Non – Leading Ledgers are parallel ledgers to Leading Ledgers.
Definition They can be based on local accounting principle. Non – Leading
Ledgers are company code level & have company code currency.

AS-IS

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Non – Leading Ledger is defined & activated for Company Code.

TO-BE
BO is two digits Non – Leading Ledger.

Gap
Process
flow
Reports

DEFINE DOCUMENT TYPES FOR NON – LEADING LEDGER

CONCEPT- DOCUMENT TYPES FOR NON – LEADING LEDGER

Description Particulars Remarks
Settings specifying the document type for postings to non-leading
Definition
ledgers.

AS-IS

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We have defined number range for all document types for non
leading ledger we have created, and then we have specified
TO-BE
Number Intervals to Number Ranges for Non Leading Ledger.
Number Range is BO.
Gap
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1.7.0. TOLERANCE GROUPS

CONCEPT- TOLERANCE GROUPS

Description Particulars Remarks
The tolerance groups represent amounts or percentages by which
Definition
receivables may be underpaid or overpaid.

AS-IS Tolerance Limit is set for Rs.1000

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Tolerance Group for GL Account is created in Company Code, In

Tolerance groups the permissible amounts for accounts and for
line items are specified

Tolerance group for employees is created in Company Code.

This group defines different amount limits for your employees. It
determines:

 The maximum amount for which an employee is permitted

to post a document.
 The maximum line item amount an employee is permitted
to enter in a customer, vendor or general ledger account.
 The maximum acceptable payment difference.
TO-BE
T CODE:- OBA4

Tolerance group for (vendor / customer) is created for company

code. In the tolerance group limits for vendor / customer payment
differences are defined. The tolerance group determines:
 Limits to which differences in payment are posted
automatically to expense or revenue accounts when
clearing open items
The handling of the terms of payment for residual items, if they
are to be posted during clearing

T CODE:- OBA3

Gap
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1.8.0. POSTINGS/ POSTING KEYS

CONCEPT- POSTINGS / POSTING KEYS

Description Particulars Remarks
Definition
A two-digit numerical key that determines the way transaction
items are posted. This key determines several factors including
the:

Account type

Type of posting (debit or credit)

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Layout of entry screens

As per the accounting rules every accounts have one debit and same
amount in the credit, is the same Bharat Aluminium Limited is following
the accounting rules to post the accounts in day to day activity.

Every transaction is recorded in Journal at the first instance and every

journal we have debit and credit. This helps the type of posting of the
AS-IS journal.

Separate journals are maintained for cash, sales daybook, sales returns,
purchase daybook, purchase returns.

Standard SAP Document Types are used to classify the

transactions.

Document number range intervals are specified for each document

number range. From this number range interval, system picks and
assigns a number to each transaction posted in SAP system.
TO-BE
Standard posting keys defined in SAP are used.

T CODE: - OBX1

Document Type.xls

Gap
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1.9.0. GENERAL LEDGER ACCOUNTING

CONCEPT- GENERAL LEDGER ACCOUNTING

Description Particulars Remarks

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A structure that records value movements in a company code and

represents the G/L account items in a chart of accounts. A G/L
Definition account has transaction figures that record changes to the account
during a posting period. These figures are totals that are used for
G/L reporting.

General ledger accounts are maintains for day to day business

purpose. It maintained by Bharat Aluminum Limited under
various heads like :

• Capital,
• Liabilities,
AS-IS • Assets,
• Incomes
• Expenditure,
• Creditor’s Ledger,
• Debtor’s Ledger.

As per Bharat Aluminium Limited General ledger accounts are

mapped in SAP under various heads like,
• Capital,
• Liabilities,
TO-BE
• Assets,
• Incomes
• Expenditure,
T CODE: - FS00
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1.9.1. Chart of Accounts

CONCEPT- CHART OF ACCOUNTS

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Description Particulars Remarks

This is a list of all G/L accounts used by one or several company
codes.

Definition For each G/L account, the chart of accounts contains the account
number, account name, and the information that controls how an
account functions and how a G/L account is created in a company
code.

AS-IS

Chart of Accounts consists of list of GL accounts. Chart of accounts

defines the language, length of GL accounts and integration with
Controlling.
TO-BE T CODE: - OB13

Chart of accounts BLCO is assigned to Company Code.

T CODE: - OB62
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1.10.0. ACCOUNT GROUPS

CONCEPT- ACCOUNT GROUPS

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Description Particulars Remarks

The account group consists of the data that is relevant for the
Definition master record. A number range from which numbers are selected
for the master records. An account group must be assigned to each
master record.

BLCO accounts are classified under Account groups.

Share Capital
Reserves & Surplus
Secured Loans
Unsecured Loans
Current Liabilities & Provisions
AS-IS Fixed Assets
Investments
Current Assets
Loans & Advances
Incomes
Expenses

The following account groups are created for the Chart of

Accounts:

T CODE: - OBD4
TO-BE

Account Group.xls

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1.11.0. RETAINED EARNINGS

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CONCEPT- RETAINED EARNINGS

Description Particulars Remarks

The annual net incomes accumulated since the founding of the
company, adjusted by the distributions of dividends and retained
Definition
earnings appropriations, such as transfers to or withdrawals from
provisions.

AS-IS

One retained earnings account is created with GL account 110000

and P&L statement account type X.
TO-BE
T CODE: - OB53

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1.12.0. GL MASTER RECORDS

CONCEPT- GL MASTER RECORDS

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Description Particulars Remarks

A data record containing information that controls how data is
Definition
entered into a G/L account and how that account is managed

AS-IS

G/L Master record is maintained for General Ledger account.

Each G/L master record is recognized by a number and text

TO-BE
GL master record consists of two segments chart of account
segment and company code segment.

T CODE: - FS00
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1.13.0. BANK ACCOUNTING

CONCEPT- BANK ACCOUNTING

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Description Particulars Remarks

It defines how the bank accounts and transactions are maintained
Definition
within the Company records
Bharat Aluminum Limited is banking with SBI, HDFC, ICICI and HSBC.

Bharat Aluminum Limited is having three current accounts with SBI,

HDFC, ICICI and HSBC Bank.
AS-IS All foreign Transactions are routed though SBI Bank only.

All payments over and above Rs.500/- should be through Cheque and
Bank Transfer only.
All the Bank Reconciliations would be done fortnightly.

Bankers: Client is banking with SBI, ICICI, HDFC, and HSBC

Bharat Aluminum Limited is having three current accounts with

SBI,ICICI, HDFC and HSBC

One House bank is created for each bank account.

T CODE: - FI12
TO-BE Co. Code House Account Bank Acc.No
Description
Bank ID

BLCO ICICI ICICI1 ICICI Bank ICICI10010

BLCO HDFC HDFC1 HDFC Bank HDFC20020

BLCO HSBC HSBC1 HSBC Bank HSBC30030

BLCO SBI SBIC1 SBI Bank SBIC40040

Gap Yes
Process
flow
The reconciliation statement Bank displays the actual bank
Reports statement, the cheques that are deposited but not realized and the
cheques that are issued but not cleared.

1.14.0. CASH JOURNAL

CONCEPT- CASH JOURNAL

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Description Particulars Remarks

A double-entry compact journal managed in account form that
Definition
records the postings for cash transactions.
Cashbooks are maintained at Plants and sales offices to Record the
AS-IS
cash receipts, Payment and expenditure. (Below Rs 500).
Cashbooks are maintained at Plants and sales offices to Record the
cash receipts, Payment and expenditure.

Settings for Cash journal

GL account for Cash journal – 220500

Document0 type for Cash journal – SA (General Accounting
TO-BE Document)
Number Range Intervals-01: 1 – 999999
Set up Cash Journal
Create Business transactions
Set up print parameters

Postings to cash journal is made through

T CODE: - FBCJ
Gap Yes
Process
flow
The purpose of this report is to capture the Daily Cash Flow. The
report contains the Opening Balance of Cash, Bank, and
Investment as per the Bank Book as increased by all the receipts
Reports
and reduced by all the payments. The report is required by the
management for planning the optimum utilization of the
unutilized funds lying in the report.

1.15.0. Terms of Payment

CONCEPT- TERMS OF PAYMENT
Description Particulars Remarks

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The terms of payment are nothing but the rules defined for
Definition customers/vendors in relation to discounts, credit period,
installments etc.
Terms of Payments – Customers

Regular Customers:-
25% of the down payment before order confirmation
75% balance after delivery
 25% p.a. Interest would charged if not paid with in 45 days
 10% discount allowed to customers for immediate payment
 8% discount allowed for payment made with in 15 days
 5% discount allowed for payment made between 15 days to 30
days
One time customers:-
FOR ONE TIME CUSTOMERS 10% DISCOUNT FACILITY IS AVAILABLE ON FULL
PAYMENT

AS-IS  For c&f agent 15% commission.

Emi customers :-
For EMI facility customers 25% installments for 3 months & interest of
5%.
Terms of payment – vendors:
 6o days credit period
 Company pays its vendors only through cheques and bank
transfers.
 25% of the down payment before order confirmation
 75% balance after delivery
 20% p.a. Interest would charged if not paid with in 60 days
 10% discount allowed for immediate payment
 8% discount allowed for payment made with in 25 days
 5% discount allowed for payment made between 25 days to 40
days

Terms of Payments – Customers

Terms of Payment Description

D001 Dealer
I002 Institutional
S003 Ship-to Party
TO - BE
B004 Bill-to Party
P005 Payer

Terms of Payment – Vendors:

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Terms of Payment Description

Domestic vendors
Foreign vendors
Onetime Vendor

T CODE: - OBB8
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1.16.0. INTEREST SETTINGS

CONCEPT- INTEREST SETTINGS

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Description Particulars Remarks

Interest calculation is done through a key under which interest
calculation parameters are defined such as interest calculation
frequency, minimum and maximum amounts, transfer and
Definition
tolerance days. An interest key is always connected to an interest
calculation rule, under which basic agreements for interest
calculation are defined.

AS-IS Rate of Interest on delayed payment after due date is @ 25% p.a.

Interest Calculation: As per the Company Policy, interest is

calculated @ 25% p.a. on the balance overdue.

Company has taken loans from ICICI Banks for which they are
paying interest @ 9% p.a.

Standard Interest Calculation Indicators available are

P: Item Interest

S: Balance Interest

Z: Penalty Interest

Interest Indicators

CB: Balance Interest Indicator

TO-BE CI: Item Interest Indicator

Reference Interest rates

P3L1: Reference Interest @ 8%

P3L2: Reference Interest @ 9%

Time based terms

C1: Term – Debit Interest: Balance Interest calculation

C1: Term – Credit Interest: Balance Interest calculation

C2: Term – Debit Interest: Arrears Interest calculation

C2: Term – Credit Interest: Arrears Interest calculation

T CODE: OB46
Gap

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Process
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1.17.0. DUNNING PROCEDURE

CONCEPT- DUNNING PROCEDURE

Description Particulars Remarks
A procedure which specifies how reminders / notices are sent to
the customers/vendors for non – payment of due amounts – it can
Definition
either be a reminder or a legal notice depending upon the overdue
period

AS-IS

Weekly reminders are sent to customers with regard to overdue

items for amounts more than Rs.50000/-

Balance confirmation statements are sent to vendors two times in a

year.

Dunning procedure is created for sending reminder notices to

customers/vendors

TO-BE Dunning procedure: BLCD

Dunning Interval in days: 7

Dunning levels: 4+1

Minimum amount for dunning: INR 50000

Dunning charges: INR 100 to 500

T CODE:- FBMP/F150
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1.18.0. WITHHOLDING TAX

CONCEPT- WITHHOLDING TAX

Description Particulars Remarks
A class of tax deducted at the beginning of the payment flow.
Typically, an amount is withheld and paid over or reported to the
Definition
tax authorities on behalf of (as opposed to by) the person subject to
tax, the exception being self-withholding tax.
As per the Income Tax Act 1961, TDS is deducted on service
related payments under the following categories.
Salaries
Dividends
Interest payments
Contract payments
Rent
Professional & Technical fees

AS-IS Quarterly Returns are submitted to the Tax Department.

At the Year End, TDS certificates are issued to the concerned
parties from whom the TDS is made.
When customer makes TDS, it is not accounted until receipt of
certificate. Up to that time it is shown as outstanding against
certificate.
In the year-end TDS certificates are obtained from the customers.

TO-BE In SAP, Withholding Tax types and Withholding Tax codes can be
maintained for each category of Withholding Tax.

WITHHOLDING TAX TYPES

C1: TDS on Payment posting

C2: Surcharge on TDS

C3: Cess on TDS

C4: Cess on Surcharge

WIWWITHHOLDING TAX CODES

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WITHHOLDING TAX
CODES.xls

Remittance challans are created in

Withholding Tax certificates are created in

T CODE: - J1INCHLN /J1INCERT

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1.18.1. TAXES ON SALES & PURCHASES

CONCEPT- TAXES ON SALES & PURCHASES

Description Particulars Remarks
It is the term used for input and output taxes, consisting of defining,
Definition calculating and posting different taxes on sales and purchases specified
by law/Government from time to time
AS-IS Taxes on Sales & Purchases:

• Excise duty
• BED,SED,AED, CESS,EDUCATION CESS

Sales Tax :

• VAT/LST
• CST

Special Taxes:

• Turnover Tax (TOT)

• State Entry Tax
• State Development Tax

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• Octroi

Purchases – Input Tax :

• Excise duty
• BED,SED,AED, CESS,EDUCATION CESS
• VAT
• CST
The following are the Taxes, which the company is paying on Sales and
Purchases

Sales – Output Tax: Excise duty, CESS, VAT, CST

Purchases – Input Tax: Excise duty, CESS, VAT, CST

Tax on sales and purchases are procedure-based taxation in FI

component.

CONDITION TYPES:

Condition Types Description

BLC1 Input Tax – Excise Duty

TO-BE BLC2 Input Tax – Cess

BLC3 Input Tax – VAT

BLC4 Input Tax – CST

BLC5 Output Tax – Excise Duty

BLC6 Output Tax – Cess

BLC7 Output Tax – VAT

BLC8 Output Tax – CST

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Account Keys
Not Posting
A/c Key Description Type
Deductible Indicator

BL1 Excise Duty paid Input Tax 2

BL2 Cess paid Input Tax X 3

BL3 VAT paid Input Tax 2

BL4 CST paid Input Tax X 3

BL5 Excise Duty Output Tax 2

payable

BL6 Cess payable Output Tax 2

BL7 VAT payable Output Tax 2

BL8 CST payable Output Tax 2

NOTE: 2 – Separate Line Items

3 – Distributed to relevant expenses / revenue items
T.CODE:-FTXP/OBCN
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Entry Tax Register is required to be maintained by every dealer in order
to calculate and pay the entry tax on purchase/ import of goods if the
total purchase exceeds a specified amount. The amount and rate of entry
Reports
tax would vary from circle to circle. Entry tax register also helps in filing
Entry Tax Return to Statutory authorities. Periodicity of Return filing is
defined by the relevant State Act.

1.18.2. TAX PROCEDURE

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CONCEPT- TAX PROCEDURE

Description Particulars Remarks

The rules on how to calculate tax on sales and purchases. They
encompass several levels, which determine the partial amounts
Definition
that are to be calculated for each individual type of tax on sales
and purchases, and define the sequence of these levels.

AS-IS

TO-BE
A calculation procedure is defined for country INDIA,
containing the specifications required to calculate and post tax
on sales/purchases. Calculation procedure contains condition
types.

The condition type (such as input or output tax) specifies the base
amount on which the tax is calculated and the account key that is
used to post the tax. The specifications necessary for calculating
and posting tax have been defined for the condition type and
account key.

TAX PROCEDURE – BLCTXP

T.CODE:-OBYZ

Condition Account
Step Description From To
Type Key

10 BASB

100 BLC1 Input Tax – 10 10 BL1

Excise Duty

110 BLC 2 Input Tax – Cess 100 100 BL 2

120 BLC 3 Input Tax – VAT 10 110 BL 3

130 BLC 4 Input Tax – CST 10 110 BL 4

200 BLC 5 Output Tax – 10 10 BL 5

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Excise Duty

210 BLC 6 Output Tax – 200 200 BL 6

Cess

220 BLC 7 Output Tax – 10 210 BL 7

VAT

230 BLC8 Output Tax - 10 210 BL 8

CST

Tax procedure BLCTXP is assigned to country India.

T.CODE: OBBG
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1.18.3. TAX CODES

CONCEPT- TAX CODES

Description Particulars Remarks
A two-digit code that represents the specifications used for
calculating and displaying tax. Examples of the specifications
Definition defined under the tax code are: Tax rate, Type of tax (input tax or
output tax), Calculation method (percentage included or
percentage separate) etc

AS-IS

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TO-BE The tax code represents a tax category, which must be taken into
consideration when making a tax return to the tax authorities.

Tax codes are unique per country. The tax rate calculation
rules and further features are stored in a table for each
tax code.

Tax Code Description Tax Type

I0 Input Tax V
Exempted

I1 Excise + Cess + V
VAT

I2 Excise + Cess + V
CST

O0 Output Tax A
Exempted

O1 Excise + Cess + A
VAT

O2 Excise + Cess + A
CST

RATES OF TAX

Tax Rate of Tax (Percentage)

Excise Duty 8

Cess 3

VAT 4

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CST 3

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1.19.0. ACCOUNTS RECEIVABLE

CONCEPT- ACCOUNTS RECEIVABLE

Description Particulars Remarks
The whole subject of Customers – how the customers are grouped
Definition
and numbered are dealt here
A sub ledger is maintained for each Customer to accounts receivable
AS-IS GL account.

TO-BE The Accounts Receivable application component records and

manages accounting data of all customers. It is also an integral part
of sales management.

All postings in Accounts Receivable are also recorded directly in the

General Ledger.

1.19.1.Customer Account Groups

Account groups control the following functions of the customer

master
 Number range
 Views selection
 Field selection in each view
 Field statuses

The following Account groups shall be configured:

 Different sets of account groups for the entire customers

belonging to each sales organization, with different number
range.

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 One account group for prospective customer with limited

views.

Note: The Prospective Customer can be converted into sold-to party

when there is a need to do actual business and the additional fields
shall to be maintained and the missing views need to be created.

Account Description No. Range

group From To
BG01 Sold-to-party
BG02 Ship-to-party
BG03 Bill-to-party
BG04 Payer
BG05 One Time Customer
BG06 Sales Employee
BG07 Forwarding Agent
BG08 Commission Agent

Customer Account Group Number Ranges

From To
BG01 110000 119999
BG02 120000 129999
BG03 130000 139999
BG04 140000 149999
BG05 150000 159999
BG06 160000 169999
BG07 170000 179999
BG08 180000 189999
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1.19.2. CUSTOMER MASTER RECORD

CONCEPT- CUSTOMER MASTER RECORD

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Description Particulars Remarks

The customer master contains the basic data for all customers
Definition
with which a company conducts business.

Bharat Aluminium Pvt. Limited is maintaining each customer

master record.
AS-IS
Name, Address of the customer, payment terms, bank details and
etc.

Customer master record is maintained for each customer. A

number is assigned to each customer master record.

TO-BE Customer Masters: Customer Master record consists of three

segments, general data, company code data and sales area data.

T CODE:-FD01
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1.19.3. CUSTOMER BILLING

CONCEPT- CUSTOMER BILLING

Description Particulars Remarks
It deals with how the customer is billed, when he is billed and
Definition
how the amount is received etc.

AS-IS

Customer billing is done through the following steps:

Sales order
TO-BE
Outbound Delivery T.CODE:VL01N
Billing a Document T.CODE:-VOFA

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1.20.0. INTEGRATION WITH SD

CONCEPT- INTEGRATION WITH SD

Description Particulars Remarks
From which sales process the finance – g/l part is hitting, how it is
Definition
accounted for is dealt here

AS-IS

GL accounts are assigned to condition types

Customer Payments

Payments are accepted from customers through bank transfers

and cheque payments. T-CODE-VOKA
TO-BE

Document type – DZ is used to make payments.

Incoming payments are made

T.CODE:F-28
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1.21.0. SPECIAL GL TRANSACTIONS

CONCEPT- SPECIAL GL TRANSACTIONS

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Description Particulars Remarks

Special G/L transactions include down payments and bills of
exchange, guarantees etc which does not form part of normal
Definition
business transactions - how these transactions are accounted for is
stated here

AS-IS

In SAP, advance to parties can be dealt as a special GL transaction.

TO-BE
T.CODE:-OBYR/FBKP
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1.21.1. SPECIAL GL INDICATORS

CONCEPT- SPECIAL GL INDICATORS

Description Particulars Remarks
An indicator that identifies a special G/L transaction such as
Definition
advances, bills of exchange etc.

Bharat Aluminium Pvt. Limited making advance from customer.

Advance like Down payments, Down payment request, Bank
AS-IS
guarantees.

A – Down payments T.CODE:-F-48

TO-BE F – Down payment request T.CODE:-F-47
G – Bank guarantees T.CODE:F-55
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1.22.0. ACCOUNTS PAYABLE

CONCEPT- ACCOUNTS PAYABLE

Description Particulars Remarks
A ledger set up to account for the values from business
Definition
transactions with vendors.
The Accounts Payable application component records and
manages accounting data for all vendors.
AS-IS

TO-BE It is also an integral part of the purchasing system: Deliveries and

invoices are managed according to vendors.

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1.22.1. VENDOR ACCOUNT GROUPS

Vendor account group is classifying feature in vendor master that
determines
 The type of number assignment
 A number range for assigning account numbers
 Which fields are displayed and whether their entry is
optional or required when you enter or change
vendor master data
Whether the account is for one time vendor?

Vendor Account Description

Group
V001 Domestic vendors
V002 Foreign vendors
V003 Onetime Vendor

T.CODE:-OBD3
NUMBER RANGES

Internal number ranges are used.

Vendor Account Number Ranges
Group From To
V001 110000 119999
V002 120000 129999
V003 130000 139999

Number ranges are assigned to vendor account groups.

T.CODE:-XKN1
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1.22.2. VENDOR MASTER RECORDS

CONCEPT- VENDOR MASTER RECORDS

Description Particulars Remarks

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The Accounts Payable application component records and

Definition
manages accounting data for all vendors.

Bharat Aluminium Pvt. Limited is maintaining each vendor

AS-IS master record.

A Vendor master record is maintained for each Vendor. Number

recognizes each Vendor master record.

TO-BE Vendor Masters: Vendor Master record consists of three segments,

general data, company code data and purchasing data.
T.CODE:-FK01

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1.22. 3.INVOICING

CONCEPT- INVOICING

Description Particulars Remarks

Definition Documentation for each business process is invoicing

AS-IS

TO-BE Invoicing is done through the following steps:

Purchase order
Goods receipt
Invoice verification

Invoice clearing

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Invoices are cleared through Cheque payments and bank transfers.

Payment method – C (Cheque payment)

Document type – KZ

T.CODE:ME21N/MIGO/MIRO/F-44
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1.23.0. INTEGRATION WITH MM

CONCEPT- INTEGRATION WITH MM (T CODE –OBYC)

Description Particulars Remarks
How the Financial aspects are hit with Procurement process is
Definition
the concept of integration of Finance with Materials Management
Payments are made through
Bank transfers and Cheques
AS-IS

TO-BE GL accounts are assigned to condition types

Vendor Payments

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Payments are made to vendor through bank transfers and cheque

payments.

Document type – KZ is used to make payments.

Outgoing payments are made

AUTOMATIC
PAYMENT PROGRAM.xlsx

Steps involved in APP:

1. All Company Codes for payment transactions

2. Paying Company Codes
3. Payment methods in Country
4. Payment methods in Company Code
5. Bank Determination
6. House Banks
T.CODE:-F11O
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1.24.0. SPECIAL GL TRANSACTIONS

CONCEPT- SPECIAL GL TRANSACTIONS

Description Particulars Remarks
Special G/L transactions include down payments and bills of
exchange, guarantees etc which does not form part of normal
Definition
business transactions - how these transactions are accounted for is
stated here

Advances are paid to vendors before goods are delivered.

AS-IS
Invoices are received with the delivery of goods.

Advances made to vendors are treated as Special GL transactions

TO-BE
T.CODE:-F-48
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1.24.1. SPECIAL GL INDICATORS

CONCEPT- SPECIAL GL INDICATORS

Description Particulars Remarks
An indicator that identifies a special G/L transaction such as
Definition
advances, bills of exchange etc.

AS-IS Invoices are cleared as per the terms agreed upon.

A – Down payments T.CODE:F-48

TO-BE F – Down payment request T.CODE:F-47
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1.25.0. ASSET ACCOUNTING

CONCEPT- ASSET ACCOUNTING

Description Particulars Remarks
Asset Accounting is utilized for Managing companies Fixed
Assets, we can recognize and to the said value of the depreciation
Definition for each Fixed Asset. Fixed asset having a useful life and are
utilized for Business Process. In the course of process some wear &
tear will occur, for that reason we calculate Depreciation.
AS-IS Assets are broadly grouped under the following heads
 Land and buildings.
 Plant and machinery.

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 Vehicles.
 Furniture & fixtures
 Loose tools and Mould
 Computer.

Company’s Assets are broadly grouped under the following heads

 Land and buildings.

 Plant and machinery.
 Vehicles.
 Furniture & fixtures
 Loose tools and Mould
TO-BE  Computer.

The Asset Accounting component is used for managing and

supervising fixed assets with the SAP R/3 System. In SAP R/3
Financial Accounting, it serves as a subsidiary ledger to the FI
General Ledger, providing detailed information on transactions
involving fixed assets.

T.CODE:-
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1.25.1. CHARTS OF DEPRECIATION

CONCEPT- CHARTS OF DEPRECIATION

Description Particulars Remarks
A chart of depreciation is used in order to manage various legal
Definition
requirements for the depreciation and valuation of assets.

BLCO Follows Written down value method & Straight Line

AS-IS
method of depreciation.
Depreciation rates from 10% to 40% is applied to different assets

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A chart of depreciation is used in order to manage various legal

requirements for the depreciation and valuation of assets.

Chart of Depreciation code: BLCO

Depreciation areas: Book depreciation

Chart of depreciation BLCO is used for company code BLCO.

TO-BE
Tax codes to assigned to non-taxable transactions
Input Tax: I0 - exempted
Output Tax: O0 – exempted
Chart of depreciation is created and assigned to company code.
T.Code :OAOB
Method of depreciation and Rates of depreciation is provided in
depreciation keys
T.codes: EC08, OADB, OAOA, AO90, AFAMA, AO21, F-90.

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1.2 5.2. ASSET CLASS

CONCEPT- ASSET CLASS

Description Particulars Remarks
Asset classes are used to structure fixed assets. Asset classes are
applied to all Company Codes. Asset classes provide default
Definition
values for all asset master records. Asset classes consist of account
determination, screen layouts and number ranges.
Asset classes are the classification of assets in accordance with the
AS-IS
nature/type of assets. In BLCO assets are classified as given above
TO-BE
Asset classes are used to structure fixed assets. Asset classes
provide default values for all asset master records. Asset classes

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consists of account determination, screen layouts and number

ranges.

Asset Account Screen Number

Description
Class Determination layout range
20000 Land and 200000 B100 01
Buildings
20100 Plant and 201000 B200 02
Machinery
20200 Furniture and 202000 B 300 03
fixtures
20300 Vehicles 203000 B 310 04
20400 Loose tools and 204000 B 210 05
Mould
205000 Computer 205000 06

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1.25.3. ACCOUNT DETERMINATION

CONCEPT- ACCOUNT DETERMINATION

Description Particulars Remarks
GL accounts for acquisition, retirement, profit or loss on sale of
Definition assets, accumulated depreciation; depreciation and special reserve
are specified in account determination.

AS-IS In BLCO , account determination is done for all the fixed assets

TO-BE GL accounts for acquisition, retirement, profit or loss on sale of

assets, accumulated depreciation; depreciation and special reserve
are specified in account determination.

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Account Determination
Description
number
Land and
200000
Buildings
Plant and
201000
Machinery
Furniture and
202000
fixtures
203000 Vehicles
Loose tools and
204000
Mould.
205000 Computer

Number range interval for asset main numbers in asset class.

Number range From To

01 100000 199999
02 200000 299999
03 300000 399999
04 400000 499999
05 500000 599999
06 600000 699999
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1.25.4. DEPRECIATION KEYS

CONCEPT- DEPRECIATION KEYS

Description Particulars Remarks
Definition A key for calculating depreciation amounts.
The Company is following the Depreciation rates prescribed by
Schedule 14 of the Companies Act 1956. Rates of depreciation are
AS-IS
10% to 40%.
For each rate of depreciation, a Depreciation Key is maintained.

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Depreciation method – The Company follows Straight-line method

and Written down value method for depreciation

Rates of depreciation
TO-BE
Company is following the Depreciation rates prescribed by
Schedule 14 of the Companies Act 1956.
For each rate of depreciation, a Depreciation Key is maintained.

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1.26.0. INTEGRATION OF FI WITH OTHER MODLES

CONCEPT - INTEGRATION OF FI WITH OTHER MODLES

Description Particulars Remarks
The requirements for purchase of asset flows from different
departments/modules to Finance Department, for eg; a machine
Definition
purchased through a vendor should come from procurement
department under MM.

In BLCO, the Production Department gives the list of machinery

AS-IS
required for the production, same as like from administration
department-Sales Offices.
In SAP assets are purchased from vendor through transaction code
TO-BE F-90 and assets are sold to customers by using the transaction code
F-92.
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WITH OTHER MODLES.xlsx

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1.27.0. INFORMATION SYSTEM

1.27.1. CONCEPT- EXTERNAL REPORTS

Description Particulars Remarks
All the reports to be submitted to the Registrar of Companies,
Definition Stock Exchanges, Income Tax authorities and Share holders etc,
such as Profit and Loss Statement and Balance Sheet etc.
In BLCO month-wise, year-wise profit and Loss statements,
AS-IS Balance Sheet and cash flow statements are prepared

 Profit and loss account for year.

 Profit and loss account half yearly or quarterly.
TO-BE
 Balance sheet actual / actual year.
 Cash flow statement
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1.27.2. INTERNAL REPORTS

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1.27.2 .CONCEPT- INTERNAL REPORTS

Description Particulars Remarks

Internal reports are the reports prepared for managerial decision
Definition making purpose, which are not required to be submitted to
outsiders
In BLCO, weekly, fortnightly, monthly, quarterly, half-yearly and
AS-IS yearly sales reports are generated, customer overdue reports, age-
wise reports are prepared
Weekly, fortnight, monthly, quarter- year, half-yearly, yearly Sales
reports
TO-BE Over due items from customers statement
Outstanding payments to accounts payable statements
Ageing analysis report
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BUSINESS BLUEPRINT
(CONTROLLING)
OF
BHARAT ALUMINIUM
PVT.LIMITED

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AS-IS AND TO-BE BUSINESS PROCESS – CONTROLLING

2.1.0. CONTROLLING

CONCEPT- CONTROLLING
Description Particulars Remarks
An instrument that supports management's decision-making
processes.
The various phases of controlling include:
Planning
Definition
Monitoring
Reporting
Consulting
Informing
The company is maintaining cost accounts for the purpose of
controlling costs in manufacturing units. Costing is done to
ascertain the batch wise cost of the finished products.
AS-IS
BLCO is using Standard Costing method for arriving the product
cost.
TO-BE Controlling Area represents a closed system used for cost
accounting purposes.

Controlling Area Code –BLCO

Company Code BLCO is assigned to Controlling Area BLCO

Components are activated in the Controlling Area

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Number range intervals for controlling are maintained

VERSIONS

Version 0 (Plan / Actual Version) is maintained for controlling

area.

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2.1.1. COST ELEMENT ACCOUNTING

CONCEPT- COST ELEMENT ACCOUNTING

Description Particulars Remarks
Cost element accounting tells you on what item you are incurring
Definition
the costs. Eg: salaries, rent etc.

BLCO is Maintaining costs records in the form of cost elements.

Cost elements are classified into two categories:

AS-IS
• Primary Cost Element (Direct Expenses ): Direct material, Direct
labour and Direct expenses.
• Secondary Cost Element (Indirect `Expenses): Overheads.

TO-BE
As a manufacturing organization Client Company is concerned
with the conversion of raw materials into finished products with
the help of machine, labour and other services.

In order to compute cost of each of these functions, cost of

manufacturing a product is sub divided into cost elements

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They are Maintaining costs records in the form cost elements

Cost elements are classified into: direct material; direct labour,

direct expenses and overheads.

Cost Element Accounting is the part of accounting where you

enter and organize costs incurred during a settlement period. It is
not an accounting system. It is a detailed recording of data that
forms the basis for cost accounting.

Cost elements

Cost elements are created in two ways

 Manual

 Automatic

Primary Cost Elements

A cost element is created for each GL account under the revenue

account group (IC30) ranging from 300000 to 399999

A cost element is created for each GL account under the expenses

account group (EX40) ranging from 400000 to 499999

Cost Element Group

A Cost Element Group is created to classify the Cost Elements.

Cost Element Group – BLCOCEGROUP

Secondary cost elements

500000 Machine Overheads

501000 Labour Overheads

502000 Set Up Costs

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Reports

2.1.2. COST CENTER ACCOUNTING

CONCEPT- COST CENTER ACCOUNTING

Description Particulars Remarks

Cost centers define a location of costs. It tells you where you are
Definition incurring costs. Every cost center is created under a company
code. Ex. Maintenance department, canteen department etc

Maintaining Cost centers for collection and distribution of costs.

Cost centers are classified into two :
AS-IS
 Production cost centers such as Manufacturing department.
 Service cost centers such as Administration department.

TO-BE
Cost accounting department of the client is Maintaining Cost
centers for collection and distribution of costs.

Cost centers are classified into

 Production, non-production and mixed cost centers.

Cost Center Accounting is used for controlling purposes within

the organization to make sure costs incurred by the organization
are transparent. This enables you to check the profitability of
individual functional areas and provide decision-making data for
management. This requires that all costs be

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assigned according to their source. However, source-related

assignment is especially difficult for overhead costs. Cost Center
Accounting lets you analyze the overhead costs according to
where they were incurred within the organization.

Cost center categories

Standard Cost Center Categories are used

E: Development
F: Production
G: Logistics
H: Service Cost Center
L: Management
M: Material
S: Human resource
V: Sales
W: Administration

Cost Center Groups

Cost Center Groups are created to classify the Cost Centers

Cost Center Structure – BLCOCCGROUP.

Under this group, Cost Centers are grouped into the following
heads.

COST CENTER.xls

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2.2.0. STATISTICAL KEY FIGURES

CONCEPT- STATISTICAL KEY FIGURES

Description Particulars Remarks

The statistical values describing Cost centers, Orders, business

Definition processes, profit centers etc. For eg : no of employees in a
department, no of units of electricity consumed, floor area etc.

No. Of Employees:

Area occupied:

Administrative hours:
AS-IS
Raw Material

Production

TO-BE

Statistical Key Figures used as tracing factors for distribution or

assessment can be collected in groups.

Statistical Unit of
Description Category
Key Figure Measurement

1000 No. Of Employees EA (Each) Fixed

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3000 Area occupied FT2 (square foot) Fixed

Administrative
6000 HR Total
hours

7000 Raw Material PC Total

8000 Production PC Total

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2.3.0. ACTIVITY TYPES

CONCEPT- ACTIVITY TYPES

Description Particulars Remarks

Activity types denote the output of the cost center. Ex. No of units
Definition produced by a fabrication department, no of meals served by the canteen
department etc.

AS-IS

TO-BE
An unit in a controlling area that classifies the activities performed in a cost
center

Cost Allocation
Activity Descriptio Activit Activity
Center Cost
Type Id n y Unit Category
Category Element
Machine
BLCOMACH H * 1 500000
Hours

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Labor
BLCOLABR H * 1 501000
Hours
Set Up
BLCOSETP H * 1 502000
Hours

*All cost center categories :

Activity Category 1 – Manual Entry, Manual allocation

Activity Category 2 –Indirect Entry(automatic),Indirect

allocation(automatic)

Activity Category 3 – Manual Entry, Indirect allocation

Activity Category 4 –Manual Entry, No Allocation

Planning

The following steps do Cost Center Planning

Version 0 – Plan / Actual

Planning Profile

Set Planning Profile

Revaluation of Planning
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2.4.0. OVERHEAD STRUCTURE

CONCEPT- OVERHEAD STRUCTURE

Description Particulars Remarks

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The structure that defines the expenses under different classes

Definition
depending upon the nature of the business

Overhead Costs are termed as indirect or supplementary costs.

These are costs which cannot be wholly debited directly to a

particular job. It is classified as :

• Normal overhead
• Abnormal overhead
AS-IS
Distribution of Overheads :

It involves three stages :

• Collection and classification of overheads.
• Department wise calculation and allocation of overheads.
• Absorption of overheads.

TO-BE Overhead Structure defines the rules for the calculation of the
values to be posted.

An overhead structure consists of the following rows:

 Base row - Contains the amount used as a basis for the

overhead application
 Calculation row - Contains the overhead percentage rate to be
applied to the base row
 Totals row - Contains the sum of the base and overhead
amounts

Overhead structures are used to calculate accrual costs.

Distribution of overheads

It involves three stages

 Collection and classification of overheads

 Departmentalization of overheads: allocation / apportionment

of over heads

 Absorption of overheads

Overheads can be distributed/apportioned or absorbed by using

assessment cycles

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Gap

Process
flow

Reports

2.5.0. PRODUCT COST CONTROLLING

CONCEPT- PRODUCT COST CONTROLLING

Description Particulars Remarks
Product cost controlling is used mainly for valuating of inventory and
Definition
pricing of finished products.

AS-IS

TO-BE
Product Cost Controlling is used to estimate the Standard Cost per Unit of a
product and also determine the cost of goods manufactured or cost of goods
sold.

This will help

o To fix the pricing floors

o To optimize the cost of goods manufactured and cost of goods
sold

To valuate inventories and work in process & production variances and

scrapping costs

Cost of a Product constitutes

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Raw Material Cost

Process/Conversion costs
Overheads

BLCOMRMM Machine-1 (Raw Material

Mixing)
( Bucket & Chair )
BLCOMBTH Machine-2 ( Bucket Handle)
BLCOMBTB Machine-3 ( Bucket Base)
BLCOASLG Assembling
BLCOMCHR Machine-5 (Chair)

WORK CENTRE WORK COST

CENTRE I.D CENTER
Machine-1 (Raw Material BLCOMRMM
Mixing) Work01
( Bucket & Chair )
Machine-2 ( Bucket BLCOMBTH
Work02
Handle)
Machine-3 ( Bucket BLCOMBTB
Work03
Base)
BLCOASLG
Work 04 Assembling Work04

BLCOMCHR
Machine-5 (Chair) Work05

WORK CENTRE.xls

Product Cost Planning – The following settings are made for the Product
Cost

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1. Calculation bases are defined

2. Overhead rates are defined
3. Overhead Cost Elements are maintained for Material
overheads, Personnel
Overheads and Manufacturing overheads
4. Credits are defined
5. Costing sheets

Costing Sheet defines how values are posted in the SAP system

A costing sheet consists of the following lines:

Base rows - These contain the amount or quantity on which the

overhead is
Calculated.

Calculation rows – These contain the percentage rate to be applied to

one or more base lines.

Totals rows–These contain the sum of the base amount and

calculated amounts.

6. Cost Component Structure

7. Cost Estimation with Quantity Structure
Gap

PRODUCT COST
Process CONTROLLING.xls

flow
PRODUCT COST
CONTROLLING-1.xls

Reports

2.5.1. COST OBJECT CONTROLLING

CONCEPT- COST OBJECT CONTROLLING

Description Particulars Remarks

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Definition

AS-IS

TO-BE
Cost Object Controlling

The following steps are involved in Cost Object Controlling

1. Order Type – Standard Order Type PP01 is used.

2. Order Type dependent parameters are defined. Plant is

specified in this step.

3. Scheduling parameters for Production orders are defined.

4. Confirmation of parameters.

5. Costing Variants
PPP1 - Production Order: Planned

PPP2 - Production Order: Actual are used

Work in Process (WIP)

The following steps are involved for calculating Work in Process

1. Result Analysis Keys.

2. Define Cost Element for WIP Calculation.

3. Define Result Analysis Versions

4. Define Valuation Methods.

5. Define Line Ids

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6. Define Assignments

7. Define Posting Rules for settling WIP

8. Calculation of WIP

Gap

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flow COST OBJECT
CONTROLLING FLOW CHART.xls

Reports

1. PRODUCT COST PLANNING (INTEGRATION WITH OTHER

MODULES)
Integration
The cost estimate with quantity structure accesses data in the Production Planning (PP),
Materials Management (MM) and Controlling (CO) components of the SAP System. The
following table provides an overview of the origin of the data used by costing with quantity
structure:

Type of data determined by cost estimate

with quantity structure
From In

The material input quantity for each

The BOM for the material PP
component

The standard times for production of the The routing or rate routing for the
PP
product material

The work centers at which the

PP
operations are carried out

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The price for an externally-procured

The material master record MM
material

Or the purchasing info record MM

The price for an external operation The purchasing info record MM

Or the purchase order MM

Or the routing or rate routing PP

The cost estimate for the semi

finished product that is generated
The costs for a semi finished product CO
when the finished product is Costed
(acc. to transfer control)

The price for a semi finished product

The purchasing info record MM
processed by a vendor (subcontracting)

Or the purchase order MM

The price for an activity used with in-house

Activity type planning CO
operations

Or activity price calculation CO

The conditions for the calculation of The costing sheet and, if applicable,
CO
overhead the overhead group

The process costs The process template CO

The material master (changeable default

The costing lot size value)
MM

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PRODUCT COST COLLECTOR: -

In repetitive manufacturing we always use product cost collectors as cost objects. Cost object
in Product Cost by Period that collects the periodic actual costs incurred in the production of
a material. When we use a product cost collector, the product is the main cost object.

Product cost collectors is independent of the production type. This means that we can collect
actual costs on product cost collectors.

STANDARD COST ESTIMATOR: -

The standard cost estimate is then valid for the entire year or season. So we use it to
determine a standard price for materials in this period.

The results of the cost estimate then remain constant and are not influenced by price
fluctuations or changes in the production set-up during the course of the planning period.
You valuate the planned quantity structure of a standard cost estimate with standard prices.
A standard cost estimate for a material is not linked to an order or to a production version.

2.5.4. INTERNAL ORDERS

CONCEPT- INTERNAL ORDERS

Description Particulars Remarks
An internal order acts as an internal cost object for collecting all
costs related to a given job or an event or an individual item. This
Definition
job/event should be unique , and there would be no market for
that product, only customer-made product.

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AS-IS

This functionality of Internal orders are normally for plans, collect,

and settle the costs of internal jobs and tasks. The SAP system
TO-BE enables you to monitor your internal orders throughout their
entire life-cycle; from initial creation, through the planning and
posting of all the actual costs, to the final settlement and archiving

Gap

Process
flow INTERNAL
ORDERS.xls

Reports

2.6.0 PROFITABILITY ANALYSIS

CONCEPT- PROFITABILITY ANALYSIS

Description Particulars Remarks
To analyze the profitability of various market segments as
structured according to product or customer or distribution
Definition
channel etc is Profitability Analysis. It consists of different reports
very crucial for managerial decision making

AS-IS

TO-BE This functionality of CO enables an enterprise to get profitability

related information that is critical and useful for Sales & Marketing
strategic decisions. The functionality uses critical Sales &
Marketing related characteristics (such as Sales order, customer,
division, sales organization) mapped as profitability segment and
value figures are captured for profitability analysis. These in turn
provide input for strategic decisions relating to product mix,

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regional focus, specific customer care etc. Operating concern is the

organizational unit created for profitability analysis.

 Define operating concern (with Characteristics & Value

Files)
 Set operating concern

 Mapping between SD and COPA

 PA Transfer structure for directing posting
 Transfer of overheads

 Create profitability report

Gap

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2.6.1. PROFIT CENTER ACCOUNTING

CONCEPT- PROFIT CENTER ACCOUNTING

Description Particulars Remarks
Profit Center is an organizational sub-unit that bares
responsibility of revenues and costs. Ex: a sales branch, factory
Definition etc. Every Profit Center is defined under a controlling area. Every
cost center is assigned to a Profit Center belonging to the same
controlling area.
AS-IS
Maintaining profit centers for collection of costs and revenues. In
BLCO using Profit center for profitability analysis.

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Profit centers are another organizational unit in CO similar to cost

centers. The objectives of creation of profit centers are of two fold:
To enable transfer price mechanism within organization between
two profit centers.
To evaluate performance of profit centers based on ROI, where the
numerator is costing based profits earned by profit center and the
TO-BE
denominator is investment in the profit center (fixed assets and
current assets are values are derived from these assets assigned to
cost centers, which are in turn assigned to profit centers) overhead
costs. Cost Center Accounting lets you analyze the overhead costs
according to where they were incurred within the organization.

Gap

Process
flow PROFIT CENTER
ACCOUNTING.xls

Reports

2.7.1. INTERNAL REPORTS

CONCEPT- INTERNAL REPORTS

Description Particulars Remarks
Internal reports are the reports prepared for managerial decision making
Definition purpose, which are not required to be submitted to outsiders

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Reconciliation statement of financial accounting with cost

accounting.
Production statement (periodic).
Cost element allocation to cost centers report
AS-IS
Cost center plan/ actual comparison.
Cost center actual/actual.
Production Variance Analysis Report.

TO-BE

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2.8.0. GAPS TO BE ADDRESSED

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 The reconciliation statement Bank displays the actual bank statement, the cheques
that are deposited but not realized and the cheques that are issued but not cleared.
( Page- 18 )

 The purpose of this report is to capture the Daily Cash Flow. The report contains the
Opening Balance of Cash, Bank, and Investment as per the Bank Book as increased by
all the receipts and reduced by all the payments. The report is required by the
management for planning the optimum utilization of the unutilized funds lying in the
report. ( Page- 19 )

 Entry Tax Register is required to be maintained by every dealer in order to calculate

and pay the entry tax on purchase/ import of goods if the total purchase exceeds a
specified amount. The amount and rate of entry tax would vary from circle to circle.
Entry tax register also helps in filing Entry Tax Return to Statutory authorities.
Periodicity of Return filing is defined by the relevant State Act.

 Dunning Notice Format. (Page- )

 In Payment with print out- Transaction code: F-58 a Cheque to be designed.

 Ageing reports of customers. ( Page- )

 Ageing reports of vendors. ( Page- )

 Depreciation report ( Ref: Given By Mr. Lawrence ).

 Examine position of budget plan v/s Actual cost incurred and variance between the
same so it can plan and monitor cost effectively.

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